WENDELL IS A SMALL TOWN in Franklin County with fewer than 1,000 people. Much of it is taken up by Wendell State Forest, a 7,500-acre property with hills, streams, ponds, and trails.
While the state pays Wendell around $110,000 a year for the land, in lieu of paying property taxes, the sum is less than what Wendell would get if the land were on the property tax rolls.
“People come from Eastern Mass. and enjoy it, yet we get to bear the brunt of paying for it,” said town coordinator Nancy Aldrich.
A report being released Thursday by Auditor Suzanne Bump found that state payments to municipalities to compensate them for state-owned land are massively underfunded. The report also finds that the way the payments are distributed disadvantages rural, towns in Western Massachusetts like Wendell over urban communities in the eastern part of the state where property values are higher.
“The failure of the state to make good on the commitment to fund the PILOT program does a disservice to everyone, all the municipalities with state-owned land,” Bump said of the payment-in-lieu-of-taxes system. “It’s especially unfair to the communities who are largely, though not exclusively, smaller rural communities whose property values are not increasing.”
Bump said underfunding of even several thousand dollars can have a substantial impact on local services in a town with a small budget. And communities with decreasing land values are often those with less economic activity overall and less ability to raise needed money. “Even though there are certain benefits to preserving open space and maintaining the rural character of communities, they’re finding it comes at a literal cost and one they’re increasingly unable to bear,” Bump said.
The report says some Western Massachusetts municipal officials now oppose the state acquiring more land in their communities, because they could get more money if the land remained privately held.
The finding is not a surprise to Western Massachusetts officials, who have for years been asking Beacon Hill lawmakers to take a second look at the state-owned land PILOT program.
Linda Dunlavy, executive director of the Greenfield-based Franklin Regional Council of Governments, said for decades, Western Massachusetts towns have been “stuck between a rock and hard place, where they can’t pursue development and they aren’t receiving revenue to help cover their expenses.”
Under state law, land owned by state government is not subject to municipal property taxes. The state-owned land PILOT program, created in 1910, is a way for government to reimburse municipalities for the value of that land. These properties – worth $3.15 billion statewide – include places like conservation land, parks, beaches, public universities, and prisons.
To figure out how to reimburse communities, the state uses a formula to calculate the value of the land, based on that town’s property values, then divides up the program’s total budget based on what percentage of state-owned land is in each town.
The Legislature sets the funding amount for the PILOT program in each year’s annual budget. In fiscal 2020, it was $30 million, divided among 297 communities. This year, the budget conference committee report sitting on Gov. Charlie Baker’s desk increases that to $31 million – the highest it has ever been. But Bump’s report says that is nowhere near enough to fully reimburse communities for the impact on their property tax collections. To pay for the full value of state-owned land, the Legislature would have to spend at least $45 million, she said.
The PILOT program is particularly important to many rural communities in Western Massachusetts which have huge swaths of state-owned land and for whom this money comprises a significant portion of their budget. For example, the state owns one-fifth of the property value in Mount Washington and one-tenth of all property value in Warwick, Hawley, Savoy, and Wendell. All these communities have state forests of at least 8,000 acres each. Reimbursement levels range from $57,000 for Hawley to $239,000 for Mount Washington.
But those rural communities do not get the highest reimbursements –– those go to communities with far higher land values. A 2,800-acre state forest on Martha’s Vineyard netted $1.4 million for Edgartown, while the 683-acre Hanscom Air Force Base in Bedford yielded the town a $1 million payment.
One stark example of the inequality is in comparing Savoy and Plymouth. Savoy, a rural Berkshire County town, has 11,900 acres of state-owned forest land and received $79,200 for it in fiscal 2020. Plymouth, perched on the coast south of Boston, has 11,800 acres of state-owned forest land, for which it received $698,000. That is because due to the surrounding property values, Savoy’s land represents 0.26 percent of the value of all state-owned land in the PILOT program, while Plymouth’s land of similar size represents 2.33 percent of the value of all state-owned land.
A legislative change that went into effect in fiscal 2019, related to how land values are calculated, simplified the process, but at the same time helped communities with growing property values while disadvantaging those where land values are stagnant or declining – like parts of Western and Central Massachusetts.
“Urban and suburban areas in the eastern part of the state, especially affluent ones, are the largest recipients of the program’s reimbursements,” the report writes. “Rural, less affluent areas in central and western Massachusetts receive declining PILOT reimbursements.”
That formula change hurt rural towns in a way that “didn’t make a lot of sense,” said Rep. Paul Mark, a Peru Democrat. “It’s a noble goal for the state to set a policy goal of preserving open space and open land,” Mark said. “The problem is the burden has been falling on the few residents who remain in these towns to be the state’s playground.”
Rep. Susannah Whipps, an Athol independent, has introduced bills for years, unsuccessfully, to create a commission to study the state-owned land PILOT program. Whipps said many towns in the rural western part of the state are straining taxpayers with high property tax rates and still struggling to pay their expenses, because the towns are not being fully compensated for large state-owned parcels of land. “Over the years we’ve seen towns increase the amount of state property they have, but their pilot payments have gone down,” Whipps said. “We need some rhyme and reason in the formula.”
Whipps said she doesn’t think the needs of Western Mass. communities are considered in the current formula. “I’d like to have it looked at a little closer, just to make sure people in the eastern part of the state understand the contribution that these towns in the Quabbin region give to the Commonwealth –– food, water, clean air,” she said.
The report suggests that there are other ways the payments could be calculated, by using local tax rates, or by applying the same rate across all municipalities based on an average statewide tax rate, rather than basing the payment on local land values. It proposes increasing total funding and holding communities harmless so no community gets less money if property values decline.
The audit also found that the state-owned land program is inconsistent since only certain state agencies are eligible. For example, a property in Bridgewater is being transferred from the Department of Correction to the Department of Fire Services for use as a fire training academy, and Bridgewater will lose its PILOT payment because the fire services department is ineligible. State prison land is eligible for reimbursement; county jail land is not. The report says state officials should apply the program more consistently across all state agencies.