Amherst Finance Committee: Implications of the override

The Amherst Finance Committee posted their analysis of Question 5 (which SASS recommends voting NO on), published in the Amherst Bulletin on Saturday, October 22 (link: http://www.amherstbulletin.com/Amherst-Finance-Committee-report-on-override-vote-5484545) .

Amherst Finance Committee: Implications of the override

by MaryLou Theilman

On the Nov. 8 ballot for president, Amherst voters will be asked in Question 5 whether they want to increase their taxes for a proposed new elementary school through a debt-exclusion override. A simple majority is needed. State law prohibits the ballot question from listing the amount of money requested in the override or how much it would add to annual property tax bills.

New school cost

The Amherst School Committee has recommended construction of a new school on the Wildwood site to serve all students in Grades 2-6 as part of a reconfiguration of the elementary school system. Estimated cost is $67.2 million. The School Building Committee expects the Massachusetts School Building Authority (MSBA) to pay about $34.4 million, leaving Amherst the remaining $32.8 million. Assuming interest at 5 percent, payments on a 25-year bond for $32.8 million is estimated at $21.3 million. The town’s actual cost would thus be approximately $54.1 million.

Override explanation

An override raises the state’s limit on how much towns can increase their property taxes each year. This limit, Proposition 2½, caps property tax increases to 2.5 percent of the previous year’s tax levy, plus any amounts derived from new taxable property development. Towns can only exceed this limit if a majority of the voters agree to override the limit. There are two main types of overrides, both of which Amherst has used. The first is a “basic override” that adds a specific amount of revenue for the operating budget in a given year. In future years subsequent percentage increases are based on that higher amount. This type of override is thus permanent.

The other type (the Nov. 8 vote) is a “debt-exclusion override,” which allows the cost/debt of a project to be excluded from the normal Proposition 2½ limits. When the debt for the project has been paid off, the additional yearly charge ends.

If the townwide vote for the override is successful, Town Meeting would still need to authorize (by a two-thirds vote) the actual borrowing required. Town Meeting begins Nov. 14.

Cost for property owners

Exact cost estimates are not possible because the interest rate or structure of the bonds that would fund the project are not known. Here are two examples which are reasonable approximations: a resident with properly assessed at $200,000 would see an average yearly increase to the existing tax bill of $212, ranging from $270 to $126 during the 25-year bond; with an assessed value of $700,000, the average would be $742 with the range from $945 to $441.

Note that the actual impact on tax bills will change with time: payments will be highest in the early years of the bond repayment period, and lower in later years. These estimates cover both the principal and interest that the town will pay over the bond life.

Additional information

If the debt exclusion override is passed, and Town Meeting authorizes the borrowing, the impact on residential property taxes would start in July 2017 with the greater impacts starting in 2020.

If funding for this project is defeated, either by voters or Town Meeting, options for addressing the schools’ needs are available. Although there is no guarantee that MSBA funds will be available, the MSBA allows another vote on the same override question, or a new proposal for downsizing, renovation, or some combination of renovation and new construction. A new proposal needs to be submitted as a new statement of interest to the MSBA and follow established rules for consideration of a project. A new or revised Feasibility Study would be required, which may be funded partially or solely by the town, depending on how much of the study is new, and how much the MSBA agrees to pay.

Reconsiderations have been submitted to the MSBA by other districts following a failed initial funding vote, and some districts have received funding for new/revised projects. The timeline for the reconsideration process is difficult to predict.

Voters should also be aware that, in addition to the proposed school project, Amherst is also weighing three other large capital projects — a new fire station, new DPW building, and expanded Jones Library — which will need to be paid for by some combination of another debt-exclusion override or the town’s existing capital budget. To help offset the impact of these projects on taxpayers, the town is exploring the following: savings from the operating budget; use of reserve funds; sale of town properties; and increased revenue from new development.

This report was prepared by the Amherst Finance Committee, which is chaired by Marylou Theilman. The other members are Stephen Braun, Joseph Jayne, Bernard Kubiak, Tim Neal, Janice Ratner and Anurag Sharma.

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One comment

  1. Amherst Anne

    My former open concept “Intermediate” School (grades 5-8 when I was there) is being renovated:
    http://www.nhregister.com/article/NH/20160123/NEWS/160129780
    “We’ve gone through this in a very deliberate manner, evaluating the impact to our debt service,” Cosgrove said. “We did a feasibility study to address the issues we’ve heard over the years, really focusing on how to maximize state reimbursement and minimize the impact. It’s sensitive to the taxpayers.”

    Like

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