Patrick aid plan gets cool reception

Governor Deval Patrick's plan to help cities and towns ran into immediate resistance in the Legislature yesterday, with the House speaker characterizing portions of it as "absolutely" tantamount to raising taxes and cautioning that it would not benefit all communities equally.

Speaker Salvatore F. DiMasi said that Patrick's proposed pension and health insurance changes are "good, creative ways for cities and towns to save money." But he rejected the Patrick administration's argument that giving communities the right to impose local meals and lodging taxes did not constitute a tax hike.

"Whether they raise it or we raise it, it's allowing them to raise it," the Boston Democrat said in a phone interview yesterday. While the new taxing power deserves careful consideration, he said, "I don't think all communities are going to benefit across the board."

DiMasi's reaction to Patrick's first major legislative proposal hints at the challenge the freshman governor may face in pursuing this key agenda item in the Legislature, which has historically been loath to share its taxing authority. Patrick's municipal relief package, which he announced yesterday at a press conference in Watertown, will be one of the first tests of his ability to deliver on a central campaign promise: to help communities gain a firmer financial footing and to reduce their reliance on the property tax.

"Local option taxes have historically been a tough sell in Massachusetts, and it's been that way for literally generations, so it's a tough hill to climb; there's no question," said Senator Stanley C. Rosenberg, a strong supporter of local taxes who helped craft a municipal relief package several years ago.

The governor's bill would also end longstanding exemptions that let telecommunications companies avoid paying certain property taxes, something Patrick said could bring in about $140 million to local coffers across the state. DiMasi and others raised concerns that this could discourage economic development in the state when Patrick and the Legislature have made it a priority. But Patrick said that eliminating the exemptions would only ask the companies to pay their fair share of the property tax, and that he did not think the exemptions were a determining factor in whether the telecom companies would add infrastructure in less developed areas.

Local leaders who had eagerly awaited Patrick's announcement gave it mixed reviews yesterday. In Boston, where a new 2 percent meals tax could bring in another $40 million, leaders were gleeful. Mayor Thomas M. Menino said a provision that would allow communities to impose new taxes on telecommunications equipment would save Boston homeowners an average of $200.

"I'm grateful to the governor for coming out with this," Menino said. "A lot of people said he wouldn't, but he's come through with a real strong program to help the taxpayers and homeowners in our state."

But the plan encountered a lukewarm reception from many communities without a strong tourism base.

"There's a lot more they have to do, a lot more," said Mayor John Barrett III of North Adams, who said the package would put a small dent in his nearly $40 million budget. "But it's a start."

As a candidate, Patrick made an early pitch for support from local leaders, tapping into their frustration about stagnant state aid, which had forced many communities to raise property taxes and cut services to cover skyrocketing healthcare costs and other local needs.

About 53 percent of municipal revenues statewide come from property taxes, the highest level in 25 years, said Geoffrey Beckwith, executive director of the Massachusetts Municipal Association.

"The reason for that is that communities have no real options other than the hotel/motel and the property tax," Beckwith said. "Right now the two choices that are in front of communities are not good choices: increasing the property tax or decreasing services."

Yesterday, Patrick hailed the relief package as the beginning of a new relationship between state and local government and said it would help lower property taxes.

"The idea is to develop both revenue sources and cost-containment mechanisms to get the pressure off property taxes that local governments are facing," he told reporters at Watertown Town Hall, where he met with local leaders from across the state.

Responding to DiMasi's contention that the local option tax is the equivalent of raising taxes, Patrick spokesman Kyle Sullivan said yesterday, "The governor is looking to give local communities the authority to make a judgment that's in their best interest."

Patrick's package would allow cities and towns to adopt a local meal tax of up to 2 percent. It would also raise the 4 percent limit on the local hotel tax to 5 percent. (Some communities already have a hotel tax.)

Twenty-five percent of the new revenue would go to a state reserve fund that would reimburse cities and towns for property tax abatements for low-income seniors and for other tax abatements that Patrick plans to propose in his budget at the end of February. Communities that already have a hotel tax would have to send only 25 percent of the new revenue they earn to the fund.

On the cost-savings side, Patrick's plan would allow communities to buy health insurance though the state's Group Insurance Commission, whose large size has helped the state control the growth in its employees' healthcare costs.

Michael Widmer, president of the Massachusetts Taxpayers Foundation, said the package would help many cities and towns by holding down their healthcare costs, finding pension savings, and bringing in new tax revenues.

But "this is hardly a panacea to providing much property tax relief in the short-term," he said.

For some local leaders, however, every bit helps.