IN HIS RECENT book, Our Kids, Harvard political scientist Robert Putnam argues that the American dream of obtaining a good education, joining the workforce, owning property, and being a prosperous citizen has become increasingly skewed during the past half century. A nation that was built upon the concepts of opportunity and social mobility has been replaced by a bifurcated nation. Likewise, a recent book by Bill Bishop entitled The Big Sort confirms that, across America, people are choosing to live in neighborhoods with people like themselves. Sadly, this trend extends to where we worship and with whom we socialize.
In Massachusetts, this economic stratification that controls where people live and how they conduct their lives is being exacerbated by two big public policy measures we have put in place: Proposition 2½ and the Community Preservation Act. At a time when income inequality is a topic of frequent and intense debate, it is important that those of us who care about the future of Massachusetts acknowledge the impact of public policies enacted over the past 35 years that result in an ever-increasing division between the haves and the have-nots in the Commonwealth.
Proposition 2½ and the Community Preservation Act determine how Massachusetts municipalities collect and spend the money they take in from property taxes. Proposition 2½, approved by voters in 1980, limits, with statutory exceptions, the amount of money a municipality can collect from property taxes. The Community Preservation Act, which must be adopted by a local approval of voters in a community, creates a special municipal fund that collects a surcharge on property taxes and then apportions the amount raised for the purposes of purchasing open space, historic preservation, recreational upgrades, or the building of affordable housing units. Both laws may have had good intentions, but there are unanticipated consequences resulting from each which should now merit our attention.
The main problem with Proposition 2½ arises from the reality that affluent communities are far more likely to pass override and exclusion votes to fund projects through property tax increases. It is simple math — the rich have more expendable income than do the poor. The rich can afford the extra tax increases, while the poor cannot. Affluent communities pass overrides regularly; in poor communities, overrides fail frequently. Newton passed an override to approve $11.5 million in spending in 2002. Duxbury passed an override in 2008, that increased the average household tax bill by $108 in order to design renovations for the town’s public pool. North Attleboro, however, voted down an override to increase spending by $4 million ($413 per household) in April of 2015, causing large cuts to be made by municipal officials. In July of this year, residents of Rutland also voted down an override that would increase taxes $135 per household for the purpose of increasing funds for the Wachusett Regional School District.
People who are in lower-income brackets often settle in low tax/low service communities partly because they cannot afford to pay the taxes in the more affluent communities. There results an economic segregation far greater than prior to Proposition 2½.
We looked at three communities of similar size, but with very different demographics.
Since 1990, the town of Marblehead, population 19,808, has collected $5.1 million in additional tax revenues obtained by override votes. The funds gained through these overrides enabled the town to build a new school, repair roads and drainage systems, and provided much needed updates to the town’s infrastructure. In the city of Gardner, in contrast, all eight override ballot questions proposed since 1990 have failed. Gardner’s 20,354 residents simply cannot afford the increased taxes. Where Marblehead was able to build a new school, Gardner’s students are spread among several buildings, the oldest of which was first opened in the same year William McKinley was elected president. In Marblehead, 11.2 percent of the student population is considered low income, while Gardner’s student population is 52.7 percent low income. This tale of two towns causes more affluent families to look to settle in places like Marblehead so that they can provide their children with the best possible education, leaving the less affluent to live in communities more defined by budget cuts, outdated school facilities, and poor bond ratings.
Pembroke is slightly smaller than Gardner, with a population of 17,959. Its population, however, is about the only thing that is smaller than Gardner’s. Pembroke voted to adopt the Community Preservation Act in November of 2006. Since then, it has been able to raise almost $1 million ($951,116) to be used for historic preservation, $39,056 for the creation of affordable housing, $52,000 to build and renovate recreational facilities, and $38,509 for the acquisition of land for open space. Pembroke has also seen a steady population growth, as well as a steady growth in the per capita income of the town.
As some communities begin to be more appealing than others, and give the appearance of investing in their communities, people are more apt to settle in these municipalities. The loss of students from districts because of school choice also reduces the amount of state Chapter 70 funding that school districts receive. This also makes the school district where the student resides pay the school district to which the student transfers the per pupil cost of educating the child. Low-income municipalities simply cannot keep up with the funds that affluent communities have available to them. Those who suffer from this are the students who live in these areas. Having to attend a low-performing school district limits students from low-income communities from being deemed qualified to attend higher-performing colleges and universities and gain a stronger footing in the workforce later on. School fees mean that lower-middle class students often decline to participate in extracurricular activities.
In an article in the current issue of CommonWealth, “Rich-poor divide in high school sports,” Bruce Mohl and Hari Patel explain that in lower-income communities high school sports participation is 43 percent below the statewide average due to high participation fees. Meanwhile, in affluent communities it is 32 percent above the statewide figure, as they are able to lower their athletic fees on students and supplement the cost with extra money collected through overrides. This shows that the issue not only causes educational stratification across the Commonwealth, but also creates a bar to student participation in non-academic realms of school. Studies have shown that such extracurricular activities help students learn interpersonal skills and lessons of teamwork that are valuable throughout their adult life.
The same can be said for many art, music, theater, and other programs across the state. Pembroke passed a Proposition 2½ override in the spring of 2015 that allowed the district to keep funding the music programs offered by its schools. In 2010, Gardner had to cut its elementary school band program, three high school ensembles, and many members of the coaching and instructional staff for athletic and music programs, due to budget constraints.
The Massachusetts Community Preservation Act only adds to the inequality fueled by Proposition 2½. The Community Preservation Act is adopted by municipalities through a local ballot initiative. If the community adopts the CPA, then residents receive a surcharge on their property taxes for the purpose of either open space acquisition, historic preservation, affordable housing, or recreation. Communities that adopt the CPA and implement the increase in taxes also receive matching grants from a state account that is funded through a surcharge collected on all deed transfers recorded at the time of a property sale. It is these state matching grants, in particular, that underscore the inequities of the system. Residents from every municipality pay into the fund through the use of the Registry of Deeds, but only the affluent communities that are able to adopt these tax increases are eligible to receive these matching grants from the state. Thus, most of the money deposited in the state trust from the Community Preservation Act is collected at the expense of the less affluent; by providing funds from a state endowment to fund open space land acquisition, poorer communities are funding wealthier communities, which in turn increases their property values and tax rates.
Cambridge has received a total of $45.7 million in state matching grants since it adopted the CPA in 2002. This equates to Cambridge receiving about 15 percent of all state matching funds annually, while its residents only account for 1 percent of the amount of money paid into the CPA fund. Meanwhile, the two largest cities in the state, Boston and Worcester, contribute the most to the state trust fund through their transactions at the registry of deeds about $14.5 million annually but they receive no funds back because their voters have not approved a CPA property tax surcharge. The Community Preservation Act has unwittingly created a system in which the rich are subsidized by the poor.
Another example of the problems that arise from the CPA is that 20 percent of the funds that have been collected through the law have been used to purchase land for open space purposes. This increases the value of all other land in the community and creates an even greater affordability obstacle for anyone seeking to live in these communities.
Proposition 2½ and the Community Preservation Act help affluent communities thrive at the expense of the less affluent. Less affluent communities simply cannot compete with the affluent communities in the state when it comes to obtaining new businesses, good credit ratings, or grant opportunities, because they just do not have the extra money to invest in themselves that affluent communities do.
Proposition 2½ and the Community Preservation Act are based on good intentions. No one wants to argue against protection of the taxpayer, preservation of historical sites, recreation facilities for youth, or purchasing land for conservation. However, these initiatives have unwittingly exacerbated class segregation in the Commonwealth.
There is enough data in hand for the Legislature to review the merits of Proposition 2½, the CPA, and perhaps other programs. If we seek to address income inequality in Massachusetts, it is best if we start by examining the laws which have been on the books, in some cases, for many decades that are contributing to the problem.
While it will only be a start to fixing the problem, we suggest creating a new form of state aid for those municipalities that have not — mainly because of the tight budgets many residents live on — taken advantage of state programs such as the CPA or approved Proposition 2½ overrides. Why not set aside 25 percent of the funds collected for the state CPA account from the fees collected on deed transfers? This could then be distributed to communities that choose to fund CPA-sanctioned projects, but simply cannot afford the tax increase. This would advance the overall economic development of the state by allowing less affluent areas to stand a chance at attracting outside businesses.
Proposition 2½ and the Community Preservation Act have resulted in a new form of class warfare in the Commonwealth of Massachusetts. Home values in municipalities where these tax increases have been passed have risen far more than those in municipalities that have not and cannot pass them. While the rate at which these overrides are being passed has decreased recently, they still have a large effect on municipal policies in Massachusetts.
In Gardner, a house that was worth $118,000 in 1990 is now worth $207,000; a house in Marblehead worth the same amount in 1990 is now worth $298,000. In Fitchburg, a house worth $101,000 in 1990 is now worth $126,500, but in Pembroke, a house of the same value in 1990 is now worth $405,000.
|Municipality||Home Value in 1990 ($)||Home Value in 2015 ($)|
These zip code class wars affect every single citizen of the Commonwealth. In an era of heightened concern about inequality, it’s time to take a stand against the inequality caused by these two laws.
Lawrence S. DiCara, a former Boston City Council president, is a partner at Nixon Peabody. Michael Nicholson is a master’s of public policy student at the Center for Public Policy and Administration at the University of Massachusetts Amherst.