| On November 6, Boston
voters must decide Ballot Question 1, which would impose
a 2% surcharge on property taxes for the purpose of funding
affordable housing, open space and historic preservation.
The initiative is expected to raise Boston property tax
collections by $14 million annually for the next five years.
By approving the ballot question, Boston voters
would implement the Community Preservation Act, under
which the state provides dollar-for-dollar matching for
communities that agree to raise their taxes. A dozen other
Massachusetts communities will decide similar proposals.
Despite its noble purpose, the
Community Preservation Act is bad policy and a bad deal
for Boston. It's bad policy because it ratifies an upward
statewide drift in property tax rates and because it encourages
a beggar-thy-neighbor attitude toward local government:
“Your town can double its money for `community preservation'
by getting state taxpayers in other towns to foot the
bill.”
There are two reasons why the CPA
is a bad deal for Boston: First, there is a giant
loophole that makes it possible for communities approving
it actually to shirk their commitment to affordable housing.
Because Boston is not one of these communities, it gets
left holding the bag as the demand for affordable housing
increases.
Massachusetts requires that 10%
of housing units in a community be affordable. But almost
20% of Boston housing is already affordable, while most
of the surrounding communities fall well short of the
10% standard.
The CPA arguably worsens this discrepancy.
According to the Boston Municipal Research Bureau, 30
towns have implemented the CPA. Of these, there is information
about 29. Of the 29, only two have met the 10% standard.
The average for all 29 is 3.8%. Voters living in bedroom
communities use CPA revenues for open space rather than
affordable housing, for the simple reason that open space
increases property values while affordable housing has
the opposite effect.
Boston, however, is not a bedroom
community. It has little open space to preserve, and advocates
of the initiative make it clear that their goal is to
fund more housing. So Boston, which has already stepped
up the plate when it comes to providing affordable housing,
is asked to more while other communities do less. Call
Question 1 the “Let Boston Do It Act.”
The second reason why Question
1 is a bad deal for Boston is that it will cost jobs.
Businesses pay 70% of Boston property taxes and the tax
rate on commercial and industrial property is 18% higher
for Boston businesses than it is on businesses throughout
the state. The proposed 2% tax surcharge would worsen
this discrepancy and, in so doing, drive more than 1,500
jobs out of Boston.
Advocates claim that the measure
would create jobs by stimulating housing construction.
The trouble with this claim is that it ignores the fact
money extracted from business owners to finance housing
construction is money that would otherwise have gone into
business improvements and salaries. A dollar more for
affordable housing is a dollar less for some business's
plant, equipment or payrolls.
The CPA is bad for state taxpayers,
is arguably causing a reduction in the supply of affordable
housing and threatens to destroy Boston jobs as it forces
Boston taxpayers to shoulder what should be a statewide
responsibility. Boston voters should think twice before
they make this lemon into law.
David G. Tuerck, PhD, is chairman
and professor of Economics at Suffolk University where
he also serves as Executive Director of the Beacon Hill
Institute for Public Policy Research.
This article appeared in the November
2-8, 2001 edition of the Boston Business Journal
Format revised on 18 August, 2004
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