The advocacy group that represents the state’s 351 cities and towns is calling for Beacon Hill to give local officials more flexibility around raising property taxes
The Massachusetts Municipal Association issued a report this fall describing a financial crisis facing cities and towns, brought on by high inflation, limited revenue-raising options, and other factors. The association on Thursday followed up with a set of policy recommendations it said could help stabilize local finances, potentially fending off cuts to public services.
“I think residents are already feeling, and if they’re not yet feeling, are at risk of feeling service-level reductions,” MMA executive director Adam Chapdelaine told GBH News in a recent interview. “Now, that could mean that the class size in the school district is going up, and that has an impact on you and your children. It could mean that recreational programs are being diminished. It could mean there’s been issues with settling a trash contract that has impacts on recycling and trash pickup.”
The MMA’s marquee recommendation is a major boost – $351 million dollars – in the flexible state aid to cities and towns. The association says that amount, a symbolic million dollars for each municipality in Massachusetts and a 26% increase from the funding in this year’s budget, would help make up for cuts during the Great Recession from 2008-2010. The cuts of that recession were so significant that it’s only in this year’s budget that unrestricted local aid is back above fiscal 2008 levels.
The association is also suggesting changes to a state law passed at the ballot in 1980 that limits how much revenue cities and towns can collect through property taxes each year. Known as Proposition 2 ½, the law caps annual increases in a community’s property tax revenue at 2.5%, plus extra room to allow for new growth.
The MMA stopped short of calling for repeal of the law, which supporters describe as a key protection for taxpayers.
Instead, the association recommends letting municipalities bump up the 2.5% limit, either temporarily or permanently, if their voters allow it. The higher threshold could be tied “either to a specific economic indicator (e.g., the Consumer Price Index) or some other locally appropriate rate,” the MMA wrote in its recommendations.
“Aside from the local property tax, cities and towns have very few places to turn for revenue in order to keep up with inflation and maintain key municipal services — and those revenue options are not equally available among all types of municipalities,” the association wrote.
Proposition 2 ½ has a workaround that allows for higher tax increases in certain cases. Communities can hold a referendum asking their residents to override the limit and raise taxes to cover specific needs, like a school renovation project. The MMA wants the state to also allow multi-year overrides that could be phased in gradually over a set schedule, “reducing abrupt tax shocks while giving local governments breathing room.”
The MMA’s recommendations come as Boston Mayor Michelle Wu is locked in a standoff with the state Senate over property tax rules.
Wu created a stir earlier this year when she suggested Massachusetts should consider moving away from Proposition 2 ½. In October, she said the state needs a “new system,” either through full repeal of the law or a “different pathway.”
Top policymakers on Beacon Hill show little to no interest in repealing Prop 2 ½.
An election-year vote to allow higher property taxes could prove politically risky. The Massachusetts Fiscal Alliance has warned that changes to Proposition 2 ½ could bring about a “taxpayer revolt” and consequences for the housing market.
“If you gouge property taxpayers any more than they are right now, you’ll see a pendulum swing so hard against them that it would probably do pretty significant damage to the state,” MassFiscal executive director Paul Craney said in a recent interview.
Asked if she supports eliminating Proposition 2 ½ during a November appearance on Boston Public Radio, Healey said she respects “the will of the voters on that” but will review anything the Legislature sends to her desk.
State Senate President Karen Spilka told GBH News last month that she hadn’t “heard directly from anybody about lifting [Proposition] 2 ½ at this point.”
Spilka said she was not specifically looking at changing property tax rules, but was interested in seeing movement on a bill Healey filed that would let cities and towns increase their local meals and lodging taxes, among other provisions.
“That’s what I want to take a look at, and I want to hear directly from cities and towns and the organizations that represent them, because I think there is a diverse feeling about what would work for many different, all 351 cities and towns,” Spilka said.
The MMA is also recommending that the Legislature pass Healey’s bill.
