Amendment #1 to H.4385

HOUSE . . . . . . . No. 4546

The Commonwealth of Massachusetts
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HOUSE OF REPRESENTATIVES, May 30, 2018.

The committee on Ways and Means, to whom was referred the Bill relative to community benefit districts (House, No. 4385), reports recommending that the same ought to pass with an amendment substituting therefor the accompanying bill (House, No. 4546).

For the committee,

JEFFREY SÁNCHEZ.

FILED ON: 5/30/2018

HOUSE . . . . . . . . . . . . . . . No. 4546

The Commonwealth of Massachusetts

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In the One Hundred and Ninetieth General Court
(2017-2018)

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An Act relative to community benefit districts.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

SECTION 1. The General Laws are hereby amended by inserting after chapter 40W the following chapter:-

CHAPTER 40X.

COMMUNITY BENEFIT DISTRICTS

Section 1. As used in this chapter, the following words shall, unless the context clearly requires otherwise, have the following meanings:

“Beneficial owner”, a natural person or entity that controls multiple properties with different owners of record.

“Board of directors”, the persons designated to oversee the operation of the community benefit district corporation as set forth in chapter 180.

“Community benefit district”, or “district”, a contiguous geographic area with clearly-defined boundaries formed pursuant to this chapter.

“Community benefit district corporation”, or “corporation”, a nonprofit corporation organized pursuant to chapter 180, designated to receive district fees, provide district services and otherwise implement the management plan for the district.

“Community benefit district fee”, or “district fee”, a payment for services or improvements specified by the management plan.

“District fee formula”, a formula used to calculate the district fee owed by each participating property owner.

“Exempt property”, any property whose owner is not required to pay the district fee, which shall include property owned by a non-profit corporation and is exempted from real property tax; all property owned by the commonwealth, a municipality or another governmental entity; and any other property exempted from real property tax by statute or local ordinance or bylaw. A municipality may classify all owner-occupied residential property as exempt property when approving the petition to establish a new community benefit district.

“Formation threshold”, the requirement that a new community benefit district may be established, a community benefit district may be renewed, or a community benefit district may have a change of boundaries, only if the petition signers will pay more than 50 per cent of the proposed yearly assessment; provided that the amount of the yearly assessment attributable to property owned by the same property owner that is in excess of 40 per cent of the amount of the yearly assessment proposed shall not count toward the threshold for formation of the district; provided further that in such instances the percentage attributable to each of the other properties shall be increased proportionately so that the properties total 100 per cent.

“Management plan”, the initial strategic and operating plan for the district approved by the municipal governing body as part of the petition to create the community benefit district, or any subsequent, updated version of the initial management plan that is approved by the board of directors.

“Municipal governing body”, the city council or board of aldermen in a city or the board of selectmen or town council in a town.

“Participating property owner”, a property owner who is required to pay the community benefit district fee and any exempt property owner who voluntarily enters into a binding written agreement to support the district activities by making a cash payment or providing in-kind services; provided that no property owner shall be deemed to be a participating property owner during the period said property owner has not timely paid such fee or made such voluntary contribution, or while such property owner has the benefit of a hardship waiver as contemplated in subsection (b) of section 6.

“Petition signer”, a participating property owner or a designee who voluntarily signs a petition to establish a community benefit district or amend the district boundaries of a community benefit district; provided, however, that when a property is owned by an entity other than a natural person, a petition signer for that property shall include the petition signer’s title and shall submit an affidavit signed under the pains and penalties of perjury that the petition signer has authority to sign on behalf of the property owner; and provided further that each petition signer shall disclose if any properties owned by the petition signer have the same beneficial owner.

“Property”, real property located within the community benefit district.

“Property owner”, the owner of record of property.

“Standard government services”, governmental functions, programs, activities, facilities, improvements and other services that a municipality is authorized to perform or provide and that are paid for out of the municipal government budget.

“Supplemental services”, the provision of programs, public rights of way services, activities, amenities or information in addition to the standard governmental services provided to the community benefit district.

“Yearly assessment”, the total amount of money to be paid by participating property owners in a fiscal year, including community benefit district fees and voluntary payments in cash or in-kind services by otherwise exempt property owners.

Section 2. The rights and powers of a community benefit district corporation approved by the municipal governing body pursuant to section 4 shall include the authority to undertake any of the following activities within the district: (i) retain or recruit business; (ii) administer and manage central and neighborhood business districts; (iii) promote economic development; (iv) manage parking; (v) design, engineer, construct, maintain or operate buildings, facilities, urban streetscapes or infrastructure to further economic development and public purposes; (vi) conduct historic preservation activities; (vii) lease, own, acquire or option real property; (viii) own and manage parks, public spaces and community facilities; (ix) supplement maintenance, security and sanitation; (x) plan and design services; (xi) formulate a fee structure; (xii) accumulate interest; (xiii) incur costs or indebtedness; (xiv) enter into contracts; (xv) sue and be sued; (xvi) employ legal and accounting services; (xvii) undertake planning, feasibility and market analyses; (xviii) develop common marketing and promotional activities; (xix) engage in placemaking, programming and event management within the district; (xx) solicit donations, sponsorships and grants; (xxi) operate transit services; and (xxii) support public art, human and environmental services related to the enhancement of the district or other supplemental services or programs that would further the purposes of this chapter.

Section 3. (a) The organization of a community benefit district shall be initiated by a petition of property owners within the proposed community benefit district, which shall be filed in the office of the clerk of the municipality and with the department of housing and community development. Each petition shall contain:

(i) a list of each property and corresponding property owner within the proposed district;

(ii) the proposed yearly assessment, with a description of the proposed district fee formula and a schedule of participating property owners, the district fees to be paid by each participating property owner, and the voluntary payments or monetary value of any in-kind services to be provided by otherwise exempt property owners;

(iii) the signatures of petition signers, which meet the formation threshold; provided, however, that if there are not more than 4 participating property owners in the proposed district, all such participating property owners shall sign the petition;

(iv) a description of and a site map delineating the boundaries of the proposed community benefit district;

(v) the identity and address of the community benefit district corporation, including its initial set of directors and officers and copies of its articles of incorporation and by-laws;

(vi) a management plan which shall set forth the supplemental services and programs, vision, strategy, fee collection mechanism and budget proposed for the community benefit district;

(vii) the criteria for a temporary waiver of the fee for a participating property owner within the community benefit district who can provide evidence that the imposition of such a fee would create a significant financial hardship;

(viii) a staffing plan which may include private nonprofit, for profit or public agency contractors or subcontractors;

(ix) a mechanism for reimbursing the municipality for the costs, if any, incurred in establishing the community benefit district;

(x) a description of the responsibility, if any, the municipality will have to invoice and collect district fees, and a mechanism for reimbursing the municipality for costs incurred in collecting the district fees or a valuation of those services if the services are intended as an in-kind contribution to the district; and

(xi) a copy of a proposed memorandum of understanding, if any, with the municipality.

(b) A copy of the petition shall be filed by the clerk of the municipality with the undersecretary of housing and community development and the secretary of housing and economic development not more than 30 days following receipt of the petition by the clerk.

Section 4. (a) The municipal governing body shall commence a public hearing not more than 60 days following receipt of a petition by the clerk of the municipality. Written notification of the hearing shall be sent by the clerk of the municipality to each property owner at least 30 days before the opening of the hearing by mailing notice to the address listed in the property tax records. Notification of the hearing shall be published by the clerk for 2 consecutive weeks in a newspaper of general circulation in the area, the last publication of which shall be not less than 14 days before the hearing and listed on the municipality’s website. The public notice shall contain the proposed boundaries of the community benefit district, the proposed district fee formula, a summary of supplemental programs and services provided by the petitioners, and where the property owner may obtain a full copy of the petition and the management plan.

(b) Prior to the public hearing, the municipal governing body shall direct the clerk of the municipality or a designee to inform the municipal governing body whether the formation threshold and other petition requirements have been met, as set forth in section 3.

(c) Not more than 45 days after the close of the public hearing, and not more than 180 days after the filing of the petition, the municipal governing body shall approve or disapprove the petition by majority vote. Action on the petition shall be by vote of the city council with the approval of the mayor in a city, except in any city operating under a Plan D or Plan E charter, in which case, by vote of the city council with the approval of the city manager, and by a vote of the board of selectmen in a town; provided, however, that in a town with a population of not more than 10,000 residents, there shall be a vote by the board of selectmen and a town meeting. If approved, the municipal governing body shall declare the district organized, and describe the boundaries and service area of the district. If the community benefit district corporation has not already entered into a memorandum of understanding with the municipality, the declaration of organization shall include, if required, authorization for the municipal executive to enter into such a memorandum in the form submitted with the petition, or with such modifications as the municipal governing body shall determine. Upon such declaration, the community benefit district corporation may commence operations as set forth in the management plan.

(d) Not later than 30 days after a municipal governing authority votes to approve a new community benefit district, the clerk of said municipality shall mail notice of the declaration of the organization of the community benefit district to each property owner within the district. The notice shall include: (i) a statement that participation for property owners subject to the community benefit district fee is mandatory for so long as the district is in existence, (ii) a description of the district fee formula, (iii) the district fees to be paid by each property owner, (iv) the cash payments or in-kind services, if any, to be provided by otherwise exempt property owners, and (v) a description of the services to be provided within the district. The notice shall be published by the clerk for 2 consecutive weeks in a newspaper of general circulation in the area, the last publication being not more than 30 days after the vote to declare the district organized.

(e) Once established, a community benefit district shall have continuing legal existence until the failure to renew the district as provided in subsection (f) of this section, or until the district is dissolved pursuant to section 10. All participating property owners shall make payments in accordance with the district fee formula as outlined in the petition or management plan, or in the case of an otherwise exempt property owner, consistent with the binding written agreement between that property owner and the corporation.

(f) Within 60 days of the tenth anniversary of the organization of a community benefit district and within 60 days of the tenth anniversary thereafter of the date of the most recent renewal of the district, the board of directors of the community benefit district corporation shall call a renewal meeting of the participating property owners to (i) review the preceding 10-year history of the district, (ii) propose an updated management plan to succeed the then current management plan, and (iii) consider whether to continue the district. The meeting shall be held at a location within the district. Notice of the meeting, including a statement of the purposes set forth in the preceding sentence, shall be given to participating property owners by the corporation in the manner provided in the by-laws, at least 30 days prior to the meeting. The district shall continue in existence after each renewal meeting if continuation of the district is approved by participating property owners who pay more than 50 per cent of the yearly assessment proposed to be assessed in the next fiscal year following the renewal meeting. Votes to renew a district shall be made by participating property owners at the renewal meeting unless the by-laws shall provide for vote by proxy. This must meet the formation threshold, provided however, if there are not more than 4 participating property owners in the district, the district shall continue in existence only if all such participating property owners shall vote in favor of renewal.

(g) If the eligible participating property owners elect not to continue the district, the board shall conclude the business of the district prior to the next anniversary of the district’s creation, or of the prior renewal vote and proceed to discontinue the district and dissolve the corporation in accordance with the requirements set forth in section 10.

Section 5. (a) Each community benefit district corporation shall have a board of directors that shall oversee its operations to ensure the implementation of the management plan. Not less than 51 per cent of the board members shall be participating property owners or their designees. The remaining members of the board may represent the community including residents, municipal government, business tenants and nonprofits.

(b) The management plan shall be updated not less than once every 3 years by the community benefit district corporation’s board of directors. The corporation shall mail, email or hand-deliver a copy of each update to the management plan to each participating property owner, and shall file a copy of such update with the municipal governing body and the department of housing and community development.

(c) The community benefit district corporation shall comply with the requirements applicable to public charities, including without limitation sections 8 and 8F of chapter 12 and sections 18 to 35, inclusive, of chapter 68.

(d) The corporation shall keep a complete copy of the following items: (i) a true and accurate copy of the management plan; (ii) the by-laws, including amendments thereto, as recorded; (iii) a book of the minutes of board meetings; and (iv) financial records, including the following: (a) records of all receipts, expenditures, invoices and vouchers authorizing payments, receivables, and bank statements relating thereto; (b) audits, reviews, accounting statements and financial reports relating to the finances of the corporation; (c) contracts for work to be performed for or services to be provided to the district; and (d) all current insurance policies, or policies which name the corporation as insured or obligee. Such records shall be kept in an up-to-date manner and shall be available for reasonable inspection by any participating property owner during regular business hours. Access to said records shall include the right to photocopy said records at the expense of the person or entity making the request.

(e) The bylaws of the corporation shall provide that the board of directors shall be selected by the participating property owners and shall specify the number of board members, provide for board terms not to exceed 3 years, and state whether the voting rights of each participating property owner are weighted to reflect the percentage of the yearly assessment paid.

Section 6. (a) Exempt property owners shall not be required to pay the district fee, but may elect to do so by entering into a written agreement with the community benefit district corporation. Exempt property owners may also enter into written agreement with the corporation in lieu of, or to supplement, monetary payments, including: space for events, loans of equipment or vehicles, volunteers or volunteer management, staff time, programs and services to the community or another contribution deemed appropriate to support implementation of the management plan. An exempt property owner who agrees to pay the community district fee or provide in-kind services shall be deemed to be a participating property owner.

(b) The community benefit district corporation may grant a financial hardship waiver to a participating property owner pursuant to the waiver criteria established within the petition or management plan. A waiver shall not be intended to be permanent, shall be requested and granted on an annual basis and shall be based upon temporary, extraordinary circumstances.

Section 7. (a) The yearly assessment shall not exceed ½ of 1 per cent of the sum of the assessed valuation of the property owned by participating property owners who are required to pay the district fee. The district fee formula shall utilize at least 1 or may utilize a combination of the following methodologies: (i) different levels for varying classifications of real property; (ii) benefit zones; (iii) assessed valuation; (iv) building or parcel square footage; (v) street frontage; or (vi) another formula that meets the objectives of the community benefit district. The community benefit district corporation, through its management plan, shall have the option to limit or cap the district fee derived from individual properties or to set a lower cap on the total yearly assessment. The management plan may also propose a phase-in period of not more than 3 years in which the yearly assessment and community district fees increase over the stated period. The district fee formula shall be set forth in the original petition as required by section 3.

(b) The community benefit district corporation may change the district fee formula or the district fee set forth in the management plan by majority vote of its board of directors, ratified by a vote of the participating property owners who will pay at least ⅔ of the newly proposed yearly assessment; provided, that if the district petition was approved on the condition that owner-occupied residential property shall be deemed to be exempt property, then the board may not make such owner-occupied property subject to the district fee without prior approval of the municipal governing body. Not more than 30 days after amendment of the formula or fee level, the community benefit district corporation shall file notice of the changes with the municipal governing body and the department of housing and community development.

(c) In addition to receiving the district fees, the community benefit district corporation may receive grants, donations, revenues generated from parking fees, community benefit district activities or gifts on behalf of the community benefit district.

(d) District fees and other revenues received by the community benefit district corporation shall be used solely to fund items to further the goals identified and approved in the management plan for the community benefit district.

Section 8. (a) A memorandum of understanding with the municipality may provide that the collector or treasurer of the municipality will collect district fees in designated community benefit districts and disburse the funds to the community benefit district corporation. In addition to the items identified in section 3A of chapter 60, the collector or treasurer may include notices for district fees in the envelope or electronic message in which a real property tax bill is sent. Unless otherwise provided in the memorandum of understanding, the collector or treasurer shall disburse fee revenues to the community benefit district corporation not later than 30 days after the collection of such fees, together with any interest earned on those fees. In the event that the municipal collector or treasurer shall receive a partial payment and such payment does not specify how it is to be applied, the amount received shall be applied first to municipal tax due and the remainder shall be applied to the community benefit district fee.

(b) Following establishment of the community benefit district, the fees billed by or on behalf of the community benefit district and unpaid after 30 days from the date of billing shall become a lien on the property, which shall have priority over all other liens except municipal tax liens and mortgages of record prior to the recording of a notice of lien, if notice of the lien is duly recorded by the community benefit district corporation in the appropriate registry of deeds or land court registry district.

Section 9. (a) After the establishment of a community benefit district pursuant to this chapter, the district boundaries upon which the establishment was based may, upon majority vote of the community benefit district corporation board of directors, be amended by the municipal governing body after compliance with the procedures set forth in this section.

(b) The community benefit district corporation may prepare a petition to expand or reduce the area, consistent with the requirements set forth in section 3. The petition shall include all of the signatures and information required for a petition to establish a new district as set forth in section 3.

(c) The municipal governing body shall open a public hearing not more than 60 days after its receipt of a petition to amend the district boundaries. In the case of an expansion petition, written notification of the hearing shall be sent by the clerk of the municipality to each property owner within the existing district and the proposed expansion area at least 30 days before the hearing by mailing notice to the address listed in the property tax records. In the case of a petition to reduce the area of a district, the notice shall be sent to each property owner in the existing district. For either an expansion or reduction petition, notification of the hearing shall also be published by the clerk for 2 consecutive weeks in a newspaper of general circulation in the area with the last publication being not less than 14 days before the hearing and shall be listed on the municipality’s website. The municipal governing body may request a determination from the municipal clerk as to whether the newly configured district complies with the formation threshold and other petition requirements set forth in section 3. Not more than 30 days after the close of the hearing, and not more than 180 days after the filing of the petition, the municipal governing body shall vote on whether to declare the district boundaries amended. Upon the adoption of an amendment to the district boundaries, owners of property within the existing district and any property owners to be added to the district shall be notified of the new boundaries of the district in accordance with section 4.

Section 10. (a) A community benefit district may be dissolved by a majority vote by the corporation’s board of directors, ratified by the participating property owners paying more than ⅔ of the yearly assessment; provided, that the amount of the yearly assessment attributable to property owned by the same property owner that is in excess of 40 per cent of the amount of the yearly assessment shall not be counted toward the dissolution threshold; and provided further, that the community benefit district shall not be dissolved until the corporation has satisfied or paid in full its outstanding indebtedness, obligations and liabilities, until funds are on deposit and available therefore, or until a repayment schedule has been formulated and approved by the municipal governing body. Upon a vote for dissolution, the community benefit district corporation shall not incur any new or increased financial obligations. Any liabilities, either current or future, incurred as a result of action to accomplish the purposes of the management plan shall not be an obligation of the municipality. Liabilities shall be paid for entirely from revenue gained from the project or facilities authorized or from the fees on the properties in the community benefit district.

(b) Upon a vote to dissolve a community benefit district, the community benefit district corporation shall windup its affairs as set forth in chapter 180. Any remaining revenues derived from the sale of assets acquired with fees collected shall be refunded to the participating property owners by applying the district fee formula used in the fiscal year in which the community benefit district is dissolved. After the community benefit district corporation’s liabilities have been fully paid and assets fully distributed, the corporation shall be dissolved. Nothing in this section shall prevent the filing of a subsequent petition to create a similar community benefit district.