So, how high could the tax increase go in Barrington?
More information about the special FTM
The town recently issued this list of frequently asked questions and their answers regarding the upcoming special financial town meeting on Thursday, March 16:
Why are we here to vote on the Barrington Middle School project again? I thought this project was approved in a referendum vote last November.
This meeting has a limited scope: we are here to vote to allow the town to exceed the tax levy maximum increase of 4 percent set by state law, sometimes called the tax cap. This is necessary because the annual debt service payments on the bond to build the new middle school will exceed the 4 percent tax cap by itself, and state law provides this mechanism to exceed the cap for just such situations.
Will this meeting determine the municipal and school budgets?
No. There will still be the regular financial town meeting (FTM) on May 24, which will fully decide the new tax levy. The Committee on Appropriations has just received the preliminary budgets and will be carefully reviewing them and meeting with officials of the town and the school district between now and the May 24 FTM.
Why have a meeting in March? Could it not wait until the May FTM?
By holding a meeting in March, it is expected to save money. By moving this decision up approximately 8 weeks, it is hoped that:
• The town will save money by securing a favorable interest rate on the bond since interest rates are rising. Waiting until May will expose us to greater risk of higher rates.
• The town will avoid an escalation in construction costs which could be as much as $150,000 per month.
• If approved on March 16, the construction funds could be available as early as April.
• The current construction timeline is ambitious and allows for occupancy of the new building at the beginning of the 2019 school year.
How much is 4 percent of the tax levy?
The current certified tax levy is $58,548,512. A 4 percent increase is $2,341,940. With no changes to the current operating budgets, the bond payments of approximately $3.1 million alone will require an increase exceeding the 4 percent tax cap.
How much is the debt service on the middle school bond?
The final number will not be known until the bond is issued. However, the debt service is expected to be approximately $3,100,000 per year. This assumes a 25-year term, and a 3.4 percent interest rate.
If the tax cap is exceeded, is there any limit to how high the levy can go?
Yes. If the 4 percent cap is exceeded, by state law it may increase by up to, but not more than, $2,899,572 over the 4 percent maximum. In dollar terms, that would mean a maximum increase of $5,241,512 over last year’s levy. This “Ceiling” would represent an 8.95 percent increase over the current tax levy.
If we vote to exceed the cap, will the budget increase to the maximum “Ceiling” of $5,241,512?
That is highly unlikely. This Ceiling is the maximum allowable increase by state law but even the preliminary budgets submitted to the Committee on Appropriations would not reach this level. The May FTM will decide the final outcome of the budget and the increase.
What will happen if the voters turn down the resolution to exceed the cap on March 16?
The bond will not be issued. There will not be financing available to build a new middle school as planned despite the affirmative voter referendum last November. Extensive repairs and system upgrades to the existing middle school will instead need to be financed to bring the school into compliance.
How much are the operating budgets of the town expected to increase?
We will not know until the Appropriations Committee presents the budget for approval by the voters at the financial town meeting on Wednesday, May 24. Both the school budget and the municipal budget are under careful review by the Committee on Appropriations who will, before that May 24 FTM, meet with representatives to see if further savings can be achieved.
How much will my taxes increase if I vote to exceed the 4 percent tax levy cap?
The total tax rate increase will be determined based on the town and school FY17-18 budgets as approved at the May 24 FTM. Tonight’s meeting will only address exceeding the 4 percent cap to the extent required for the middle school project.
Important numbers and terms to know for this discussion
$58,548,512 — Last year’s certified tax levy, approved at the May 2016 FTM
$2,341,940 — The “Tax Cap” set by state law representing a 4 percent increase over last year’s certified tax levy. This meeting is part of a procedure to allow the town to exceed that tax cap.
$2,899,572 — The “State Approved Amount” which is the amount over the tax cap that has been approved by the state. With a vote in favor of exceeding the tax cap, the state will allow the town to exceed the tax cap by an amount up to, but not more than, the state approved amount.
$5,241,512 — The “Ceiling” which is the maximum amount, by state law that the tax levy could increase over last year’s tax levy. This is the sum of the tax cap, plus the state approved amount. It would represent an 8.95 percent increase over last year’s tax levy.
$3,100,000 — The “Debt Service” which is the expected amount of the annual payments on the Middle School Bond, a kind of mortgage payment on the building. This is the expected amount based on a 25-year term, and a 3.4 percent interest rate. The actual amount will depend on the interest rate at the time the bond is floated.
Barrington Town Manager