Is Proposal a Tool or a Tax?
Proponents describe it as a tool for economic development. Opponents call it a work-around to levy more taxes.
After sailing through the Massachusetts House of Representatives, and a positive, though weaker, show of support in the state Senate, a bill allowing the creation of Community Benefit Districts is a few procedural votes -- and a signature from Gov. Charlie Baker -- away from being entered into law.
In short, Community Benefit Districts allow businesses, residents and nonprofits to form a local organization that can levy fees on property owners in a certain geographical area, particularly down towns, for projects like landscaping or event planning.
“Some people will say that’s the job of local government and in an ideal world that might be true, but local governments are dealing with rising costs,” said André Leroux, executive director of the Massachusetts Smart Growth Alliance. He described the bill as a form of “community governance” that empowers local people, but does not replace municipal services.
For many -- including those involved in a late-developing bipartisan resistance to the bill -- the fees are a stumbling block.
“Community Benefit Districts allow property owners who create the district to impose additional fees or an increase in fees and taxes without a consensus, taking away the voice of the people. This is unjust and unconstitutional,” said state Sen. Dean Tran, a Fitchburg Republican, in a prepared statement. In a vote last week, he was one of 15 state Senators to oppose the bill, which passed with 22 votes. In May, the bill passed 149-2 through the house.
The proposal has roots in Lowell, where former state Sen. Eileen Donoghue was a sponsor the bill. Calling the fees a tax, isn’t correct she says.
“It’s not coming from the municipality at all,” she said.
While a City Council vote may be necessary to set up one of these districts, she said the organization to create the district must be formed by community members, not the government.
Leroux expanded on her argument.
“Tax is a one size fits all,” he said. “People pay it and then it goes into general funds.”
Fees -- based on property assessments -- that fund a Community Benefit Districts never enter a municipality’s coffers and only “property owners that directly benefit from these services” pay, he said.
“That’s why it’s not a tax,” he said.
Proponents equate the structure to a homeowner’s association. These districts can also use funding from other sources, like entrepreneurial revenue, charitable support and parking fees.
The bill allows property owners to draw a district and start charging fees as long as the people who initiate the district pay the majority of the proposed assessment. The annual assessment could equal up to half of 1 percent of the district’s total assessed valuation.
The bill allows exemptions for some properties including non-profits and government owned parks or buildings. While a district is being established, municipalities can also choose to exempt residential owners.
Outside these exemptions, the options of an individual who simply doesn’t want to pay the fee yet owns property inside the district are limited, according to Donoghue.
“If it’s approved they would be involved in it,” she said. “It’s not an opt out situation.”
Like many other aspects of the district, who is included in it depends on the community group that creates the district and isn’t precisely spelled out in the bill, he said. Leroux recommends creating a district where everyone participates and working with owners to see what they can pay.
“You can’t have a district that looks like Swiss (cheese),” he said.
In at least two gateway cities, officials believe Community Benefit Districts could be an option for economic growth and revitalization.
Fitchburg’s Tom Skwierawski, executive director of community development, said these districts or the similar Business Improvement Districts are on the city’s list of strategies for promoting the area, especially Main Street.
“This would be a tool we would use if and only if we had the support of local business owners,” he said.
Skwierawski said the community could benefit from a more sustainable funding source to promote downtown and a structure to manage the area’s aesthetics.
“These fees are seen as an investment,” he said. “Sometimes you have to spend money to make it.”
Donoghue, now the City Manager of Lowell, remembered ultimately unsuccessful efforts to create a Business Improvement District, or BID, downtown last year.
“It roadblocked and that’s been the history of business districts,” she said.
In over two decades, only a handful of BIDs have been created in the state. Comparatively, she said Community Benefit Districts have less barriers and need to be renewed every 10 years, instead of five years.
“Not that they’re simple to form, but they’re more manageable,” Donoghue said.
Community Benefit Districts also have a broader focus, allowing residential and non-profit owners to get involved in the district in addition to businesses.
Donoghue said she hasn’t spoken to any proponents of BIDs recently, but believes there still might be an interest.
“I wouldn’t be surprised if a group in Lowell would like to support a Community Benefit District,” she said.
Chelmsford Community Development Director Evan Belansky said these districts are considered most applicable to municipalities with dense downtown areas. The possibility of incorporating a Community Business District of BID hasn’t come up in Chelmsford recently, though a property owners association on Route 129 is in the early stages of forming, he said.
“I’m generally aware, but there hasn’t been any previous or recent discussions,” Belansky said.
The future of the bill is unclear as support has faltered as the end of formal sessions near.
Previous versions have passed through both the house and senate, but stalled on the governor’s desk. Donoghue said this version incorporated input from Baker’s office, including greater protections for the elderly and small property owners.
Meanwhile, organizations from the left, right and center have come out in opposition of the bill, including City Life/Vida Urbana, Citizens for Limited Taxation and American Civil Liberties Union of Massachusetts.
The latter, along with Secretary of State William Galvin, have called for the nonprofit entities that govern these districts to be subject to public record laws.
“I think there may have just been a fundamental misreading or misunderstanding of what CBDs are,” Donoghue said.
The legislation is supported by several mayors and chambers of commerce as well as the Massachusetts Smart Growth Alliance, which is led by the Conservation Law Foundation, Citizens Housing and Planning Association and the Massachusetts Association of Community Development Corporations.
Community Benefit Districts are used in other states, particularly California and resulted in success stories like Little Italy in San Diego, according to Leroux.
“It’s about local people solving local problems,” he said.
State House News Services contributed to this report. Follow Elizabeth Dobbins on Twitter @ElizDobbins