Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The Honorable Jay R. Kaufman, House Chair
The Honorable Michael J. Rodrigues, Senate Chair
Joint Committee on Revenue
State House,
Boston
Dear Chairman Kaufman, Chairman Rodrigues, and Distinguished Committee Members,
On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association appreciates the opportunity to offer testimony in support of Senate Bill 1308 and House Bill 2642, An Act Relative to Payments in Lieu of Taxation of Organizations Exempt from the Property Tax. We strongly urge the Committee to favorably report these bills, as they will create, at local option, a structured, standardized pathway through which municipalities and nonprofits may collaborate on Payment-in-Lieu-of-Taxation (PILOT) agreements to fund essential public services.
The two bills before you today would allow a municipality, upon acceptance at local option, to implement a program through which nonprofits would make an annual PILOT payment to the municipality equivalent to 25 percent 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 may allow for exemptions or consideration of community benefits that reduce the amount of the required PILOT payment by the nonprofit.
Massachusetts hosts more than 23,000 nonprofit public charities that own $22 billion in tax-exempt property, and cities and towns provide a wide array of costly core services that benefit these organizations, including police, fire and emergency response services, public works maintenance for the sidewalks and roadways surrounding the property, planning, zoning and economic development services to facilitate safe access to the property and appropriate commerce and development in the area, and much more.
This legislation would simply create a process for municipalities and nonprofits to work closely to ensure their mutual interests and create a sustainable system to ensure that nonprofits make a 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 has tax-exempt status, leaving these municipalities with a comparatively small tax base to finance the provision of a wide array of services. Other municipalities see properties leave the tax rolls for nonprofit use as the nonprofit sector continues to grow, constricting the property tax base they rely on to fund essential municipal services. In fact, from 1999 to 2009, the number of nonprofits operating in Massachusetts grew by more than 7,000. With this increase, real property that was previously taxable has now attained tax-exempt status, leaving the host municipalities with less revenue to provide the same or increased services to the community.
This legislation offers a timely opportunity to ensure that a municipality may receive a payment from a nonprofit approximately equal to the costs of the public services that the municipality expends on the nonprofit’s behalf. (The most recent Census of Governments, completed in 2007, indicates that on average, 27.3 percent of local government general expenditures are police and fire protection and road maintenance and construction.)
Nonprofits play a crucial role in the social, cultural, and economic fabric of our communities, and ensuring their long-term viability and success is truly a shared priority with municipalities. Municipalities, however, provide important necessary public services to the 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 modest 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 from the municipality regardless of whether the organizations are providing the services that benefit the host community. Under this legislation, municipalities could exempt nonprofits that offer crucial social services to members of the community, or reduce from 25 percent the PILOT required, based upon the degree of community benefit.
Additionally, many cities and towns host nonprofits that provide services that do not primarily benefit residents of the host communities, but instead benefit residents of other communities, states or countries. All of the public service costs associated with the nonprofit, however, are borne by the host community alone. This legislation would allow for the consideration of the direct benefit that the 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 indeed fortunate to be home to some of the finest nonprofits in the nation. 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. Nonprofits employ more than 10 percent of the state’s workforce, a rate much higher than the national average. While municipalities are dedicated to the continued prosperity of these nonprofits, the organizations must in turn have an interest in the fiscal vitality and sustainability of local communities, as their long-term prosperity is ultimately linked. H. 2642 and S. 1308 would create an equitable framework for PILOT agreements between 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.
Thank you very much for the opportunity to submit testimony on this important local-option legislation for cities and towns. We appreciate your consideration and strongly urge you to give these two bills a favorable report. If you have any questions, please feel free to contact Catherine Rollins of the MMA staff at 617-426-7272 at any time.
Sincerely,
Geoffrey C. Beckwith
Executive Director, MMA