Garbage Fees - Trash Collection Is Still a Taxing Issue for Many Condominium Associations
By: Nena Groskind
Have you wondered why condominium associations in some cities and towns must pay private contractors to provide trash collection, recycling and other services municipalities provide owners of detached, single-family homes at no charge? Condominium owners pay property taxes, like other single-family homeowners; why don’t they receive the same municipal services?
You’re not the first to pose that question. The answer lies largely in the history of condominium development. Henry Goodman, a partner in Goodman, Shapiro & Lombardi, LLC, and Richard Brooks, a partner in Marcus, Errico, Emmer & Brooks, P.C., explain: In the early days, when the common interest ownership concept was new and condominiums virtually unknown in New England, local governments often resisted high-density developments because they were concerned about the cost of providing municipal services to so many new residents. To win approval for their projects, developers often proposed that the condominium communities would be self-sufficient – responsible for providing many of their own services (trash collection was the big one), financed through the association dues condominium owners would pay.
This ‘we’ll do it ourselves’ idea assuaged the concerns of local officials, many of whom made it a condition for approving the special permits developers needed to exceed local density limits. But it left condominium owners feeling that they were being treated unfairly, and some decided they wanted to fight.
Brooks took up their cause, representing condominium associations individually (and pro bono), as they took their arguments to their respective city halls. The battles were political rather than legal – waged in public hearings rather than in court, because Brooks advised associations not to sue. Condominium associations aren’t a “protected class,” he explains, so they couldn’t argue that the refusal to provide municipal services to them was discriminatory. Local governments weren’t required to provide the services, he told his clients; they simply needed a rational basis for not doing so, and they had many.
Shifting the Burden
In some cases, the special permits authorizing the condominium developments required them to provide their own services. Where that wasn’t the case, Goodman notes, local officials often argued that the streets in the condominium community did not meet local standards and so were ‘private ways’ the owners had to maintain. It was clear, he said, that “[municipal governments] would do all they could to shift the burden of their financial needs to common interest owners.”
So Brooks didn’t argue that municipalities were required to provide trash collection services to condominium communities; he argued that failing to provide the services was unfair to the owners living there. The argument resonated with many local officials, who may have been persuaded as much by the large number of condominium owners (and the votes they represented) who often attended the hearings as by the logic of their position.
Since Brooks began working with associations on this issue more than 25 years ago (earning him the sobriquet, “Trash Man”), approximately 40 municipalities that did not previously provide trash and/or recycling services to condominium communities have agreed to provide one or both. That represents about half the Massachusetts cities and towns that provide trash services to residents paid for by their local property taxes. (In some communities, all property owners pay separately for trash and recycling services; in others, residents must take their trash to a town dump.)
A New Battle
The question of municipal services for condominiums has surfaced recently in a different form in Stoughton, where condominium associations are challenging a town decision to set a higher water rate for condominium communities with common meters and more than 100 units. Only two condominium communities, with a combined total of 521 units, fall into that category, and Goodman is representing both of them.
The reason for Stoughton’s policy Goodman contends, is its need for additional revenue to finance necessary repairs and upgrades in the water system. Town officials didn’t want to increase rates across-the board, because voters would object, he says, “so they changed the classification system.”
The new policy took effect in January 2017, but when Goodman’s clients objected, the town selectmen delayed implementation pending a public hearing, at which Goodman asked them to “spread the charges across the entire town, rather than placing the burden entirely on the backs of two condominiums.” The selectmen had not made a decision when Condo Media went to press.
No “Rational Basis”
“If they vote against us,” which Goodman said he expects, “we’ll go to court.” The primary legal argument would be: The town must have a rational basis for charging owners in these two condominium associations higher rates than those paid by single-family owners and owners in smaller condominium associations. The town has no such justification, Goodman maintains, making the differential rate structure “arbitrary and capricious.”
Among other points, he notes, local officials have produced no evidence indicating that residents of the condominium communities abuse their privileges (by overusing water) and should pay a higher rate because of that.
Environmentalists suggest that people who pay for water individually rather than collectively (through a common meter) tend to be more conscientious about water use – an argument that has led many condominium communities to convert to individual metering. But that conservation argument would apply equally to commonly-metered condominium communities with fewer than 100 units, which, Goodman notes, aren’t included in Stoughton’s higher pricing tier.
Even more telling, he believes – although the town-house structure of the two communities would make the installation of separate meters “exorbitant,” the boards have concluded that if they could finance the projects with long-term loans, it might cost owners less over time than they would be paying under Stoughton’s new rate structure. When Goodman reported that to local officials, he says, they told him the selectmen would have to approve the individual metering, which they might not be willing to do. “That told me, they aren’t really focusing on conservation at these communities,” Goodman says. “They just want the money.”
A Possible Precedent
Goodman has represented associations in other cities and towns that have proposed charging condominiums more for some municipal services, “but we’ve always worked out a compromise,” he says.
If the Stoughton battle goes to court, it could establish a precedent, which may or may not be favorable. That’s the problem with carving out new law, Goodman agrees ― you don’t know how a court will decide. A victory for Stoughton could lead other communities to adopt differential pricing structures for condominiums; a victory for the condominium associations would tell other municipalities they can’t do that. One way or the other, Goodman says, “the decision could affect every condominium in the state.”
The underlying question – how municipalities provide services to condominium communities ― is actually a national issue, and the Community Associations Institute (CAI) has addressed it. The trade group’s long-standing policy position states: “The provision of public services to homeowners in community associations should be equal to services provided to all other homeowners. Otherwise, (a) public service providers should compensate community association homeowners for the cost of services not provided or, (b) Congress and the state legislatures should permit homeowners to deduct that portion of their community association assessments properly attributable to the association's performance of public functions, or to receive a credit equal to that amount.”
“For condominium owners to pay the same property taxes as their neighbors but not receive the same services definitely isn’t fair,” Dawn Bauman, CAI’s senior vice president for governmental affairs, says. And the issue, she notes, “has been percolating for a long time. It’s definitely on our mind. But it’s not at the top of our list [of concerns],” she acknowledges.
CAI is focusing on tax reform to address the inequity, supporting federal legislation that would allow condominium owners to deduct their association fees from their federal taxes. “We’re watching for opportunities to support the same tax policy at the state level, too,” Bauman says.
New Jersey has enacted a law requiring municipalities either to provide municipal services to condominium communities or reimburse them for the cost. (See sidebar on page x). But it appears to be the only state to have taken that step.
Massachusetts condominiums came close to winning legislative approval of a similar measure in Massachusetts nearly 30 years ago. “We did very well until the last minute,” Brooks says – until legislators were reminded of a provision in Proposition 2-1/2 (capping local property taxes) requiring the state to reimburse cities and towns for the cost of any services the state required municipalities to provide. At that point, someone proposed a “friendly amendment” specifying that municipalities could provide services to condominiums “at their option.” The odds of local governments doing that being negligible, Brooks says, “We decided we were better off without any law,” and the measure died.
Other Strategies for Condos
Some industry executives have suggested that municipalities should grant tax abatements, reflecting the cost of services condominium owners don’t receive, or should reduce the tax appraisals on condominiums, because they arguably would have lower values than properties receiving local services.
Brooks dismisses both ideas. “Under state law, towns can’t approve tax rebates,” he notes. As for reducing condominium appraisals: “Assessors will say they took the cost of services into account,” he says, and it would be difficult for owners to prove otherwise.
The argument that buyers will pay less for condomiiniums because they aren’t receiving municipal services is also hard to support, Brooks says, because “most buyers don’t realize they aren’t getting services other property owners are receiving – they don’ t know the town is using their tax dollars to pay for trash pick-up for single-family homes,” but not for their condominiums.
Legal support for reducing condominium tax appraisals is also unclear. A Connecticut Appeals Court ruling in a 1996 case (Beacon Hill Condo. Assoc. v. Beacon Falls), while not precedent-setting outside of that state, is nonetheless, interesting. Overturning a lower court decision ordering the town to reduce tax assessments on condominiums because it didn’t provide trash collection services to them, the Appeals Court ruled that courts could mandate a lower assessment only if it “was unjust, not merely because the plaintiffs did not benefit from public services.”
Over the years, Brooks has found that the fairness argument is most effective in securing trash collection services for condominiums. Why not expand that fairness argument to demand other services, such as snow plowing, that associations must finance themselves?
Brooks cites two reasons: First, streets in condominium communities are typically classified as private roadways, which municipalities don’t typically plow for single-family owners either. Second, and perhaps more compelling for condominium associations, he poses this question: “Do you want to tie people up waiting for the town to plow,” rather than relying on the private contractor the association has hired to provide that service?
The answer, Brooks suggests, is: “Most community associations don’t want to give up that control.”