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 is writing to offer our strong support for H. 3908, an Act Relative to Modernizing Municipal Finance and Government. H. 3908 includes select sections from H. 3905, an Act to Modernize Municipal Finance and Government, filed by the Governor on December 7, 2015.
The legislation is intended to improve the effectiveness of local government by removing obsolete state laws and updating existing statutes to allow for greater efficiency at the local level.
H. 3908 includes 43 specific proposals that we strongly endorse, as each of these initiatives would improve the administration of revenue and finance systems for cities and towns. We herein offer a summary of each proposal, and ask you to also strongly support these measures.
Certification of Local Property Assessments (31-32, 243) These sections would decrease the frequency with which DOR must certify that local property assessments reflect fair cash valuation from every three years to every five years. The certification is a condition of approving the municipality’s property classifications for purposes of allocating responsibility for the local tax levy. This change would take effect for the fiscal years starting on or after July 1, 2017.
Collections Taxpayer Good Standing (33-34) These sections would permit municipalities to deny local licenses and permits to any taxpayer who has neglected or refused to pay local taxes and who has not filed a good faith application for an abatement. Current law permits this collection method, but only if the taxpayer has been delinquent for at least one year. This change is intended to allow municipalities to mirror a “good standing” requirement for licensure under their implementation by- law or ordinance.
Municipal Fines Lien Collection (35) This section would amend the law, which permits a municipality to impose a lien on real property for unpaid local charges or fees, to permit a lien for unpaid fines. Consistent with current law, such unpaid amounts may be certified to the local assessors to be added to property taxes for collection. This section would have the effect of adding this method of collection for fines that are unpaid by persons who own real estate.
District Improvement Financing (42-47) These sections would amend the district improvement financing statutes so that the “DIF” reserved for debt service and project costs equals the new property tax revenue generated by new development that is added to the community’s levy limit as new growth under Proposition 21⁄2. These sections also clarify that the requirement to reserve tax increment funds ends when monies are set aside to pay all debt service. The formula in the law is based on models used in other states that do not have levy limitations or require tax rate recalculation based on current values, i.e., where valuation increases generate additional revenue. For this reason, the tax increment is very difficult for local assessors to calculate, and more importantly does not actually reflect the new property tax revenue generated by the project.
Compensation District Assessor (56) This section would remove the DOR Commissioner’s role as mediator if a dispute arises regarding the amount annually appropriated for the salaries and compensations of assessors and tax collectors in tax levying districts.
CPA Surcharge Exemptions (95) This section would set a deadline for taxpayer applications for exemptions from the statutory surcharge on real property under the Community Preservation Act. The deadline is the same as that for other types of applications for local tax exemptions, and provisions are also made for appeals to the Appellate Tax Board and confidentiality on the same terms as those applicable to such other applications.
Corporations List (101, 116) These sections would require that the Department of Revenue identify those corporations that are classified as research and development corporations, so that cities and towns can use that classification in their administration of property tax exemptions.
Approval of Forms (102, 109, 131-132, 154, 162) These sections would eliminate existing requirements that the Department of Revenue print and distribute various forms, and approve electronic formats, used in the assessment and collection of local taxes.
Collection Title Foreclosure (103, 155) These sections would eliminate an existing but apparently never-exercised mechanism under which the Department of Revenue could take over collection actions on behalf of towns.
Affordable Housing Abatements (104-105, 139-140) These sections would amend the property tax laws to allow local implementation of affordable housing abatement agreements in the same manner as brownfield abatement agreements under G.L. c. 59, § 59A. The brownfield abatement agreement is an entirely local process with an implementation by-law or ordinance providing transparency in allowable abatements within the statutory parameters. That process would be appropriate for affordable housing abatements as well.
State-Owned Land Valuation (106-107, 249) These sections would eliminate the current procedure under which the Department of Revenue values state-owned land every four years, replacing that process with a statutory formula for determining the valuation every two years after the 2017 valuation required by current law. That valuation will be adjusted every two years by the equalized valuation and the value of acquisitions and dispositions. The acquisitions and dispositions will be based on a per acre value that will also be adjusted every two years by the equalized valuation. These sections are proposed to take effect as of January 1, 2018, to govern the state-owned valuation on January 1, 2019 for distributions made in fiscal year 2021.
Schedule A Compliance (108) This section would improve compliance for municipal reporting by changing the annual deadline from October 1 to November 30 for cities and towns to submit the prior year’s annual financial report. This would also modify the law to provide the intended consequence for non-compliance and withhold all future payments (regardless of fiscal year) until such time as the Schedule A is submitted and accepted.
Supplemental Assessments (110-113, 244) Current law provides for supplemental assessments on new construction, and abatement of regular real estate for damage due to fire or natural disaster, unless a community rejects this option. These sections would change this assessment by excluding the value of the land from the calculation of the 50 percent trigger for the supplemental assessment. They would also clarify the applicable tax rate, and establish a one-year time limit in which a property owner may apply to the assessors for abatement after a fire or other natural disaster.
Right of First Refusal (114) This section would give a municipality a right of first refusal if property owned by a charitable organization or a church is being sold or developed for a non-exempt purpose. The right of first refusal would be similar to a municipality’s right when an owner of forest, farm or recreational land which has received a tax benefit sells for or converts that property for development. A tax-exempt organization would be required to give notice of the proposed sale or development to the city or town, which would have 120 days to exercise its right of first refusal. A city or town would be authorized to assign its rights to a nonprofit conservation organization, the Commonwealth or any of its political subdivisions.
Charitable Exemption Technical Correction (115) This section would correct two references in the charitable exemption for real property to local adoption of a “paragraph.” The local adoption should be of the “sentence.”
Exemption Applications (117, 119, 121-122, 138, 242) These sections would create a single due date for personal exemption applications regardless of billing system used, and would make April 1 the deadline for personal exemption applications in all communities, creating a uniform and consistent deadline for taxpayers.
Residential Exemption (120, 242) These sections would increases from 20 percent to 35 percent the statutory limit on the amount of a residential exemption that can be granted, if a municipality grants such an exemption as one of its property tax classification options. Five of the thirteen municipalities that have decided to grant such an exemption have asked for, and received approval for, residential exemption amounts that are higher than the current statutory limit of 20 percent.
DOR’s Authorization to Assess (123-125, 244) These sections would eliminate the requirement that local assessors obtain the Department of Revenue’s approval before assessing taxes on real property to unknown owners or owners of present interests. The Department is unable to conduct independent title or other analyses to verify these requests. Moreover, local assessors determine record ownership for assessment purpose for millions of real estate parcels and there is no regulatory purpose served in having them obtain the Department’s approval about the party assessed in these selected situations. The Department has the power to issue guidelines on assessment administration and can provide appropriate oversight and guidance on the statutory standards and best practices.
Single Overlay (126-127, 143, 246) This section would create a single overlay account and remove anachronistic references to a repealed cap on cities. Currently, there is a separate overlay reserve for each fiscal year. A surplus in one year cannot be used to cover a deficit in another year without the assessors declaring a surplus, the accounting officer transferring the amount to an overlay surplus account and the legislative body appropriating from the surplus by year end. This is cumbersome and inefficient.
Central Valuation (128-130) These sections would change the timelines for company reporting and DOR certification to conform with the same schedule as pipeline companies, and to be able to obtain the most current company regulatory reports. These sections would also define a telephone company for central valuation purposes to include only landline incumbent local exchange carriers (ILECs) under the federal Telecommunications Act and allow DOR to share information with local assessors so they can make an informed decision whether to appeal. Finally, these sections would provide for a more streamlined and expeditious appeal process by allowing one party to file a notice of appeal in response to another parties’ filing.
Interest on Collections (133-135, 245) These sections would standardize the accrual of interest on delinquent property tax installments, addressing an inequity in the accrual of interest on overdue installments between communities using semiannual and quarterly billing. Currently, under semiannual systems, interest accrues from the date the tax bills are mailed, i.e., if the payment is one day overdue, the taxpayer is charged 31 days interest. Under the quarterly system, interest does not accrue until the due date. The sections would also permit all communities to make small bills of $100 or less payable in one installment.
Mortgagee Abatements (136-137, 242) These sections would change the timeline for applying for an abatement, in recognition of the widespread use of quarterly billing systems in cities and towns of the Commonwealth. Currently, any holder of a mortgage (regardless of the property tax payment system in use in the city or town) must apply for abatement between September 20 and October 1. These sections change that requirement so that the application must be filed during the last ten days of the abatement period, regardless of the city or town’s billing system. The provisions would also correct a reference to ensure that Section 59 of Chapter 59 of the General Laws applies to all persons who may represent a person’s estate. These changes are proposed to take effect for the fiscal year starting on July 1, 2016.
Appeals (141-142) These sections would clarify that the failure to pay semiannual and quarterly preliminary tax payments, as well as actual tax payments, is a bar to Appellate Tax Board appeal. Taxpayers are obligated to pay preliminary taxes based on prior year actual under quarterly and semiannual systems. Their failure to pay preliminary taxes subjects them to the same interest on overdue amounts that accrues on overdue actual installment payments.
Abatement on Low Value Lands (144, 146) These sections would repeal the Department of Revenue’s authority to authorize assessors to abate taxes on low value lands and under a local option, let assessors abate these taxes when the collector determines the costs to collect are more than the amount owed. Treasurers could also foreclose the tax title under the land of low value procedure.
Apportionment Appeal (145) This section would extend from seven to thirty days the time period within which a taxpayer may appeal an apportionment decision.
Mailing Tax Bills (147) This section would modernize where tax bills are mailed in absence of written direction by the taxpayer. Under current law, the tax bill only has to be sent to the “town” where the person resides. This is anachronistic language. Bills should be mailed to the taxpayer’s address if known, or the property address, unless the taxpayer directs otherwise.
E-Billing Technical Correction (148) This section would correct an internal cross-reference to the electronic billing program.
Betterment Suspension (149) Under current law, the Department of Revenue is authorized to approve assessors’ suspension of betterments for persons receiving certain exemptions. There is no institutional record of the Department exercising this authority, and if a request was received, it is not clear what criteria are to be used to determine approval. This section would delete an obsolete provision that pre-dates the enactment of local option G.L. c. 80, § 13B, which allows for betterment deferrals for seniors.
Scholarship and Educational Funds (150-153) These sections would amend the authorization for cities and towns to form such funds to clarify that each fund is separately accepted and to clarify the distinct purposes for which such funds can be used.
Electronic Payment Penalties (156-157) These sections would amend the process for appealing penalties imposed on individuals who tender a check for local taxes with insufficient funds, requiring the individual to appeal at the local level, rather than with the DOR Commissioner. The provisions would further amend the statute to cover electronic payments that are made with insufficient funds.
Covenant Extension (158) Under current law, a city or town must apply to the Department of Revenue to extend (for up to one year) the duration of the municipality’s statutory exemption from the terms of a covenant running with the land. There is no institutional record of receiving any request to exercise these powers and DOR is not in position to do so. There is no regulatory purpose served by a DOR role in the local tax title foreclosure process. This section would strike references to post-foreclosure extensions of such exemptions.
Foreclosure of Abandoned Buildings (159-160) These sections would eliminate the need for the involvement of the Department of Revenue in determining whether buildings are abandoned. Currently, the Commissioner is required to “make an affidavit” confirming that the Commissioner agrees with the conclusions of local officials that the building is abandoned. These sections would eliminate references to the involvement of the Department of Revenue, and allow the affidavits and writings of the local officials involved, including a recitation of efforts to locate the property owner, to be recorded and to be treated as prima facie evidence that the building is in fact abandoned.
Taxes in Litigation (161) This section would eliminate a purely ministerial requirement that the Department of Revenue authorize and allow the transfer of taxes in litigation by an accounting officer. By law, if the collector cannot perfect the tax lien due to bankruptcy or other litigation, the lien securing collection continues when the tax collector records a statement of the legal action. Providing a copy of the recorded statement to the accounting officer should be sufficient for the transfer of those taxes from the collector’s current books.
Prisoners of War Exemption from Motor Vehicle Excise (163) This section would re-organize and clarify the paragraph granting a local option exemption from the motor vehicle excise to prisoners of war or their surviving spouses.
Motor Vehicle Excise Collection (164-165) These sections would allow a tax collector to be able to notify the Registry of Motor Vehicles of non-payment of the motor vehicle excise directly, after notifying delinquent taxpayer of the intent to “mark” their license or registration for non-payment. This would reduce fees imposed on taxpayers. These sections are intended to address the Wright court decision, that a warrant to collect must be issued to a deputy collector for a collector to mark.
Jet Fuel Excise (167-169, 248) These sections would implement changes to comply with a recent change in FAA policy that requires use of state and local taxes on aviation fuel for airport purposes. Under the amended policy, excises imposed after December 30, 1987 are subject to federal revenue use restrictions, i.e., can be used for just aviation and airport purposes. If any municipality accepted and imposed the excise after that date, the FAA requires a state action plan to amend any non- compliant laws. States have until the end of 2015 to come up with any required action plan. All but 1 community that has adopted the excise is either grandfathered from complying with the new policy or has adopted/can adopt an enterprise fund for its municipal airport that will effectuate this policy. The sections would also allow a community whose airport is located in another community to receive and use the taxes for airport purposes.
Regional School District Debt (171) This section would make a technical change, inserting the word “committee” to clarify that it is the regional district school committee that may require the approval of any particular authorized issue of indebtedness by referendum.
Extended School Programs (177 -179) Under current law, school committees may provide pre- school and extended school services for certain children and establish a revolving fund for payments made by parents and other monies received in connection with these programs. These amendments would remove outdated restrictions on the students who may receive the services and extend these sections to regional school committees.
Community School Program Fund (180) This section would increase the current community school fund’s $3,000 expenditure limit for material and equipment purchases within a fiscal year, to $10,000.
School Revolving Fund (181) This section would qualify revenue received from enrichment and summer programs authorized by the school committee, and parking fees as monies received in connection with the "use of school property" for the purposes of the district’s revolving fund.
Vocational School Revolving Fund (182) This section would remove the $5,000 expenditure limit placed on vocational schools’ revolving funds, used for culinary arts or other related programs.
Betterment Installments (183) This section would amend current law to allow cities, towns, and districts greater flexibility in setting interest rates that run on betterments or special assessments, at any level up to 2% above the rate of borrowing the city, town, or district is paying. It would also make the interest accrual/due date run from the mailing of the bill, rather than the commitment to the tax collector).
Demolition Liens (221) This section would extend the period of time in which a “demolition lien,” imposed on a property for failure to demolish damaged or dilapidated buildings or structures, may last. Specifically, this section permits a lien added to real estate tax property in the next year to extend for the same period of time permitted for the tax lien. If the demolition lien is not added to a tax until later, it would expire on October 1 of the third year after filing of the lien (current law specifies October 1 of the next year after filing).
We respectfully ask you to approve H. 3908 as soon as possible. Cities and towns are eager to use these provisions to update and modernize their municipal practices, but they cannot do so without these common-sense changes to the General Laws.
Thank you very much for your consideration.
Sincerely,
Geoffrey C. Beckwith
MMA Executive Director & CEO