A levy limit underride (Ch. 59 Sec. 21C(h)) reduces the amount of property tax revenue a community may raise and, like an override, has a permanent impact on taxing authority, but in the opposite direction. If the loss of tax revenue through an underride occurs after approval of the annual budget, it would prompt a corresponding reduction in expenditures, unless the community has significant unused levy capacity.

1. LEVY LIMIT: This is the maximum amount of money that a municipality can get from property taxes in any year for its budget. A simplified calculation goes like this: the previous year’s levy limit, plus a 2.5% increase, plus whatever new growth happened over the past year.
2. THE LEVY CEILING: This is what determines the maximum amount a levy limit can be. It is 2.5% of the full cash value of all taxable property in a municipality. This number changes every year. Think of these as nesting dolls: the levy limit must always be smaller than the levy ceiling.

What is an Underride? Proposition 21 ⁄2 allows a community to reduce its levy limit by passing an underride. When an underride is passed, the levy limit for the year is calculated by subtracting the amount of the underride. The underride results in a permanent decrease in the levy limit of a community because it reduces the base upon which levy limits are calculated for future years. A majority vote of a community’s selectmen, or town or city council (with the mayor’s approval if required by law) allows an underride question to be placed on the ballot. An underride question may also be placed on the ballot by the people using a local initiative procedure, if one is provided by law. Underride questions must state a dollar amount and require a majority vote of approval by the electorate.