Sprawl and the Community Preservation Act (S.1988, H.3203)

Massachusetts is falling victim to its own success. People are flocking to our state because it is a great place to live. Many think we have it all – beaches, mountains, rivers, forests. This is a wonderful boon to our economy, but we must remember our lessons from physics class: For every action there is an equal and opposite reaction. What is the downside of this inflow of people? Overbuilding.

Massachusetts is the third most densely populated state in the nation, yet it has a land mass of only 5 million acres. Burgeoning rates of construction and increasing "sprawl" limit opportunities to preserve open spaces and diminish the standard of living and the overall environmental quality enjoyed by a community. According to joint research from the White House Council on Environmental Quality, the US Department of Housing and Urban Development, and the US Environmental Protection Agency, "sprawl is the most expensive form of residential development in terms of economic costs, natural resource consumption, and many other types of personal costs."

Unmanaged growth can have a variety of negative effects on a community, including:

Day in and day out, communities are desperately trying to combat the negative externalities of the development bug. The following scenarios are constantly repeated in cities and towns throughout the Commonwealth: A town has the near impossible task of coming up with $750,000 in 120 days to purchase wetlands that are crucial to protecting the town water supply. The renovations of a town’s historic theatre area, which is the centerpiece for its downtown revitalization plan, is hopelessly stalled for want of funding assistance. The local community development corporation and a for-profit developer are unable to implement their plans to acquire and rehab affordable homes because they lack sufficient financing.

What is the limiting factor in implementing plans in our cities and towns which protect open space, preserve historic sites, and promote affordable housing? MONEY! This is where a Community Preservation Fund comes into play.

Providing cities and towns with the option to create local community preservation funds makes good economic sense. Massachusetts’ scenic and diverse landscapes – such as beaches, mountains, rivers, and forests – not only enhance residents’ quality of life, but also attract investment capital and tourist dollars to the state. In rural communities, these natural vistas face an increased risk of being replaced by shopping centers and housing developments. This kind of land use change is often costly for municipalities to service, particularly if the development site is not carefully chosen. This financial strain makes it difficult if not impossible for small communities to offset environmental and economic costs.

Why should the House include the real estate transfer fee option in the Community Preservation Act?

  1. It is good public policy because it closely ties the solution to the source of the problem.

    2. When used as a means for new development, the buying and selling of real estate is precisely the type of activity that puts a drain on municipal coffers. On average, construction of new homes in a community increases everyone’s taxes because of the need for improved roads, sewer, water, extension of fires service, etc. The major expense incurred with new homes is in the schools. Hence, past and present development presents an equity concern. The whole community is potentially paying for something that benefits a single household.

    The real estate transfer fee is a reasonable attempt to target the tax to the type of activity that raises concerns. It is generally those communities where real estate is turning over quickly that are experiencing a dramatic loss of open space, historic properties, and affordable housing.

    (SIDE NOTE: Based on a study conducted by the New England Forest Consortium, towns spend $1.14/$1 of tax revenue from residential land and only 42 cents/$1 tax revenue from farms and forests.)

  2. It is fiscally more responsible than providing matching money.

    3. In the second version of the Cape Cod Land Bank $15 million of matching money was made available to towns that adopted the property tax surcharge option. This incentive was the primary reason that the property tax surcharge was adopted by Cape voters. To be fair, a Community Preservation Act with only a property tax surcharge possibility would have to include the same level of matching money which means $1 million/town for a total of $336 million. No such matching pot of money would be necessary if the real estate transfer fee option were in the bill.

  3. The property tax surcharge option is a non-option for most communities.

    4. The local property tax post of money is already oversubscribed by many local demands – police, fire, schools. Many communities want to preserve this tool for public works and education concerns. The best indicator of what towns want to do is the 70 some odd home rule petitions which have been filed with the legislature since 1985 requesting the authority to vote on the real estate transfer fee.

    Below is a partial list of cities and towns that have currently or previously filed or have considered transfer fee home rule petitions or other related legislation:
    Amherst Barnstable Berlin Bolton
    Bourne Boxborough Boxford Brewster
    Brookline Cambridge Carlisle Chatham
    Chelmsford Cohasset Concord Dartmouth
    Dennis Dover Eastham Easton
    Edgartown Falmouth Gay Head Gosnold
    Grafton Groton Harvard Harwich
    Hadley Hingham Hull Ipswich
    Lexington Lincoln Littleton Marblehead
    Mansfield Marion Mashpee Maynard
    Medway Middleton Milton Montague
    Monterey Nantucket Natick Newbury
    N. Andover Northampton Northborough Norton
    Norwell Oak Bluffs Orleans Pelham
    Provincetown Rochester Rowley Sandwich
    Scituate Sharon Stoughton Stow
    Sudbury Swampscott Tisbury Truro
    Walpole Waltham Wayland Wellfleet
    Wendell Westford Westport Wilbraham
    Yarmouth
  4. Providing the real estate transfer fee supports local option authority and a local dialogue about critical issues.

    5. The very best thing about the options is the opportunity a community would have to discuss and debate its present and future growth. Cities and towns throughout the Commonwealth would have the same opportunity that Cape voters did: They could talk about and vote on a transfer tax; if that fails, they could talk about and vote on a surcharge; if that fails, they might still talk about the issues raised and vote for a local override on a case by case basis. This process creates awareness and citizen interest and participation. It is the essence of democratic government.

  5. The transfer fee is less of burden because it is a one-time levy rather than an annual increase in property tax.
  6. It is unfair that the rest of the state does not have the same options for promoting and protecting community character that was provided to Nantucket and Martha’s Vineyard.

Other arguments:

  1. This real estate transfer fee is elitist. It only taxes a subset of the community – those buying and selling property – for benefits that the whole community enjoys.

    2. The same argument can be made for the property tax surcharge. Like the transfer tax, those that don’t own property are accruing benefits for which they do not directly pay. In fact, this type of argument takes you down a slippery slope for essentially dismantling all of tax policy. Is there really a one-to-one correlation anywhere in our tax code between those who pay taxes being the ones to reap the benefit?

    That being said, the real estate transfer fee is a reasonable, admittedly imperfect, attempt to target the tax to the type of activity that raises concerns. It is generally those communities where real estate is turning over quickly that are experiencing a dramatic loss of open space and affordable housing.

  2. If the tax is placed on the buyer, a local vote is tantamount to taxation without representation. If the tax is placed on the seller, no one will pass it because they will not want to impose a sales tax on themselves.

    3. As an economic reality, it doesn’t really matter who is legally designated to pay the fee. Who really pays the fee is determined by the marketplace. If it is a buyer’s market, the seller will bear the burden. If it is a seller’s market, the buyer will bear the burden.

  3. We do not want to be seen as promoting a new tax.

    4. The Community Preservation Act does not mandate a new tax. It provides a new tax option, but it leaves it up to the community to decide whether or not they feel that the community preservation warrants this taxation method.

  4. This will hurt the real estate market.

On Martha’ Vineyard, the realtors are supportive of the transfer fee because it helps the local market – Martha’s Vineyard Land Bank Commissioner, Edith Potter.

 

Political perspective:

Supporting the real estate transfer fee is consistent with the House’s action of supporting and overriding the Governor’s veto of a real estate transfer fee option for Cape Cod.