Date: 10/26/2023
Our town faces a voting dilemma on Nov. 7. The proposal is to fund a new high school and a new pool building and pool by borrowing the money. An affirmative vote will increase the amount the Town can tax for real estate & personal property taxes for up to 30 years. The financial ramifications deserve serious consideration.
The cost of the new school construction is $177.5 million. The town will receive $63 million from the state school building assistance for that cost, leaving the need to borrow $114.5 million. If that amount is borrowed at 5% interest over 30 years, the total amount to be repaid is $221.6 million. This means an additional cost to taxpayers of $107.1 million in debt service alone.
The construction for the pool building and the pool is $16.8 million. There is no reimbursement from the state for any portion of the pool. Borrowing for 30 years at 5% will result in a final cost of $32.8 million. Additional debt service of $16 million could be mitigated by reducing the bond term for the pool to 20 years.
Up for voter approval is borrowing $131.3 million for these two proposals. The town has never borrowed that much money, nor has it ever bonded a project for 30 years. The term of the bond whether 30, 25 or 20 years will be decided by the Town Council. Correspondingly, projected figures are fluid. Factors such as fiscal property valuations, interest rates and bond term will affect the final tax impact. Bonding for 30 years is the most expensive option for the taxpayers. Bonding for a shorter period will increase the tax rate but will substantially reduce the interest taxpayers pay.
Much concern centers on the residential tax impact. The most recent tax rate (fiscal year 2023) was $19.20 per thousand. It’s been determined that residential valuations will increase by 9% this year (fiscal 2024). Generally, if valuations rise, the tax rate is reduced. That may happen when the rate is set later this fall. If approved, the cost of financing the high school and pool results in an approximate $3.50 increase to the tax rate. In the following year, this will bring the tax rate near or above $23 per $1,000. The town’s residential tax rate, according to Proposition 2 1/2, cannot exceed $25 per $1,000. This limitation will undoubtedly put a strain on future town budgets. Our town must consider how it will sustain other departmental budgets, capital projects, pay raises, emergency expenditures, trash pickup, employee health insurance, contribution to the retirement benefit fund, etc. Otherwise, future cuts in services are inevitable.
There’s been little mention of the impact on local commercial and industrial property tax bills. A quick calculation of the $3.50 rate increase result in a range of impacts. Commercial property tax increases will range from roughly $1,900 to $40,800. Industrial property tax increases will range from $3,400 to $100,600. The increase may have a chilling effect on sustaining or attracting business in our town.
The town’s financial status has been highly rated for decades. A voter should consider how the bond could jeopardize the town’s financial health and its future needs.
Christine Saulnier
East Longmeadow
Editor’s note: For clarification, the vote will ask voters to authorize the borrowing of $177.5 million of which $63 million was estimated to be reimbursed by the MSBA. However, after publication of this letter, the MSBA increased its estimated reimbursement level for the project. Information on that will be reported as soon as possible. Additionally, the estimated tax rate is expected to decrease once the tax rate recapitualtion is submitted. Should this occur, the estimated tax rate would be below $23 per $1,000.
