Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The Honorable Paul Donato, House Chair
The Honorable James Eldridge, Senate Chair
Joint Committee on Municipalities and Regional Government
State House, Boston
Dear Representative Donato, Senator Eldridge, and Members of the Committee,
On behalf of the cities and towns of Massachusetts, the Massachusetts Municipal Association would like to offer comment on the recommendations of the Special Commission on Municipal Relief (H. 1971), released on May 7, and on the Act Strengthening the Commonwealth’s Partnership with Municipalities (H. 104), filed by the Governor in January. We also offer comment on municipal relief provisions in the Governor’s Emergency Measures Act (H. 101) and on legislation filed by the MMA.
We appreciate the commitment of the Governor and the Legislature to work with municipal officials to find ways to expand local revenue capacity and reduce costs. The harsh recession is posing extraordinary challenges to state and local government that will endure for several years. Cities and towns will need strong and effective tools to balance budgets and avoid turning back progress made over the past decade in keeping communities safe and reforming education. Without a strong and aggressive municipal relief package, communities will lay off thousands of key workers and slash essential services. This is the time for real and meaningful reform.
We are still analyzing the language of the many separate provisions in House 1971 and making comparisons to similar provisions in House 104 and in legislation that we have filed. We will keep you informed of our comments as they are developed. For the purpose of our testimony today and this letter, we will focus on the major municipal relief provisions that would most help cities and towns preserve essential services, balance their budgets, and protect our long-term economic interests during this fiscal crisis.
Health Insurance Provisions
The single largest expense challenge facing cities, towns and school districts is the cost of health insurance, which has outpaced growth in local government revenues and will continue to do so under current laws and rules. Without meaningful reform of municipal health insurance laws, localities will be forced to lay off thousands of teachers, police officers, firefighters, public works employees, librarians and other key workers, and job losses at the local level will be higher through the end of this recession with little ability to restore services when the economy recovers.
We strongly oppose the unworkable health insurance provisions in the Governor’s bill (Sections 18-19 of H. 104) and in the report of the Special Municipal Relief Commission (Sections 26, 33 and 34 of H. 1971). These recommendations would be a giant step backward in the road to modernizing municipal personnel practices and saving money. From the municipal perspective, these bills are actually worse than no reform at all.
We have attached separate and detailed testimony on municipal health insurance reform. It is imperative that you reject the health insurance-related provisions of H. 104 and H. 1971, and pass real reform based on giving cities and towns parity with the state in shaping health insurance plans for municipal employees.
Municipal Tax Provisions
Sales Tax on Meals
The MMA strongly supports providing cities and towns with the authority to adopt a sales tax on meals as an essential source of municipal revenue and an alternative to the property tax. We strongly support House 2796, filed by Rep. Peter Kocot, which would allow cities and towns to levy, at local option, a sales tax on meals of up to 3 percentage points. This option would provide an estimated $125 million per point for city and town general fund purposes.
H. 1971 and H. 101 include municipal meals tax provisions.
Section 31 of H. 101 would authorize cities and towns to adopt a meals tax of as much as 1 percent for municipal general fund purposes. Section 31 would also impose a statewide meals tax of 1 percent to be used to provide additional local aid to cities and towns.
Sections 96 and 97 of H. 1971 would authorize cities and towns to adopt a meals tax of 2 percent. An amount equal to 1 percent would be remitted to the city or town where the meal was sold. From the balance, 7.5 percent would be deposited in a special state Municipal Regionalization Incentives Fund and 92.5 percent would be distributed through a formula to cities and towns that adopted the tax.
Room Occupancy
The MMA strongly supports providing cities and towns with the authority to increase the municipal room occupancy excise by an amount to be determined by the locality. The MMA also supports the reform and expansion of the room occupancy base to include transient accommodations that are now exempt from taxation, a very important provision to end tax avoidance schemes and create a level playing field, especially in resort communities. Each percent increase in the room occupancy tax would generate $25 million to fund essential local services and reduce reliance on the property tax.
H. 1971 and H. 101 include municipal room occupancy tax provisions.
Sections 29-30 of H. 101 would increase the existing local-option room occupancy excise by 1 percentage point, from 4 percent to 5 percent (and to 5.5 percent for certain cities and towns where the rate may be 4.5 percent). Sections 27-28 would increase the statewide excise by 1 percentage point.
Sections 91-95 and 137 of H. 1971 would expand the room occupancy excise to include transient accommodations and allow cities and towns to increase the existing local option by up to 4 percentage points.
Property Tax Assessments on Telecommunication Companies
The MMA supports long-overdue reform of obsolete property tax laws governing telephone and other telecommunications companies. We support the language included in House 3486, filed by Rep. Stephen Kulik, that would eliminate the property tax exemption for certain machinery of telecommunications companies and the exemption for poles and wires owned by telecommunications companies on public ways. We have a draft of perfecting language that we will forward to you that would protect ongoing litigation from being compromised by any changes to the law. We support similar sections (21-24 in House 101) recommended by the Governor.
This legislation would codify the Appellate Tax Board’s recent ruling that allows cities and towns to collect $26 million in property taxes for poles and wires, and would finally end the special tax loophole that allows telecommunications companies to avoid approximately $25 million or more for telecommunications equipment and machinery. The telecommunications industry is using these antiquated tax provisions to avoid paying their fair share of local taxes, shifting this burden onto local taxpayers and other businesses.
Section 66-68 and 138 of H. 1971 would make changes to property law governing telecommunications companies. The language used in these sections is significantly different from language in H. 101 and other legislation that would reform and update these property tax laws. The MMA and municipal assessing department staff are reviewing these sections, which appear to be problematic. We instead urge you to use the language in H. 101 or the updated H. 3486 language.
Municipal Tax Administration
Both House 104 and House 1971 include helpful changes to laws governing tax administration at the local level.
In House 104, we support Section 25 (assessment certification schedule), Section 26 (joint assessing agreement), Section 39 (streamlined abatement process), Sections 40-47 (audit of personal property returns) and Section 53 (separate taxation of condominium development rights).
In House 1971, we support Section 42 (joint assessing agreement), Section 61 (streamlined abatement process), Section 70 (failure to file penalty), Section 71 (limits on tax extension requests), Sections 74-76 and 117 (separate taxation of condominium development rights), and Section 78 (boat excise collection).
Administration, Procurement and Public Construction
Like the Governor’s legislation, H. 1971 would establish a statewide mutual aid program available to all cities and towns who opt-in (Section 37). The MMA supports these provisions in that they would provide a comprehensive protocol for requesting and receiving assistance during public safety incidents for all types of first responders, including, but not limited to, public works, police, fire and public health services. In House 104 we support Sections 1, 7 and 8 (Internet advertising), Sections 2 and 10 (reverse auctions), Sections 3, 7 and 9 (electronic bids), Section 21 (long-term leases) and Section 23 (collective purchasing by educational collaboratives. In addition, Sections 4-6, which would increase bidding thresholds, and Section 52, which would increase the threshold for construction bonds, are particularly important.
The MMA enthusiastically supports the similar language in H. 1971 (Sections 20-25), and Sections 113 and 114, which would only require sound business practices for building and repair construction contracts below $5,000, pursuant to M.G.L. 149, but we strongly urge you to consider re-writing Section 113 to read as follows: Section 44A of Chapter 149 of the General Laws, as so appearing, is hereby amended by striking, in line 47, the following: “less than $10,000” and replacing with the following: “not less than $5,000 but less than $10,000.” Without this language, Section 113 would still require solicitation of three written quotes for such procurements below $5,000, in direct conflict with Section 114 of H. 1971.
Municipal Finance
In House 104, we support Sections 27-37 and 48, which increase flexibility in municipal and regional school district borrowing. These proposals are similar to provisions in legislation filed by the MMA (H. 1989).
We also support Section 38 (elimination of the fee for State House Notes).
We support similar provisions in House 1971, including Sections 48-59 and 100 (borrowing), Section 60 (State House Notes), Section 39 (Chapter 40B excess profits), Section 41 (municipal fine collection), and Section 47 (borrowing for dredging projects).
Regionalization
Cities and towns are committed to regionalizing services whenever possible, and have worked diligently to implement innovative initiatives all across the Commonwealth, from purchasing, to shared equipment, to shared services. These efforts would be propelled forward with the technical and financial resources envisioned in H. 1971, and the MMA strongly supports the proposals to provide funding and assistance as very helpful. In addition, please note our strong support, cited in the next section, for the Commission and gubernatorial recommendations to remove decisions to regionalize services from collective bargaining, as these decisions should rest wholly with the municipality acting on behalf of the citizens of the community.
Personnel Matters
In House 104, we support Sections 11 and 12 (maximum age for civil service appointment), Section 13 (PRIT participation), Section 15 (prorating health insurance contribution for part-time employees), Sections 16 and 17 (Medicare for municipal retirees), Section 54 (retirement system funding relief).
We support similar provisions in House 1971, including Sections 27 and 28 (prorating health insurance contribution for part-time employees), Sections 31 and 32 (Medicare for municipal retirees), Section 36 (collective bargaining over adoption of inter-municipal or regional agreements).
Conclusion
A strong Municipal Partnership Act is a necessity in this fiscal crisis. There are many good and helpful provisions in House 104 and House 1971 that appear ready to be enacted while there are others that require additional review and revision. Again, we urge you to reject the health insurance provisions in H. 104 and H. 1971, and provide cities and towns with true cost-saving reform through plan design authority.
Thank you for your interest in these vital and important matters. If you have any questions, please contact MMA Legislative Director David Baier or Deputy Legislative Director John Robertson (617-426-7272) at any time.
Sincerely,
Geoffrey C. Beckwith
MMA Executive Director