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
Sunday, October 2, 2016
What is a Levy?
The property tax levy is the revenue a community can raise through real and personal property taxes. We will refer to the property tax levy simply as the levy. In Massachusetts, municipal revenues to support local spending for schools, public safety and other public services are raised through the property tax levy, state aid, local receipts and other sources. The property tax levy is the largest source of revenue for most cities and towns.
What is a Levy Ceiling?
What is a Levy Limit? Proposition 21 ⁄2 places constraints on the amount of the levy raised by a city or town and on how much the levy can be increased from year to year. A levy limit is a restriction on the amount of property taxes a community can levy. Proposition 21 ⁄2 established two types of levy limits: First, a community cannot levy more than 2.5 percent of the total full and fair cash value of all taxable real and personal property in the community. In this primer we will refer to the full and fair cash value limit as the levy ceiling. Second, a community’s levy is also constrained in that it can only increase by a certain amount from year to year. We will refer to the maximum amount a community can levy in a given year as the levy limit. The levy limit will always be below, or at most, equal to the levy ceiling. The levy limit may not exceed the levy ceiling. Proposition 21 ⁄2 does provide communities with some flexibility. It is possible for a community to levy above its levy limit or its levy ceiling on a temporary basis, as well as to increase its levy limit on a permanent basis. These options are discussed in more detail in other sections of this primer. The concepts of levy ceiling and levy limit are illustrated in Figure
How is a Levy Ceiling Calculated?
The levy ceiling is determined by calculating 2.5 percent of the total full and fair cash value of taxable real and personal property in the community:
posted by Jeff Bennett
The property tax levy is the revenue a community can raise through real and personal property taxes. We will refer to the property tax levy simply as the levy. In Massachusetts, municipal revenues to support local spending for schools, public safety and other public services are raised through the property tax levy, state aid, local receipts and other sources. The property tax levy is the largest source of revenue for most cities and towns.
What is a Levy Ceiling?
What is a Levy Limit? Proposition 21 ⁄2 places constraints on the amount of the levy raised by a city or town and on how much the levy can be increased from year to year. A levy limit is a restriction on the amount of property taxes a community can levy. Proposition 21 ⁄2 established two types of levy limits: First, a community cannot levy more than 2.5 percent of the total full and fair cash value of all taxable real and personal property in the community. In this primer we will refer to the full and fair cash value limit as the levy ceiling. Second, a community’s levy is also constrained in that it can only increase by a certain amount from year to year. We will refer to the maximum amount a community can levy in a given year as the levy limit. The levy limit will always be below, or at most, equal to the levy ceiling. The levy limit may not exceed the levy ceiling. Proposition 21 ⁄2 does provide communities with some flexibility. It is possible for a community to levy above its levy limit or its levy ceiling on a temporary basis, as well as to increase its levy limit on a permanent basis. These options are discussed in more detail in other sections of this primer. The concepts of levy ceiling and levy limit are illustrated in Figure
How is a Levy Ceiling Calculated?
The levy ceiling is determined by calculating 2.5 percent of the total full and fair cash value of taxable real and personal property in the community:
posted by Jeff Bennett
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