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City rolls dice on bill to capture casino taxes

April 12, 2013

By G. Michael Dobbs


SPRINGFIELD — State Sen. James Welch has seen a mixed response to Mayor Domenic Sarno's testimony supporting legislation that would allow a modification to the tax-rate controlling Proposition 2 ½, which would allow the city benefit faster from the influx of taxes from a casino.

Springfield, according to Assessor Richard Allen, is in the position, with its decreasing property values and the resulting tax structure, to not fully and immediately receive all of the new property tax money a casino could represent.

Welch and state Sen. Gale Candaras filed a new bill that would provide an exception to the limits placed on taxation strictly for casino property. The proposed addition to the Proposition 2 ½ law reads, "The local appropriating authority may, by accepting this paragraph, provide that taxes may thereafter, be assessed in excess of the amount otherwise allowed by this section, provided that the increased tax amount is related solely to the assessed value of any parcel, which is subject to a gaming license issued pursuant to Chapter 23K, multiplied by the tax rate for the preceding fiscal year."

Sarno, appearing before the Legislature's Joint Committee on Revenue on March 26, said, "This needs your immediate attention to ensure that your intentions in passing the casino legislation are met as soon as they can be and to allow for Springfield to capture much needed revenue, not to expand services but to maintain the core that we have. On behalf of the city of Springfield, thank you for your continued efforts and we appreciate the fiscal challenges that all governments continue to face."

Welch said that people with whom he spoke in the Senate were "receptive to it but are hearing from both sides." This is a reference to proponents of Proposition 2 ½, who see the legislation as a corruption of the law.

He continued, "I think there is a general thought when the Legislature passed expanded gaming a community could reap all of the benefits and could capture al of the new growth.

"It's not trying to pull an end-run around Proposition 2 ½," Welch contended.

He acknowledged, though, that some people fear this proposed alteration to the long-standing legislation, "could open the door for other changes."

That attitude was expressed in an editorial in the Boston Herald on April 8. The editorial read in part, "We understand that Springfield is struggling. But in addition to violating the spirit of the law, passage of this change would set a terrible precedent. Next time a city or town falls on hard times it may come looking for a similar special deal. There's a solution other than pulling an end-run around a critical law that was enacted to protect property owners. It's called an override."

Allen explained how Springfield came to the tax situation it presently faces. Under Proposition 2 ½, communities may only increase its levy limit by 2 ½ percent plus any new business growth as determined by the state's Department of Revenue.

For example, if the levy limit was $100 million, a municipality could raise the limit by $2.5 million and if there were an additional $1 million in new growth, the new levy limit would be $103.5 million.

Municipalities don't have to tax up to the levy limit, Allen said.

There is another controlling factor in taxation, though, and Allen said the levy ceiling reflects the value of the property in a community.

"If property values start to decline," Allen said, "there can be a downward spiral."

Because Springfield has seen a steady decline in property values there has been a decrease in the levy ceiling and therefore a fall in the levy limit. The lower the levy limit, the less amount of taxation possible. With less tax revenues, Allen noted, comes budget cuts.

In his testimony before legislators, Sarno noted, "The city has cut costs in the last two years by eliminating 190 positions through a combination of vacancies and layoffs, instituting furloughs, no pay increases, the closure of a fire company, reduced library hours, the elimination of the CitiStat department and discontinued maintenance of 10 city parks.

"Additional revenue has been generated from an increase in the trash fee, as well as adjustments to departmentally generated fees such as dog licenses, building permit fees and animal adoption fees.

"Reserves have been utilized to maintain core services in the amount of $15 million in each of the last two years.

"Since I took over as mayor in 2008, I have cut the budget for 6 years in a row. I had 1,589 full time employees on the city side when I became mayor in 2008. I now have about 1,200 of which 60 percent are front line public safety employees such as police and fire," he continued.

Allen said that in fiscal year 2013, the levy limit and the levy ceiling met and "the levy [limit] has been capped."

The financial events of 2008, the foreclosure crisis, the June 1, 2011 tornado and the recent gas explosion that leveled buildings downtown have all contributed to the decline in property values, Allen explained.

The influx of additional property tax revenues from a casino — Allen declined to speculate what the potential amount might be — might not be felt by the city for three or four years because of the current situation with property values and the levy limit.

"Cities like Springfield and other Gateway Cities are getting close to the levy ceiling. They risk not getting the full benefit [of new growth,]" Allen said.

He continued, "How can we address that? How can we provide services? If residents want to see tax bills remain the same, the city wants to be back into a growth mode and see the full benefit of a casino."

A question posed to Sarno's office about whether or not an override to Proposition 2 ½ could address the issue of fully realizing the tax benefits of a casino was not answered by press time.

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