Massachusetts Association of School Business Officers

1. Massachusetts Association of School Business Officers Proposition 2½ Levy Limits Division of Local Services MA Department of Revenue February 7, 2013

2. DOR/DLS Role in Local Taxes • Establish assessment administration standards • Prescribe local tax forms • Review local assessing practices • Determine Proposition 2½ levy limits • Determine tax classification limits • Approve tax rates

3. PROPERTY TAXES

4. Property Tax Features • Assessed in proportion to valuation (ad valorem tax) • Tax rate set to produce fixed amount of revenue (property tax levy)

5. Tax Levy • Allocated by valuation of taxable property • Based on municipal budget decisions • Limited by Proposition 2½ Tax Levy • Tax Rate = X $1,000 Assessed Value

6. Example • 80% of assessed valuation is in Residential property class • Residential taxpayers are assessed and pay 80% of tax levy

7. Shifting the Tax Burden Tax classification changes distribution of tax levy notthe amount

8. Tax Levy Summary Total Budgeted Expenditures and Required Amounts less anticipated state aid (“Cherry Sheet”) less anticipated local fees, charges and other revenues less local reserves appropriated in budget____________ = Tax Levy < Proposition 2½ maximum allowable levy

9. Levy Building Blocks Levy Ceiling Levy Limit Levy

10. Factor 1 Increase by 2.5% Factor 2 "New Growth" Annual Levy Limit To Calculate New Levy Limit Begin with Last Year’s Levy Limit

11. Annual Levy Limit Levy Ceiling Levy Limit Levy Limit Base

12. New Growth To Calculate the New Growth Factor Multiply Prior Year's Tax Rate by Allowable Valuation Increases over Prior Year

13. To Illustrate Calculation of New Growth New Development Parcel A – Last Year Assessed at $50,000 Parcel A – This Year Assessed at $250,000 $200,000 Included in New Growth Calculation

14. Annual Levy Ceiling To Calculate the New Levy Ceiling Begin with This Year’s Total Assessed Valuation Multiply by 2.5%

15. To Illustrate Calculation of Annual Levy Limit Levy Ceiling $ 250 million Levy Ceiling Assessed valuation of the community is $10,000,000,000 Assessed Value of 10 billion x 2.5% = $250million Subtotal and Levy Limit = $ 105 million Growth $ 2.5 million 2.5% $ 2.5 million $100 million Levy Limit Base Last Year’s Levy Limit $ 100 million

16. Override Levy Ceiling New Levy Limit Levy Limit Base

17. Next Year $1 million override Levy Limit Base = $101 million To Illustrate Impact of Override This Year $1 million Override The community can now levy $101 million Levy Limit = $100 Million

18. Underride Current Levy Limit New Levy Limit

19. Purchase Equipment Purchase land Exclusion Renovate public buildings Construct public works

20. Exclusion Maximum Allowable Levy Levy Ceiling New Levy Limit Levy Limit Base

21. To Illustrate Impact of Debt Exclusion Debt Exclusion approved for 20 year loan with annual debt service payment of $1,000,000 Current Year Levy Limit $100 million Community can Levy $101,000,000

22. Levy Limit of $100 million Year 1 $1,000,000 Exclusion Community can levy $101,000,000 To Illustrate Impact of Debt Exclusion Year 2 Begin with Year 1 Levy Limit $100 million PLUS - - $1,000,000 Exclusion

23. Any Spending Purpose Only Capital Purchases Permanent Temporary Debt (Life of Bond) Capital (1 Year) Amount Limited by Ceiling No Limit on the Number Or Dollar Amount Comparison of Referenda Questions Overrides Exclusions

24. The Maximum Levy Maximum Allowable Levy Levy Ceiling New Levy Limit Levy Limit Base

25. Levy Limit $100 Million Excess Levy Capacity 2 Million Actual Levy $98 Million Excess Levy Capacity Levy Ceiling

26. Actual Levy $105 Million + 2.5% and New Growth Levy Limit Base $100 Million Excess Levy Capacity Last Year This Year Levy Limit $100 Million 2 Million $98 Million Actual Levy

27. PROPOSITION 2½ BALLOT QUESTIONS

28. Actual ballot question voted by Selectboard or Council (with mayor approval if required) Majority for overrides 2/3 for exclusions Question Presentation

29. Specified in statute Spending & borrowing purpose (all) Amount (overrides & capital exclusions) Fiscal Year effective (overrides & capital exclusions) Question Form

30. May present at regular or special municipal election Written notice to Clerk at least35 days in advance of election date Unlimited number of questions Municipal Elections

31. May present at state biennial election Written certification to Secretary of State by 1st Wednesday in August Limited to 3 questions State Elections

32. Majority voting on question Single or menu questions Each counts Pyramid or tiered questions Highest $ counts Question Approval

33. Legislative body must approve spending (appropriation or borrowing authorization) May approve before or after election May spend for purpose within limit if question fails Related Spending

34. DOR Resourceswww.mass.gov/dls • Publications • Levy Limits: A Primer on Proposition 2½ • Proposition 2½ Ballot Questions – Requirements and Procedures • Data Bank Reports • Levy Limits • Ballot Questions