Patrick seeks tax freedom for cities, towns
Governor Deval Patrick's administration is preparing a push to give Massachusetts cities and towns more freedom to raise taxes and fees, as a new report suggests Boston will lose talent and businesses to other similarly-sized cities because it is hamstrung by state constraints.
The effort is likely to encounter resistance in the Legislature, but the governor has begun making a case for helping cities and towns. As that effort begins, a 200-page report to be released by The Boston Foundation today concludes that six other cities are better able to adapt in an increasingly competitive battle to attract people and commercial enterprises because they have more flexibility to find their own revenue sources to take pressure off property taxes.
"Those that have a better legal structure are doing things that we cannot do," said Gerald Frug, a professor at Harvard Law School and coauthor of the study. "And the cumulative effect of that is worrisome."
Boston, along with many other Massachusetts cities and towns, has contended for years that it is too dependent on state funds because it is prohibited by state law from raising revenue through local sales taxes, meals taxes, or other means.
And because state aid is not keeping up with increases in municipal budgets under pressure from rising costs, Patrick suggested yesterday that he is considering ways to relax the restrictions.
"We have to look at ways to help local communities help themselves on both the revenue side and on the cost side," Patrick said.
Patrick said allowing local officials to raise taxes such as a meals tax would not benefit all communities equally, and so he is exploring other possibilities.
Today, the governor is planning to name a director of municipal affairs to work with local leaders on a range of issues, including giving cities and towns more authority over their tax structure. Tomorrow he is expected to announce a package of legislation to help muncipalities.
Overturning or weakening the century-old restrictions on cities' abilities to raise their taxes is attractive to the Patrick administration because it would provide more funding while avoiding the need for a statewide tax increase.
But the Legislature has been reluctant to cede power on taxes to local governments; legislation allowing cities to institute a meals tax has consistently failed on Beacon Hill in recent years.
"It's been resoundingly defeated by the House in the past, and we have no reason to think that opposition has changed," said David Guarino, spokesman for House Speaker Salvatore F. DiMasi.
Still, some proponents of local taxes say some lawmakers may be more receptive this time. After 16 years of Republican governors, Patrick may give Democrats more cover to vote for legislation that could be labeled "pro-tax" by conservative opponents, they said.
The Boston Foundation report looks at six other cities -- Atlanta, Chicago, Denver, New York, San Francisco, and Seattle -- and argues that the Hub is hampered by requirements that cities and towns gain approval from the state Legislature on a variety of issues.
"There's this web of constraints that means the city has to go hat in hand to the Legislature for a very large number of things that other cities can do on their own," said Paul Grogan, president of The Boston Foundation. "This thicket of restrictions and regulations make Boston less competitive than it could be and less of a potent economic factor."
Despite a nationwide return-to-the-cities movement , Boston's population is growing at a much slower rate than that of other cities, according to the report, in part because of the high cost of housing. Nearly 60 percent of Boston's revenue comes from property taxes, compared with 10 percent in Denver, 20 percent in Atlanta, and 25 percent in New York. "If you're relying on prop taxes as your only source of income, you want to have them increase. Your whole tax structure works against affordability," Frug said.
Like many other US cities, Boston currently can impose taxes on hotel rooms, jet fuel, and motor vehicles. Other cities have an array of other taxes . Denver, for example, has a car rental tax. Atlanta taxes insurance premiums. San Francisco has a parking tax.
Every other city looked at in the study also collected at least a portion of the sales tax generated in the city. But sales taxes from Boston and other Massachusetts cities go into a statewide pot, and the funds are distributed through local aid that varies from year to year -- removing some local incentives to increase economic activity, according to the study.
"We're in a different environment of fiscal tightness and there's a need for cities and towns to react more quickly to these conditions, and they're less able to do that in Massachusetts," said Samuel R. Tyler, president of the Boston Municipal Research Bureau, a business-funded government watchdog. "Even small little issues like storage fees for towed vehicles require the city to go to the Legislature. Those things are getting to the point of micromanaging and should be at the discretion of the city or town."
City councils, boards of selectmen, and other local boards send hundreds of home rule petitions to the state Legislature each year. Mayor Thomas M. Menino said through a spokeswoman yesterday that he supported the changes.
Two years ago Boston had to ask the state Legislature for permission to increase its fees for towing cars from $12 -- a fee that was so low it cost the city money to tow parking scofflaws -- to $90.
"These laws are outdated and don't work for today's economy," said Menino's spokeswoman, Dot Joyce. "We need more tools to be more responsive to today's economy without having to lobby Beacon Hill every step of the way."
Lisa Wangsness of the Globe staff contributed to this report. Matt Viser can be reached at maviser@globe.com. 