By David Taber

The Governor trekked to Somerville Feb. 22 to lunch at a local restaurant, discuss a proposal that would offer municipalities new fundraising options, and unveil a new property tax relief plan.

The relief plan, described as a homeowner circuit breaker, is based on a program that provides up to $870 in property tax credit for senior citizens.   ‚ÄúNext week we will file legislation that makes that credit available to all families,‚Äù Governor Deval Patrick said.

The program will affect an estimated 100,000 families and individuals across the commonwealth.  Individuals earning up to $46,000 and heads of households earning up to $58,000 or married couples earning up to $70,000 will qualify if the assessed value of their principle residence does not exceed $684,000. The credit will cover the amount by which a household‚Äôs property tax payment, including water and sewer charges, exceeds 10 percent of their income. 

Board of Aldermen President Robert Trane, who attended the lunch, said the program would be a boon for many Somerville residents who are ‚Äòhouse-rich‚Äô struggling to meet obligations on their assets.   

With regard to municipal funding, city hall spokesman Thomas Champion said the city stands to collect an additional $1 million a year if it is able to enact proposals contained in the Municipal Partnership Act, which Patrick filed last week.

The act would allow cities and towns to levy up to 2 percent meal and hotel tax, and close a number of corporate tax loopholes, including one that shields telephone and telecommunications companies from paying property tax, Patrick said.

Pointing to a telephone pole visible through Amelia‚Äôs storefront, he said, while utilities pay taxes for the right to run lines along the pole, since 1950 telecommunications companies have been exempt. 

“We have almost universal phone service now,” he said.

While universal wireless service is another goal the commonwealth should pursue, that pursuit should not be at the expense of the municipalities, he said.  Champion said, if the bill is passed, taxing telecommunications companies would net the city about $790,000 a year and the meal tax would generate about $120,000 a year.

‚ÄúThat‚Äôs a welcome hunk of change when it looks like local aid is going to be level funded this year,‚Äù Champion said.  He said the city did not yet have an estimate for how much revenue the hotel tax would generate.

Without adjusting for inflation, state aid for Somerville, including education funding, is projected to be $6 million less than it was in 2002, he said.  Mayor Joseph A. Curtatone praised the governor‚Äôs plan as legislation that would enable cities to stabilize their revenue sources in the long term.  ‚ÄúYou have talked about long term solutions, not quick fixes,‚Äù he said.

Somerville homeowner Joe Thompson, who attended the meeting supports the meal and hotel taxes, he said.  ‚ÄúTwo cents on the dollar isn‚Äôt going to do much either way, except when you get enough two cents it‚Äôs $1 million, and I am not going to complain when there are kids to be educated,‚Äù he said.   

In addition to closing the telecommunications property tax loophole, the Governor’s plan proposes to close six other corporate tax loopholes, including one which currently allows companies to set up under different names in different states in order to avoid paying taxes on all of their assets.

Massachusetts will be following 15 other states in requiring so-called combined reporting, Patrick said.  Closing these loopholes will generate $500 million in revenue for the state, $75 million of which will go toward paying for the property tax abatement, he said.

Ward 6 Alderman Rebekah Gewirtz said she was thrilled the Governor is moving to close corporate tax loopholes.  ‚ÄúIt’s an issue of basic fairness and equity,‚Äù she said.
It is unfair, she said, for corporations to escape paying their fair share by ‘gaming the system’ while working families who can least afford it are left to pick up the tab.

The Municipal Partnership Act also contains provisions that will require under-performing public employee pension funds to be taken over by the state retirement board, establish a commission to review existing policy on home rule petitions, and offer municipalities struggling with employee health insurance costs the opportunity to opt into the state-run General Insurance Commission.

“There is no doubt health insurance costs are eating cities and towns alive,” Champion said.

Without raising taxes, the city estimates that it will raise an additional $5.3 million for property taxes next year, but it also estimates that health insurance will cost an extra $3 million, he said.

If the cost of insurance does not abate, the increase in annual insurance costs will overtake the annual increase in property tax revenue within three years, he said.
The city is looking at a number of plans to deal with the rising cost of insurance, including forming insurance pools with other cities and towns.

Opting into the GIC might not be the best option because it would hurt the city’s ability to negotiate with unions, Champion said.