Debt Exclusions and Overrides
Voters often confuse the terms debt exclusion and override.
Override: “Proposition 2 1⁄2 allows a community to assess taxes in excess of the automatic annual 2.5 percent increase and any increase due to new growth by passing an override.”
Debt Exclusion: “A community can assess taxes in excess of its levy limit or levy ceiling for the payment of certain capital projects and for the payment of specified debt service costs. An exclusion for the purpose of raising funds for debt service costs is referred to as a debt exclusion, and an exclusion for the purpose of raising funds for capital project costs is referred to as a capital outlay expenditure exclusion.”
“The additional amount for the payment of debt service is added to the levy limit or levy ceiling for the life of the debt only. The additional amount for the payment of the capital project cost is added to the levy limit or levy ceiling only for the year in which the project is being undertaken. Unlike overrides, exclusions do not become part of the base upon which the levy limit is calculated for future years.”
Source: Mass. Department of Revenue, see below.
When voters evaluate an override or debt exclusion, they should consider several factors:
- Will the town benefit?
- Can it be afforded by the town collectively and oneself individually?
- Does it require an increase in taxes beyond the Proposition 2 1/2 levy limit.
When Proposition 2 1/2 was passed, it seemed certain to constrict local government. The 1970s and 1980 were a highly inflationary, with 1980 exceeding 10%. Proposition 2 1/2 was inspired by Proposition 13 in California, and the Taxachusetts label as Massachusetts had one of the highest tax rates in the country. Proposition 2 1/2 was passed at a time when Massachusetts was struggling, and before the Massachusetts miracle of the 1980s. Limiting local government expansion to 2 1/2% per year when inflation is 10% seemed a recipe for contraction if not disaster.
Today, the restrictions have landed unevenly on the shoulders of communities. Some wealthier communities like Lexington have seen much new growth, excluded from Proposition 2 1/2 constraints, and have also passed numerous operating overrides and debt exclusions. Other communities struggle with these limits, and in some cases are prohibited from passing overrides.
Whether Lexington should pass a debt exclusion may depend on one’s view of local expenditures. For some taxpayers, the town’s commitment to low income housing, open space, and social justice needs to be increased. These liberals have criticized others as greedy or selfish for failing to be more generous for these causes.
Other taxpayers believe these causes should be privately funded, and observe the cycle caused by high taxes driving residents out after their children graduate from school. With school enrollment as the number one budget driver as well as cause for planned and future debt exclusions, they argue that steps need to be taken to limit taxes so residents can afford to stay in Lexington.
Collectively we’re all in this together. We pay our taxes, our children and grandchildren go to schools, we use the services, and our real estate values reflect how these decisions position Lexington relative to other towns. Our opinion is that there are avoidable expenses, such as town meeting proposals to build a new cemetery building, change all the water meters in town, pay for carbon credits to offset residents, and the use of many CPA funds.
Lexington has a “representative town meeting” composed of elected representatives, not an “open town meeting” where all can participate and vote. We do not believe town meeting is broadly representative of Lexington residents. Many residents are not voting US citizens. The town meeting membership is older, not nearly as racially diverse as the town, and votes quite liberally. The town meeting election system favors incumbents and without concerted effort it will take decades to change the town meeting composition. This situation leaves it to voters at the polls for overrides and debt exclusions to weigh in on general taxes and spending. Unfortunately, it means that certain projects are hostage to this negotiation between town leadership and voters, and unsurprisingly those projects are selected as those which will be most palatable to voters.
The ballot is a clumsy process for communicating a citizen’s views to the town. If a debt exclusion fails, who interprets why the voters voted as they did? For this reason, we encourage all voters to increase engagement with their town meeting members, selectmen, and various committees (appropriations, capital expenditures, and school committee). Much of the communication today is between political elites who participate in one or more aspect of this system. Citizens who do not have time to engage in significant town volunteer activities should nevertheless seek avenues to express their support and concerns with elected representatives so the local government process does not depend so heavily on the ballot box at the time of an override or debt exclusion.
For more details, consult the Massachusetts Department of Revenue primer on Proposition 2 1/2. This very detailed document can walk one through many computations around local tax revenue.
The Milford town clerk has a clear explanation of debt exclusions v. overrides. This is useful for a succinct description.
ShrewsburyAdvocates.org has a well written public fact sheet on overrides v. debt exclusions. This document uses analogies to explain how debt exclusions are like a family borrowing for an expense which is too large, and cites relevant supporting documents.
Hidden consequences article points out that Proposition 2 1/2 coincided with declining school enrollment, which may have avoided the catastrophe it could have been for the state.