HOLYOKE — Property taxes will go up in 2021, with homeowners paying $19.28 per $1,000 in assessed valuation and businesses paying $40.65 per $1,000.

The new commercial rate likely will produce groans in Holyoke’s business community, which feared breaking the $40 mark. Holyoke has the highest commercial tax rate in Massachusetts.

The City Council set the rates during an online session Friday night.

The new resident rate is a 1.0% increase from 2020's rate of $19.08. It reflects in part the assessed value of the average single-family home in Holyoke jumping from $197,000 to $207,000. The average residential tax bill in 2021 will be around $3,990.

The commercial rate will rise 2.3% from $39.73 in 2020. Councilor Mike Sullivan noted most commercial properties increased in value, but said the average was dragged down by the devaluation of the Holyoke Mall at Ingleside.

The city may collect $57.5 million in taxes and fees this year. The levy limit in fiscal 2020 was $54.7 million and $53.9 million the prior year.

The latest aggregate real and personal property values for the city are $2.3 billion, a $60 million gain in values from last year. Around $469 million is classified as tax-exempt or nontaxable.

Despite the pandemic and a faltering economy, the Assessor’s Office expects home values to climb into fiscal 2022, continuing a five-year trend.

The City Council on Friday initially approved rates of $19.20 and $40.87. Councilor Joseph M. McGiverin asked his colleagues to reconsider, saying a $40.87 commercial rate would have a “detrimental effect” on all tax classes.

“This is an over a dollar increase on average property bills that are much higher than the residential properties,” McGiverin said. “I’m not optimistic we can keep the rate under $40 with what’s been handed to us.”

He felt the higher commercial rate would harm small businesses across Holyoke, including bars and mom-and-pop stores.

Council President Todd McGee said, “We have to consider both sides, what is fair and what is equitable.” Residential and commercial owners are feeling the economic pain caused by the coronavirus pandemic, he said.

McGiverin, who chairs the Finance Committee, said the latest local and state revenue numbers contained good short-term news.

At Tuesday’s City Council meeting, Mayor Alex B. Morse said he made assumptions for the fiscal 2021 budget based on the information available at the time. But instead of a projected $883,000 shortfall, the city will have a surplus of more than $600,000.

Morse had requested transfers to cover deficits, mainly the Sewer Fund Account, a subject of chronic shortages. He said the city had federal COVID-19 relief dollars to pay for fire and police overtime, which produced more savings.

Ward 2 Councilor Terence Murphy proposed taking money from the Stabilization Account to lower property rates.

“I would have hoped we would be looking to use some of this money to try and make the financial situation as palatable for all our residents and businesses as much as possible,” Murphy said.

Morse said the Stabilization Account is over $14 million. It gained $1.3 million from investments, a “good sign,” he said. He recommended the City Council revisit Murphy’s proposal at budget time in the spring.

“We need to pressure our federal delegation and Congress to provide relief to cities and towns,” Morse said. “A one-time payment of $1,200 to most Americans isn’t enough. The failure of the federal government can’t fall on Holyoke taxpayers.”