GOVERNOR PATRICK, LT. GOVERNOR MURRAY PRESS FOR LOCAL PROPERTY TAX RELIEF
Urge legislative panel to enact Municipal Partnership Act, repeal costly and outdated telecom exemption
"Homeowners in Massachusetts need real property tax relief and they need it today," Governor Patrick testified before the Joint Revenue Committee. "We believe that giving municipalities tools to manage their costs and increase their revenues is key to a long-term solution."
The Municipal Partnership Act addresses the significant fiscal challenges faced by cities and towns by providing local governments with tools to address the skyrocketing costs associated with health insurance and pensions. These two expenses continue to grow at rates that, in many communities, exceed revenue growth. In many cases, the only option left for municipalities being asked to do more and more with less and less money is to raise property taxes.
"For the average person the most direct and obvious impact of government is experienced at the local level - police and fire protection, emergency services, schools, parks, road and sidewalk maintenance. In recent years, as the fiscal situation worsened, paying for these vital services were put on the backs of the citizens through increased property taxes," Lieutenant Governor Timothy Murray testified.
Over the last six years, residential property taxpayers have seen their bills grow by 50 percent. This rate of growth is not sustainable. Fiscal crises already have led the City of Springfield and three regional school districts to come under the guidance of state control boards. The Legislature has granted the towns of Medway, Southbridge and Swansea the ability to deficit borrow, while being monitored closely by the Department of Revenue. Many more cities and towns are facing multi-million-dollar shortfalls in Fiscal Year 2008.
"Cities and towns in Massachusetts are in need of two things: greater revenue flexibility and reduced costs," Governor Patrick said.
Under the Municipal Partnership Act, cities and towns would be allowed to join the state's Group Insurance Commission, where the rate of increase in premiums is about half what it has been for most cities and towns. The Act also provides for local pension systems to invest in the state Pension Reserve Investment Trust. Of the 106 pension systems in Massachusetts, the majority of those not invested in PRIT have seen smaller returns over the last 21 years than returns realized by the state fund. The local pension systems have left $2.6 billion on the table by not joining the larger state system, leaving local communities to make up the difference. Pooling resources through PRIT and GIC would provide immediately save money for cities and towns.
Governor Patrick also urged the panel to consider new ways to generate more money for local governments - including changing a 92-year-old law exempting telephone companies from paying property taxes on poles and wires. This year alone the telecom exemption will cost cities and towns $78 million.
"At the end of the day, this 1915 law designed to bring telephone service to all corners of the Commonwealth has done its job and it is now time to retire it. Let's put $78 million back on the books. If we don't, homeowners, and other corporations that do have to pay property taxes, will continue to see their property tax bill rise disproportionately," Governor Patrick said.
Passing the Municipal Partnership Act would also allow local communities to impose a modest local option meals tax of up to 2 percent and expand the existing hotel tax from 4 percent to 5 percent.
"This is purely a local decision. It is designed to give cities and towns the flexibility to add additional revenue if they choose," the governor said.
The bill also provides for 25 percent of the new revenue generated by the local option meal and hotel taxes to fund a Municipal Property Tax Exemption Fund, which would be used to reimburse municipalities for property tax exemptions given to senior citizens through existing programs.
For some cities, like Boston, passage of this legislation will result in an actual property tax reduction. For other communities, passage of the legislation will stabilize municipal finances and help to minimize expected property tax increases.
"Our cities and towns are on the front line of service delivery. It is our responsibility to strengthen the partnership between local government and state government and to find ways to make owning a home in Massachusetts more affordable," Governor Patrick said.