Money through our fingers

By JIM OLDHAM

Published on February 15, 2008

I write this column in advance of the "Community Voices and Budget Choices" forum sponsored by Amherst's Budget Coordinating Committee. You'll read it a few days after that event. Since work obligations prevent me from attending the forum, I want to draw attention to what could be one important piece of a multifaceted approach to our town's on-going financial difficulties.

Those who went to the forum, follow in the papers, or have reviewed the League of Women voters' excellent Municipal Finances study (www.lwvamherst.org/MunicipalFinances.html), are aware that Amherst struggles with fiscal challenges that are not easily resolved. Expenditures are rising faster than income, largely because of factors beyond our control. Throughout the state, healthcare, pensions, energy costs, debt services and certain education costs are rising at rates well above inflation. Income, in Amherst as in towns throughout the state, is constrained by dependence on property taxes, which are regressive and limited by Proposition 2½, combined with unreliable state aid that usually drops just when we need it the most.

In this situation, Amherst would be wise to quickly increase our town's Community Preservation Act surcharge to 3 percent and not let state matching funds slip through our fingers. Although this is only a small piece of the puzzle, since any solution to our situation must combine a mix of new revenue and budget cuts with new and creative ways to provide the things we want more economically, it is an opportunity that deserves attention.

Massachusetts' Community Preservation Act allows communities to collect a surcharge of up to 3 percent of the real estate tax levy to create a local fund for open space protection, historic preservation and affordable housing. It also provides a matching fund that increases the benefits for the local communities that implement the surcharge.

The CPA was passed in 2000, and Amherst was among the first communities in the state to see the benefits and adopt such a surcharge. The CPA surcharge has two big advantages over regular property taxes. The first, already mentioned, is that the state provides matching funds. To date, this has been a 100 percent match, doubling each dollar collected locally. The other advantage is that towns can exempt $100,000 of the value of each taxable residential property, as well as property owned by individuals who would qualify for low income housing, or low to moderate senior housing, in the town. Amherst has adopted both exemptions. This reduces the burden on those least able to pay, making the CPA surcharge more progressive than ordinary property taxes.

Established through referendum, the CPA surcharge is a particularly democratic form of taxation. Voters in 127 Massachusetts communities have adopted it, in large part because it funds things people really care about. As the name suggests, the Community Preservation Act targets money at keeping our communities affordable and desirable. The three purposes of the CPA funds - open space protection, historic preservation and provision of affordable housing - closely match many of the key directions laid out in Amherst's developing master plan, directions based on strong public input. Increasing the surcharge would provide important funding for these key areas while drawing state matching funds at a time when they are sorely needed. Failure to act not only limits the funds we raise locally, but risks losing the state funds we have been receiving. Here's why:

Although Amherst was a leader in adopting the surcharge, we are now lagging behind our neighbors. In 2001, Amherst initially adopted the surcharge at only 1 percent because of uncertain public support. In a referendum in fall of 2006, we raised the surcharge an extra half a percent, to 1.5 percent. Meanwhile, many of our neighbors have adopted the surcharge at the maximum allowed three percent. These include Hadley, Northampton, Leverett, Deerfield, Easthampton and Hatfield, among others.

As more towns participate, and choose higher surcharges, there is more demand for limited state matching funds. Also, complicated rules for fund distribution favor communities with the highest-level surcharge. The first round distribution provides all communities an equal percentage match to the funds they raised, but the level of match is uncertain. Although 100 percent in the past, the match is expected to drop to 80 percent this year and can potentially be significantly less. Later distribution rounds can potentially make up the difference, but they are only open to municipalities that adopt the maximum surcharge.

Those who accept that some tax increase will have to be a part of the answer to Amherst's fiscal problems would be wise to focus on the CPA surcharge, which raises the same money with half the pain of normal taxes, while providing support for key community goals.

Jim Oldham, a Town Meeting member from precinct 5 and a member of the Comprehensive Planning Committee, does environmental justice work in Massachusetts and Ecuador.