Massachusetts consistently underfunds payments to municipalities for state-owned land, the state auditor has found.
In smaller towns where the state owns large amounts of land, local budgets rely heavily on reimbursements through Payments in Lieu of Taxes (PILOT). While meant to make up for revenue lost from property tax exemptions, that program has not been fully funded in the past 20 years, according to a report from the office of State Auditor Suzanne Bump.
Further, the formula bases reimbursements on land value, hurting municipalities with stagnant or declining property values.
“The way the formula works, it’s distinctly disadvantaging our towns in Western Massachusetts,” said state Sen. Adam Hinds, D-Pittsfield. “This report pulls out quite clearly: The acreage that some of our towns have is significant, and we still get less money than other towns.
“It’s gotten to the point that towns have come to me and asked that the state stops acquiring land.”
The state owns more than half the land in the Berkshire County town of Mount Washington, said Select Board member Jim Lovejoy. Since an additional 20 percent of land in the town is owned by a tax-exempt nonprofit, PILOT reimbursements of $239,492 amounted to more than 40 percent of the town’s fiscal year 2020 budget.
Any fluctuations in reimbursements, Lovejoy said, would cripple the town’s ability to maintain roads and pay employees.
While Mount Washington State Forest has attracted tourists from far and wide, particularly during the coronavirus pandemic, finding the money to maintain the surrounding roads has been a challenge, Lovejoy said.
“The state has recognized this property as having unique value, and it’s being saved as a resource for people all over the commonwealth,” Lovejoy said. “They’re not just doing it for the benefit of 150 people who live in Mount Washington, yet we’re required to maintain the roads, the bridges, the culverts and access to all of these properties.”
Despite Mount Washington’s relatively high property value for the region, the state’s valuation falls far short of what it would cost a private entity to buy that land, Lovejoy said. While state-owned acreage counts for over half of Mount Washington’s land, the state’s valuation puts that land at just 20 percent of the town’s total land valuation.
Still, other towns receive reimbursements at even lower rates.
Mount Washington’s 8,409 state-owned acres received $239,492 in fiscal year 2020, while Savoy’s 11,924 acres received just $79,254, according to the report.
Some municipalities that have added state-owned land have nevertheless lost reimbursements.
Williamstown added 363 acres of state-owned land in fiscal year 2020 but lost $13,863, about 8 percent of its reimbursements from the previous year. Peru, similarly, accumulated 141 additional acres last year but saw a decline of $19,867, or 29.16 percent, of its PILOT reimbursements.
Those losing reimbursements have disproportionately been Western Massachusetts municipalities. At least 56 municipalities in Central and Western Massachusetts received declining reimbursements from fiscal year 2015 to fiscal year 2020, while just 14 communities did in the eastern part of the state.
The auditor’s report recommends to fully fund the program and to add a “hold harmless” provision ensuring that municipalities with stagnant or declining land values do not lose reimbursements.
Massachusetts’ fiscal year 2021 budget allocates $31 million for PILOT reimbursements. It would have taken $45.65 million to fully fund the program in the previous fiscal year, according to the report, although the state appropriated $30 million.
The report also recommends clarifying ambiguities around PILOT reimbursements for solar facilities, on which precedents have been unclear. Land-use concerns might have contributed to a 50 percent decline in new solar installations in 2019 from the previous year, the report suggests.
Hinds said he has found “strong allies” to address PILOT reimbursements in the Legislature, particularly in Western Massachusetts and on the state’s eastern coast, where there are high rates of state-owned land.
“That’s why this report is so valuable — it brings [the issue] to the attention of all of our colleagues,” Hinds said. “We’ll definitely be using this going forward in the new session.”