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Gov. Charlie Baker plans to propose an estimated $137 million annual increase in the excise tax paid on real estate transfers, a proposal he said Friday morning will generate $1 billion over the next decade to protect properties and help cities and towns cope with climate change impacts.
Baker said the fiscal year 2020 budget he will file next week will include a proposal to dedicate $75 million next year toward "climate-smart infrastructure" and "other initiatives to help build resilient communities."
"It's pretty clear that climate change is starting to have a very significant impact on our communities, on our infrastructure, on personal property, on real property and on community property, and this is a way for us to build a program that can generate about $1 billion over 10 years to invest in communities, to invest in resiliency, to invest in infrastructure, to protect people's property and to protect community property," Baker said Friday after announcing the proposal at the annual meeting of the Massachusetts Municipal Association at the Hynes Convention Center.
Though the fiscal 2020 investment would total $75 million, Baker said the investment will ultimately grow to $137 million on an ongoing, annualized basis for the Global Warming Solutions Trust Fund. The money behind the investment will come from a hike in the state's deeds excise rate.
Under Baker's plan, the excise rate will increase from $2 per $500 of assessed value to $3 per $500 of value. The governor said the increase represents "a point-two percent increase." Upon the transfer of property, the seller is required to pay the excise tax.
The Republican governor has generally opposed new taxes and fees, but just this week he has proposed taxing daily fantasy sports, legalizing and taxing sports wagering, and now increasing the tax on real estate transactions. He's also signed into law new assessments on the health care industry and taxes on short-term rentals that operate like hotels.
Baker has previously defended his tax and fee increases by saying he can get behind a tax hike if it funds a new program.
"There is no program in Massachusetts that's going to put a billion dollars on the table to put the kind of resiliency programming in place that we're going to need to deal with the intensity and frequency of storms," the governor said Friday when asked how the climate adaptation and resilience plan represents a new program given that he said his administration has already spent $600 million on similar programs.
The governor did not directly answer when asked if he is now open to additional increases in taxes or fees.
"This is an excise tax that's basically about property and the proposal we're making here is to protect property," he said. "We think, in the long run, the cost/benefit on this one is a good deal for Massachusetts residents."
The real estate lobby has previously argued against increases to the real estate transfer tax, saying a hike in the transfer tax will only add to closing costs and make housing even more expensive in Massachusetts.
The administration said the new program will provide loans and grants for municipalities to make investments identified by the Municipal Vulnerability Preparedness program, including stormwater upgrades, dams and flood controls, drainage and culvert improvements, drought mitigation strategies, assistance in prioritizing, planning, and retrofitting vulnerable assets, and developing climate-smart land use frameworks.
"Over the last four years, we have increasingly witnessed the effects that climate change has on communities and infrastructure across the Commonwealth, and know that the investments we make today are critical to ensure cities and towns are prepared to face the challenges of tomorrow," Baker said.
Also Friday, Lt. Gov. Karyn Polito told the MMA that the FY2020 budget bill the administration will file next week will increase general local aid by $30 million over this year.
Polito said the administration will "continue making our promise" that local aid will increase each year apace with state tax revenue. Unrestricted local aid would grow by 2.7 percent to $1.129 billion, Polito said.
The increase in unrestricted local aid would be shared by the state's 351 cities and towns. Unrestricted aid and K-12 school aid are the largest sources of state aid to cities and towns and supplement property taxes to provide funding for local government services, including public safety, education, and other services.
The administration this year will also seek a $200 million authorization for the Chapter 90 road and bridge repair program. City and town officials have sought larger and multi-year authorizations, saying road conditions warrant more spending.
Lawmakers could increase Baker's proposed local aid spending recommendation as the House and Senate take up their own budgets in April and May, but the Legislature is unlikely to reduce them.
Baker's fiscal 2020 budget proposal is due by Wednesday.
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