Question 1: Bad policy, bad deal for Boston


By David G. Tuerck
Executive Director, BHI

Despite its noble purpose, the Community Preservation Act is bad policy and a bad deal for Boston.

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