MetroFuture would help the region to resolve its municipal finance crisis, with balanced efforts at cost savings and revenue diversification. With new municipal revenue streams, property tax would comprise a smaller share of total municipal revenue. More predictable funding would help municipalities to run efficiently, and fewer overrides would be necessary.

Currently, cities and towns work under the double bind of shrinking and unpredictable revenues and steadily growing expenses. Massachusetts municipalities have few revenue options and rely heavily on the property tax, with 53% of all municipal revenue coming from property tax, compared to a national average of 28%. Proposition 2 1/2 helps to limit this reliance, but often at the expense of overall municipal strength. From 2000 – 2007, there were 467 override attempts in Metro Boston, of which 61% were successful. However, there are significant economic disparities in the use of overrides. Wealthier municipalities attempt and pass more overrides; poorer communities and urban municipalities attempt fewer overrides and have success rates that are half of that for wealthier communities (27% versus 74%, for the first and fourth income quartiles.) Nearly 75% of suburban municipalities have attempted overrides since 2008, compared to just 25% of municipalities in the Inner Core and 5% of the Regional Urban Centers. Constrained by limits on municipal taxes, the amount of money municipalities raise from local revenue other than the property tax only grew by 6% from 1994 – 2004, in real dollar terms. With those constraints, reliance on the property tax is expected to continue increasing, from 54% in 2000 to 62% by 2030.

From 1987 to 2004 total municipal spending in Massachusetts grew by 1.3% annually in real dollars per capita. The following have seen growth rates beyond the 1.3% state-wide: Debt service (growth of 3.1% annually); fixed costs (health insurance, pensions and benefits, 2.2% annually per capita); education (2.1% annually.) The fastest increases in debt service and fixed costs have been in Maturing and Developing Suburbs. If Current Trends continue, per capita spending on fixed costs, adjusted for inflation, would increase 60% by 2030. Meanwhile, per-capita municipal spending on public works, public safety, libraries, planning, and other non-school services would decline by 29%, adjusted for inflation.

Objectives:

• No more than 53% of municipal revenue, regionwide, will come from local property taxes.
• In all Community Types, a steadily decreasing share of municipal revenue will come from property taxes.
• Per capita local revenue (property taxes, state aid, local “other”) will increase at least as fast as inflation.
• The region’s municipalities will have fewer override attempts; and there will be less disparity in override attempts by municipal median income.
• Regionwide, annual increases in municipal fixed costs will be slower than currently, after adjusting for inflation.
• The majority of the region’s cities and towns will have a municipal bond rating of AA or higher.