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Pole tax revenue provides relief

Reward small, but helps offset cuts

By Matt Gunderson
Globe Correspondent / August 4, 2011

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The 2009 repeal of a state law that exempted telephone companies from paying property taxes on telephone poles and wires over public ways continues to reap financial rewards for cities and towns across the state. But while the extra revenue is helping to offset a recent round of cuts in state aid, the money isn’t enough to completely alleviate municipalities’ ongoing monetary headaches, say officials in cities and towns across the western suburbs.

In Stow, the total valuation of poles and wires is about $3 million which has generated an additional $51,525 in property taxes this year, said Assessor Dorothy Wilbur. That’s not a lot of money for this small rural town that has an annual operating budget of about $21 million. but it helps in a time of tight fisted spending and depressed revenues, she said.

“I suppose it’s not much, but when the town is struggling, that’s an employee or two, so that’s good,’’ said Wilbur.

Newton appears to be among the communities that stand to benefit the most from the tax. In addition to the roughly $700,000 the city levies from the pole tax over public ways annually, Newton has also been granted the ability by the state to collect $2.2 million in back taxes from Verizon for poles and wires dating to 2003, said Elizabeth Dromey, director of assessment administration. The back tax payments are under appeal by Verizon in the Massachusetts Appeals Court, she noted.

Newton and Boston were the only cities Dromey was aware of that will be able to apply the back tax to telephone poles and wires over public ways. But even without the back tax, the $700,000 annual windfall is a boon in the tight financial climate, said Dromey. The tax money has helped offset a $1.1 million cut in local aid from the state this fiscal year.

“It’s a substantial amount of money,’’ she said. “And certainly, any amount of revenue helps the city.’’

That same message reverberated across the suburbs, where layoffs and curbed budgets have become a regular and unpleasant topic of debate each year. But telephone pole tax money is not a cure for municipalities’ fiscal problems, say some town officials.

The exemption was repealed by the state Legislature in 2009, following a ruling in 2008 by the state Appellate Tax Board that poles and wires could be taxed.

In Belmont, Town Manager Thomas Younger said the $142,066 that the telephone tax amassed this fiscal year has helped offset local aid cuts but not erase them. The town lost $526,000 in federal stimulus funding this year, in addition to dealing with a $130,000 cut in state aid. The town’s total budget is $84.4 million.

“Every cent counts and is a positive value to the budget, but it doesn’t get us back to where we were originally,’’ said Younger.

“This money assists, but it doesn’t offset’’ the reduction in aid,

Some cities and towns are making out better than others, depending on how many poles and wires they have within their boundaries.

While Stow collected $51,525 in property taxes for the current fiscal year, Brookline is getting $123,000 a year on average in property taxes for poles and wires over public ways. Considering that Brookline has a $230 million budget, while Stow’s budget is $21 million, Stow is making a higher percentage proportionally off the property tax than Brookline.

Shrewsbury Town Manager Dan Morgado said $153,000 in telephone tax money helped stave off a $500,000 reduction in local aid but hasn’t been a major factor in the town’s $101.8 million budget.

Shrewsbury doesn’t benefit as much as othes from the poles and wires tax because the town owns all the utility poles, he said. Morgado said the $153,000 comes from the equipment that telephone companies place on the poles.

The tax’s receipts are “significant but not a major influence,’’ said Morgado. “The impact in Shrewsbury is muted by the fact that we own all utility poles since we are a public power community.’’

Brookline Town Administrator Mel Kleckner said his community is facing a $700,000 loss in state aid this fiscal year. The money the town receives from the poles and wires tax has been “very helpful’’ in making a dent in the deficit.

Still, the money isn’t close to erasing the local aid cuts.

Telephone wires and poles had been exempt from property taxes since the early 1900s to help boost the proliferation of the telephone service across the state, said Geoff Beckwith, director of the Massachusetts Municipal Association. But the law was viewed by critics as outdated, a major reason why it was repealed, he said.

“It was an antiquated exemption that really turned into a loophole,’’ said Beckwith, who noted that the estimated total revenue from the poles and wires across the state is around $25 million.

But while the telephone pole tax may be a windfall for municipalities, the change may have a downside. John Bonomo, a spokesperson for Verizon, said the pole tax has been passed on to the consumer in the form of a surcharge. When the tax exemption was lifted, the surcharge was set at $1.26 per month for customers. The surcharge is currently at $1.98 a month, due to rising tax rates in communities across the state, said Bonomo.

The surcharge “was something we were frankly clear about when we were talking with legislators about this changeover - that it would be a surcharge passed onto the consumers,’’ he said.

Verizon would like to see the property tax on poles and wires lifted, since it places the company at a disadvantage to other utility companies that don’t own conventional poles, such as cable television providers, Bonomo said. Cable companies use different wiring technology to route calls and often don’t own telephone poles.

“From a competitive point of view, it puts us at a disadvantage because it’s an additional charge to customers’ bills,’’ Bonomo said.

Beckwith countered that the exemption never really resulted in lower phone bills in the past. Poles and wires need to be taxed to preserve equity and fairness to all property owners in the state, he said.

“The fact that the tax break existed certainly didn’t result in lower telephone bills here in New England,’’ Beckwith said. “It just led to higher profits for the telephone companies.’’