Updated December 2, 2008 - Click here to download a PDF version of this strategy.

Municipalities in Massachusetts face a two-fold challenge when trying to make sustainable and equitable land use decisions: structural constraints imposed by the Commonwealth’s flawed system of “home rule,” and financial constraints due to Massachusetts’ system of municipal finance.  Cities and towns are responsible for many aspects of land use and service delivery, but are hampered by a system that neither truly empowers them nor facilitates regionalism.  While municipalities are granted the authority to make all decisions not specifically subject to legislation, the Legislature has taken a haphazard approach to granting –and taking away – local autonomy.

This approach is strongly on display in the severe restrictions placed on the ability of cities and towns to raise revenue.  According to an analysis of U.S. Census data by the Massachusetts Taxpayers Foundation, the Commonwealth ranked 47th nationwide in 2002 for state and local taxes and fees as a percentage of personal income. At the same time, the Foundation reported that Massachusetts property taxes were 9.1 percent above the national average, and that the state ranked 17th in terms of property tax burden.  

The crippling effect of restrictions on revenue choices open to local governments (that is, not reserved for state use) is compounded by a resistance to increased property tax and state policies that require local governments to pay top dollar prices for public projects and services.  As a result, municipalities find themselves desperate for cash, pursuing short-term payments at the expense of longer-term benefits.  Cities and towns across the region aggressively pursue economic development -- from factories to malls to casinos – which is assumed to generate the most revenue while requiring the fewest services.  In order to mitigate the impacts, they push that development to the far corners of the municipality, increasing impacts on neighboring municipalities.  Municipalities negotiate “mitigation” from developers to address infrastructure impacts, but the haphazard system creates unpredictability and delays for developers (discouraging them from locating in the region) and the mitigation is rarely linked to comprehensive capital plans or land use planning.  

Meanwhile, the conventional wisdom among cities and towns is that most residential development “costs” money (due to the “negative impact” associated with schoolchildren).  Empirical data suggests that this assumption is exaggerated if not outright false, but land use policies still discourage residential development by minimizing residential density.  Such behavior can have a spiraling negative effect on both state and local economies because business and industry are less likely to locate or expand in regions where their employees cannot afford to live.

MetroFuture recommends providing municipalities with a more stable financial foundation by creating more revenue options and tools for controlling costs, including lowering barriers to inter-local collaboration and regionalization of various municipal services (addressed in more detail in Strategy #4).  Increases in state aid would be directed to those areas with the largest expenses for new growth.  Special attention will also be paid to those communities that are limiting growth, and therefore tax receipts, in order to preserve critical assets of statewide importance, such as aquifers, open space, and farmland.  Municipalities would cooperatively manage the impacts and appreciate the benefits associated with development.

The fundamental principles of the MetroFuture’s municipal finance recommendations concur with those of the Municipal Finance Task Force, which published a report “Local Communities at Risk: Revisiting the Fiscal Partnership Between the Commonwealth and Cities and Towns” in September 2005.  As stated by John Hamill, the Chairman of the Municipal Finance Task Force, “There are some fundamental principles that form the basis for the recommendations in the Report: Revenue sharing from the state to local governments must be even-handed, favoring neither state nor local interests or programs; sharing of revenue should be based upon a substantially enhanced needs-based approach; non-educational governmental services at a local level must be adequately funded or we will have a growing crisis about the fundamental ability of governments to deliver basic services; local government officials should be given the tools to raise local municipal receipts and control costs, in some cases by reducing the constraints of state law.”