Ballot Question April 2 -- Debt Exemption Sewer Debt Service

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Ballot Question April 2 -- Debt Exemption Sewer Debt Service

Postby dougsears on Mon Feb 28, 2011 8:55 am

Memorandum



To: Mary Ann Nichols, Town Clerk
From: Richard A. Montuori, Town Manager
RE: Ballot Question
Date: February 25, 2011


At a meeting of the Board of Selectmen on Tuesday February 15, 2011, the Board voted 5-0 to include the following Proposition 2 ½ Debt Exemption Ballot Question on the April 2, 2011 Election Ballot.


“Shall the Town of Tewksbury be allowed to exempt from the provisions of proposition two and one-half, so-called, the amounts required to pay for 50% of the Town’s debt service on all existing sewer bonds which were issued in order to construct the municipal sewer system and which were not previously exempted from the provisions of proposition two and one-half, so called?”

Yes ____________________ No ____________________
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Re: Ballot Question April 2 -- Debt Exemption Sewer Debt Ser

Postby Harry on Mon Feb 28, 2011 1:08 pm

Ahhhh...is this the whole ballot question Doug? How much money is the ballot question asking for? It should be called a debt exemption should it not? This is because it for sewer debt of 50% so it will not be a permanent tax increase but will expire as the debt expires?? Not a lot of specifics in the way the question is worded?
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Re: Ballot Question April 2 -- Debt Exemption Sewer Debt Ser

Postby dougsears on Mon Feb 28, 2011 9:14 pm

Harry:

Getting the 50/50 debt service is more complicated than first thought.

This is what I think is involved.

The ballot question expresses the intent -- pro or con -- of the voters on April 2.

If the vote is in the affirmative, then the next step will be to take the 50/50 issue to the Special Town Meeting in October.

Why?

Because the DOR does not approve of a ballot question expressed in percentages i.e. 50%. There must be hard numbers involved.

The only hard numbers involved to date are the $80M and $18M voted at two town meetings.

As neither of these is near 50%, these are not meaningful alternatives.

Special Town Meeting needs to specify a dollar amount which represents the 50% intended in the April 2nd vote.

This figures will be included in a Home Rule Petition which, if it passes at Special Town Meeting, it will go on to the Legislature and then on to the Governor.

This is cumbersome, but participatory. There will be no re-bonding involved. It will be a paper transfer of 50% of the debt service cost from the Enterprise Fund onto the Real Estate Tax Levy.

Sewer bills will be lower. Property tax bills will rise.

Property owners would be able to deduct on their federal income taxes the portion of the taxes attributed to 50% of the sewer debt service.

If a majority vote this on April 2, this will happen. It considers the sewering to be a benefit to the whole town with 50% of the cost of this betterment to be supported by all taxpayers.

Doug
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Re: Ballot Question April 2 -- Debt Exemption Sewer Debt Ser

Postby qwilson on Mon Feb 28, 2011 9:43 pm

Mike Flynn asked these questions a week ago...here are the answers.

1. The wording of the ballot question is very vague. What is the exact dollar amount of the Proposition 2-1/2 Debt Exemption? I would hope that it would be significantly less than 50% of $100M since we have been paying down the debt for quite some time.
You do not put a dollar amount in the ballot question the question is similar to what has been used in the past. Its related to the current cost of principal and interest on the remaining debt. The 50% exemption is 50% of the current and future annual debt service on the remaining debt which ends in 2035

[b]2. What is the projected total amount (principal and interest) of the Excluded Debt when it is completely paid down? What is the total cost to the mythical Average Single Family Residential taxpayer.[/b]
The total cost of sewer debt in the town is approximately 96,590,600 Principal and 47,251,478 Interest for a total of 143,842,078 and this debt ends in 2035 some of this debt is already exempt (approximately 3,000,000) so the 50% shift would not be this total amount it would be the total minus any sewer debt already exempt. We still need to borrow 400,000 in sewer debt that is remaining from the project which will be a 20 year bond costing $199,000 in interest over the 20 years. We are updating the presentation to make it easier to review and understand the tax impact better. Jay updated the tax rate numbers which have higher increase in taxes than I showed the other night ranging from a $14 difference on a home valued at 250,000 to a high of $23 difference on a home valued at $400,000. Not that big of a change in the scheme of things but still a change that needs to be updated. Updated presentation will be ready in a week and I will discuss it at the next Board meeting and I will put it on the website when I am comfortable with the information.

3. Haven't we already bonded the Sewer Program? The debt service schedule should already be known (bar any future refinancing). Are we going to stick to this schedule? What is the highest debt service year, and what is the associated cost to the mythical Average Single Family Residential taxpayer.
Everything is borrowed except 400,000 as stated above and the debt peaks at 8.7 million in 2021. The word mythical should really be projected or estimated and we know better than anyone that there are many assumptions involved in the tax rate that is why we revisited it and will have disclaimers. We will never be exact and we know things could change but we are working with the information we have and making the best estimates possible what other choice do we have.

4. Most importantly, what changes/modifications/adjustments can be made in the future, and can we repeal this if we decide later on that we want to go in a different direction?
If this is voted to repeal it we would have to go to a Town election for an “under ride” I think not sure. The only way to do this with the ability to change it on a yearly basis would be if the Selectmen shifted the debt and not go to the ballot.
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Re: Ballot Question April 2 -- Debt Exemption Sewer Debt Ser

Postby ELLE2 on Tue Mar 01, 2011 5:00 am

qwilson wrote:If this is voted to repeal it we would have to go to a Town election for an “under ride” I think not sure. The only way to do this with the ability to change it on a yearly basis would be if the Selectmen shifted the debt and not go to the ballot.


So then even if it fails, there is an option of a 1 year shift should the sewer rates turn out to be exorbitant?
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Re: Ballot Question April 2 -- Debt Exemption Sewer Debt Ser

Postby qwilson on Tue Mar 01, 2011 4:03 pm

ELLE2 wrote:
qwilson wrote:If this is voted to repeal it we would have to go to a Town election for an “under ride” I think not sure. The only way to do this with the ability to change it on a yearly basis would be if the Selectmen shifted the debt and not go to the ballot.


So then even if it fails, there is an option of a 1 year shift should the sewer rates turn out to be exorbitant?


NO. I was answering Mike's question not providing different alternatives. He was wondering what other changes/modification/adjustments could be made or if there was an option to repeal this debt exclusion if residents decided they no longer wanted the debt on the tax levy. My answer was that I believe instead of an override (debt exclusion), we would need to have an underride which could repeal the debt exclusion. I haven't ever been involved with one, so I am not an expert on the subject but I believe that is the only way.

The BOS have voted to let the residents decide. The vote the residents make will be the final resolution to this issue in the short term (if it fails) and the long term (if it passes). If this fails, we would look at the situation again based on the annual review of water & sewer revenues and expenses.
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