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"Evaluation of Proposition 2 /2"
Report of the Tax Policy Committee
SEPTEMBER 29, 1980
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TAX POLICY COMMITTEE
LEXINGTON, MASSACHUSETTS
John McLaughlin, Chairman
Ronald Levy, Vice Chairman and Chairman, Fiscal Impact Subcommittee
John Pierce, Chairman, State-Local Relations Subcommittee
Robert Dodd
Mansfield Neal
Steve Politi
Laurence Redgate
Christina Welch
Linda Wik
Ex-Officio
Robert M. Hutchinson, Town Manager
John Lawson, Superintendent of Schools
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October 3, 1980
Robert M. Hutchinson, Jr., Town Manager
Town Office Building
1625 Massachusetts Avenue
Lexington, MA. 02173
Dear Mr Hutchinson:
Enclosed is the report of the Tax Policy Committee of Lexington.
Personal schedules allowing, the members of the Committee will make themselves
available to discuss the report until our mandate expires November 1. I suggest
that the Selectmen consider holding an open discussion meeting on this report.
As Chairman of the Committee, I would like to make two personal observations:
- Lexington has been fortunate to enjoy the professional management
which you and Dr. Lawson have brought the Town. Given recent
conditions (soaring energy costs, declining school enrollments,
etc.) , Lexington's record of financial performance should be
envied by other municipalities in Massachusetts.
- Lexington is lucky, too, to have the kind of dedicated and talented
citizens with whom I have had the pleasure to serve on this Committee.
We argued on everything but agreed upon much. It has been my privi-
ledge to work with them.
Best regards,
John F. McLaughlin, Chairman
Tax Policy Committee
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1425 MABBACHUSETTS AVENUE • LEXINGTON, MASSACHUSETTS 02173 • TELEPHONE (417) 462.0500
ACKNOWLEDGEMENTS
The Tax Policy Committee wishes to thank the following persons who appeared
before the committee to explain their positions on tax policy:
Barbara Anderson -- Citizens for Limited Taxation
Michael E. Capuano -- Committee on Taxation, Massachusetts House of Rep.
Wesley Matthei -- Citizens for Limited Taxation
K. Heinz Muehlmann -- Associated Industries of Massachusetts
Alan Tosti -- Massachusetts Municipal Association
Our thanks too, to Mr Robert Hutchinson, Town Manager and Dr. John Lawson,
Superintendent of Schools for providing financial forecasts and other
assistance.
Mr Richard Perry, Comptroller, Mr. William Streeter, Management Intern and
Miss Phyllis Smith, Administrative Assistant to the Town Manager provided
quick and competent responses to our numerous requests for information and
administrative support. The Committee appreciated their assistance.
TABLE OF CONTENTS
Page
Introduction 1
I. Summary and Conclusion of the Tax Policy Committee 2
II. A Summary of Proposition 2-1/2 6
III. Proposition 2-1/2 -- The Fiscal Consequences 7
IV. The Local Override Provisions of Proposition 2-1/2 14
V. Proposition 2-1/2 -- Other Changes in Governmental Structure 18
Appendices
A. Text of Proposition 2-1/2, House Bill 5933
B. Lexington's Municipal Budget, 1976 - 1986
C. Lexington's School Budget, 1977 - 1984
D. Attorney's Response to the Tax Policy Committee's Questions on
Proposition 2-1/2
INTRODUCTION
By direction of the Selectmen of the Town of Lexington, Town Manager Robert M.
Hutchinson, Jr. appointed a Tax Policy Committee which convened initially on
May 21, 1980.
The Committee was charged with reviewing and evaluating "Proposition 2-1/2",
(Ballot Question Number 2) and other proposals for restructuring state and local
taxes which were then under consideration by the legislature. Since these other
proposals did not emerge as legislation, the Committee's report focuses upon
Proposition 2-1/2.
The Committee looked at Proposition 2-1/2 from an admittedly parochial viewpoint.
Our primary yardstick was, "how will 2-1/2 affect Lexington?" To this end, the
Committee attempted to project both the local financial impact and likely
changes in the relationship between Lexington and the Commonwealth.
Part I of this report summarizes our findings
Part II contains a summary of Proposition 2-1/2 prepared by its proponents,
Citizens for Limited Taxation, and references the Committee's discussion
of each section
Part III is devoted to a detailed review of the tax reduction articles of
Proposition 2-1/2 and an analysis of the projected fiscal impact upon
Lexington.
Part IV reviews the local override provisions of Proposition 2-1/2 and their
bearing on Lexington's current budget process.
Dart V includes a review and analysis of the other portions of Proposition
2-1/2 which would restructure the political and economic relations
between the Commonwealth and its municipalities.
It should be noted that another referendum question concerning taxes was added
to the ballot in August. Ballot Question Number 3, sponsored by the Mass-
achusetts Teachers Association (MTA) , would amend state laws to provide (1)
that the percentage growth in state and local taxes be limited to the percentage
growth in statewide personal income and (2) that reliance upon the property tax
for education funding be gradually decreased so that by fiscal 1984 the
Commonwealth would pay 50% of the costs of local education
Since the proposition was not placed on the ballot until August and since the
Committee has been unable to secure detailed information on the proposition, we
have not considered it in our report. Our silence on Question Number 3 should
not be construed as supporting or opposing it
- 1 -
I. SUMMARY AND CONCLUSIONS OF THE TAX POLICY COMMITTEE
On November 4, 1980 the citizens of Lexington will be asked to vote for
or against Ballot Question Number 2, commonly referred to as "Proposition 2-1/2."
THE MEMBERS OF THE TAX POLICY COMMITTEE OF THE TOWN OF LEXINGTON UNANIMOUSLY
URGE LEXINGTONIANS TO VOTE AGAINST PROPOSITION 2-1/2.
Fiscal Impact
The tax reductions imposed by Proposition 2-1/2 would reduce Lexington's
spending on schools and municipal services by $3.4 million - or 10% - during
its first year of implementation.
In the fifth year after its passage, Proposition 2-1/2 would require
Lexington's budget to be reduced by $7.8 million or 19%. Cumulatively over five
years, Lexington would suffer a gross revenue shortfall of $26.1 million
LEXINGTON'S REVENUE SHORTFALL UNDER PROP. 2-1/2
($ Millions)
FISCAL YEARS
1982 1983 1984 1985 1986
Projected Tax Revenues Required 29.2 30.2 32.1 34 0 36.5
Revenue Allowed By Prop. 2-1/2 -25.8 -26.4 -27 1 -27.9 -28 7
Gross Revenue Shortfall 3.4 3 8 5.0 6.1 7.8
Shortfall as % of Total Approp. 10 1% 11.0% 13.7% 15.7% 18.8%
While Proposition 2-1/2 will bring property tax reductions for many
Lexingtonians, the Tax Policy Committee is convinced that budget reductions of
this magnitude will result in serious damage to Lexington's schools and a
significant curtailment of other municipal services.
Fiscal Disputes
Proponents of Proposition 2-1/2 have maintained that approval of the Proposition
will not be harmful because:
1. Loss of tax revenues can be compensated by "cutting waste."
2. Individual municipalities can over-ride Proposition 2-1/2's tax limits
by means of annual popular referenda.
3. Additional state aid to municipalities might be forthcoming in order to
compensate for local loss of revenues
4. Municipalities can off-set tax losses by raising fees for specific local
services.
The Tax Policy Committee rejects these positions
1 - While many towns and cities might be able to absorb tax cuts by eliminating
"waste," the Committee feels that Lexington has been sufficiently well managed
- 2 -
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in recen.. years that the budget does not have 10% to 19% of "waste" to be cut.
Proposition 2-1/2 would mean cutting "muscle", not just "fat". It would pen-
alize those communities, such as Lexington, that are better and more pro-
fessionally managed as they are probably closer to a "bare-bones" budget already.
2 - The local over-ride provisionSof Proposition 2-1/2 requires approval of
two-thirds of voters in order to increase the local tax levy in any given
fiscal year. This provision effectively gives one-third of the electorate
a veto over local operating budgets. The over-ride process also requires
the state legislature to authorize referenda in odd-numbered years and
municipalities would be required to finance such special elections. Addi-
tionally, a referendum to over-ride must be held in November, but municipali-
ties presently approve their fiscal year budgets before July 1 and issue
tax bills in October. The Committee finds the over-ride provisions of Pro-
position 2-1/2 to be anti-democratic, awkward and wasteful.
3 - Massachusetts has no surplus income from which it might provide new state
aid to municipalities. In order to provide new funds, the state would be
required to raise new taxes. Given the greater impact of Proposition 2-1/2
on cities, the Committee feels that any new taxes would be distributed in
such a manner as to favor Boston, Cambridge, Lynn, Quincy and other large
cities and towns at the expense of smaller towns such as Lexington. It
appears likely that present state aid to Lexington also might be reduced by
such rescue efforts. Additionally, further reliance upon state aid effective-
ly reduces local control of spending and taxation.
4 - Increased fees for specific local services might be appropriate in many
instances. In the case of Lexington, however, imposing a sewer usage fee and
raising other fees to cover "costs" (as allowed by Preposition 2-1/2) would
have an insignificant impact upon local funding. The increased use of such
fees also has a negative impact upon most Lexington residents by transferring
such costs from "local taxes" - which are deductible from personal federal
income taxes - to "fees" which are not deductible.
Other Financial Considerations
Proposition 2-1/2 has other serious defects
- Under Proposition 2-1/2, municipalities may not increase their total tax
revenues by more than 2-1/2% per year, regardless of changes in their tax base.
In the opinion of the Committee, this limitation might discourage towns from allow-
ing new residential, commercial or industrial development. Municipalities will be
unable to off-set the cost of new development by honest increases in their tax base.
- Proposition 2-1/2 allows renters to deduct one-half of their annual rent from
their state income tax. This deduction - which will cost Massachusetts between
$30 million and $80 million annually in state income tax revenues - has no known
relationship between the renter's income or the property tax actually incurred for
any given rental unit. Individual renters qualify for the reduction if their
apartment owner pays no property tax, a situation common to public housing and
some luxury rental units built under tax abatement laws.
- 3 -
- Proposition 2-1/2 would allow state agencies and authorities such as
Middlesex County, the Metropolitan District Commission (MDC) and the Massachusetts
Bay Transit Authority (MBTA) to increase their assessments and charges to municipal-
ities by 4% per year. Municipalities, limited to a 2-1/2% annual increase, in
total property tax revenues, therefore can expect to spend an ever increasing
proportion of their income to support the MBTA and Middlesex County as opposed to
local schools and town services.
Other Legislative Changes
Passage of Proposition 2-1/2 also legislates the following items:
- Future state mandates (comparable to compulsory Kindergarten) must be fully
funded by the Commonwealth.
- Compulsory and binding arbitration for police and firemen would be abolished
- The fiscal autonomy of local school committees would be eliminated
Members of the Committee have varied views upon these individual articles.
The Committee is unified, however, in believing that these provisions do not off-
set the negative financial impact of Proposition 2-1/2 upon Lexington. Regardless
of our individual positions on these items, we feel that each of them is of
sufficient importance to warrant consideration on specific merits, not as part of
an omnibus tax bill.
The Language of Proposition 2-1/2
The Tax Policy Committee has studied Proposition 2-1/2 for approximately four
months. The Committee includes two attorneys and many other members conversant
with legislation and regulations. We are quick to admit, however, that the
Committee may have misinterpreted the language of the legislation.
The language of the act frequently is vague. The proponents readily admit
that the bill is technically flawed. The proponents have argued before the
Committee and in the press that these technical flaws can be corrected easily by
the legislature in January if Proposition 2-1/2 is enacted by referendum in November.
The Tax Policy Committee takes issue with this casual approach to legislation
The public should be asked to vote tax legislation only when they can understand
and appreciate the true meaning of the legislation Legislative language which
creates public confusion and invites unlimited legislative and judicial re-inter-
pretation
einter-
pretation appears to be more of a "problem" than a "solution".
Proposition 2-1/2 Invitation to a Financial Crisis
Many advocates of Proposition 2-1/2 - such as Boston Globe columnist Ian Menzies -
disavow the specifics of the legislation while pushing for its approval. Such
advocates admit that Proposition 2-1/2 is badly flawed, but contend that its passage
will create a fiscal crisis for the state and its municipalities thereby forcing
the Legislature to undertake comprehensive tax "reform".
- 4 -
The Tax Policy Committee considers this position to be naive or misleading
While all members of the Committee consider the present tax structure as requiring
"reform", we are divided in what "reform" means. We agree, however, that the
existing state legislature is unlikely to enact meaningful tax "reform" legisla-
tion within the few months allowed it under the provisions of Proposition 2-1/2.
If citizens vote for 2-1/2 because they want tax reform badly, that is how they
will get it.
In Closing
All of the members of the Tax Policy Committee favor some reform of state
and local tax policies in Massachusetts. Many members of the Committee are
sympathetic to some form of limitation upon taxation.
Despite our personal predilections we concur unanimously that Proposition
2-1/2 is the wrong way to go. We think that it hurts the average person in Massa-
chusetts; we know it will hurt the quality of life for the average family in
Lexington.
Proposition 2-1/2 imposes severe limitations upon local governments while
tolerating or endorsing the growth of county and state spending. As citizens of
Lexington, we feel that our local government has been relatively efficient We
believe that our elected Town Meeting members, Board of Selectmen and School
Committee are responsive to public concerns We have real qualms about legislation
that limits taxpayers from deciding what level of local services they wish to
support. We also object to tax legislation that does not attack the problem of
state spending.
FOR ALL OF THE ABOVE REASONS, WE URGE LEXINGTONIANS TO VOTE "NO" ON PROPOSITION
2-1/2, BALLOT QUESTION NUMBER 2
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II. A SUMMARY OF PROPOSITION 2-1/2*
This Summary was prepared by Citizens for Limited Taxation,
SECTION 1 -Limits property taxes in a city or town to 2.5% of the fair cash
value of all real & personal property in a city or town
( Page 2 )
-Provides for 15% annual reduction in total tax levy of city or town
until the 2.5% limit is reached. ( Page 2 )
-Limits annual increases in total taxes to 2-1/2%. ( Page 3 )
-Allows raising of 2-1/2% limit on total property tax levy and 2-1/2%
annual increase by vote of 2/3 of those voting in local referendum.
( Pages 2, 3 )
-Allows lowering of 2-1/2% limit on total tax levy by simple majority
of vote in local referendum. ( Pages 3, 4 )
SECTION 2 -Forbids future unfunded mandates from the state. (Pages 4 - 6 ),
-Forbids expansion of property tax exemptions mandated by the state
unless the state assumes the cost of such exemptions. ( Pages 4 - 6 )
SECTION 3 -Gives state auditor the authority to hire and fire within his
department. ( Page 6 )
SECTION 4 -Requires establishment of a division of local mandates to demonstrate
the financial impact on cities and towns of laws, proposed or in
effect, imposed by administrative agencies of the Commonwealth.
( Pages 6, 7 )
SECTION 5 -Gives municipalities the authority to revoke optional mandates.
( Pages 7, 8 )
SECTION 6,7,8-Repeals fiscal autonomy of school committees. ( Pages 8, 9 )
SECTION 9 -Reduces auto excise tax from $66 to $25 per thousand of valuation
( Page 9 )
SECTION 10 -Eliminate compulsory & binding arbitration for public employees
( Page 9 )
SECTION 11 -Allows renters one-half of annual rent as a deduction on state in-
come tax. ( Page 9 )
SECTION 12 -Limits fees & assessments of costs to no more than 4% increase a year.
No fees may be charged for goods or services in excess of the cost
of providing said goods or services. ( Page 9 )
* Page references made to House Bill No 5933
- 6 -
III. PROPOSITION 2-1/2 - THE FISCAL CONSEQUENCES
A. Tax Limits: Sections 1 and 9
1. Intent
Section 1 of Proposition 2-1/2 will limit property taxes in Lexington to
2.5% of the full and fair cash value of all real and personal property in
Lexington in the year of enactment. The section requires annual reductions in
the total tax levy until the 2.5% limit is reached, and thereafter limits annual
increases in total taxes to 2.5% of the previous year's levy.' This 2.5% growth
limit can be contrasted to the current tax cap of 4% in Massachusetts, which
permits exemptions. The 2.5% tax cap is assumed not to be parcel-specific, but
applies to the community's total tax revenues The limit can be overruled by a
two-thirds vote by local referendum. (See next chapter) .
Section 9 would reduce the automobile excise tax in the first calendar year
of implementation from $66 per $1000 of auto value to $25 per $1000.
2. Analysis and Implications
An analysis of the impact of Sections 1 and 9 on the Town of Lexington must
take into account:
- The current level of taxation relative to 2.5% of the full and fair cash
value (which is analogous to the Towns equalized value) .
- The forecast levels of town and school budgets in the foreseeable future; and,
- The current and anticipated levels of automobile excise tax revenues in
the Town
Excluding state and county assessments, Lexington appropriated $32 million for
fiscal year 1980-81, and, after allowing for state and county assessments and
revenues from the Cherry Sheet, the motor vehicle excise tax and other sources, the
net amount to be raised by taxes in the current fiscal year amounted to $25 2 million,
or 2 8% of current equalized value.
The analysis carried out by the Committee is herein presented, and has utilized
forecasts to fiscal year 1986 prepared by the School Superintendent and the Towr
Manager's Office and represents their best estimates at this time (See appendix)
Without Proposition 2-1/2 the Town projects that
- the amount to be appropriated will increase from $32 million in FY 1981
to $41 5 million in FY 1986 (measured in current, inflated, dollars)
- the amount to be raised by property taxes, which includes the school budget
requirements, will increase at a rate of about 6.0% per year to $33.7 million,
or at a rate below that anticipated for general inflation.
- the anticipated auto tax revenues will increase from $2 million currently
to $2 8 million in FY 1986.
1 Proposition 2-1/2 also requires that the tax levy remain below 2-1/2 per cent
of equalized value in every future year This is largely an academic requirement
for the majority of the cities and towns as it is highly probable that property
values will increase far more rapidly than 2-1/2 per cent per year, but it could
affect those cities with a declining tax base
The analysis (Table A) conducted by the Commitee assumes that Proposition
2-1/2 is first fully in effect in fiscal year 19824 and applies to the projected
equalized value of $998.3 million, estimated by the Town. Section 1 of Proposi-
tion 2-1/2 would limit Lexington's property tax revenues in the first year to
2.5% of the market value, or $25.0 million (Column 4) . This would result in an
immediate reduction of 8.1% in property tax revenues, reaching the target set in
the first year. Increases in subsequent years would allow the revenues to reach
$27.6 million by 1986. A reduction in the auto excise tax rate to $25 per thousand
dollars would have an immediate and additional impact on the Town's revenue base
by reducing excise tax revenues from $2 million to $0.8 million in the first year.
This revenue level would increase very gradually from $0.8 to $1.1 .million in 1986
in comparison to $2.8 million projected without Proposition 2-1/2
The cumulative effect of limitations on property tax and auto excise tax
revenues would be to create a gross revenue shortfall for the Town of $3.4 million
in the first year of implementation (here assumed to be 1981-82) , growing to
$7.8 million by 1986. (Column 6) The greater part of this 1986 shortfall ($6.1
million) will result from the limitation on the property tax revenue but the impact
on the Town of the total shortfall is quickly evident The Committee projects that
the Town would have to reduce its total appropriation by 10.1% in FY 1982, the year
of implementation, in order to live within its permitted revenue base (Column 7)
This annual percentage shortfall would reach 18.8% by FY 1986 and continue to
increase in each year thereafter unless it were to be made up from increased state
allocations or user fees, by reduced Town services or by reduced state assessments
Measured on a cumulative basis over the first five years (FY 1982 to FY 1986) ,
Lexington stands to forgo $26 1 million in potential revenue. Essential services
in Lexington would probably have to be curtailed since Proposition 2-1/2 would
place a cap on all future property tax receipts, regardless of inflation, business
expansion, population growth, or increased energy costs. The cutbacks would pro-
bably result in manpower layoffs and resulting unemployment compensation costs
The Committee examined the sensitivity of the base case analysis to variations
in the assumptions:
a Total appropriations and the net property tax revenue required by Lexington is
projected to increase at 6 0% per year over the next five years If this rate
of increase is arbitrarily assumed to be 8%, or closer to that expected for
general inflation, the Committee has estimated that the gross revenue shortfall
would increase to $11.1 million by 1986, or 26.7% of 1986 appropriations On
a cumulative basis, Lexington would then forge $35.7 million in potential
revenue In other words, a higher rate of general inflation would have the
effect of further reducing Lexington's purchasing power under Proposition 2-1/2
and would quickly cripple our municipal economy without some form of significant
relief from other revenue sources
` As automobiles are subject to an excise tax on a calendar and not a fiscal year
basis, the Town will actually stand to lose $1.2 million in auto excise tax
revenues in early calendar 1981 (or the second half of fiscal year 1981)
- 8 -
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b. There are some indications, from a sampling of recent property sales in
Lexington, that the actual ratio of property tax to equalized value will prove
to be lower than 2.5% vs. about 2.8% currently. If the official equalized
value were to be revised prior to July 1, 1981 it would prevail in implementing
Proposition 2-1/2 in FY 1982. Under this scenario, Lexington would not be
required to reduce property tax revenues in the year of implementation but be
permitted annual increases of 2.5% based on FY 1981 revenues.
The Committee's analysis of this possibility suggests that the gross revenue
shortfall in FY 1982 would be $2 6 million (vs $3.4 million in Table 'A') and
increasing to $6.9 million in FY 1986 (vs. $7.8 million) . Cumulatively Lexing-
ton could then forgo $21.7 million in potential revenue.
c If the equalized value is not revised upwards prior to July 1, 1981, the current
value of $907 5 million would hold. The first-year gross revenue shortfall
would be $5.3 million (vs. $3.4 million in the base case) , or 15.7% of total
appropriation in FY 1982 (vs. 10 1%) . In other words, the Town would face an
even greater impact if the equalized value is not increased
3. Related Issues
A number of philosophical issues related to Sections 1 and 9 of Proposition
2-1/2 were also addressed by the Committee.
a. Proposition 2-1/2 makes no provisions for exemptions under the 2.5% tax cap.
Unlike other tax limit proposals in Massachusetts, expense items such as the
existing debt burden and mandated pensions will not be exempted from the cap.
b. Many of the proponents of tax reform legislation feel that reform is necessary
in order to encourage industrial growth. The Committee feels, however, that
tax legislation of the nature of Proposition 2-1/2 would act as a strong dis-
incentive to new construction since the community would not be permitted a
significant growth in tax revenue no matter how large a tax base it achieves.
Moreover, it is possible that cities and towns would alter zoning regulations
to discourage future industrial, commercial or residential development unless
these developments themselves were prepared to carry the incremental costs of
the infrastructure (roads, water, sewer, police and fire protection, etc )
required to service them
c. Proponents of Proposition 2-1/2 have also argued that its passage in November
is only a message to the state legislature, who will then have the opportunity
to modify it into a form more palatable to the cities and towns in Massachusetts.
The Committee is uncomfortable with that premise What assurance do we have
that the legislative body that has been partly responsible for creating the
fiscal and tax problems that exist in this state will act responsibly in re-
forming the system equitably? In fact, there is every reason to be concerned
that otiler cities and towns, such as Boston, Cambridge, and the more industria-
lized communities, will be considerably more burdened The rollback in Boston
has been estimated at 70% in comparison to 8% for Lexington. It is inconceivable
that the legislature will stand aside and allow impacts of this severity to occur.
- 10 -
It will act, and will act in an environment of crisis. It will probably try
to dampen the impact of Proposition 2-1/2 on such communities by increasing
state reinbursements. But at whose expense? Certainly, our major cities
must be supported but the burden is likely to land fully on suburban communi-
ties, such as Lexington, and might manifest itself in reduced Cherry Sheet
reinbursements to our Town in future years. In fact, in assuming Cherry Sheet
anticipation steady in its analysis, this Committee may have been unduly
optimistic.
d. Another factor cited by the proponents is the historic growth of state revenues
from its sources of revenue They claim that this growth of state revenue
would permit much larger local aid, which would close any revenue gap resulting
from Proposition 2-1/2. In this regard, we note that state aid has always
exhibited large fluctuations, depending on the general health of the national
and state economy. In the absence of an absolute guarantee of a steady
increase in state aid, this appears to us to be a weak reed to lean on.
e. Strong arguments can be made both against and for the proposed changes in the
auto excise tax under Proposition 2-1/2. Against the change is the belief
that the excise tax is non-regressive, in that it penalizes only those who
wish to invest in a more valuable vehicle and presumably can afford to do so,
and that it reverts directly to Lexington Also, the reduction in the tax
would be immediate and totally in the first year of implementation, with no
phase-in provisions. On the other hand, a lower excise tax rate may induce
the car owner to replace his vehicle more frequently, resulting in a direct
employment benefit to the state's automobile industry and its distributors,
in greater energy conservation, in reduced air pollution and in increased high-
way safety.
B. Renter's Tax Deduction Section 11
1 Intent
Section 11 will permit an individual who rents his principal place of residence
in the Commonwealth (a renter) to deduct from the state income tax an amount
one-half of the annual rent paid
2. Analysis and Implications
Our Committee was informed by proponents of Proposition 2-1/2 that the purpose
of this Section was to avoid the unfortunate experience of California where
mandated property tax decreases were not passed on to tenants by their land-
lords. The proponents feel that there is no way to accomplish this by direct
legislation and therefore attempted to make the Proposition more attractive to
renters by what amounts to a small subsidy (nominally 2-1/2%) via the state
income tax deduction.
We view this provision as an implicit transfer payment from homeowners to
renters. This transfer payment would be imposed on a homeowner even if Proposi-
tion 2-1/2 did not result in a decrease in his property tax. It would be given
to the renter independent of how much or how little of his rent was a result
of the property tax, or how much that property tax was changed by 2-1/2.
Furthermore, we note that the maximal benefit of this provision accrues to
renters that are required to file a return and pay income tax and the least
- 11 -
benefit would accrue to those (such as low income families and the elderly)
who do not. We feel that, whether one espouses rent-contrdl or free market
economies, less gimmicky ways could be found to pass on to renters the
advantage of property tax reduction.
In financial terms, this section will not have a direct effect on Lexington
but will reduce income tax revenues at the state level. The amount of this
reduction is difficult to estimate but the legislature has placed the loss at
$29 million while other estimates have put it as high as $80 million The
Committee believes that the amount of loss will be significant at the higher
level and that, as there is no provision in Proposition 2-1/2 to close this
gap through increases in other state taxes or cuts in service, Massachusetts
will find it increasingly difficult to prepare a balanced budget while pro-
viding necessary aid to cities and towns
C Fees and Assessments Section 12
1. Intent
Section 12 states that any governmental entity authorized to assess "costs,
charges or fees" upon cities and towns may increase the assessment in any
fiscal year by no more than 4% over the assessment of the previous year.
It further states that no city, town, county, district, public authority, or
other governmental entity shall charge any fees for goods or services greater
than the "cost" of furnishing the goods or providing the services.
2 Analysis and Implications
The immediate and obvious fiscal impact of Section 12 on Lexington is that
Lexington must absorb up to an annual increase of 4% in assessments while
operating under a 2-1/2% tax cap. This 4% increase in assessment charges is
permitted even ±n the first year of the tax limit when Lexington must roll
back its tax levy by 8.1%.
The long term implications of Section 12 are uncertain and depend on several
factors. Unlike the present Mess 4% tax cap and other limits specified in
Proposition 2-1/2, there is no provision for an override of the 4% limit
increase in assessments. That is, governmental entities such as the MDC,
regional schools, prisons, county hospitals, MBTA etc. , can increase their
charges to cities and towns by only 4% no matter what their budgets or expenses
and no matter what services their constituents want.
The question is what happens when these entities cannot operate under a 4%
cap. As in the town budget, it can be expected that the cumulative effect of
the 4% limit under inflation would create an increasing shortfall. The gap
would have to be made up by state allocations, reduced services or a complete
takeover by the state (e g. , court costs, welfare) . Unless services are
reduced, state taxes will have to be increased. In some cases, such as county
government which many reform groups feel should be abolished, a state takeover
- 12 -
would be a beneficial side effect of Proposition 2-1/2. However, not all
services presently provided by regional areas would be better managed at the
state level.
Sponsors of 2-1/2 are willing to decrease the 4% limit to 2-1/2% even though
they initially believed a 4% limit to be an appropriate and necessary level.
While this modification would help Lexington in its own budget, this reduction
would increase the shortfall described above.
The second part of Section 12 essentially requires that fees be limited to
actual costs. Examples of such fees in Lexington include sewer and water
charges, recreation, licenses and permits, etc. There is no doubt that
additional revenues can be raised through realistic user fees. However, it
is also clear that the user fee mechanism will be inadequate to compensate
for the gross revenue shortfall that could result from Proposition 2-1/2.
- 13 -
IV. THE LOCAL OVERRIDE PROVISIONS OF PROPOSITION 2-1/2
The statute that would be created by Proposition 2-1/2 contains override provi-
sions that would permit local voters to modify the percentage limitations
applicable to their community. Specifically, it permits the voters at a November
election to
a. Increase the allowable average tax rate, by a 2/3 vote;
b. Increase the growth rate of total tax revenue by a 2/3 vote;
c. Decrease the allowable average tax rate, by a simple majority.
A. Interpretation
As in other parts of the proposition, there are certain ambiguities of wording
that leave it open to slightly different interpretations. However, the follow-
ing discussion appears to summarize the mechanics of the budget-setting process.
Under current law, in order for tax bills to be mailed to the townspeople in early
fall, it is necessary for the Department of Revenue of the state to have certified
the tax rate. This includes a review of the budgetary figures and the tax base
to ensure that proper accounting procedures have been followed, and that the pro-
cess has adhered to various statutory requirements. Under the provisions of
2-1/2 it would also be necessary to certify that:
1. the tax rate complies with the percentage limitation on tax
rate then in effect;
2. the total property tax levy does not exceed the previous year's
by more than the percentage growth limitation then in effect.
The certification process currently takes place in the summer, and assumedly would
continue to occur then.
Since there is no possibility for the voters to modify the limitations between
the time that budgets are drawn up in the spring, and the time that real estate bills
go out in the early fall, it appears that the limitations in effect would be based
on the provisions of 2-1/2 as modified by the voters at the most recent November
election
B Special Points, and Ambiguities
There are a number of special points to which attention should be called in
evaluating the override provisions
1. The tax rate of a community does not depend only on that community's budget.
The "Cherry Sheet" distributed in July by the state contains sizable assess-
ments against Lexington and sizable reimbursements to the Town from state aid.
These assessments and reimbursements fluctuate in an unpredictable manner
from year to year. It is quite possible for Town Meeting to enact a budget
that would comply with the various percentage limitations under the assumption
of constant state aid, and then find that the budget is in violation of the
- 14 -
act because the state aid decreased. There is no mechanism in 2-1/2 for
handling this problem.
2. The ballot questions permitting a change in the percentage limitations would
appear on the regular ballot during the gubernatorial or presidential elec-
tions in even-numbered years. In odd-numbered years, the questions per-
mitting increases would only appear if the state legislature calls a special
election. In the absence of such a special election, the limitations would
remain in effect for two fiscal years
3. There is a provision in 2-1/2 (with minor or no impact on Lexington) that
requires communities with a tax rate above 2.5% to decrease their total tax
levy by 15% a year until they reach the limitation. There is no direct over-
ride procedure that would permit a more gradual decrease.
4. The ballot questions that would permit larger percentages have a blank space
in which to insert a specific numerical value of the percentage. The act
does not specify whether this blank is to be filled in by the local town
governing body, the election commission, or the state legislature.
5. If Proposition 2-1/2 becomes law at the election of November 1980, there
obviously is no chance°to hold an override vote between then and the Town
Meeting in the spring of 1981. Depending on how the Proposition is inter-
preted by the courts, or amended by the legislature at the beginning of 1981,
this could apparently lead to a situation where at least the first year's
budget would have to be drawn up without any recourse to the override process.
6. The preparation of a town budget is so appallingly complicated under the over-
ride mechanism of 2-1/2, that our committee was led to speculate that there
might be some way to bring about split-year budgeting, with different tax bills
in October and May, with a fall Town Meeting in between. There is no precedent
for this under our current mode of operation
C. Philosophy and Intent
Proposition 2-1/2 represents a significantly different philosophy of govern-
ment than that under which we currently function. At present, the budget
process of a municipality resides in the particular legislative body in that
municipality -- city council, representative town meeting, or open town
meeting. Furthermore, current expenditures (as opposed to bonded indebtedness)
are approved by a simple majority. The only time that the general electorate
is involved directly in the budget process is when there is a referendum vote
to overturn the action of the legislative body. The mechanism of these
referenda requires a substantial vote by the general electorate in order to
undo the actions of its legislative body. Historically, until the recent 4%
"tax cap", local governments have operated pretty much free of state limita-
tions on their budget process, and with only occasional tests of the process
by the general electorate. Even the 4% tax cap (which restricts the annual
growth of the total budget) can be overridden by the legislative body itself
- 15 -
Proposition 2-1/2 would make major changes in the autonomy of the local
legislative body vis-a-vis both the citizens of the community it represents,
and the state. Proposition 2-1/2 implicitly says that there are limits on
taxation that are appropriate for the state as a whole, and that it is only
with great difficulty that a particular community should be allowed to deviate
from these general guidelines. Furthermore, the deviation is not entrusted
to the local legislative body, but rather can be blocked by a minority of the
general electorate.
The two specifically philosophic questions that must be addressed in evaluat-
ing the desirability of these particular segments of 2-1/2 are then
1. Should the creation of the current operating budget require
a 2/3 majority rather than the simple majority that
traditionally has been required?
2. Should this control of the budget be taken away from the
governmental body that must decide on its details?
The proponents of 2-1/2 believe that legislative bodies in general do not
reflect the sentiments of the average voter in fiscal matters, and that there-
fore the control should be left in the hands of the general electorate. With
regard to the 2/3 vote, they feel that taxation of any sort inherently
represents a confiscation of property which should not be imposed on 49% of
the populace by the other 51% but rather should be as difficult as possible.
Opponents of 2-1/2 feel that it is alien to our structure of government to
separate the control of a total budget from the control of its details, and
to eliminate majority rule from this one aspect of government. The opponents
further feel that the legislative bodies can be made responsive to the
desires of the electorate, either by direct participation in an open town-
meeting form of government, or by voting for responsive representatives in
either the city council or representative town meeting forms of government.
D. Implications for Lexington
The implications for Lexington -- and other communities -- of the override
provisions fall in two categories:
1. They may either aggravate or obviate the adverse fiscal
implications of the Proposition
2 They require a major modification of our budget process.
The first area is of central importance. Clearly, if the voters of every
community routinely weaken the fiscal constraints of 2-1/2, it will have no
major impact on budgets. This does not appear likely, however. First, the
ballot questions are worded in a way that can be paraphrased as asking voters
whether they would like their taxes raised, without telling them what services
they would get for the higher taxes. Furthermore, agreement of 2/3 of the
voters is needed to permit the increase. (Note that it is assumed in the fore-
going that there is no way to circumvent the problem posed by the sequence of
spring town meeting, summer certification, and November override.)
- 16 -
As a point of reference on this topic, Lexington has had a number of
referenda over the years in which capital appropriations for building con-
struction have gone to a special election as the result of petitions to
overturn the action of the Town Meeting. For example, the initial design
for Clarke Junior High School, the addition to the town office building,
and most recently the new swimming facility, have all been subjects of such
referenda. Now, in order to overturn the appropriation action of the Town
Meeting, it is necessary for the opponents to get not only a simple majority
of those voters who actually turn up for the election, but also 20% of the
entire list of registered voters. In the three examples cited, the majority
of those actually voting opposed the town meeting action (by very sizable
majorities in some cases) and, in one example (Clarke JHS) , also were suffi-
cient in number to overturn the 2/3 vote of the town meeting, and block the
construction.
One must be careful about extrapolating from these referenda to the probable
response of Lexingtonians to the ballot override questions prescribed by
Proposition 2-1/2, since the 20% feature of the current referendum procedure
makes a "stay-at-home" vote almost as effective a way of agreeing with the
Town Meeting as an actual affirmative vote However, the cited referendum
results at least hint that it might be difficult to get support for a laxer
growth limitation percentage until substantial numbers of voters had been hurt
by loss of services
The other major impact on communities would be a requirement for sophisticated
projection of expenditures over either a 2.5 or 3.5 year interval in advance
of need, in order to ensure that the override question requested a sufficient-
ly generous allowance for growth This projection of expenditures would, of
necessity, have to include an estimate of the inflation rate over that peric .
It also appears that the town might have to include in its budgets a very ample
contingency fund sufficient to accommodate a complete loss of state aid, in
order to ensure that partial or complete loss of state aid would not result in
accidental violation of the limitations
As a final small irritant, it will be noted that the town must provide for
the expense of the override elections in odd-numbered years when there is no
regularly scheduled election
- 17 -
V. PROPOSITION 2-1/2 -- OTHER CHANGES IN GOVERNMENTAL STRUCTURE
Proposition 2-1/2 contains three sections that modify current governmental
practices. The ostensible purpose of these modifications is to make it easier
for local government to keep future expenses under control, and thus easier to
comply with the fiscal limitations of the proposition. Specifically, these
three sections would:
1. Prohibit new unfunded state mandates and rules.
2. Abolish School Committee fiscal autonomy.
3. Eliminate compulsory and binding arbitration for police
and firemen.
A. General Comments
The three current practices which would be eliminated share certain common
attributes
a. They have all been cited in the past as explanations of unpopular
budget increases, sometimes with justification.
b. There have been unsuccessful attempts to eliminate them independent
of the present Proposition.
c. It is difficult to estimate how much impact they have had on past
budgets.
d. It is virtually impossible to estimate how much impact they might
have on future budgets.
All three of these elements of current governmental structure have both
positive and negative aspects We have heard the argument advanced that their
abolition is necessary in order to make the fiscal provisions of 2-1/2
workable. It is apparent, however, that if their benefits outweigh their dis-
advantages, then this is actually an argument against 2-1/2. We also have
heard the argument that abolition of the three structural elements is desira-
ble of itself and that this is an additional reason to support 2-1/2. This
also seems somewhat questionable in that the same effect could be achieved by
three separate initiative petitions changing each provision separately.
B. Unfunded Mandates and Rules
1 Current Practice and Proposed Changes
From time to time the state legislature identifies certain services that would
be of general benefit to the citizenry and identifies local government as the
proper vehicle for delivery of the services The result is what is known as a
legislative mandate to the local communities; it places a statutory require-
ment on the communities to deliver the services. The objectionable features
of unfunded mandates are that
- 18 -
a. they are often enacted without knowing the cost of
providing the services;
b. the cost is added to the property tax rather than more
broadly based state taxes which cause less hardship in
poor communities.
In addition to mandates for new governmental functions, which haphazardly
result in increased property taxes, there are also examples of mandates
where the legislature has transferred some existing administrative function
from the state to the local government, with a net effect of reducing that
component of the state budget and increasing the local budget accordingly.
• Proposition 2-1/2 would not preclude mandated programs, but it would require
that the costs of the programs be borne by the state, and it would allow a town
to reject the mandate if it could be proved that the funding was insufficient.
It also would allow towns to have second thoughts about their acceptance of
new, imperfectly funded mandates A division of local mandates is estab-
lished by 2-1/2 as part of the administrative machinery necessary to deter-
mine the actual costs. Rules laid down by administrative agencies and new
property tax exemptions created by the legislature would be treated in the
same way as legislative mandates: they could be ignored by the communities
if funds to implement them were not provided by the legislature.
The classic example of a mandated program that is widely believed to have
increased local taxes is Chapter 766. This program sets down requirements
for educating students with special needs, with the goal of integrating them
into the community as well as possible. The program resulted in assumption
of some educational costs that were previously borne by the state. It also
required extra administrative personnel in the schools, and some people feel
that overzealous enforcement of the provisions of the statute has also led
to occasionally excessive costs. Since the communities don't receive complete
reimbursement of all of the costs of the program, it has led to increased
local taxes. An exact determination of the financial impact is difficult
since the state aid for general education (under the Chapter 70 entitlements)
might have been larger in the absence of the categorical reimbursement under
Chapter 766.
There are many other examples of mandated expenses within the school budgets,
and it is nearly always difficult to assess their exact financial impact.
For example, physical education at the elementary school level is a state re-
quirement, but the net cost of providing it is less than the salaries of
physical education teachers, since the p.e. programs occupy time that would
have been filled by other teachers.
2. Questions of Interpretation
The section of Proposition 2-1/2 that eliminates unfunded mandates is
apparently straightforward However, past experience with categorical re-
imbursements suggests that there will be many disputes over validity of costs
assigned to the specific programs Referring to the example of mandated
physical education cited in the previous paragraph, a local community would
- 19 -
have been likely to claim that all of the salaries of gym teachers resulted
from the mandate, and the state would have been likely to claim that there
was no incremental cost at all.
Another gray area of interpretation relates to mandates or rules that require
all communities to do what some of them are already doing. For example, at
the time that the state first required public kindergartens in all communi-
ties, many communities already had them. It is not clear whether the cost
of such a mandate would have included only the newly opened kindergartens, or
all of them, including ones in existence for years.
3. A Special Side Issue
The section of Proposition 2-1/2 that creates the division of mandates within
the state auditor's office apparently exempts the auditor's office from Civil
Service The motive for this exemption is not known to us.
4. Implications for Lexington
Elimination of future unfunded mandates, rules, or property tax exemptions
would have the beneficial effects of:
a. causing the legislature to be more cognizant of costs
in adopting new programs;
b. funding new programs through the state tax system instead
of through local taxes.
On the negative side, it is possible that the total of income tax, sales tax,
and property tax paid by an individual Lexingtonian might increase since his
share of the state-funded costs in other communities might exceed his share of
the cost of implementing the program just in Lexington, In addition, the
division of mandates itself might prove to be a costly bureaucracy.
B School Committee Fiscal Autonomy
1_ _Present Practice
The current statutes, as interpreted by the courts, permit local school
committees to decide how much money they need to operate the schools, and
require that the communities provide this money. Furthermore they allow the
school committees complete flexibility in the use of the money after it is
appropriated: they may transfer money from one account to another If a
community is dissatisfied with its school budget, its principal recourse is
the evolutionary change of electing different school committee members over
the ensuing three year period
- 20 -
2. The Changes Under 2-1/2
Proposition 2-1/2 lets the local legislative body (the Town Meeting in
Lexington) control the overall size of the school budget The exact wording is :
. . no city or town shall be required to provide more money
for the support of the public schools than is appropriated
by vote of the legislative body .. . "
A particular situation could arise from a school committee's autonomy in the
context of tax cap legislation like that in 2-1/2 This legislation imposes
a control on the total tax revenue, rather than separate controls on the
school tax and general tax. This has led to conjecture that school committees
might consider educational needs of paramount importance, and might find- it
difficult to make the same proportionate cutbacks as other town departments.
The assumed result is that the other departments would have to bear a larger
share of budget cutbacks.
Since court decisions have given school committees complete freedom to transfer
money from one account to another within the school budget, and since there is
nothing in the wording of 2-1/2 that specifically revokes this flexibility, it
may be assumed to remain in force. Consequently, although the Town Meeting may
choose to review individual items in the process of arriving at the total school
budget, there is no reason to assume that the School Committee will have to use
the money as the Town Meeting intended. For example, the Town Meeting might
decide to cancel the budget for a particular educational program, but the
School Committee might absorb the resulting smaller budget by eliminating
the athletic program instead.
It is not clear what would happen under the changes wrought by 2-1/2 if the
budget appropriated by Town Meeting conflicts with the requirements of pro-
viding for existing mandated educational programs at the salary levels
dictated by existing contractual agreements with teachers: most of current
educational costs are necessary simply to staff the schools for the required
186 days under work rules and salary levels embodied in the Lexington Education
Association's contract. It appears to our committee that this type of issue
ultimately will be resolved in the courts.
3. Implications for Lexington
•
The shape that public education in Lexington will take under 2-1/2 depends on
a mutual interaction among:
a. the School Committee, in proposing a budget, and administering
the funds appropriated by Town Meeting;
b the Town Meeting, in apportioning the limited available tax
revenue between the schools and other town departments;
c the state, in providing educational reimbursements and
categorical aid to education;
d. the voters, in permitting a more liberal total budget via the
override provisions.
- 21 -
We have had the good fortune up to this point not to have to manage our
educational establishment in such a complex environment. The closest approach
to the difficulties we will face under 2-1/2 was the period of rapid growth
of school population in the 60's when the need arose to provide new school
buildings at great expense, and double sessions and overcrowding were experi-
enced pending their construction At this time it would amount to wild specu-
lation to try and conjecture what our school system will look like after a
few years of government under the rules of Proposition 2-1/2.
C. Binding Arbitration
1. Background
The history of compulsory arbitration in this state originates with Chapter 149S
which granted public employees the right to join unions and to "present proposals"
to their employers. Further statutes granted additional rights to public em-
ployees, culminating in Chapter 150E in 1973 which extended full bargaining
rights to all public employees, and required binding arbitration of disputes
involving the interests of police and fire department employees
The argument in favor of binding arbitration is that since strikes by public
employees are forbidden by law, the police and fire department employees would
not have any leverage to set a good contract. In addition, it is felt that the
availability of binding arbitration provides an atmosphere of labor peace that
is essential in providing police and fire protection.
The arguments against binding arbitration include the loss •of local control that occurs
when contract decisions are made by an independent arbitrator with no links to
the town. In addition, many managers feel that binding arbitration hampers
bargaining in good faith, since it encourages employees to ask for more than
they think they should get. These managers also feel that settlements specified
by the arbitrators are typically more liberal in terms of work rules, benefits,
and salaries, than would have been reached by more traditional forms of contract
negotiations.
Even in those towns that have not resorted to binding arbitration, it is
claimed that the threat of even more costly settlements via the arbitration
route has forced the town negotiators to settle for contract terms that are
more favorable to the employees and less favorable to the taxpayers than
would have been the case in the absence of the statute that requires binding
arbitration
2 Changes Affected by 2-1/2
The change to occur under 2-1/2 is relatively straightforward compulsory binding
arbitration would be eliminated (There is a curious problem in the draft of the
statute as a result of a typographical error, the initiative petition apparently
eliminates the Labor Relations Board instead of binding arbitration. We have
been informed that this will be amended before the petition appears on the ballot)
The significant thing to note is that no other means of resolving labor disputes
is provided by the statute.
- 22 -
_
3. Implications for Lexington
Lexington is one of the communities alluded to earlier that has not as yet
experienced the results of contract negotiations under binding arbitration.
Because of this, we have no way of knowing whether there will be any significant
fiscal impact as a result of eliminating it. It must be recognized that under
the stringent fiscal constraints of 2-1/2, the attitude of negotiators repre-
senting the town government is liable to be considerably less liberal than
prior to 2-1/2. This may well lead to disagreements during negotiations that
are much more difficult to resolve amicably. It would be pure speculation
to guess at the means that will be taken by our public employees to try
to emphasize the seriousnesss of their negotiation goals in the absence of
the settiment procedure provided by binding arbitration. It is necessary to
be cognizant, however, of some of the sophisticated tactics used by disgrun-
tled public employees in other localities in which "sickouts", ,slowdowns,
and other methods have been used to dramatize the earnestness of the employees'
goals .
•
- 23 -
APPENDIX A
HOUSE • • • • • . • No . 3933
4vit,WatlataltEN
Zte Cotranortturalt oi 035+11(1JUBCNB
INITIATIVE PETITION OF DONALD L. CASYDY
AND OTHERS
OFFiCE Or - Si CRI=
BOSTON. FFBRk ARN
• rMilk
:ht., ou,e of Representatives
ins(
i(
t,a, Massachuscits
-sir I ncrewith transmit to you, in act.ordunee with t',t. ru r
!--R it of Article XLVIII of the Amendments to the ConstiL :or
't :it VC Pe ition for an Act Limiting State And Local Taxation \
tr id tares, signed by ten quolifiLd voters am. filed with tit depa
r 1. 1 1)ccember 5, 1979, together with add4ional certiikal
°to hfied vote s in tL rumber of 60 26S, ilerig a
number to comply with the provisions of said Article
I hi prtiti(m has been delayed in transtrIttal beLause of .1 protest
tier v th the State Ballot La ih ommission, and subsequent coup
I on
Very truly yours,
N.41CIIAEL JOA. -1 V)I I ,
S.',Trehir) of Stat
AN INITI ATIVE PETITION
Pur,oarit to Article Xi VII! of the Amendments to the Constaut!on
of the orrimonweaith, as amended, the undersigned qualified voters
Ot 7 he omrnonwealth, ten 11 numb,' at least, hereby petition for the
cc.a*Icic t into law of the following measure:
2 HOUSE — No. 5933 [February
orbe Commoritnealtb of filaltatbultettli
In the Year One Thousand Nine hundred and Eighty
AN ACT LIMITING STATE AND L0( AL TAXATION AND EXPENDITUFS.
Be it enacted bv the Senate and House of Representatives in General
Court assembled, and b) the authority of the same, as follows.
I SFC1 ION I Chapter 59 of the General Laws is hereby amend-
2 ed by inserting after Section 21 l the following nrw section
3 Se(ti‘ ,,21C (I) Fhe total taxes assessed under any pvovision of
4 (his chapter by the commonwealth or by any city, town, county,
5 district, authority or other governmental entity upon real estate
6 and personal property as defined in this chapter shall not, in any
7 fiscal year,exceed two and one-half percent of the full and fair cash
8 valuation thereof unless, at a biennial general election or at a
9 general election called by the general court for the first Tuesday
10 after the first Monday in November in a year in which a biennial
I I general election is not held, not less than two-thirds of the persons
12 voting on the question shall vote"Yes" to the following question
1 Shall the present [two and one-half percent or such other
14 percent as shall then be in effect pursuant to this Section] limit on
15 the assessment of real estate and personal property taxes with
lo respect to this city[or town]be increased to percent for
17 the fiscal year
18 YES 0 NO E.]
19 (2) Notwithstanding the provisions of sub section (I), if in any
20 cit y or town the total taxes assessed upon real esLic and perst..nd
21 property as defined in tills chaptci shall exceed R1, and on -h1;
2 percent of the full and fair cash valuation thereof on OIL effective
date of the enactment of this section, the total taxes so-nssesi,L
24 shall be reduced annually by not less than fifteen percent of such
2S total for each successive fiscal year until the total taxes so assessed
shall not exceed the said twc arid one-half percent.
27 (3) Notwithstanding the provisions of sub-section (1), if in any
city or town the total taxes assessed upon real estate and personal
- '
'980J HOUSE — No. 5933 3
29 property as defined in this chapter in the fiscal year 1979 were less
30 than two and one-half percent of the full and fair cash valuation
11 thereof in such fiscal year, that lesser percentage shall be the
x:rnurn percentage of full and fair cash valuation at which such
n total taxes may he assessed under section one and if betweenethe_........
14 fiscal year 1979 and the cffcctive date of the enactment °Nits —.-
15 seetion the total taxes so asses,W shall have increased above the
16 said lesser percentage, the tot l taxes so assessed shall he reduced
37 annuall by not less than fifteen percent oi such total for k
18 successive fiscal year until the total taxes so assessed shall not
mced the said lesscr percentage
40 (4) Notwithstanding the provisions of sections (1) (4) and (1),
41 the total taxes assessed by thL commonwealth or by any city town
42 county, district, authority or other governmental entity upon real
41 estatk, and personal property as defined in this chapter shall not in
44 any fiscal year, with respect to any ctty or town, exceed the total
45 taxes so assessed in the preceding fiscal year by more than two and
46 one-half percent unless, at a biennial general election or aI a
47 general election which shall be called by the genera! court for the
48 first Tuesday after the first Monday in November in a year in which
49 a biennial general election is not held, not less than two-thucs of
50 th,e persons voting on the question shall vote Yes"to the follnv.Ing
51 question:
52 Shall the total taxes assessed on real estate and personal
53 property with respect to this city (or town) in the fiscal year
54 ,, be increased by° percent of the total taxes
55 so assessed in the preceding fiscal year rather than by the present
56 two and one-half percent limit on such increase'
57 YES 0 NO 0
5s (5) If the legislative body of any city or town shall so vote, or if
59 the people by local mitt,: we procedure shall so require, there shall
60 appear on the ballot for such city or town at a biennial general
6! election or at an election which shall be called for the first Tuesday
62 after the first Monday in November in a year in which a biennial
61 election is not held, the following question
64 Shall the present [two a.:d one-half percent or such other
percent as shall then be in effect pursuant to this Section; limit on
66 the assessment of real estat and personal property taxes with
4 HOUSE — No. 5933 [February
67 respect to this city or town be decreased to— percent for
6 the fiscal year
69 YES 0 NO 0
70 If a majority of the persons voting on the question shall vote
71 "Yes"the limit on total taxes assessed as set forth in subsection(l)
72 shall be decreased to the percentage so voted for that fiscal year
1 SECTION 2 Chapter 29 of the General Laws is hereby amend-
2 ed be inserting after section 27H the following new section.
t;elifn 27C. Notwithstanding any provision of any special or
4genered law to the contrary.
5 (a) Any law imposing any direct service or cost
6 arik( city or town shill be effe Aive in an city or town on'y if such
7 law is accentcd by vote or by the appropriation of money f( r stieh
purpncs, in he case of a city by the city council in aci.ordan,,e with
9 its charter, and in the case of a tow n by a town meeting, t.riless the
10 ge,neril .!ourt, at the same session in which such lay, is e acted,
11 provides, by g:meral law anu by appropriation,for the assumpt on
12 by the commonwealth of such cost, exclusive of mcLdental local
II administration expenses and unless the general court provides by
14 appropriation in each succe,sive year for such assumption
(h) Any law granting or increasing exemptions fro xi local ti-.
l(, tion shall be effective in any city or town only if the general cello,at
17 the same session in which such law is enacted, provides by general
18 law and by appropriation for payment by the commonwealth to
19 each city and town of any loss of taxes resulting from such excinp-
20 non
21 (e) Any administrative rule or regulation which shall result in the
22 Imposition of additional costs upon any city or town shall not be
Lilt:dive until the general court has provided by general law and by
24 appropriation for the a sumption by the commonwealth of such
25 cost, exclusive of incidental local administration expenses, and
26 unit-ss the general court provides by appropriation in each succes-
17 sill.: year for such assumption
2s 0) Any city or town, any committee of the general court, i41111
29 tittles house of the general court by a majority vote of its members,
to may submit wrtten notice to the division of local mandates,estab-
41 1c cd under section six of chapter eleven of the General Laws,
32 FL-questing that the LI:view:1 determine whether the costs imposed
19801 HOUSE — No. 5933 5
33 "and any penalty required to be raised under the provisions of
34 Section 34 of Chapter 71 "
35 wealth in the preceding year and,if not,the amount of any def,cien-
cy in such payments The division shall make public its dew-mina-
37 sixty-six dollars per thousand of valuation"and inserting in place
38 (e) Ani city or town,or any ten taxable inhabitants of any city or
19 town may in a class action suit petition the superior court alleging
40 that under the provisions of subsections (a), (b) and te) of this
41 section with respect to a general or special law or rule or regulation
42 of any administrative agency of the commonwealth under which
43 any city or town is required to expend funds in antiCipation of
44 reimbursement by the commonwealth, the amount necessary for
45 such reimbursement has not been included in the general or any
46 special appropriation bill for any year Any city or town,or any ten
47 taxable inhabitants of any city or town may in a class action suit
48 petition the superior court alleging that under the provisions of
49 subsections (a), (h) and (c) of this section with respell to'any
.50 general or special law, or rule or regulation of any administrative
51 ageney of the Commonwealth which imposes additional costs on
52 any city or town or which grants or increases exemptions from
53 local taxation, the amount necessary to reimburse seeh city or
54 town has not been included in the general or any special app opria
55 non hill for any year The determination of the amount of deficLa
cy provided by the division of local mandates under sutheci on(d)
57 of this section shall he prima facie evidence of the amount ncees-
48 sary The superior court shall determine the amount ( the deft-
59 cienese if any, and shall order that Toe said city or two be c,“:mpt
e:() ttom such general or special law, or rule or regulation of any
61 administrative agency until the commonwea th sha I reimburse
62 sueh city or town the amount of said deficiency or additional costs
63 or shall repeal such exemption from local taxation.
64 (1) Any of the parties permitteu a submit written notice to the
di‘.i.don )ca) a andatcs mulct.subsLctian 09) of this secnon may
66 submit v,ritten notice to the division requesting that the di‘ision
67 determi -le the total annual financial effect for a period of not less
614 than three years of any proposed law or rule or regulation of any
69 administrative agency of the commonwealth, The division shall
70 make public its determination within sixty days of such notice.
_
6 HOCSE — No iFebruary
7 The provisions of this section shall not apply to an),costs to eines
72 and towns or exemptions to local taxation resulting from a deei-
71 sum of any court of competent jurisdiction, or to any law,rule or
74 regulation enacted or promulgated as a direct result of such a
75 decision.
I SECTION 3 Chapter 11 of the General Laws is hereby amend-
2 ed by striking out section 6 and inserting in place thereof the
3 following section —
4 Section 6 The state auditor may appoint and remove such
5 employees as the work of the department may require. Said em-
6 ployees shall he organised in five divisions, narre' the division of
7 !ate audits, the division of authority audits, the division of leder.iI
8 audits, the division of contract audits and the di.ision ot local
4 mandates Thc state auditor shall establish the salaries, dities and
10 personnel regulations of all officers and employees within the
It department of the state auditor; provided, howel.er, that the salar-
12 les of said officers and employees shall not exceed the sunt annually
1 appropriated therefor by the general court. The provisions of
14 sections nine A and forty-five of chapter thirty,chapter tt, rty-on,'
15 and chapter one hundred and fifty E shall not apply to offiec.rs and
16 employees within the department of the state auditor
I 'sLCTION 4 Chapter II ol the General Laws is hereby amend-
2 ed by inserting after section 6A the following new section
Sec ti on 7 The division of local mandates, as provided for in
4 section six of this chapter,shall have the responsibility oldetermin-
5 mg to the best of its ability and in a timely manner the estimated
6 and actual financial effects on each city and town of MVS,and rules
7 and regulations of administrative agencies of the Commonwealth
8 either proposed or in effect,as required under section twenty-seven
9 C of chapter twenty-nine of the General Laws.
10 The division shall have the power to require the chief officer of
It any appropriate administrative agency of the commonwealth to
12 supply in a timely manner any information determined by the
11 division to he necessary in the determination of local financial
14 el lecis under said section twenty-seven C. 1 he chief officer shall
I 5 Loioicy the requested information to the division with a signed
16 statement to the effect that the information is accurate and corn-
17 to the best of his ability
er%
„ -
19801 HOUSE No, 5933 7
I The division, when sequested under the provisions of subsec-
19 tions (d) and (0 of said section twenty-seven C, shah update its
20 determination of financial effects based on either actual cost fig
21 ures or improved estimates or both
SFCT1ON 5 Chapter 4 ol the General Laws is hereby amended
2 by inserting after section 4A the following section. --
3 .3ection 411. At any time after the expiration of three Yearsfrom
4 the date on which any optional pros ision of the General 1 a ws has
5 been accc fled in ans Loy or tots n, whether by official ballot, by
lni w h ldinamc or by v, to of the kgilaIive body of thccio,
7 t ii, oi bk, ote of the boaid ul sJectiuen Of seiioil committee ot a
8 town the revocation of such acceptance of any optional provision
9 of the General Laws may be effected in the same manner as was the
10 original vote to accept the said provisions, but such revocation
II shall be subject to the following restrict.ons.
12 (a) This section shall not apply if the optional provision con-
3 tains, within itself, another manner of revocation.
14 (IQ -I his section shall not appll, to any optional provision which
15 authorties, but does not req uire, the city or town to act
16 I his section shall not apply to ny action taken under chapter
17 thirty two or thirty-two 13 of the General Laws.
(ri). Thts section shall not apply to any action taken to establish a
19 regional district, authority or other entity which involves another
20 city town, district or other governmental entity
21 (e) Ihis ection shall not affect any contractual or civil service
27 holt!, which have come into existence between the city or town and
21 ary cfliccr or employee thereof as a result of the original accep-
24 tance of any optional pros ion of the General Laws, provided,
25 however, such revocation shall apply to the successor to the mom
-
26 bent officer or employee
27 CO If a petition signed by five percent or more of the registered
"ti oters of a city or town is filed in the office of the city or town clerk
29 within sixty days following a vote other than a vote taken by voters
10 on an off it oil ballot to revoke the acceptance of any optional
11 pi()vision of the(icneral Laws rcquestmg that the revoking of such
31 acceptance be submitted as a question to the voters of such city or
31 town, said vote to revoke Si all be suspended from taking effect
.14 until such question is determined by vote of the registered voters
15 s otirg thereon at the next regular city or town election,or ii the city
CY
8 HOUSE — No. 5933 jFebruary
in council or board of selectmen or other authorioy charged with
37 calling elections shall so direct, at a special election called for that
tit purpose Petitions filed requesting the placement of the question or
ao revocation on the ballot for determination by the voters shall be
40 substantially in conformity w ith the provisions ol the law govern-
!
41 ing the signing of nomination papers for city or town officers,as to
42 the identification and certification of names thereon, and subinis-
43 sum to the registrars thereof A brief summary of the relevant
44 section or sections of the General Laws shall also appear on the
45 offioal ballot. If such revocation is favored by a majority o the
46 voters voting thereon, the acceptance of said optional law shall be
47 revoked and it shall become null and void beginning with the first
Vri day of the month next following said vote of revocation 1 he
4.) question to he placed on a ballot shall he essentially as follow s.
Sholl the acceptance by (City,Town)of section(s)
of chapter of the General Laws be re-
52 Yoked'?
53 YES 0 NOD
54 If on the sixty-first day following the date a vote has been taken
55 to revoke the acceptance of an optional provision of the General
fin I ai vo„and no petition as aforesaid has been filed,the viae to revoke
57 shall become effective forthwith
SECT ION 6 Chapter 71 of the General Laws is herebyamended
2 by striking out in Section 1613, as most recently amended by
chapter 823 of the Acts of 1977, the last two sentences
I SR 1 ION 7 Chapter 71 of the General Laws is hereby amend-
ed by striking out Section 34,as most recently amended by Chapter
194 of the Acts oi 1979,and ins,o-ting in place thereof the following.
4 .Saetion 34 Every city and town shall annually provide an
5 amount of money sufficient for the support of the public schools as
6 required by this chapter provided however, that no city'or town
7 shall be required to provide more money for the support of the
public schools than is appropriated by vote of the legislative body of
9 the city or town.
SR 1-ION 8 Section 21C of Chapter 59 of the Geileral I a ws is
2 hereby amended by striking out in the third paragraph the words
e..
HOUSE — No. 5933 9
3 "any any penalty required to be raised under the provisions of
4 Section 34 of Chapter 71 "
1 SECTION 9 Section 1 of Chapter 60A of the General Laws,as
2 most recently amended by Section 87 of Chapter 514 of the Acts of
3 1978, is hereby further amended by striking out in the first sentence
4 thi. words"except that no rate fixed hereunder shall be in excess ol
5 sixty-six dollars per thousand of A aluation"and inserting in place
6 thereof the following:— except that no rate fixed hereunder shall
7 be in excess of twenty-five dollars per thousand of valuation as
8 determined by the valuation formula in effect in the year nineteen
9 hundred and seventy-nine.
I SECTION 10 Section 4Xof Chapter 1078 of the Acts of 1973.
2 as most recently amended by Chapter 154 of the Acts of 1979, is
3 hereby repealed.
‘IECTION II Section 3 of Chapter 72 of the General Laws,as
2 most recently amended by Chapter 599 of the Acts of 1977, is
3 hereby further amended by adding after Part B(8) the following
4 new sub paragraph
5 (9) in the case of an individual who rents his principal place of
6 residence in the Commonwealth,an amount equal to fifty percent
7 of such rent.
• SECTION 12. Chapter 59 of the General Laws is hereby
amended by adding after section 20. the following section. ---
Section 204 No county, district, public authority or other
2 governmental entity authorized by law to assess costs, charges or
3 fees upon cities or towns may increase thetotal of such costs,eharpes
4 or fees with respect toanycity or town in any fiscal year by more than
5 four percent over the total of such costs,charges or fees for suchcity
6 or town for the preceding fiscal year.No city,town,county,district,
7 public authority or other governmental entity shall make arty charge
8 or impose any fee for goods provided or services rendered in excess
9 of the cost of furnishing such goods or providing such services.
7
10 HOUSE — No, 5933 I February
I SECT ION 13 The provisions of this act are severable, and if
2 any of its provisions or an application thereof shall be held uncon-
3 stitutional by any court of competent jurisdiction, the decision of
4 such court shall not affect or impair any of the remaining provi-
,
5 sions or other applications thereof,
FIRST TEN SIGNERS
NAIF RESIDENCE CITY OR TOWN
Donald L Cassidy 49 Stonybrook Drive Holliston
Elaine T Bonavita 84 Walnut Street Agawam
Robert E, Benson 95 Dean Street Norton
Shepard A. Spunt 177 Reservoir Road Brookline
Freda Lee Nason 61 Garfield Street Cambridge
John S. Isaac 22 Shaw Street Quincy
Carol R Cloukcy 24 King Street Orange
William 3 Pribusauskas 369 No. Cary Street Brockton
Sandra Cohen 10 Briarwo(xl Road Framingham
Robert D Wetzel 78 Deer Hill Land Marshfield
SUMMARY OF INITIATIVE PETITION.
The proposed law would limiicertain taxes,and change laws relating
to sc hool budgets and compulsory binding arbitiation. It ould impose
a limit on state and local taxes on real estate and personal pripertycqual
to 2Vn of the full and fair c,ash value of the property being taxed If a
locality currently imposes a tax greater than 21/2g of that Lash value,the
tax would have to be decreased by 15%each year until the 21an level is
reached if a locality currently imposes a tax of less than 21/2%,it would
not be allowed to increase the tax rate In either situation,a city or town
could raise its limit by a 2/3 local vote at a general election.
The proposed law would provide that the total taxes on realestate and
personal property imposed by the state or by localities could never be
increased by more than 21/2%ol the total taxes imposed for ihe,preceding
year, unless two thirds of the voters agreed to the increase at a general
election.
“a„
1980j HOUSE — No. 5933 11
It w old further provide that no law or regulation which imposes
additional costs on a city or town, or a law granting or increasing tax
exemptions, would be effective unless the state agrees to assume the
added cost. A division of the State Auditor's Department would
determine the financial effect of laws and regulations on the various
loc,hoes.
The proposal would limit the amount of money required to he
appropmIted for public schools to that amount voted upon by the local
appropriating authority It would also repeal the law which provides for
compulsory binding arbitration when labor negotiations concerning
police and fire personnel come to an impasse. in addition, the petition
would provide that no county,district,or authority could impose any
annual increase in costs on a locality of greater than4%of the total ol the
year before.
The proposed law would also reduce the maximum excise tax rate on
motor vehicles from$66 per thousand to$25 per thousand,arid it would
allow a state income tax deduction equal to one half of the rent paid for
the taxpayer's principal place of residence.
1
J
12 HOUSE — No. 5933
CERTIFICATE OF THE ATTORNEY GENERAL.
September 5, 1979
Honorable Michael Joseph Connolly
Secretary of the Commonwealth
State .House
Boston, Massachusetts 02133
Dear Secretary Connolly.
•
I hereby certify that the accompanying initiative Petition" was
submitted to mc not later than August 1, 1979, which was the first
Wednesday of August this year The petition is entitled,"Initiative
Petition For A Law Limiting State And Local Taxation And
Expenditures", and was signed by at least ten persons certified to
be qualified voters of the Commonwealth. The proposal would
place limits on local and state taxes.
1 hereby certify that this measure is in proper form for submis-
sion to the people; that the measure is not, either affirmatively or
negatively, substantially the same as any measure which has been
qualified for submission or submitted to the people at either of the
1 preceding biennial state elections, and that its subjects are related
or are mutually dependent. I further certify, under the standards
established by the Massachusetts Constitution and by the Supreme
Judicial Court, that the petition contains only subjects not ex-
cluded from the popular initiative.
In accordance with the provisions of Article 48 of the Amend-
ments to the Constitution, I have enclosed a fair and concise
summary of the proposal.
Very truly yours,
FRANCIS X. BELLOTTI,
Attorney General.
APPENDIX B
The Component Method Forecast
The Appendix to the Lexington Five-Year Financial History and Budgetary Forecast
listed some of the problems associated with the average annual increase method. The
forecasting approach used in this analysis is explained below:
1) Lexington population levels will not change significantly during the forecast period.
Therefore, municipal service levels should remain close to where they are now. These
assumptions permit the use of 1981 town workforce and service levels for the forecast
years. Budgetary increases will reflect inflation.
2) The component method provides a superior forecasting tool over the average annual
increase method, since various components within a budgetary category experience
differing inflation rates. For example, the Police Expense category should not be
projected as a whole category. Budgetary items within that category, such as auto-
mobiles, automobile repairs, fuel, administrative supplies, etc., all have differing
inflation rates. The components are projected, then added up to give the projected
category. The projected categories are then added up to give the Total Appropriations.
3) 1986 capital items forecasts are guesstimates.
4) The tax rate is derived from the net amount to be raised by taxes and the property
valuation. There were many methodological problems associated with projecting state
and county assessments, and town revenues. In many cases, there were no definite
patterns or trends to which statistical techniques could be applied. Review of track
years revealed a strong historical correlation between the net amount to be raised by
taxes and total appropriations. This relationship is expressed as a ratio, where net
amount to be raised by taxes is roughly 80% of total appropriations. This ratio is
applied to the total appropriations for each forecasted year, giving the forecasted
net amount to be raised by taxes.
Appendix A gives a category-by category explanation of how the forecasted numbers
were derived. Appendix B shows the calculations used in the forecasts.
1
r Component Method Forecast and Tax Rate
Town of Lexington
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Appropriation 1975-76 1976-77 1977-7R 1978-79 1979-80
A. Police Personal 963,052 1,044,704 1,123,996 1,167,974 1,206,839
Expenses 109,925 121,600 123,765 168,125 144,500
Capital 0 0 0 0 0
B. Fire Personal 878,518 945,616 928,423 1,074,426 1,176,144
Expenses 55,260 62,275 60,125 71,475 79,750
Capital 5,000 0 80,000 20,000 60,000
C. DPW Personal 1,431,130 1,487,485 1,498,340 1,576/046 1,607,417
Expenses 954,765 1,033,810 1,112,495 1,140,700 1,194,838
Capital 927,500 991,100 747,545 461,700 289,050
D. Other Personal 944,630 1,117,632 1,088,541 1,208,352 1,129,275
Expenses 504,330 569,205 572,168 625,612 651,017
Capital 136,388 211,398 156,570 346,947 504,853
E. Debt Service 2,392,240 2,424,615 2,963,051 1,906,435 1,905,361
F. Pensions 522,025 656,542 666,275 1,004,280 1,108,122
Employee Benefits
G. Grp./ns. 260,500 577,000 709,000 792,000 762,000
H. Unempl.Comp. - - - 60,000 60,000
I. Munic.Prop. &
W}cmn's Comp. 210,470 235,000 293,661 291,203 306,503
J. School Budget 14,156,244 15,136,971 15,746,245 16,209,840 16,505,087
K. Vo-Tech 501,047 505,952 512,305 517,364 442,571
L. Reserve Fund - - - 200,000 150,300
M. Total Approp. 25,003,024 27,120,905 28,382,504 28,842,479 29,283,327
N Net Ait.to raise 17,979,419 20,375,051 22,808,614 23,746,408 23,513,684
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
1980-81 1981-82 1982-83 1983-84 1984-85 1985-86
1,212,982 1,297,891 1,388,743 1,485,955 1,589,972 1,701,270
161,925 190,256 212,145 237,122 265,705 298,493
125,000 0 0 0 0 0
1,265,446 1,354,027 1,448,809 1,550,226 1,658,742 1,774,854
98,900 109,726 123,880 140,081 158,655 179,977
27,000 185,100 30,250 79,860 21,961 100,000
1,673,925 1,791,100 1,916,477 2,050,630 2,194,174 2,347,766
1, 391,451 1,553,524 1,736,680 ► 1,943,421 2,178,355 2,444,111
1,054,450 1,749,000 1,183,380 1,309,704 1,440,674 1,500,000
1,419,353 1,518,708 1,625,018 1,738,769 1,860,483 1,990,717
657,577 694,401 733,287 774,351 817,715 863,507
883,910 192,500 291,930 201,780 350,000 400.000
2,257,103 1,935,050 1,636,114 1,534,152 1,417,485 1,237,745
1,102,101 1,582,793 1,881,729 1,983,690 2,100,358 2,280,098
800,000 920,000 1,058,000 1,216,700 1,399,205 1,609,086
331,203 363,661 399,300 438,431 481,397 528,574
16,989,262 37,657,000 18,449,000 19,381,000 20,464,000 21,660,000
396,265 349,206 346,840 342,895 337,230 333,648
150,000 200,000 200,000 200,000 200,000 200,000
31,997,853 33,643,943 34,,661,,582 36,608,768 38,936,111 41,449,846
25,210,348 27,237,258 ' 28,051,370 29,719,668 31,421,703 33,686,331
Appendix A: Component Forecast Methodology
A. Police: The projected 1986 Police budget is $1,999,763, which is 34% higher
than the 1981 budget.
1. Personal - Police personnel and service levels should not be affected by any
crime increases attributable to the current recession, because_of Lexington's
affluence. The resources are not available to predict how the recession
will affect outside crime coming into Lexington.
The average annual rate of growth method gives an annual personal growth
factor of 4.7%, but this is probably too low, considering inflation. The
adjusted annual growth factor is 7%.
2. Expenses - have been divided into six major components:
a. fuel - 36,000 gallons (wholesale prices) , 20% annual growth factor.
b. vehicle maintenance - $2000/vehicle, 13 vehicles, 7% annual growth
factor.
c. new vehicles - $6000/vehicle, 7 new vehicles/yr., 10% annual growth
factor.
d. tires - $28.85/tire, 3 sets tires/vehicle/yr., 13 vehicles, 10% annual
growth factor.
e. parking meters - $6.00/meter, 250 meters, 7% annual growth factor.
f. other expenses - (admin. supplies, clothing, communications, education,
etc.) 7% annual growth factor.
3. Capital - Except for patrol cars, whose purchase falls under the expense
budget, there should be no major capital requests from the Police Dept.
during the forecast period. The 1981 purchase of communications equipment
was the last major capital expense required by the department to conduct
its present level of services. Therefore, the capital category of the
forecasted budget shows no entries.
B. Fire: The projected 1985 Fire budget is $1,839,358, which is 32% higher than
the 1981 Fire budget.
1. Personal - a 7% annual growth factor was applied to 1981 figure.
2. Expenses - have been divided into three major components
a. fuel - is broken down into gasoline for vehicles (9450 gallons, wholesale
prices), lubricants for vehicles ( $400 expenditure in 1981) , and building
fuel (15,343 gallons) . All fuel prices incorporate a 20% annual growth
factor.
b. vehicle maintenance - $1196/vehicle, 12 vehicles, 10% annual growth
factor.
c. other expenses - 7% annual growth factor
3. Capital - The capital requests came from the Fire Chief's office and were
annualized at a 10% inflation rate.
C. D.P.W.: The projected 1985 D.P.W. budget is $5,813,203, which is 41% higher than
the 1981 budget.
1. Personal - a 7% annual growth factor was applied to the 1981 budget
2. Expenses - was divided into three major components
a. building utilities - is broken down according to per ft.2 use of
oil and gas, and KWH use of electricity, for the Police, D.P.W., Town
Office/Cary buildings, and the Visitors' Center. A 20% annual growth
factor is applied to current consumption.
b. vehicle fuel - includes gasoline, diesel, oils, greases, antifreezes,
etc. A 20% annual growth factor is applied to current consumption.
c. other expenses - have a 10% annual growth factor.
3 Capital - The capital requests came from the capital requests budget, from
the Town Manager's Office. All items were annualized at a 10% inflation
rate.
D. Other Includes all other town departments and offices, such as the Town Manager's,
Comptroller's, Town Clerks, Treasurer's, Assessor's Offices, and the Planning,
Recreation, Veteran's and Health departments, etc
1 Personal - a 7% annual growth factor was applied to the 1981 budget.
2 Expenses - no change was executed from the average annual rate of growth
method, since it tracks well with the expected inflation rate.
3. Capital - The capital requests for '82 - '84 came from the capital request
budget, from the Town Manager's office. All items were annualized at a
10% inflation rate. The 1985 figure is an estimated capital request
based upon the '82 - '84 projected track.
E. Debt Service The actual debt service (bonded debt plus interest) will
decline in the eighties. The adjusted budgetary forecast shows the known
bonded debt and interest, plus an allowance for authorized/unissued and
unforseen bonded capital projects. The 1981 debt service level was used as
a base figure for the allowance. One-half of the difference between the 1981
base figure and the projected year's debt service, equals the allowance.
F. Pensions: Over the past five years, pension costs have increased dramatically, and
have contributed to increases in the budget. In the early eighties, pension costs
should continue to rise, although at a slower rate, as 1) no major changes are
forecasted in the town's workforce size, 2) as the number of non-contributory
and high-risk recipients stabilizes, and 3) as inflation makes more retirement
age employees reluctant to retire early
With Proposition 2 , the city's ability to raise revenues from property taxes
will be reduced, creating conservation efforts to cut costs. Pensions, however, is
one area where cost increases cannot be avoided. Many factors will push costs up,
such as 1) increases in the number of recipients, 2) continued inflation, 3) rising
salary scales, coupled with continued collective bargaining efforts, 41 a decline
in the number of contributors, and 5) federal/state regulations.
Pension cost increases have averaged around 20% annually, meaning that the
1981 estimate is 300% higher than the expenditure level of 1975. The number of
recipients during that same period, however, only rose by roughly 150%. Thus,
increases in the number of recipients is only one factor in determining higher
pension costs
Rising costs per recipient is another factor, and this is due to inflation,
rising salaries, collective bargaining efforts, and increased federal/state
pension regulations. Changes in these variab3es are extremely hard to predict,
but most economists feel that the central one, .inflation, will grow at slower
rates in the early eighties than it grew in the seventies. A lower inflation
rate would help to lower future increases in pension costs.
A third factor in rising pension costs is the declining number of employee
contributors. There were 569 contributors in 1976, but only 535 by 1979. In
the past, losses in total contributors were compensated through higher charges
per contributor. This method is limited by the realistic number of increases
the town can levy upon its employees. Even with the predicted stable employment
of the early eighties, employee contributions are not expected to keep pace with
increases in pension costs.
If a forecast of future pension outlays were based solely upon past trends,
the impression would be of soaring costs. There are, however, many reasons to
believe that past trends alone, do not provide enough information to forecast
future costs.
First of all, the decline in contributors should become less important in
the early eighties as the town's workforce size stabilizes. The town's population
is expected to remain close to where it is now, and this translates into a stable
town workforce.
Secondly, the increase in accidental disabilities under the. high risk category
has remained at around one a year, and the number of noncontributory recipients
has stayed around 19-20. The Comptroller's office does not feel that there should
be any significant change in the number of non-contributory recipients, and with a
stable workforce size, the increase of high risk recipients should also stay at
current levels.
With the high-risk and noncontributory classifications accounted for, the
unknown becomes the remaining bulk of contributory recipients (excluding high-
risk) . This group has traditionally increased the most; from 147 in 1975, to
227 in 1980. However, there is strong reason to believe that this increase will
slow down in the early eighties. The high cost of living has created •a reluctancy
to retire early, forcing more retirement age employees to work longer.
The Adjusted Budgetary Forecast gives the 1982 forecasted pension figure
as a base ($1,260,740) . Recall that an allowance was made to the debt service
which reflected 50% of the difference between the 1981 debt service bases and
the projected year's debt service. The other 50% of this difference is a
stabilization allowance which is added to the 1982 pension base figure in
anticipation of increased pension costs,
Appendix B, section F (1-3) shows the forecasted pension fund, which
reflects an estimate of what the town will need to finance future pension costs.
The figures shown in the M-+usted Budgetary Forecast reflect the '82 base plus
a stabilization allowance. The two sets of figures can be compared as expected
costs vs expected revenues. Any surplus is applied to future pension costs.
G. Group Insurance: The average annual rate of growth method shows a 31.5%
annual growth factor, but this is too high. Large increases were recorded from
1977-1978, but smaller increases were recorded after that. The early increases
reflect policy changes,.'and they are high enough to skew the average. Using a
15% annual inflationary factor on the 1981 base figure assumes a stabilized
workforce, and gives a more realistic forecasting approach to group insurance.
H. Unemployment Compensation: This category is impossible to project, and is a
very small portion of the budget. While it is better not to attempt a forecast
on unemployment compensation, it is important to note that past appropriations
have been around $60,000, but much of this was never used. If Proposition 212
cuts deeply into the budget, the town will be forced to make some layoffs, but this
is only one scenario. No entries were made in this category.
I. Municipal Property and Workmen's Compensation: This category was not changed,
since the 9.8% annual increase very closely parallels the projected inflation rate.
1. School Budget: The school budget for 1982-1985 comes from Superintendent
Lawson's office. The 1986 school budget is a guesstimate,
K Vo-Tech: The enrollment and budget of this school have been on a downward
turn which is expected to continue. From '79-'80, the average decline in enroll-
ment was 7%. This % decline was projected into the eighties, Per pupil costs,
however, are expected to increase at 6% annually. The overall effect on the
budget will be negative.
L. Reserve Fund: The $200,000 figure was provided by the Town Manager's Office.
M. Total Appropriations: This figure is the sum of A-L for each respective year.
N. Net Amount to be Raised by Taxes: The ratio explained in the introduction
(under 4) was used as a base for the net amount to be raised by taxes. With the
completion of several school construction projects, the state aid for such projects
will terminate. Loss of this aid will decrease revenues, driving up the net
amount to be raised by taxes. This increase is reflected in the forecast.
APPENDIX B: Calculations Used In The
Component Method Forecast *
A. POLICE
1. Personal - 7% annual growth factor, using 1981 base figure.
2. Expenses
a) fuel - 36,000 gallons (wholesale prices) , 20% annual growth factor
'79 '80 '81 '82 '83 '84 '85 '86
$/gal .87 1.04 1.25 1 50 1.80 2.16 2 60 3.12
$/36,000 gal. 31,320 37,584 45,101 54,121 64,945 77,934 93,521 112,225
b) vehicle maintenance - $2000/vehicle, 13 vehicles, 7% annual growth factor
'81 '82 '83 '84 '85 '86
$/vehicle 2,000 2,140 2,290 2,450 2,621 2,804
$/13 vehicles 26,000 27,820 29,770 31,850 34,073 36,452
c) new vehicles - $6000/vehicle, 7 new vehicles/yr , 10% annual growth factor
'81 '82 '83 '84 '85 '86
$/vehicle 6,000 6,600 7,260 7,986 8,785 9,663
$/7 vehicles 42,000 46,200 50,820 55,902 61,495 67,641
d) tires-$28.85/tire, 3 sets tires/vehicle/year, 10% annual growth factor
'81 '82 '83 '84 '85 '86
$/tire 28.85 31.73 34.90 38.30 42 23 46.45
$/156 tires 4,500 4,950 5,444 5,989 6,588 7,246
e) parking meters - $6.00/meter, 250 meters, 7% annual growth factor
'81 '82 '83 '84 '85 '86
$/meter 6 6.42 6.87 7 35 7.86 8 41
$/250 meters 1,500 1,605 1,717 1,837 1,965 2,102
f) other expenses - 7% annual growth factor
'81 '82 '83 '84 '85 '86
$ 51,925 55,560 59,449 63,610 68,063 72,827
* All regressions use time (FY) as the independent variable.
B FIRE:
1. Personal - 7% annual growth factor
2. Expenses
a) fuel
'82 '83 '84 '85 '86
$/gal. 1.278 1.534 1.841 2.209 2.651 gasoline for vehicles
$/9450 gal. 12,077 14,496 17,397 20,875 25,052 gasoline for vehicles
$ of lubs 480 576 691 829 995 lubricant for vehicles
$/gal. 1 25 1.50 1.80 2.16 2.59 building fuel
$/15,343 gal. 19,179 23,014 27,617 33,141 39,738 building fuel
total fuel $ 31,736 38,086 45,705 54,845 65,785
b) vehicle maintenance - 12 vehicles, 10% annual growth factor
auto supplies $4500
tires 2350
M/R auto 7500
$14,350 Y 12 vehicles = $1196/vehicle
'82 '83 '84 '85 '86
5/vehicle 1,316 1,448 1,593 1,752 1,927
$/12 vehicles 15,792 17,376 19,116 21,024 23,127
c) other expenses - 7% annual growth factor
'81 '82 '83 '84 '85 '86
$ 58,129 62,198 68,418 75,260 82,786 91,065
3 Capital - capital requests from the Fire Chief's office were annualized
at 10%/yr , then applied to category.
C D.P W
1. Personal - 7% annual growth factor
2. Expenses - 20% annual growth factor for all fuels
a) Building Utilities - Police Building -
'79 '80 '81 '82 '83 '84 '85 '86
Oil, $/ft.2 .28 .34 .41 .49 .59 .71 .85 1.02
$/12,500 ft.2 3,590 4,250 5,125 6,125 7,375 8,875 10,625 12,750
Gas, $/ft.2 .04 .048- .058 .069 .083 .1 12 .14
$/12,500 ft.2 503 600 725 862 1,037 1,250 1,500 1,750
Elec., $/KWH .068 .082 .098 .118 .141 .169 .203 .244
$/89,194 KWH 6,102 7,314 8,741 10,525 12,576 15,074 18,106 21,763
Total Util.$ 10,196 12,164 14,591 17,512 20,988 25,199 30,231 36,263
- D.P.W. Building -
'79 '80 '81 '82 '83 '84 '85 '86
Oil, $/ft.2 .088 .106 .127 .152 .182 .218 .262 .314
$/34,600 ft.2 3,053 3,668 4,394 5,259 6,297 7,543 9,065 10,864
Gas, $/ft.2 2 .34 .41 .49 .59 .71 .85 1.02 1.22
$/34,600 ft. 11,665 14,186 16,954 20,414 24,566 29,410 35,292 42,212
Elec. $/KWH .058 .07 .084 .10 .12 .144 173 .208
$/210,970 KWH 12,244 14,768 17,721 21,097 25,316 30,380 36,498 43,882
Total Util. $ 26,962 32,622 39,069 46,770 56,179 67,333 80,855 96,958
- Town Office/Cary Buildings -
'79 '80 '81 '82 '83 '84 '85 '86
Oil, $/f t.2 .208 .250 .30 .36 432 .518 .622 .746
$/54,000 ft2 11,213 13,500 16,200 19,440 23,328 27,972 33,588 40,284
Gas, 5/ft.2 .006 .007 .008 010 .012 .014 017 .020
$/54,000 ft2 352 378 432 540 648 756 918 1080
Elec. $/KWH .063 .076 .091 .109 .131 .157 .188 226
$/298,980 KWH 18,988 22,722 27,207 32,589 39,166 46,940 56,208 67,569
Total Util. $ 30,553 36,600 43,839 52,569 63,142 75,668 90,714 108,933
- Visitors Center -
'79 '80 '81 '82 '83 '84 '85 '86
Oil, $/ft.2 - - - - - - - -
$/4500 ft.2 - - - - - - - -
Gas, $/ft.2 .225 27 .32 .38 .46 .55 .66 .79
$/4500 ft.2 1,014 1,215 1,440 1,710 2,070 2,475 2,970 3,555
Elec. $/KWH .095 .114 .137 164 .197 .236 283 .340
$/6,480 KWH 613 739 888 1,063 1,277 1,529 1,834 2,203
Total Util $ 1,627 1,954 2,328 2,773 3,347 4,004 4,804 5,758
b) vehicle fuel
'79 '80 '81 '82 '83 '84 '85 '86
Gasoline,$/gall. .87 1:04 1.25 1.50 1.80 2.16 2,60 3.12
$/65,154 ga11.56,684 67,760 81,442 97,731 117,277 140,733 169,400 203,280
Diesel,$/gall. .87 1.04 1.25 1.50 1 80 2.16 2 60 3.12
$/28,505 gall. 24,799 29,645 35,631 42,757 51,309 61,571 74,113 88,936
Hydraulic Oil,
$/gall. 3 3.6 4 32 5 18 6.22 7.46 8 95 10 74
$1770 gall. 2,310 2,772 3,326 3,989 4,789 5,744 6,891 8,270
#30 oil,$/gall. 2.9 3.48 4.18 5 01 6.01 7.21 8.65 10.38
$/660 gall. 1,914 2,297 2,759 3,307 3,967 4,759 5,709 6,851
#5 Diesel Lub. ,
$/gall. 3 15 3.78 4.54 5 45 6 54 7.85 9.42 11.30
$/660 gall. 2,079 2,495 2,996 3,597 4,316 5,181 6,217 7,458
Rear end Grease,
$/lbs .62 .74 89 1 07 1.28 1.54 1 85 2 22
$/1440 lbs 892 1,066 1,282 1,541 1,843 2,218 2,664 3,197
Chassis Grease,
$/lb .84 1 01 1 21 1 45 1.74 2 09 2.51 3 01
$/460 lbs 386 465 557 667 800 961 1,155 1,385
Anti-freeze,
S/gall 5 6 7 2 8.64 10.37 12.44 14 93 17.92
$/440 gall. 2,200 2,640 3,168 3,802 4,563 5,474 6,569 7,885
Total Fuel $ 91,264 109,140 131,161 157,391 188,864 226,641 272,718 327,262
c) other expenses - 10% annual growth factor
'81 '82 '83 '84 '85 '86
1,160,463 1,276,509 1,404,160 1,544,576 1,699,033 1,868,937
3. Capital - annualized at 10% growth factor
D. OTHER:
1. Personal - 7% annual growth factor
2 Expenses - av annual rate of growth method used
3. Capital - '82 - '84 annualized at 10% growth factor. '85 estimate of
$350,000 from Town Manager's Office
E. DEBT SERVICE: Is a combination of known debt and interest, bonding, and the debt
allowance.
'81 '82 '83 '84 '85 '86
debt 1,855,000 1,100,000 825,000 655,000 450,000 110,000
interest 204,652 _134,797 90,125 56,202 27,867 - 8,387
capital
bonding 948,900 378,200 100,000 100,000 100,000 100,000
total 2,257,103 1,612,997 1,015,125 811,202 577,867 218,387
allowance*
0 322,053 620,989 722,950 839,618 1,019,358
adjusted
total 2,257,103 1,935,050 1,636,114 1,534,152 1,417,485 1,237,745
* calculating the allowance:
1982 2,257,103 - 1,612,997 = 644,106 x (.5) = 322,053
1983 2,257,103 - 1,015,125 = 1,241,978 x (.5) = 620,989
1984 2,257,103 - 811,202 = 1,445,901 x (.5) = 722,950
1985 2,257,103 - 577,867 = 1,679,236 x (.5) = 839,618
1986 2,257,103 - 218,387 = 2,038,716 x ) .5) =1,019,358
F. PENSIONS
1) Projecting net add-ons From 1975-1979, net add-ons averaged 10%, but because
of factors explainbd in App.A, this will be lower (around 4% estimated) . The
last two years have been around 2%.
FY '80 '81 '82 '83 '84 '85 '86
recipients 246 250 260 270 281 292 304
2) Projecting average cost/recipient From '75-'80, per recipient cost increases
pretty much parallelled inflationary increases. This analysis assumes a
continuation of this pattern, and uses a 10% inflationary factor.
FY '75 '76 '77 ' '78 '79 '80 , '81 '82 '83 '84 '85 '86
$/recipient 2450 2813 3205 3027 3752 4505 4408 4849 5334 5867 6454 7099
% d - 15 14 -6 24 20
inflation rate - 12 9 10 20 20 10 10 10 10 10 10
3) Projecting pension costs: Multiplying projected recipients x projected $/recip.
gives projected pension costs. This figure may be high, since it assumes a
continuation of the 8% ratio of non-contributory recipients to contributory
recipients. Assuming 19-20 non-contributory recipients during the forecast
period, drops that ratio to 6% by '86. Since many non-contrib. pensions are
higher than their contrib. counterparts, continuation of the 8% ratio could
mean that the projections are a little high.
FY '81 '82 '83 '84 '85 '86
Pension $ 1,102,101 1,260,740 1,440,180 1,648,627 1,884,568 2,158,096
4) Addition of allowance to 1982 pension base. Allowance equals debt service allowance
'82 '83 '84 '85 '86
1,260,740 1,260,740 1,260,740 1,260,740 1,260,740 '82 base
322,053 620,989 722,950 839,618 1,019,358 allowance
1,582,793 1,881,729 1,983,690 2,100,358 2,280,098 total
G. GROUP INSURANCE: 1981 base figure, 15% annual growth rate
H UNEMPLOYMENT COMPENSATION No entries
I MUNICIPAL PROPERTY & WORKMEN's COMPENSATION no change from av ann rate of growth
method
J. SCHOOL BUDGET:See 1981-84 School Budget Forecast from Jack Lawson's office (located
immediately after Appendix B )
K. VO-TECH: 1981 base year, 7% annual enrollment declines, 6%/pupil $ increases
FY '75 '76 '77 '78 '79 '80 '81 '82 I '83 '84 f !85 -- -- '86
per pupil > 2800 2,968 3,146 3,335 3,535 3,747 3,972
enrollment 125 146 192 149 133 129 120 111 104 97 90 84
resulting
budget 356,160 349,206 346,840 342,895 337,230 333,648
L. Reserve Fund: See App.A, section L
M. Total Appropriations: See App. A, section M
N. Net Amount to be Raised by Taxes
1) net amount = .80 (Total Appropriations by F.Y.)
82 83 84 85 86
26,915,154 27,729,266 29,287,014 30,989,049 33,159,877
2) Reduction in School Aid - School aid equals .67 X (amount set aside for
school construction, by F.Y.). The .80 ratio for net amount to be raised
by taxes assumes that net revenues will remain at .20 of total appro-
priations. The amount of school aid in '81 was 526,454. Since school
aid will decrease, this will result in a drop in net revenues, pushing
up the net amount to be raised by taxes.
82 83 84 85 86
'81 aid 526,454 526,454 526,454 526,454 526,454
reduced
aid 204,350 204,350 93,800 93,800 0
net loss 322,104 322,104 432,654 432,654 526,454
3) Adjusted net amount to be raised by taxes - calculated by adding loss
in school aid (representing net loss in revenues) to net amt. to be
raised by taxes.
APPENDIX C
Lexington Public Schools '
Lexington, Massachusetts
•
August 13, 1980
TO: Members of the Lexington Tax Policy Committee
FROM: Jack Lawson
RE: 1981-84 School Budget Forecast
The 1977 school year witnessed the start of implementing the
computerized program budgeting format recommended by Peat, Marwick, Mitchell
and Company in 1976. During that year all financial records were computerized
while maintaining the line item format. In 1978 programs were added to all
non personnel records. The following year (1979) was the first year for full
scale implementation of the programmatic budget format. The 1980 budget
is the second year of full scale implementation of the new format. Most of
the financial data compiled for this forecast for the 1977-80 years comes
from these computerized records.
The year 1984 was selected as the end year of the forecast because
it is the year that students born in 1979 will arrive in kindergarten. These
data (0-4 population) came from the January, 1980 Town census. Extrapolations
beyond this date are possible but more time and effort would be necessary and
they would be less reliable than those through 1984.
The backup data for this report has been arranged so that different
assumptions could be inserted and related to the variables and indicate the
corresponc;ing effect on the years 81 through 84. The following assumptions
guided the development of this report.
. Enrollment forecasting techniques will continue to be
reliable within 2-3% margins of error.
. Staffing ratios currently in place throughout the system
will remain constant.
. Muzzey Junior High will close in OM
. The ratio of SPED students to the total student population
will remain constant at 12%.
. Budgeted dollars rather than expended dollars were used
throughout the study.
. Negotiated salary increases for 1981-1984 will be 6.0%,
6.5%, 7.0%, 7.57. respectively.
. Negotiated increases projected above will have the effect
of increasing dollars in the 1981-1984 budgets for personnel
by the following percentages: 2.17., 2.6%, 3.1%, 3.6:.
. Non personnel dollars in the 1991-84 budgets will increase
at a constant rate of 13%.
a
1981-84 Forecast of Projected Budget Dollars
By Student, Staff, Negotiated Increases, Personnel
and Non Personnel Dollars Using Negotiated Increases
of 6.07., 6.5%, 7.0% and 7.57. Respectively
ACTUAL PROJECTED
Year 1977 1978 1979 1980 1981 1982 1983 1984
No.
Stds. 7029 6748 6363 5992 5654 5320 5107 4953
No
Staff 759.4 730.3 689.2 650.6 614.0 585.7 r 568.6 555.9
Pers. $ 13,109 13,753 13,989 14,145 14,442 14,817 15,276 15,826
Non Pers. $ 2,301 2,457 2,516 2,8452 3,215 3,632 4,105 4,638
Total
Budgetedl 15,410 16,210 16,505 17,459, 17,657 18,449 19,381 20,4641
Budgeted, not expended Projected Budgets
lExpressed in millions of dollars.
21980-81 capital and energy improvement dollars not included.
4
1981-84 Forecast of Projected Budget Dollars
By Student, Staff, Negotiated Increases, Personnel
and Non Personnel Dollars in Percent
ACTUAL PROJECTED
Year 1977 1978 1979 1980 1981 1982 1983 1984
No.
Stds. -6.8 -4.0 -5.7 -5.8 -5.6 -5.9 -4.0 -3.0
No
Staff -3.4 -3.8 -5.6 -5.6 -5.6 -4.6 -2.9 -2.2
Neg.
Inc. 5.5 5.0 5.5 5.5 6.0 6.5 7.0 7.5
Pers. $ .6 4.9 1.7 1.1 2.1 2.6 3.1 3.6
Non Pers. $ 9.0 6.8 2.4 13.11 13.0 13.0 13.0 13.0
Total 1.8 5.2 1.8 5.8 1.1 4.5 5.0 5.6
11980-81 capital and energy improvement dollars not included.
kti
APPENDIX D
il' ATTORNEY'S RESPONSE TO THE TAX POLICY COMMITTEE'S
QUESTIONS ON PROPOSITION 2-1/2
%Car 1 xti
September 17, 1980
Mr. John F. McLaughlin, Chairman
Tax Policy Committee
Town Office Building
Lexington, MA 02173
Dear Mr. McLaughlin:
Enclosed is a memorandum to me which was prepared by a law clerk in
my office in response to the questions raised in your letter to
Bob Hutchinson.
I agree that Proposition 2 1/2 is ambiguous in many respects. There
undoubtedly will be a number of court cases as a result of this poor
draftsmanship. Until these cases are decided, the exact meaning of
many sections of Proposition 2 1/2 cannot be known.
Very truly yours,
r 4
41
�lLt� t/ 7 ,
Norman P. Cohen
Town Counsel
npc/bmc
enc.
JS 1601i!,,,,,
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4;'
7
ri
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Norman P CAW.Town Couna:I amaq•'
1623 MASSACHUSETTS AVENUE • LEXINGTON, MASSACHUSETTS 02173 • TELEPHONE(619) 862-0900 t t}10t,
To: Norman Cohen
From: Paul Saba
Re: Proposition "2 1/2"
Date 9/16/80
Norman:
Here are brief responses to the questions raised by the Lexington
Town Manager concerning Proposition "2 1/2".
Question 1
Does Proposition "2 1/2" - Mass H.R. 5933 (1980) - apply to the
total town levy, or to each individual parcel of property? If it applies
to each parcel individually, what effect will the passage of Proposition
"2 1/2" have on the higher assessments on certain kinds of property
permitted by "Proposition One" - the proposed constitutional amendment
approved in the 1978 general election which allows the legislature to
establish four different classes of property for tax purposes?
Answer:
According to the legal counsel to the legislature's Joint Committee
on Taxation, the proponents of Proposition " 2 1/2" claim that it
applies to each individual parcel of property, rather than the total
town levy. The language of the bill itself, however, simply says that
the "total taxes assessed - - - upon real estate and personal property - -
shall not - - exceed two and one-half percent of the full and fair cash
valuation thereof - - -." §1 lines 3-8. This language is ambiguous on
its face, and could be interpreted to refer to a town's taxable property
taken as a whole, rather than to individual parcels. If Proposition
s l
"2 1/2" passes, this ambiguity will probably have to be resolved by the
courts.
Question 2
under Proposition "2 1/2" the residents of a city or town may vote
in a referendum to increase or decrease the 2 1/2% limit at which property
is supposed to be assessed. If such a referendum were held in November
1981, would its results apply to the fiscal year in which the referendum
occurred, or to the following fiscal year?
Answer
Again the answer is unclear. The wording of the referendum questions
which would change the assessment limit is contained in Proposition "2
1/2" itself, §1 lines 13-18 and 52-57:
Shall the present [two and one-half percent] limit on the
assessment of real estate and personal property taxes with respect
to this city (or town) be increased to per cent for
the fiscal year
Shall the total taxes assessed on real estate and personal
property with respect to this city (or town) in the fiscal year
be increased by percent of the total taxes
so assessed in the preceding fiscal year rather than by the present
two and one-half percent limit on such increase?
By leaving blank the date of the fiscal year to which these questions
refer, the wording of the questions is ambiguous and leaves open the
possibility that an assessment rate changed by referendum vote could
apply to the fiscal year in which the vote occurred.
On the other hand, the legislative Joint Committee on Taxation has
indicated that if Proposition "2 1/2" passes, it will not apply to real
estate and personal property assessments made in the present fiscal
year, but to those of fiscal year 1982. This interpretation is based
-2-
d
•
•
on the fact that property tax assessments for fiscal 1981 will have been
made and mailed to taxpayers before Proposition "2 1/2" is voted upon. (l)
Since property tax assessments in any future fiscal year ordinarily will
also have been made and mailed before any November referendum vote to
change the assessment rate, there are powerful practical reasons for
arguing that the effect of such a referendum should not apply to the
fiscal year in which it occurs. According to the legal counsel of the
Joint Committee on Taxation, this is apparently the position taken by
proponents of the bill, despite the ambiguity of the language noted
above.
Question 3
Can the language of §12 - "No county, district, public authority or
other governmental entity" - be interpreted to apply to the Commonwealth
of Massachusetts itself, as well as the MBTA, MDC, and other such creatures
of the Commonwealth?
Answer
The bill as drafted is wholly lacking in definitions, including
definitions of the terms "public authority" or "governmental entity."
In the absence of any definitions, the scope of §12 is unclear, and it
remains an open question whether the Commonwealth, the MBTA, the MDC or
other bodies are embraced by the language of this section.
(1) But Proposition "2 1/2" will apparently apply to the excise tax
levies of the present fiscal year since these levies will be made as of
January 1, 1981.