In the last two years, and projecting tax settlements in the current fiscal year, the city will have written off or paid more than $16 million in tax abatements largely in response to declining commercial values.

But this year, say city officials, should be an end to tax disputes that date back to 2006 and the onset of the Great Recession and restoration of a system where the city budgets for $800,000 to $1.3 million in annual abatements.

“The numbers will go way down,” City Finance Director Ernest Zmyslinski said. He predicted a corresponding decline in pressure to use unrestricted reserves to balance the budget and a return to growth in the tax rolls.

Officials did not provide totals for the numbers of tax cases settled, but Tax Assessor Christopher Celeste, who has focused his efforts on cleaning up the backlog ever since he came aboard 18 months ago, said it is in the hundreds. He estimates he’s two-thirds of the way through the backlog.

So far, none of the tax/valuation appeals have gone to trial, although there have been a few close ones, said City Solicitor Peter Ruggiero. And although many of the appeals represent significant sectors in the city’s lexicon of commercial establishments – hotels, marinas, apartment complexes and big box stores – appeals have all been on an individual basis, said Ruggiero.

Settlements are handled in a variety of means, ranging from a revaluation of the property with tax reductions going forward until the tax abatement is satisfied to a cash disbursement or a combination of the two. The largest single cash disbursement was this year to Leviton Manufacturing, which no longer has property in the city, for $1,075,000, according to Bruce Keiser, chief of staff to Mayor Scott Avedisian. Keiser joined the administration in early 2014 as assistant tax assessor.

The Leviton refund will come out of the $3.6 million budgeted for abatements this year. In the 2015 fiscal year, the city paid out $4.8 million in abatements, and in the year prior to that $8 million, for a total of $16.4 million for the three years.

The situation has not gone unnoticed, although some City Council members reached for this story found the numbers extraordinary and questioned why, for example, they had not voted on the Leviton payment.

In an Oct. 13 report, Moody’s Investors Service reaffirmed the city’s A1 bond rating but left its “negative” rating outlook unchanged.

In its summary, Moody’s writes: “The A1 reflects the city’s large tax base with slightly above average wealth levels, manageable debt burden, large pension and OPEB [other than pension employee benefits] and below average reserve levels. The rating also takes into account the city’s underfunding of its actuarial required pension contributions for one of its public safety pension plans.”

While pension and OPEB liabilities are highlighted, deeper in the report Moody’s cites the use of reserves to resolve commercial tax abatements and to issue tax refund payments.

Council Finance Chair Camille Vella-Wilkinson said she was aware of the abatements and that the city had issued tax refund payments. That was not the case for Ed Ladouceur (Ward 5) who asked why the payments, especially the check to Leviton, hadn’t come before the council.

Ruggiero said the council acts on abatements recommended by the tax assessor. These customarily result from inaccuracies in property definitions, such as a property being valued on a finished basement when it doesn’t have one. The council doesn’t act on valuations that are contested.

How the city ended up with such a backlog of contested valuations appears to be a product of the economy, the lengthy process of appeal, and a propensity until two years ago to push things off to another day.

Further, Ruggiero explained that although revaluations are done every three years, the values applied to properties are realistically more than a year out of date by the time they are applied to the tax rolls. This means that the values set by the 2009 revaluation reflected values before the full impact of the recession. When property owners got their tax bills in June 2010, they screamed their property was over valued.

Usually, said Ruggiero, property owners will bring appeals for two years and on the third year combine them into a single complaint. Throughout the process, the property owner has to pay the taxes as based on the disputed value.

The stakes can be high for both the city and the property owner once it gets to court, which explains why trials are rare and settlements are the norm.

Should the city lose in court, it would be faced with refunding the overage tax payment plus 12 percent interest. The property owner, on the other hand, is faced with the cost of arguing the case and gaining nothing should they lose.

The incentive to settle is high, and the bargaining can be heated. Without offering specifics, Celeste said the amount refunded Leviton was substantially lower than what they wanted at the start. Attorney Kerry Rafanelli represents the city on the bulk of the cases.

“There’s a lot of pressure on both parties to come to any agreement,” Ruggiero said. He also noted there’s the pressure on the city to settle before court so as to control the erosion of its tax base.

Keiser estimated “there are well over 20 major cases” to be resolved.

While larger companies and their attorneys understand the deadlines for appeal and that appeals can’t be made retroactive, many smaller companies and homeowners are unaware of the regulations.

“The system doesn’t obligate the city to inform them,” said Ruggiero. He said property owners, whether large or small, should check their taxes and tax cards describing the property to ensure they are correct.

Zmyslinski said city hotels – there are 16 with a total of more than 2,000 rooms – were over valued and it has taken “years and years to get a decision.”

With a bulk of the complaints resolved, or on the path to resolution, Zmyslinski says “they’re in the rear view mirror now.”