Developers and real estate agents are up in arms over a provision in the governor’s Municipal Partnership Act that would allow cities and towns to tax developers’ rights for phased condo construction. That move will discourage residential development, they say.

“In many projects, people will permit and build in phases,” said Gregory Vasil, CEO of the Greater Boston Real Estate Board. “That’s going to change, because you’re going to drive up soft costs and make them pay for each phase that isn’t built. When you do that in difficult market times, you lead developers to determine if the project is feasible at all. The difficulty is that people look at this as ‘just development,’ but when things get built, there are a lot of jobs created.

“In these times, [the state] look[s] for revenue where they can possibly find it,” Vasil said. “That’s what they do, they tax people, and that’s what they’re doing here. They’re looking to capture revenue to satisfy a real thirsty government need for money, when we’re realizing that people will not be working on these types of projects.”

If the legislation is passed it will counteract a pair of decisions from the state Appellate Court in 2000 that prevented assessors from taxing phasing rights in Acton and Hull. It also seems to be at odds with the previously stated goals of Gov. Deval Patrick’s administration, such as zoning reform, to spur residential development and create jobs.

The State Makes Its Case

Currently, when a phased-condo development is built, common areas on the property that are slated to be built out as more units cannot be taxed. According to Bob Bliss, spokesman for the Massachusetts Department of Revenue, that situation is unique to condo developments. Other developers have to pay taxes on property as buildings are built.

“There is a curtain of sorts that descends and shields the property,” said Bliss. “You may have very large parcels that in any town that cannot be taxed. A developer of single-family homes has no such protection right now.

“There is nothing inherently antagonistic here. This is really just trying to resolve what we think is an inequity in local assessing … it certainly isn’t aimed at residential housing. This is just trying to level the playing field a bit between various types of development.”

Developers argue condo developments are different than other construction projects. Condos are built in phases to gauge the viability of each successive phase depending on how completed units sell, or the availability of capital.

“Clearly this has an economic impact on a project,” said Mark Kablack, assistant general council to The Builders Association of Greater Boston. “It forces [developers’] hand[s] into either building everything up front and not phasing units at all, or to think twice about the project.”

And Kablack said that common areas slated for phasing are actually taxed as inherent value in the already-created units.

“While it may not be as direct of a tax collection as the assessors are getting at as part of this legislation, I would say that that land does lend value to the units, and that value is part of a tax levy,” Kablack said.

Bliss said assessors would determine the taxable value of the phasing rights on a town-by-town, parcel-by-parcel basis.

Bob Ellia, executive director of the Massachusetts Association of Assessing Officers, said while details may be short on the process, the tax wouldn’t stop developers from building condo developments. Ellia said that any additional costs would be passed on to people purchasing the units.

“It’s not going to be enough to stop a developer from going forward with any plan,” Ellia said. “Cities and towns are hurting. Any justifiable and fair way to increase revenue through the real estate tax should be given serious consideration.”