Support Our Town, Our Schools, Our Future.
Voters in Town of Lexington will be asked to vote to approve a debt exclusion to pay for construction of vital infrastructure for our schools and public safety.
The projects are:
These facilities are all operating in substandard buildings that are too small to handle the current and future needs of Lexington. Investing in these projects will improve the education system and public safety for all of Lexington. The buildings for the Fire Station Headquarters and Maria Hastings Elementary School are both past the end of their useful lifespan. The Lexington Children's Place is relying in part on space borrowed from "Old Harrington" that is not up to current building codes for public schools. Replacing these buildings is part of the town's master plan.
Despite sound fiscal management on the part of our Town staff and elected officials, it is clear that we need to renew our investment in critical infrastructure. Aging buildings and a growing school enrollment make this a necessity, but capital projects like schools and fire stations cost a lot of money, usually more than a town like Lexington can fund without some additional support from taxpayers.
Proposition 2½ caps the annual growth in the tax levy at 2.5%, but it also gives us the option to fund important goals with debt that is “excluded” from that annual cap. The Board of Selectmen are asking voters to approve a debt exclusion to fund these projects, which will increase property taxes to fund specific capital projects until the debt is repaid.
The Town Manager, Board of Selectmen and School Committee, in coordination with our finance committees, Ad Hoc Working Groups, and Town Meeting, all work to balance the needs of the community with prudent fiscal management. Below are some examples of how the Town plans for and manages growth.
If approved and financed according to plan, the debt service for these three new projects will not significantly impact tax bills until FY2021.
However, the Town is already using excluded debt to fund previously approved projects, most recently the major additions to both the Clarke and Diamond Middle Schools. The Town has continued to issue new debt as needed to fund these projects, and the growing debt service on existing projects will be a factor in next year's tax bill.
The Town's financing plan would use money saved in the Capital Stabilization Fund to mitigate the rise in debt service for the existing projects as well as the projects being proposed now. “Mitigation” means that tax bills will be lowered using money the Town has already put aside for large capital projects. The mitigation would start next year, and it would smooth out a "surge" in tax bills that typically follows a large increase in debt. The result will be a more gradual and consistent increase in tax bills over the next six years.
For a home of median value ($831,000), the annual tax impact from all existing and newly proposed projects is estimated to be $655 in FY2018, and to peak at approximately $1,150 in FY2025 before starting to decline in FY2026.
The chart below (based on data provided by Town Finance staff on Nov 3, 2017) shows the breakdown of baseline property tax, plus existing and new debt service, and the reduction in tax bills from mitigation through FY2024. Note that new debt service (green) begins in FY2019, but thanks to the mitigation plan, its impact on a tax bill would be completely negated until FY2021 after which it would be phased in gradually.
If the town does not vote to approve the debt exclusion in December, it is difficult to predict how Lexington's local government will react. It is possible that the plans for Maria Hastings Elementary School would be shelved for the time being. Funding construction of the Fire Station Headquarters or the Lexington Children's Place might be feasible using within-levy debt, but this would require significant cuts in other parts of the Town's operating budget. In other words, it would impose service cuts to pay for the capital investments we need.
“Proposition 2½” is a state law that controls the total amount of property tax (the tax levy) that the Town can collect annually. Under this law, the tax levy is capped by the levy limit. Every year, Lexington’s levy limit grows by 2.5%, plus any increase in tax revenue resulting from new growth (i.e. new construction and major renovations). The only way the tax levy can exceed the levy limit is if voters approve a debt exclusion. A detailed explanation of Proposition 2½ may be found here.
To fund capital projects, our Town borrows money from the public by selling municipal bonds. These bonds are a form of debt that the town pays off (with interest) in annual installments over a period of up to 30 years. Debt payments for smaller projects come from the normal tax levy, but the levy limit under Proposition 2½ effectively constrains the amount of debt that can be funded this way.
For major projects, Proposition 2½ allows voters to exclude particular debt payments from the levy limit. With voter approval, the town may raise the tax levy above the levy limit to fund debt payments for specific projects.
The vote on whether to allow debt payments to be excluded is commonly referred to as a “debt exclusion referendum”. A debt exclusion must be approved by a majority of the Town’s voters.
A debt exclusion grants permission to exceed the levy limit for a period of years, but it does not change the levy limit. The permission is granted for a specific project, and the permission expires when the debt is fully paid.
By contrast, an operating override grows the levy limit for the current year faster than the 2.5% plus new growth specified under Proposition 2½. This creates an additional, and permanent increase in the tax levy. The additional tax revenue may be used to fund any municipal expense going forward.
In short, debt exclusions are used to fund large capital projects, while operating overrides are used to grow the annual operating budget of the Town by more than the normal constraints allowed under Proposition 2½.
There are several state and local programs that offer tax relief, in the form of exemptions and/or deferrals, to qualifying property owners. These include, but are not limited to, certain exemptions for the elderly, low-income households, and disabled veterans. Information about these programs is available in a brochure published by the Town.
The referendum will be held on MONDAY, December 4. Polls will be open from 7:00am to 8:00pm.
All registered voters residing in the Town of Lexington may vote in this referendum. This includes both homeowners and renters.
If you need to register to vote, or if you are not sure about your registration status, please visit the Massachusetts Online Voter Registration System. New voter registrations must be submitted by November 14, which is 20 days prior to the election.
For more details, please see our page about voting.