Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The Honorable Adrian C. Madaro, House Chair
The Honorable James B. Eldridge, Senate Chair
Joint Committee on Revenue
State House, Boston
Delivered electronically
Dear Chair Madaro, Chair Eldridge, and Distinguished Members of the Committee,
On behalf of cities and towns across the Commonwealth, I write today to express our strong support for H. 56, An Act Empowering Municipalities and Local Governments (MEA). We deeply appreciate the opportunity to provide input on this important legislation that will deliver tools, resources, and flexibilities critical to the well-being of Massachusetts’ cities and towns.
Across the Commonwealth, communities of all shapes and sizes, across all regions, are experiencing increasing fiscal pressures that are squeezing municipal budgets and threatening essential services. As you know, city and town halls are the main touchstone to residents. Every day, municipal governments provide the essential services residents rely on. From filling potholes, to educating students, to hosting elections, and more, cities and towns are critical to the stability and progress of our Commonwealth.
In order to maintain these services, nurture economic well-being, and advance our state into the future, cities and towns require additional tools and resources that allow for revenue generation and administrative efficiencies. The legislation before you pursues this effort, and we strongly urge the Committee to advance the sections of the MEA before the Committee, and offer additions for your consideration.
Efficiencies
Manufacturing/Research and Development Assessment Clarification
The MMA supports Section 45, which clarifies the process for assessors to abate personal property taxes, or assess additional taxes, to put into effect a final decision about the classification of a corporation as a manufacturing or research and development corporation. This section streamlines processes for municipal assessors.
Central Valuation of Telecommunication and Utility Personal Property
Sections 55-57 centralize the valuation of telecommunication company personal property and utility company personal property in the Department of Revenue’s Division of Local Services (DLS) to promote consistency in assessing and utility reporting, and reduce administrative burden and costs to municipalities throughout the Commonwealth. Extending central valuation to all telecom and utility companies would result in a more efficient and cost-effective process for all stakeholders. We urge you to support these sections.
Collection of Motor Vehicle Excise
Section 65 allows a tax collector the option to notify the Registry of Motor Vehicles of non-payment of the motor vehicle excise directly, after notifying the delinquent taxpayer of the intent to “mark” their license or registration for non-payment. This simplifies the notification processes and allows for municipalities to directly contact the RMV, reducing administrative steps and costs.
Fiscal Flexibilities
Right of First Refusal Financing
The MMA supports Sections 67-69, which allow municipalities to utilize a financing mechanism for purposes of exercising their right of first refusal under Chapters 61, 61A and 61B of the General Laws. The complex nature of financing land purchases often limits the exercise of the right of first refusal for many municipalities, and providing more diverse financial mechanisms will enable them to overcome these financial hurdles.
Reporting and Tax Treatment of Solar PILOTS
Section 51 incorporates receipts from solar and wind PILOTS into the tax levy and constitutes new growth. As new clean energy developments are underway and expected to expand in the coming years, this new development should be categorized as such and captured in the tax base. We urge you to support this legislation, which compliments the Commonwealth’s efforts to expand clean energy infrastructure.
Expanding Property Tax Exemptions for Seniors
The MMA supports Section 49 allowing local flexibility for the value of senior tax property tax deductions under current law, and Section 53, allowing cities and towns to adopt a Senior Means-Tested Property Tax Exemption for qualifying seniors and increasing existing senior property tax exemptions. These provisions are all aimed at giving municipalities flexibility to provide assistance to some of our most vulnerable populations.
One-Year Override Option
Section 54 allows municipalities to adopt a one-year override for non-capital expenditures. Similar to a capital outlay exclusion, which is a one-year-only increase in the amount to be raised by taxation to pay for a capital item for which a municipality could borrow, this would be for operating expenses. For instance, a municipality might ask voters to approve a one-time investment in their OPEB fund, or might need a one-time payment for storm-related damage. Cities and towns are in dire need of expanded revenue generation and management options to suit the unique needs of the community. Section 54 provides such an option.
Local Option Revenues
In recent years, municipal revenue generation limitations have not kept pace with inflation while recent federal investments have expired, further exacerbating the fiscal pressures placed on the Commonwealth’s cities and towns. Municipalities are in need of expanded options to generate revenues through local initiatives. Local-option taxes increasingly help balance local budgets with no requirement for state investments. The MMA supports the following proposals:
Motor Vehicle Excise Tax Surcharge
Section 66 allows cities and towns to add a surcharge to assessed motor vehicle excise taxes by up to 5%. This provision seeks to offer help to all municipalities, especially those who have not seen the benefits of the existing meals and lodging local options, including small towns. This surcharge would be calculated based on a resident’s assessed motor vehicle excise tax and included in the annual excise tax bill. We estimate that the additional cost for the average vehicle would be only $7.70 annually, while the surcharge could generate nearly $50 million for cities and towns.
Lodging Tax Update
Sections 70-71 update the maximum local option lodging tax on hotel, motel and other short-term rentals from 6% to 7% in most communities, and 6.5% to 7.5% in the city of Boston. A 1% increase to this luxury tax has the potential to generate $49 million annually to support local government services, a rate that has not increased since 2009. This modest increase will help participating cities and towns to maintain critical infrastructure and services that are essential to residents as well as the visitors that will benefit during their stay.
Meals Tax Update
Section 72 increases the local option meals tax from 0.75% to 1%, the first increase since 2009. Since the initial authorization of this local-option tax, 251 municipalities have adopted the measure. Currently, this local tax adds 75 cents to a $100 meal. With the proposed update, the same $100 meal would include a $1 tax, a negligible increase that will not dissuade patrons. The MMA supports this modest increase and urges the Committee to consider a higher increase to 1.5%, which would raise the combined sales and meals tax rate to just 7.25% — still the lowest combined tax rate of all neighboring states in New England and New York, which all have combined taxes greater than 7.35%.
Such an incremental increase is modest and timely, requiring minimal costs to consumers with no realistic impact on sales, while it could generate up to $151 million in municipal revenue statewide. This revenue can be used where the city or town needs it most, in order to support critical municipal services that benefit all residents and support the operations of the restaurants that would help to generate these resources.
Navigating a “Perfect Storm”
Earlier this month, the MMA issued a package of policy recommendations designed to stabilize municipal finances and public services amid a “Perfect Storm” of fiscal challenges that the MMA reported on in October.
Cities and towns across the Commonwealth are experiencing a vise-like squeeze on municipal budgets. Thoughtful targeted policy actions, like the proposals under your consideration, are essential to supporting municipalities to weather the storm of fiscal pressures they are facing. That’s why passing the Municipal Empowerment Act is central among the recommendations.
As cities and towns continue to see expenses outpace local revenue growth, especially within the restrictive confines of Proposition 2½, expanding revenue generation capacity at the local level, as well as supporting more efficient operations, is essential. The MEA is a smart policy package that offers cities and towns helpful tools for them to navigate significant fiscal pressures.
We strongly urge the Committee to offer a favorable report for the sections of the MEA that are before the Committee. We deeply appreciate the opportunity to weigh in on these important municipal issues and offer our continued partnership as we work together to support the well-being of the Commonwealth. Please do not hesitate to reach out to me or MMA Senior Legislative Analyst Adrienne Núñez at [email protected] at any time.
Sincerely,
Adam Chapdelaine
MMA Executive Director and CEO