Auditor: State homeless policies cost municipalities $13M per year

The state program that places homeless families in hotels and motels imposes more than $13 million in costs upon the host municipalities, particularly for educational programs, without adequate state reimbursement, according to a report from the state auditor’s office released on April 22.

The study follows the auditor’s 2011 finding that the cost imposed on host communities for transporting homeless students to their home districts under the federal McKinney-Vento Act is an unfunded mandate that requires state reimbursement. In fiscal 2014 and 2015, however, the state failed to fully fund the reimbursement program, even as costs have increased, resulting in more than $7 million per year in unreimbursed costs borne by cities and towns.

“Between the time of our initial report and the end of [fiscal] 2016, unreimbursed McKinney-Vento costs for local governments will exceed $24 million,” State Auditor Suzanne Bump said in a prepared statement.

The study released last month by the auditor’s Division of Local Mandates finds that municipalities with hotels or motels that are used to house homeless families face more than $4.4 million in costs each year in addition to the McKinney-Vento transportation costs.

The report also found that some hotel and motel operators involved in the program may not be collecting and remitting local-option room excise taxes on the rooms used by the program, constituting an annual revenue loss in excess of $1.7 million for the affected cities and towns.

In response to the study, the Department of Housing and Community Development has amended its hotel and motel agreement process to require that all applicable taxes be paid on rooms rented by the agency. The department also revised its monthly invoice form to note the taxes included in the amount charged to the homeless shelter program for each room each night, and the department agreed to share this information with host communities.

The practice of sheltering homeless families in hotels and motels has grown dramatically in recent years, with the state spending more than $40 million on the program this year, compared to just $1 million six years ago. These hotels and motels are located in about three dozen communities and housed between 1,700 and 2,000 families during 2014, the year of the study’s analysis.

The report highlights that nearly 70 percent of homeless families were placed in just 10 communities: Allston-Brighton (Boston), Brockton, Chicopee, Danvers, Greenfield, Holyoke, Leominster, Malden, Waltham and Weymouth.

The report recommends that “all state agencies and branches of state government adopt a more proactive and systematic approach to understanding local costs of state policies – and more fully mitigating them whenever possible.”

Specifically, it recommends that the state provide 100 percent reimbursement for McKinney-Vento transportation costs, consider reimbursement for other related costs, and clarify that the rooms tax must be collected on hotel and motel rooms used by the shelter program.

The report is available on the state auditor’s website (www.mass.gov/auditor).