The Massachusetts state auditor's office has issued a report on the program that compensates cities and towns with state-owned land that is not subject to property tax.
This includes land where public universities are located or veterans' homes, like the Holyoke Soldiers' Home, or state forests. The state reimburses municipalities for the tax revenues they don't receive on the land values, but not on buildings or improvements to properties.
The report found the state-owned land program is underfunded, putting many communities in central and western Massachusetts at a disadvantage.
State Auditor Suzanne Bump said that's because the compensation is based in part on how municipal property values change, and because the program does not have enough state funding.
"Any community whose property values aren't increasing at the average statewide rate, and may even be decreasing, are particularly disadvantaged by the failure to fully fund the program," Bump said.
Bump wants lawmakers to change the funding formula and increase the total appropriation for the program from about $30 million to more than $45 million. That way, she said, cities and towns in central and western Massachusetts would "come closer" to getting their fair share.
Take Savoy, for example, in Berkshire County. According to the report, it has 11,924 acres of state-owned land — nearly the same as Plymouth, in Plymouth County, which has 11,881 acres.
Neither community can collect property taxes on the land, which is state forest; Myles Standish State Forest in Plymouth and Savoy Mountain State Forest in Savoy.
Instead, the towns get payments in lieu of taxes from the state. Plymouth gets $698,033, while Savoy gets only $79,254.
"Especially hard-hit are the smaller rural towns whose property taxes are not increasing and may even be decreasing," Bump said.
Bump said the state appropriation for the program has not increased in years while property values have increased.
"That means that no community — or few communities — are getting the full value of payments in lieu of taxes from the state. And this artificial constraint, by failing to fully fund this program, is providing a disservice to all communities," Bump said.
The state auditor's report also looked at the tax rules for solar development.
It found that confusion over the taxation of solar projects is hampering the development of large solar arrays in the state.
Bump said a ruling by the state appellate tax board is being interpreted by some energy developers to mean large solar projects are not subject to municipal property taxes.
"That puts municipalities in quite a quandary," she said. "It's a disincentive for them to accept solar arrays in their communities, despite some of the environmental benefits, because they won't be able to derive any property tax revenue from the arrays."
Bump is urging lawmakers to decide on legislation to clarify the issue.
