Friday, March 26, 2010
What’s the tax impact of the Carlisle School building proposal?
At the upcoming April 5 Special Town Meeting, the community will be asked to vote on funding for completion of the design documents and construction funds for the School Building Project. Some members of the community have asked me for clarification on what the project means to them as taxpayers, and how confident I am that MSBA will live up to their obligations for reimbursement of up to $6,988,000.
Last year, the town voted to support $450,000 of funding for the schematic design phase. Upon completion, the schematic design phase resulted in a list of items including construction of a new building at the school site, renovation of some of the existing buildings, major repairs to the existing campus, and removal of the Spalding building. Thus far, $327,214.70 has been expended, and the town has filed for or received reimbursement from MSBA for $130,886.
The funding being requested of approximately $19,550,000 is for the completion of the project. MSBA has offered a total grant of $6,988,000, of which we have already received the $130,886 noted above. Upon approval by Town Meeting, and an affirmative vote on the ballot question, MSBA has agreed to provide the additional funding, reimbursing the community at the rate of 40% for eligible costs, up to the net remaining grant amount of $6,857,114.
Determining the impact on property taxes is a little tricky. I have made an assumption that the community would borrow a total of $13,000,000 for a term of 25 years, at an interest rate of 4%, and based my calculation on the property value of the town today. Once we begin paying principal and interest on the loans (estimated in 2015), my calculations show that the additional tax burden on an average home in Carlisle, valued at $790,000, would be about $597 per year.
I believe that the ultimate cost will be slightly lower. Interest rates may not be as high as 4%, and the town will undoubtedly see new growth during the period. New growth will spread the burden over a broader tax base, likely lowering the burden slightly. There is also the possibility that the overall cost of the project will be lower than currently projected, meaning the town would be required to borrow less than $13,000,000.
The taxpayer will not see the impact of the school debt all in one year. Rather, the impact will be phased in over a number of years. This is because there will be the need to do some short-term interim financing as design and construction proceeds. If the town were to borrow $6,500,000 during fiscal year 2011, the town would be required to make an interest payment in 2012. At 4%, that would be $260,000, representing about $149 on the average tax bill in 2012. If we borrow the remaining funds in fiscal year 2012, and pay interest only on the outstanding $13,000,000 of short-term financing in 2013, taxes would likely increase another $149. The impact of the short-term financing is not projected to increase taxes in 2014. During 2014, we would likely bond the entire $13,000,000, for a term of 25 years. In 2015, the tax on an average home is estimated to increase another $299. Thereafter, the debt service requirements for the school project will drop slowly over the next 24 years, resulting in slightly lower bills for the school debt each year.
Lastly, a concern has been expressed regarding the commitment on the part of the Massachusetts School Building Authority (MSBA) to honor the terms of the reimbursement plan. There seems to be real concern that funding will be reduced or eliminated as the Commonwealth tries to address other pressing budgetary matters. I personally am not concerned. Unlike the reimbursement programs of the past when reimbursements were spread out over twenty year periods, MSBA will be reimbursing the community each month for eligible charges we submit. This being the case, assuming the project is completed in late 2012, the town will have received most, if not all, of the eligible funds by late 2012, or early 2013. In the years I have worked with MSBA, or the predecessor SBAB, there has never been an instance when they did not honor their commitments. I see no reason that will change over the next few years. If MSBA funding becomes limited, it is more likely that MSBA will need to modify their support of new projects they will consider in the future. I’m confident that Carlisle will not be affected. ∆
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