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APPROPRIATION COMMITTEE-2019 ATM Warrant Article Analysis and Recommendations Article 4 Reduce Community Preservation Act Surtax Rate from 3% to I% Funds Requested Funding Source Committee Recommendation None N/A IP This Committee's'usual practice is to forego detailed commentary on articles when a motion to indefinitely postpone is anticipated. In this case, we felt it was worthwhile to include our analysis, and to note that if the motion were not slated for indefinite postponement, the Committee would unanimously recommend disapproval of this request. This citizen's article seeks to reduce the CPA surcharge rate from 3%to 1% in order to provide tax relief to Lexington residents. If this article is approved,the reduction of the CPA surcharge rate would then need to be approved by a majority of those voting in a town wide ballot, likely in March 2020. if approved at each of these two stages, a reduction would take effect in FY2021. Since its adoption at the 2006 Annual Town Meeting, and subsequent voter approval in FY2007,the Town began to assess a Community Preservation Surcharge of 3% of the property tax levied on all taxable real property. Beginning in FY2008, the Town began receiving state matching funds to supplement the local surcharge. The size of the state's first-round match is calculated as a percentage of the surcharge revenue raised by the municipality. Two minor follow-up grants are given to municipalities with a 3% CPA sur- charge rate. The percentage used for the state match calculation varies each year and is determined by the number of communities that qualify for the state match and the annual fee revenue deposited into the State's CPA Trust Fund. For FY2019,Lexington received a total of$922,256 in State matching funds. This amount was the sum of a 19.01% first-round distribution of$886,051, plus a $22,508 equity round, and a $13,697 surplus round. For FY2020, the Division of Local Services estimates that the first-round match will decline to 11.57% of CPA surcharge revenue,a record low rate.'Applying this percentage to the Town's FY2019 CPA surcharge revenue would yield approximately$561,000 for the first-round distribution in FY2020. The Department of Revenue's Comprehensive Guidelines on CPA Adoption and Implementation states that before a surcharge can be revoked, a determination must be made as to the whether there are sufficient uncommitted monies available within the Town's Community Preservation Fund (CPF) to meet all out- standing obligations, including future debt service payments. If not, the surcharge must continue to be as- sessed at levels sufficient to fund the remaining obligations. The Committee understands that the outstand- ing debt issued for CPA-funded projects in Lexington would necessitate a CPA surcharge greater than 1% for the next few years, as can be seen from the table in the discussion of Article 14(1). Lowering the CPA surcharge to the minimum level required to fund previously approved debt would ef- fectively deny funding for any new CPA projects until the last payment on current CPA debt is made in ' Since 2008,the matching rate has fallen drastically due to the growing number of cities and towns that have adopted the law and are now eligible for a state match.In addition,the fees collected by the Registry of Deeds and Land Court, which provide revenue for the match,have not been adjusted since the CPA was enacted. In four out of the last six years, the legislature has approved one-time appropriations from the state's budget surplus into the CPA Trust Fund to prop up the matching rate. Several bills have been introduced in the State legislature to establish larger and more stable funding sources for the CPA Trust Fund,but none has been successful so far. 6