The Honorable Mark J. Cusack, House Chair
The Honorable Susan L. Moran, Senate Chair
Joint Committee on Revenue
State House, Boston

Delivered electronically

Dear Chair Cusack, Chair Moran, and Distinguished Members of the Committee,

On behalf of cities and towns across the Commonwealth, the MMA is writing to submit comments regarding a number of bills that are being heard by your committee today. With a wide range of revenue topics up for consideration at the hearing, we are providing comments on several topics of interest in the following categories:

Local-Option Payment in Lieu of Taxes

We strongly urge you to support H. 2963 and S. 1836, An Act relative to payments in lieu of taxation by organizations exempt from the property tax, which would enable local-option payments in lieu of taxation (PILOT) for tax-exempt organizations.

These proposals would allow a municipality, upon acceptance at local option, to implement a program through which nonprofits that own property valued over $15 million would make an annual PILOT to the municipality equivalent to 25% of the amount that the organization would have been assessed on real and personal property if it were not exempt from taxation. Municipalities that adopt this section would craft local ordinances or bylaws to allow for PILOT agreements between the municipality and nonprofits, and would have the flexibility to allow for exemptions or consideration of community benefits to reduce the amount of the required PILOT by the nonprofit.

Cities and towns provide a wide array of costly core municipal services that benefit these nonprofit entities that own over $15 million in tax-exempt property, including police, fire and emergency response services, public works maintenance for sidewalks and roadways surrounding the property, planning, zoning, and economic development services to facilitate safe access to the property, appropriate commerce and development in the area, and much more. It is important to note that the vast majority of nonprofit organizations do not own buildings or land, yet all these nonprofit entities pay property taxes — as renters, their lease payments fund the landlords’ property tax obligations. It is ironic, and inequitable, that much larger nonprofits with significantly greater financial resources are exempt, while smaller nonprofits contribute to their host communities’ property tax levy.

This legislation would simply create a process for municipalities and property-owning nonprofits to work closely to accommodate their mutual interests and create a sustainable system, ensuring that these well-endowed nonprofits make a modest yet consistent contribution to fund local public services. Many municipalities have experienced a dramatic reduction in their taxable property base because a significant portion of the total property within their borders is tax-exempt, leaving the municipalities with a comparatively small tax base to finance the provision of a growing need for services. Other municipalities see properties leave the tax rolls for nonprofit use as the nonprofit sector continues to grow, constricting the tax base they rely on to fund essential municipal services.

Nonprofits play a crucial role in the social, cultural, and economic fabric of our communities, and ensuring their long-term viability and success is a shared priority among municipalities. However, municipalities provide important and necessary public services to nonprofits within their borders, including police and fire protection, infrastructure construction and maintenance, and water and sewer, at a cost borne by local government and the residential and commercial taxpayers in the community. This bill would create a consistent structure through which a nonprofit would contribute resources to support the municipal services that the nonprofit directly enjoys.

This legislation offers an important mechanism to close a loophole created by the property tax exemption of nonprofits, in that those nonprofits with the highest-value property receive significant benefits regardless of whether they are providing the highest-value services to the community. Under this legislation, municipalities could exempt certain nonprofits offering critical social services to members of the community, or reduce the required PILOT below 25%, based upon the degree of community benefit.

In addition, many cities and towns host nonprofits that provide services that do not primarily benefit residents of those cities and towns, but instead benefit residents of other communities, states, or countries. However, all of the public service costs associated with the nonprofit are borne by the host community alone. This legislation would allow for the consideration of the direct benefit that the property-owning nonprofit has within its host community, with a resulting PILOT that makes a direct community contribution and offsets the public service costs expended by the municipality.

Massachusetts is fortunate to be home to some of the finest nonprofits in the nation, many of international renown. From acclaimed museums and cultural institutions to cutting-edge medical centers to the best universities and private schools in the world, our cities and towns are enriched by our nonprofits every day. While municipalities are dedicated to the continued prosperity of these nonprofits, the nonprofits must in turn have an interest in the fiscal vitality of local communities, as their long-term prosperity is ultimately linked. This legislation would create an equitable framework for PILOT agreements between property-owning nonprofits and municipalities that would allow municipalities to meet continued demands for public services, and allow nonprofits to make contributions proportionate to the public services they receive.

Collection of Delinquent Property Tax Revenue
We respectfully urge the Committee to create a special commission to examine current law and practice around the collection of delinquent property tax revenue, prior to the Committee advancing any legislation that would alter this fundamental municipal function. This would include the issues raised in several legislative items before you today, including: H. 2883, H. 2907, H. 2937, S. 1876, and S. 1953. These measures would mandate several changes to the way municipal treasurers or collectors pursue the collection of property taxes from those property owners who fail to pay in response to quarterly or semi-annual tax bills.

Due to the complexity and significance of these proposed legislative changes, we urge the Committee to form a special commission to examine current law and practice around the collection of delinquent property taxes and the sale of liens to third-party investors prior to advancing these bills. This special commission should include a representative of the Massachusetts Municipal Association, a representative of the Office of the Attorney General, a representative of consumer advocates, and a representative of third-party investors, among others.

The commission could examine and assess current local property tax collection processes, including property owner notification and communication, property tax deferral options or exemptions that exist for special classes, the laws governing the purchase of tax liens by a third-party investor and any subsequent foreclosure proceedings, the consumer outcomes associated with the purchase of tax liens by third-party investors, and the potential impacts of the proposed legislation on municipalities.

In light of the recent Supreme Court decision in Tyler v. Hennepin County, we understand that there is new urgency to address current Massachusetts tax title laws. Creating a special commission to closely examine the current process will be extremely beneficial to ensure that any new changes take the municipal perspective and needs into account while also ensuring that these changes will pass judicial scrutiny. We are eager and committed to partnering with the Legislature to find a legislative solution that satisfies these goals.

We appreciate this opportunity to submit testimony on these important municipal revenue issues. If you have any questions or require additional information, please do not hesitate to contact us. Your office may reach out to me or MMA Senior Legislative Analyst Jackie Lavender Bird at jlavenderbird@mma.org at any time.

Thank you very much for your partnership and your lasting support of cities and towns.

Sincerely,

Geoffrey C. Beckwith
MMA Executive Director & CEO

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