Sunday Notes December 18th 2016

What the Debt Exclusion means to Somerville Homeowners

What the Debt Exclusion means to Somerville Homeowners

What is a Proposition 2 ½ Debt Exclusion and how does it work?

Proposition 2 ½ limits the amount of revenue a city or town may raise from local property taxes each year to fund municipal operations. This amount is known as the annual levy limit. However, the law allows a city or town to increase tax revenues above that limit with voter approval. A debt exclusion increases the amount of property tax revenue a community may raise for a limited or temporary period of time in order to fund a specific capital project. Note that this is different from a Proposition 2 ½ override, which would add to the property tax rate indefinitely.

There was brief talk this week about the City of Lowell looking at perhaps doing a Debt Exclusion as a means to paying for a new High School and I heard a Councilor say “similar to what they just did in Somerville.”

What Somerville just did was NOT a normal debt exclusion, The Somerville High School Financing Plan does not call for borrowing the entire $130.3 million (The City’s portion of the $257 Million Renovation ) up front and raising the tax bill immediately.

Instead, the City’s plan keeps borrowing costs as low as possible, and allows the property tax increase to rise gradually over the next 11 years reaching a peak amount in 2027.

The property tax increase will be in effect for the payment period, 2018 to 2054, (36 Years) until the debt is retired.

The City of Somerville who proposed this type of debt exclusion provided the above and following information on their website for taxpayers:

somerville

How much will it cost the average tax payer per year?

The projected borrowing cost is not based on the current rate of 3.046% the city borrows at, but rather at a much higher rate of 5% in order to keep estimates cautious. Should borrowing rates end up being less than the 5% projected, the impact to the taxpayers would be consequently lessened. Should borrowing rates end up being more than the 5% projected, the impact to taxpayers would be increased.

CONDOS – According to financial estimates, the average-valued condo would see approximately a maximum of $189 per year added to its tax bill starting in fiscal year (FY) 2027 through approximately FY2047. Prior to 2027, during the first five years of the borrowing (FY18-FY22), the additional annual property tax on the average condo would be less: the estimate is $2 in year 1, $7 in year 2, on up to $51 in year 5. Between year 5 and year 10, the amounts begin to rise until reaching the maximum noted above. The amount would then fall again somewhat at the very end of the borrowing period before reaching zero in FY2054.

TWO-FAMILY – According to financial estimates, the average valued two-family home would see approximately a maximum of $349 per year added to its tax bill starting in fiscal year (FY) 2027 through approximately FY 2047. Prior to 2027, during the first five years of the borrowing (FY18-FY22), the additional annual property tax on the average two family would be less: the estimate is $4 in year 1, $12 in year 2, on up to $94 in year 5. Between year 5 and year 10, the amounts begin to rise until reaching the maximum noted above. The amount would then fall again somewhat at the very end of the borrowing period before reaching zero in FY2054.

SINGLE-FAMILY – According to financial estimates, the average valued single family home would see approximately a maximum of $294 per year added to its tax bill starting in fiscal year (FY) 2027 through approximately FY2047. Prior to 2027, during the first five years of the borrowing (FY18-FY22), the additional annual property tax on the average single would be less: the estimate is $4 in year 1, $11 in year 2, on up to $79 in year 5. Between year 5 and year 10, the amounts begin to rise until reaching the maximum noted above. The amount would then fall again somewhat at the very end of the borrowing period before reaching zero in FY2054.

THREE-FAMILY – According to financial estimates, the average valued three family home would see approximately a maximum of $428 per year added to its tax bill starting in fiscal year (FY) 2027 through approximately FY2047. Prior to 2027, during the first five years of the borrowing (FY18-FY22), the additional annual property tax on the average single would be less: the estimate is $5 in year 1, $15 in year 2, on up to $116 in year 5. Between year 5 and year 10, the amounts begin to rise until reaching the maximum noted above. The amount would then fall again somewhat at the very end of the borrowing period before reaching zero in FY2054.

That method of a debt exclusion is different from what the voters in Dracut did for their renovation project.

In Dracut the MSBA (Massachusetts School Building Authority )is reimbursing Dracut for 62.5 percent of the $58.4 million in project costs. Over the 25 years of the construction bond, taxpayers will add on average $193 to the yearly tax bill for a single-family home valued at $274,000, the town’s average assessment in 2011.

That $193 is a flat fee paid yearly in addition to their regular Property tax which usually goes up 2.5% yearly.

So you can do a debt exclusion in a couple of different ways but it is a set period of time, Dracut 25 years Somerville 36 Years and it is over and above the regular yearly tax increase.

For Example IF the taxpayers of Lowell approved a Debt exclusion similar to Somerville and for this example I will use the current $15.16 per thousand Residential rate and the Somerville figure but because of the overall cost of the Lowell project the rates will be higher.

The tax bill on a $250,000 home this year would be $3,790 PLUS the Debt Exclusion of $4 in year one, and increase in time over whatever period the city proposes (In Somerville $94 in year 5, and gradually up to its peak of $349 per year)

If we followed what Dracut did it would be $3,790 PLUS $193 for the Debt Exclusion. (In Lowell’s case the $193 number might be closer to $482)

No matter which way it is done, there is an additional cost on top of the yearly property tax bill and the yearly increase which can be up to 2.5%.

In my view this may be one of the last chances Lowell has at getting a renovated with New Building – New High School or Renovated High School while receiving 74% -80% reimbursement from the State. So we have to do whatever needs to be done to get this accomplished.

To many they are NOT single-use plastic bags

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While I’m always impressed and encouraged when young people take a stand and get involved, I’d rather see LHS students supporting the need for a new or renovated High School than trying to get the City Council to do what the Mass legislators smartly did not. Outlawing plastic bags.

In many households these bags are being reused on a regular basis to pick up or clean up after animals, used in bathroom trash bins, used to pack lunches or used to clean out the junk drawer or car.

With the increase just announced in fees for city services, tax bills going up do to re-evaluation and the need for a possible debt exclusion to build or renovate a new Lowell High suggesting “Adding a fine for not doing so (using reusable bags) would give the consumer an added incentive” is just saying tax the poorest people because of what we think is best. Forcing the stores to charge a small fee for people who don’t bring one (reusable bags) is just taxing people again because they don’t live the way you think they should.

Sorry but in my view there are many more important and vital issues for the City Councilors of Lowell to deal with than a Bring your own Bag ordinance. Yes I know it takes anywhere from 20 to 1,000 years for one plastic bag to decompose but to want to mandate and tax people for using this product seems unjust.

If you want to encourage people to bring your own bag than educate them on why they should do so, partner with LTC, WCAP and the SUN, create an awareness campaign, get the LRTA to let you design and post on the city buses and work with the Market Basket Corporation to create handouts to go with grocery orders encouraging people to buy reusable bags and highlight the reasons. See if that works before putting in an ordinance to add a fee to everyone.

WHERE WERE THE MODULAR CLASSROOMS IN 1981?

I GRADUATED LOWELL HIGH SCHOOL IN 1980 there was no “New Building” we had cafeteria’s set up in the basement and gym was in the bottom of the old trade school with steel beams running through the roof of the basket ball courts. There was NO modular classrooms needed when the “New building” was built in the early 1980’s and if the students who went to LHS survived in 1981 – 1985 with the building and tunnels being constructed then the students in the next few years can make it work. We can find the room without the expense of modulars.

We hear there are up to 20 classrooms empty at any given period during the day, if everyone of those classes can hold 25 students that is 500 students and that doesn’t count what might be available in the “Freshman Academy.

What are the class sizes for all of the various electives? Can some of the electives be eliminated during the construction? Maybe we need to reduce choices and/or combine choices on electives.

I’m a huge theater/radio/entertainment and the arts guy, I love the MIC and spotlight (have the face for radio) but I believe we may need to reduce / combine these choices if it is a space requirement issue.

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We need to take a look at how many students take some of these classes and electives and ask do we really need a College and Honors course? Again for a 3-5 year period can we condense for space?

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I’m aware that times have changed and we don’t want to create any excuse for little Johnny or Sally to complain about choices of electives or 25 students in class or eating in the basement because it lacks natural sunshine but sometimes desperate times call for desperate or different methods.

At one time BOTH LHS and when I worked their Greater Lowell TECH did split shifts were students start and end times differed. These are all still viable options if it means we can get a reimbursement of 74% – 80% to build/renovate the High School.

The suggested option of tearing down the 1980’s building including the gym area and building a new modern 6 story building while keeping the buildings on Kirk St and Freshman Academy open seems to make the most sense depending on cost. Will “Phys Ed” classes be much different..sure but for a few years we can tolerate it. Will we have to spend money to rebuild cafeteria’s in the basement…yes but again tolerable for what the final outcome could be.

We cannot let the opportunity to get a partially new and renovated LHS pass because of some minor inconveniences to student comfort or split shifts. Nothing should be off the table.

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