Verizon’s tax appeal setback turns into $5m gain for Boston

HAILS BOARD DECISION ‘It’s good for the city,’ Mayor Thomas M. Menino (left) said about the case that sets Boston up for a $5 million tax windfall. HAILS BOARD DECISION
‘It’s good for the city,’ Mayor Thomas M. Menino (left) said about the case that sets Boston up for a $5 million tax windfall.
By Hiawatha Bray
Globe Staff / August 6, 2009

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Boston is in line for a $5 million tax windfall, at the expense of telecom provider Verizon Communications.

The money stems from a ruling by the state’s Appellate Tax Board, which on Tuesday rejected a Verizon appeal that sought $22 million in refunds from the city. Verizon claimed that from 2005 to 2008 the city charged too much property tax on Verizon poles and wires that traverse private property, and on underground wiring conduits.

In addition to rejecting the appeal, the board held that Verizon must write a big check to cover taxes on poles and wires that pass over public property, which had previously been exempt from taxation. The board also said Verizon was liable for property taxes on poles and wires that are under construction.

Ronald W. Rakow, Boston’s commissioner of assessing, said the city should collect an additional $5.3 million in property tax revenue as a result of the board’s ruling.

“We will actually be sending a bill to them for that later today,’’ Rakow said. “Don’t want to let the ink dry.’’

Boston Mayor Thomas M. Menino hailed the board’s decision. “It’s good for the city,’’ he said. “The case demonstrates the continued commitment of my administration to tax equity, ensuring that in these tough times everyone must pay their fair share.’’

The tax board’s decision was also a victory for the City of Newton, which argued that Verizon had underpaid its property taxes from 2003 to 2008.

Newton officials said the new assessments will entitle the city to $2.2 million in back taxes from Verizon for poles and wires.

“This decision will enable Newton, Boston, and every other city and town in the Commonwealth to realize monies that are rightfully theirs,’’ said Newton Mayor David Cohen.

In 1915, when telephone service was still unavailable in much of the state, Massachusetts lawmakers exempted phone company poles and cables from property taxes when they passed through public property.

The tax break was meant to speed up construction of a statewide telephone network. But state and local government officials have complained for years that the exemption deprives them of needed revenue and is no longer necessary.

In March of 2008, the Appellate Tax Board set aside the exemption, clearing the way for cities to begin taxing poles and wires on public property. Tuesday’s ruling reaffirms the board’s decision. It also allows Boston to collect the tax retroactively to 2005, while Newton can collect the tax back to 2003. The two cities had already filed appeals for the back taxes for those years.

Mark DeFrancisco, the board’s chief counsel, said communities that have not already filed appeals to collect the tax won’t be able to do so retroactively.

However, Rakow said the board’s decisions will enable cities and towns throughout the state to charge Verizon an additional $26 million in property tax during the 2009 fiscal year, which ran from July 1, 2008, to June 30 of this year.

Verizon can appeal the board’s ruling to a state court, and spokesman Phil Santoro said his company will do so. He said Verizon still believes its taxable assets were assessed too high, and that its poles and wires over public property should remain tax-exempt.

Santoro also warned that if his company ultimately loses, it may recoup the taxes by charging customers higher rates for telephone or Internet service.

“It may very well affect customers’ bills,’’ he said, “but I don’t know yet.’’

Santoro said Verizon is still committed to building its FIOS fiber-optic broadband service in Massachusetts, but that other big-ticket network upgrades might be shelved if its property tax bill increases.

“Massachusetts is a high-cost state,’’ he said, “and new taxes will hinder new broadband investments.’’

Hiawatha Bray can be reached at