Templeton selectmen should read up on this:

Debt and Borrowing Limits 
Bill Arrigal - Bureau of Accounts Public Finance Section and Susan Whouley - Bureau of Accounts Analyst

The sky is not the limit when it comes to borrowing for certain purposes for every city, town, and special purpose district in Massachusetts. In this case, it's not just a matter of affordability or restriction based on a levy limit. In this article, we're focusing on the debt authorization limit.

Background

The concept of an authorization limit can be traced as far as the mid-19th century and is discussed in Tony Rassias' "A Sketch of the History of the Massachusetts Bureau of Accounts and Related Matters in the Growth and Development of Municipal Finance."

Passage of the Municipal Indebtedness Act was an attempt to control the use and rise of debt after the Civil War. The increase in municipal debt was unbridled. A municipality was allowed to borrow in anticipation of the current fiscal year's tax revenues as well as for the next. Borrowing was allowed for ordinary operating expenses, could be incurred to meet other loans at maturity, was allowed with no limit and did not require proper provision for payment when due.

The Municipal Indebtedness Act of 1875 contained an indebtedness limit of 2.5% for cities and 3% for towns of their last preceding assessed valuation of taxable property. The current debt limit law has its roots in that legislation.

Current Debt Limit Law

MGL c. 44 sec. 10 requires that debt authorized by cities and towns under certain sections of law, primarily MGL c. 44, sec. 7, cannot be authorized in total in excess of 5% of their most recent Equalized Valuation (EQV) or in excess of 10% of the EQV if approved by the Municipal Finance Oversight Board (MFOB).

The current law also authorizes special purpose districts to incur debt. This is done by  determining the percentage of the district's previous fiscal year's total assessed value as it relates to the municipality's previous fiscal year's total assessed value.

Regional school districts are not governed by MGL c. 44, sec. 10 and therefore have no debt authorization limit. 

Special legislation or a specific general law, of course, could authorize a debt limit to an amount or percentage other than that allowed by MGL c. 44, sec. 10.

Debt Authorization

Cities, towns, and special purpose districts may authorize indebtedness by a two-thirds approval vote of their respective legislative bodies. Three particular general laws are most often referenced: MGL c. 44, sec. 7 (within the debt limit), MGL c. 44, sec. 8, (outside the debt limit), and MGL c. 70B (outside the debt limit for school construction). The sections of Chapter 44 provide multiple purposes for which borrowing may be authorized.

posted by Jeff Bennett