Municipalities report budgeted revenue, actual revenue and actual expenditures to the Massachusetts Department of Revenue (DOR), Division of Local Services (DLS) on form Schedule A which includes a tax recapitulation report. The MetroWest Economic Research Center (MERC) at Framingham State University uses the underlying information as well as DLS reports to prepare analyses for several substate regions.
Municipal Revenue and Expenditure
Total municipal revenue is composed of the total tax levy, state aid, local receipts and in “all other” category. The tax levy consists of assessments on personal property, industrial, commercial, open space and residential real estate. State aid is earmarked for either education or general government, while local receipts include motor vehicle excise taxes, license fees and charges for other services.
Tax levies are subject to limitations imposed by related legislation. In any given year the tax levy cannot exceed 2½ percent of the total assessed value of the property of the community. In addition, the tax levy cannot increase by more than 2½ percent of the prior year tax levy limit plus new growth without voter approval of an operating budget override or a debt exclusion override. An operating budget override constitutes a permanent adjustment to the tax levy base that is used for subsequent year calculation limits while a debt exclusion override is in effect only for the life of the bond for which it was approved. It does not become a permanent adjustment to the tax levy base. Individual communities are also able to determine the extent to which property taxes will be borne by residential taxpayers or commercial and industrial taxpayers. Some communities choose to tax residential, commercial and industrial (C&I) property at the same rate while others use split rates. Personal property is generally taxed at C&I rates imposed by the respective community.
Tax levy shifts allowed under the property tax classification law for allocating the annual property tax levy among residential and business taxpayers were temporarily changed effective January 2004 for fiscal years 2004 (if rates had not already been set), 2005, 2006 and 2007. A community continued to have its maximum shift computed under current law in each of those years. If adopting the shift would result in residential taxpayers paying a greater share of the tax levy than the prior year, the shift would then be further adjusted upward using that year’s expanded parameters. The shift in tax burden for commercial properties was increased up to 200% and the maximum burden for residential properties was reduced to 45%. As a result of the decision, beginning in fiscal 2009, the maximum shift to commercial property would be 170% of the fair cash value share of the tax levy if the community qualified for and made this temporary change, choosing to exceed the preexisting 175% maximum. The maximum business shares for 2004, 2005, 2006 and 2007 were 200%, 197%, 190%, and 183% respectively while the minimum residential shares are 45%, 47%, 49% and 50% respectively. There was the additional limitation that residential taxpayers could not pay a lower share of the tax levy than in the prior year.