Sunday, May 23, 2010

10 Year Property Tax Projections

Below is Article #1 for the Special Town Meeting warrant that will be discussed and voted on Tuesday, May 25 at Longmeadow HS. The Longmeadow Finance Committee (LFC) will provide a recommendation to the Town Meeting floor regarding the impact of the pending High School Building project on future property taxes.

To see if the Town will vote to appropriate, borrow or transfer from available funds, a sum of money to be expended under the direction of the School Building Committee for Longmeadow High School, located at 95 Grassy Gutter Road, between Bliss Road and Williams Street in Longmeadow, Massachusetts, which school facility shall have an anticipated useful life as an educational facility for the instruction of school children of at least 50 years, and for which the Town may be eligible for a school construction grant from the Massachusetts School Building Authority (“MSBA”). The MSBA’s grant program is a non-entitlement, discretionary program based on need, as determined by the MSBA, and any project costs the Town incurs in excess of any grant approved by and received from the MSBA shall be the sole responsibility of the Town. Any grant that the Town of Longmeadow may receive from the MSBA for the Project shall not exceed the lesser of (1) fifty one point eight four percent (51.84%) of eligible, approved project costs, as determined by the MSBA, or (2) the total maximum grant amount determined by the MSBA.

In order to better understand the impact of the new high school project on property taxes I attended the LFC meeting on May 18 during which the LFC recommendation was discussed. (Interestingly enough, I was the only town resident other than members of the LFC in attendance at this meeting.)

The LFC reviewed a forecast prepared by Paul Pasterczyk, Longmeadow Finance Director showing the impact of the High School Building Project on Longmeadow property taxes for the next ten years (--> 2020). As part of this analysis, the impact of a series of 3- $1 million overrides (pretty conservative at an average of $3ooK/year) + construction of a new $9 million DPW facility in 2017 (much lower capital investment than the $150 million estimate for water/sewer and major building projects provided by the A Better Longmeadow/ Vote NO group) were included.

Three scenarios as described below were discussed:

Scenario #1
High School Project not approved + $1 million operational overrides in FY2012, FY2015 and FY2018.

Scenario #2
High School Project approved + $1 million operational overrides in FY2012, FY2015 and FY2018.

Scenario #3
High School Project approved + $1 million operational overrides in FY2012, FY2015 and FY2018 + construction of $9 million DPW facility in 2017.

Below are the results….

[click to enlarge chart]

One more case: do nothing.... a 2.5% annual increase (compounded) for 10 years results in a 28% increase in property taxes.

I was surprised by the relatively small difference in financial results for the three different 10 year projections. However, the analysis did show an increase in property taxes ranging from 39 - 48% for the average homeowner over the next ten years.

Obviously, there are many additional factors (state aid, health care costs, employee salaries, etc.) that could affect future property taxes, operational overrides and reductions in town services. This latest analysis is relatively conservative with only one additional $9 million capital project and 3- $1 million operational overrides over 10 years.

This type of financial analysis can be extremely useful in making long term financial decisions. I hope that the LFC continues to probe our financial future… it would be a welcome change from the year to year planning that Longmeadow always seems to be using.

Based upon what I heard at Tuesday’s meeting, the LFC will “recommend” that approval of the new high school project is “feasible”. They will likely share some of the 10 year property tax projections that I have included with this posting.

We need to do something with Longmeadow High School…. The key question is how much can we afford!


dlkava said...

Is the 39-48% projected increase in taxes over the ten years in addition to the yearly 28% from 2.5% ?
Dean Kavanagh

dlkava said...

“Financially feasible” ?

Let’s do some numbers. A 48% increase in taxes is 3.99% compounded over ten years. This doesn’t sound like much.

But how many public employees and retirees or private sector people expect their salaries or cash flow to inflate at that rate, let alone 2.5% in this global and national environment.

In addition how many employees and retirees expect that they won’t be contributing more to their retirement and health care.

Taken with some probability that incomes will not keep pace with a compounded 3.99% tax increase, these added contributions will significantly erode a standard of living.

How probable is this scenario? Longmeadow is not isolated from the national malaise nor the European sovereign debt crises or our own sovereign debt crises.

How likely, then, will the US and Longmeadow residents not be negatively impacted by these world and national events?

And while a 48% tax increase is probable it could be a low estimate.
Dean Kavanagh

Jim Moran, LongmeadowBiz said...


The 39-48% includes the Proposition 2½ levy limit. I just wanted people to understand the base case property tax increase implications of Proposition 2½ alone without any additional add-ons.