Debate renewed on local taxes

Opposition may be softening in the Legislature

House and Senate lawmakers appear to be softening their opposition to giving cities and towns the ability to levy new taxes for meals, hotels, and telephone poles, plans that could give municipal officials long-coveted powers to raise new revenue.

As Governor Deval Patrick prepares to plug a $1.1 billion gap in the current year's budget by making drastic cuts to local aid, there is a growing sentiment among legislative leaders that municipalities will need alternative sources of money.

Two years ago, Patrick raised the idea of giving local communities the option of increasing taxes in their communities, but state lawmakers did not act on his proposals. Patrick's plan also met stiff resistance from restaurant trade groups, business groups, and telephone companies that argued that they were being unfairly singled out.

"Given the climate and what we're up against, a lot of the political walls fall, and you have to start embracing solutions you might not have during good times," said Senator Steven C. Panagiotakos, chairman of the Senate Committee on Ways and Means.

The proposals could allow communities to impose a meals tax of up to 2 percent and increase the local hotel tax by 1 percentage point. The Massachusetts Municipal Association has estimated that the proposals would bring in more than $250 million each year.

Ending a property tax exemption for telecommunications companies, which now do not pay taxes on their telephone poles, would bring in more than $50 million statewide, according to administration estimates.

"I think it's imperative that we take up giving the cities and towns some other tools to make up some of the lost revenue," Representative Robert A. DeLeo, chairman of the House Committee on Ways and Means, said last week. "We have to take a fresh look on all of those items, whether it's the meals tax, whether it's the telecom tax, whether it's the hotel-motel tax. Those have to be on the table front and center and relatively soon."

For several weeks, a legislative commission has been reviewing proposals for municipal relief, and the panel plans to make recommendations soon.

"We're very close," said Senator Stanley C. Rosenberg, a Northampton Democrat and cochairman of the commission. "Everybody understands that we have to be very open-minded and do something significant, or the communities are going to be in very, very serious trouble."

The top legislative leaders appeared to be hanging back yesterday and waiting for Patrick to announce how dire the cuts to local aid will be, something Patrick may announce as early as tomorrow, when he delivers an address to the Massachusetts Municipal Association. Once local officials see how deep the cuts are, state lawmakers could focus on passing a relief package.

Senate President Therese Murray declined to comment yesterday. House Speaker Salvatore F. DiMasi also declined requests for comment.

"Everything must be on the table, given the depth and breadth of this fiscal crisis," said DiMasi's spokesman, David Guarino.

DiMasi is also pushing a proposal to allow municipalities to join the state's health insurance program without union approval, which could collectively save cities and towns up to $2.5 billion over 10 years.

While lawmakers appear more amenable to local taxes, raising broad-based taxes, such as increasing income or sales taxes, have been a political third rail, particularly as state lawmakers push for an increase in the state's gasoline tax to pay for transportation problems.

The state could face a $3.1 billion budget gap in next year's budget, according to a report that will be released today by the Massachusetts Budget and Policy Center.

Part of the shortfall is because for years the state has budgeted costs that it cannot pay with ongoing revenues. In normal years, the state can use reserves to make up the difference, but with declining revenues the state's reserves are needed to avoid deeper cuts.

There are also a number of increases that are almost unavoidable, such as Medicaid costs, pension payments, and debt service payments.

Administration officials will not say how much of a shortfall they are building into their estimates, but state budget writers will have to either find more areas to make cuts or find ways to raise revenue.

Matt Viser can be reached at maviser@globe.com.