MMA offers policy recommendations to address fiscal ‘Perfect Storm’ facing municipalities

The MMA today 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.

At the top of the list is a $351 million increase in state support for the Unrestricted General Government Aid program for cities and towns, to mitigate the structural impacts of deep UGGA cuts that were made during the Great Recession of 2008-10.

“Reinvesting in UGGA is the most direct and immediate way to strengthen the foundation of municipal government,” the MMA’s recommendations report states. “Such an investment would provide immediate and meaningful relief for local budgets statewide, and local taxpayers.”

The MMA plan also recommends giving cities and towns more flexibility to raise local property taxes within the continued framework of Proposition 2½, and flexibility to increase local-option add-ons to meals, lodging and motor vehicle excise taxes, as proposed in Gov. Maura Healey’s Municipal Empowerment Act.

“What the MMA is recommending is a renewed, strengthened partnership between the Commonwealth and its city and town governments,” said MMA Executive Director Adam Chapdelaine. “That includes the state providing more — and more stable — local aid, as well as cities and towns gaining more options for securing their share of municipal budgets and ensuring fiscal sustainability.”

• Read the report: Navigating the Storm: Charting a Course Toward Fiscal Stability (PDF)

The recommendations are built on the data analysis in the MMA’s October report, “A Perfect Storm,” and were refined through a series of conversations and meetings with city and town officials across the state. Local leaders are urging support for the recommendations.

“Working together, we can reverse the trends that have put municipalities in an untenable position and ensure the high-quality, essential local government services that make our communities great places to live and work,” said Gardner Mayor Mike Nicholson, president of the Massachusetts Mayors’ Association. “All residents rely on these services every day — like excellent schools, public safety, and well-maintained streets, sidewalks and parks.”

“The MMA’s ‘Perfect Storm’ report was a landmark analysis that documented just how close to the brink many municipal budgets are,” said Beverly City Councillor Brendan Sweeney, president of the Massachusetts Municipal Councillors’ Association and the assistant town administrator/finance director in Boxford. “The most important step is for the Commonwealth to renew its historic partnership with cities and towns by restoring local aid — the foundation for strong local services.”

The recommendations from the MMA plan include an infusion of local aid and support for increased flexibilities at the local level:
• Providing “351 for 351 cities and towns” — a $351 million infusion of discretionary aid through UGGA, to mitigate the lasting impacts of Great Recession cuts on municipal budgets.

• Ensuring that other local aid programs remain fully funded, including Chapter 70 education aid, the special education “circuit breaker” and other school-related accounts, and payments to municipalities for non-taxable state-owned property within their borders.

• Allowing Proposition 2½ flexibility, including allowing communities, with approval from their voters, to implement gradual, multi-year overrides and/or to increase the 2.5% annual levy limit increase, temporarily or permanently, with another fixed cap, such as the Consumer Price Index (CPI).

• Providing cities and towns more flexibility on reclassifying properties for tax-assessment purposes, empowering local leaders to thoughtfully balance the impact on taxpayers, and providing new options for tax exemptions to seniors, veterans and other populations.

• Increasing the local-option meals tax from 0.75% to 1%, the local hotel/motel tax from 6% to 7% (from 6.5 to 7.5% in Boston), allowing a 5% local-option surcharge on motor vehicle excise tax bills, and establishing a new, local real-estate transfer fee to fund affordable housing trusts.

• Adopting several elements of the governor’s proposed Municipal Empowerment Act, including further incentives for regional cooperation on municipal services, the removal of red tape to improve local government efficiency, and reform of ongoing municipal liabilities and legacy costs.

“Cities, suburbs, and rural communities face very different challenges for balancing budgets and living within Proposition 2½,” said Northfield Town Administrator Andrea Llamas, a past president of Small Town Administrators of Massachusetts. “Overrides are a non-starter for most communities, and state law prohibits communities from using many local revenue-generation strategies. The MMA plan offers a needed degree of flexibility. Adopting it, and restoring UGGA municipal aid, would be a huge win for the 7 million people who call Massachusetts home.”

In the weeks and months ahead, the MMA will continue to engage with its members, along with state policymakers and other stakeholders, in pursuit of action on its recommendations.