Property tax revenues across Massachusetts rose by 4.1 percent in the last fiscal year, the largest annual increase since fiscal 2010, but cities and towns continue to struggle to pay for employees and services due to unfunded fixed costs, according to a new report.
The Massachusetts Taxpayers Foundation (MTF) concluded in its annual municipal financial data report that Bay State cities and towns are “stuck in an era of modest rebound.” Overall, total municipal revenues grew by 3.8 percent.
“The pursuit of the 5.2 percent average annual revenue growth we witnessed between 1982 and 2009 continues to become more unattainable in the short term,” MTF President Eileen McAnneny said in a statement.
The average salary for a municipal employee grew by 3.7 percent in the first half of fiscal 2015, compared to a 3.3 percent increase in average wages for private sector workers in Massachusetts, according to the report. Total spending on municipal wages grew by 4.5 percent because of the addition of 2,000 employees.
Cities and towns face a collective $45 billion in unfunded pension and retiree health care liabilities, a burden that’s forcing local officials to make difficult decisions about spending priorities.
“Municipalities’ growing reliance on and limited control over property taxes, along with the unlikelihood of dramatic increases to state aid and local receipts, signals that municipal budgets must increasingly align with the slower growth rate of recent years,” the report said.
Local non-property tax receipts such as motor vehicle excise, hotel and meals taxes, building permits and service charges grew by $220 million in fiscal 2015. The 5.1 percent increase in those revenues was the largest leap since fiscal 2008.
Gov. Charlie Baker, who has emphasized his support for cities and towns sharing in the state’s revenue growth, is scheduled next month to unveil his second state budget proposal, including proposed local aid levels for fiscal 2017 which starts on July 1, 2016.
Cities and towns use local aid to supplement property taxes, the two main revenue sources for municipal budgets. Property taxes across Massachusetts totaled $14.6 billion in fiscal 2015, an increase of $579 million over fiscal 2014.
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