Explaining the Debt Exclusion for the New BP High School
Residents of Rehoboth,
At the April 4th annual town election, in addition to voting for candidates for various offices, the ballot will contain a debt exclusion question. The purpose of this question is to ask for you to allow the town to temporarily raise your taxes to pay for the new Bristol Plymouth Regional Technical School.
As a Selectman, I was conflicted on whether or not to vote to place this question on the ballot. On the one hand, residents in Town have been asked to approve a debt exclusion on this project twice prior, and both times the request was overwhelmingly defeated. On the other hand, without a debt exclusion to fund this project, there will be a substantial financial impact on the Town which will impact all departments and the level of services we provide to our residents.
The Rehoboth Board of Selectmen as an entity does not take position for or against a ballot question. However, as individuals, each of us have our own personal opinions . I, like most of you, do not favor a tax increase, but in this instance, it is truly necessary, for all the reasons will outline in this letter.
The Selectman’s office received numerous comments from residents indicating they were confused about the prior ballot questions and why they were necessary. I will attempt to explain to clear up any confusion so all of you may make the best, informed decision – whether for or against – as possible when you go to the polls on April 4th.
In a nutshell:
- The Bristol Plymouth Regional Technical School (“BP”) construction project passed last March.
- Rehoboth, as part of the BP school district, has to pay its portion of the bill for the new school.
- That bill is expected to be approximately $615,000 per year for 30 years, and will fluctuate up and down based on our student enrollment
- The only way we can pay such a large expense without having an impact on other town services or departments is through a debt exclusion
- The estimated impact based on the current figures available is the “typical” household would see a $30/quarter ($122/annual) tax increase.
- A “Yes” vote on April 4th means you approve of the debt exclusion (your taxes will go up). A “no” vote means you do not approve and you want the Town to fund the project within the normal tax levy.
If you’d like to understand more about the issue and how we got here, read on.
Like the Dighton Rehoboth Regional School District (“DR”), BP is a regional school district. BP provides what many of us, in the common vernacular, refer to as a “vocational” education to students. Under Massachusetts General Laws, the Town is obligated to offer this type of educational program to its students.
Rehoboth is one of seven communities which are a member of the BP “district”. Berkley, Bridgewater, Dighton, Middleboro, Raynham, and Taunton are the other communities. BP has superb reputation among all the communities, parents and students alike highly commend the educational programs, staff and administration at BP. As a Selectman and former Finance Committee member here in Rehoboth, I have always found BP fiscally responsible and an excellent custodian of the funds we entrust to them to educate our children.
In 2022, BP put forward a capital project to build a new school building. Their existing building, built in 1972, was well beyond its original lifespan and was becoming an increasing financial strain to maintain within the scope of their existing budget, and due to the success of their programs was becoming increasingly overcrowded. They performed a study to determine what the cost would be to renovate their existing facility and to build a new one, and the cost difference was minimal. The decision was made to recommend building a new facility, which would have minimal impact on the students as the current building would be unaffected. You can read more about the project at https://www.bptech.org/msba
As a regional school district, the BP project required a majority vote of voters from the member communities – meaning, the project’s approval required a majority of all the votes cast in all the member communities collectively added together. The collective decision is then binding on all member communities. This is different than our arrangement with DR for projects at the high school (each town pays for its own K-8 capital expenses), where the votes are tabulated in each town to determine the “town’s decision”, and both towns must vote in the affirmative to pass a project.
In March of 2022 a district-wide vote was held. Even though the project question was overwhelmingly defeated in Rehoboth with 70.5% of the residents voting against the project, the project narrowly passed by a majority vote when all the votes in all the communities were combined.
As a result of the collective vote, Rehoboth is now “on the hook” for our portion of the costs of this new building project, even though we as a town overwhelming rejected the project. Whether or not you or I supported or didn’t support the project is irrelevant, that ship has sailed, and now we have to figure out how we’re going to pay for it. This is one of the downsides of being part of a regional school district – residents of other communities have an effect on decisions you make in your town. We are now legally obligated to pay for our portion of the project.
Municipalities and regional school districts “borrow” money by issuing bonds. Those bonds are issued for a set period of time, during which annual payments are made to the bond holders.
The estimated cost of the BP project is $305m with $125m in state assistance, leaving BP with a $180 difference. They will issue a bond to fund that difference. The annual costs associated with the bond will be passed to the member communities, in the form of an increased capital assessment which the towns must fund as part of their budget until 2056.
The exact amount of the annual capital assessment to each community is not set in stone. As a regional school district, the capital assessment to each community fluctuates annually based on each member community’s enrollment percentage. So, for example, if one year 10% of the total student population at BP are Rehoboth students, the town will be assessed 10% of that year’s capital costs related to the project. Next year, however, if Rehoboth has 15% of the students, we would be expected to pay 15%. Conversely, if we only had 5%, our capital assessment would decrease.
Based on the enrollment numbers and estimated construction costs presented in March 2022, the Town of Rehoboth would see an annual capital assessment of approximately $615,000 annually for 24 years. For a few years at the start and the tail end the capital assessment will be less as BP’s bond payment will be less. That $615,000 number is based on a 5.4% enrollment percentage from Rehoboth.
Why a debt exclusion?
This variability in the annual capital assessment makes it impossible to budget it within the Town’s regular budget process. Even if we can manage to cobble together the funds to pay the bill this year, next year the bill might go up significantly, depending on how the enrollment figures change.
In terms of new revenue on an annual basis, the town has two principal sources: our annual Proposition 2 ½ tax increase allowed by state law, and “new growth”. For the upcoming fiscal year we are currently budgeting for (FY24) those two sources combined are expected to be between $1.1 and $1.2 million, with the bulk coming from the annual property tax increase. “New growth” is variable and dependent on new construction, remodeling, etc.
The other sources of revenue the town receives – state aid, meals tax, and motor vehicle excise taxes – have been flat with no real increases for almost a full decade. Due to Rehoboth’s rural character (and the desire of residents to keep it that way) our options for additional sources of revenue to help pay for projects such as the BP school are significantly hampered.
While an additional $1.1 million in revenue next fiscal year may seem like a lot of money, it really isn’t. Traditionally, during my tenure as a member of the Finance Committee, we would see anywhere between 60% to 65% of new revenue the town would generate allocated to DR due to increased assessments from our participation in that regional school district. For many years, the Finance Committee’s position was to recommend a 60/40 split between education and town when it came to allocating new revenue toward budget requests.
Basic math tells all of us that 40% of $1.1 million is a lot less than $615,000. Even if we spent 100% of all additional revenue the town expects to receive (which we all know isn’t realistic), it isn’t enough to cover the increase from BP. And that assumes the BP capital assessment doesn’t increase if our enrollment percent increases!
Clearly we have a real problem on the Town side. Either we find another source of revenue to fund that $615,000, or we need to make reductions to the town budget, which will definitely impact the services you receive – or potentially also reduce the amount of money we can provide to DR, which likewise will have an impact on educational services our children receive.
For large capital projects, a debt exclusion makes financial sense. It allows the town to spread the cost of a significant capital expense over several years with minimal impact to existing services. Naturally your next question is “Okay Mike, but what’s this going to cost me?”
To simplify it the best I can, the town’s total real estate tax levy for FY24 (according to the Massachusetts Department of Revenue) is $30,160,228. A $615,000 affirmative debt exclusion vote represents an increase of 2.04% in our total tax levy.
If you look at the tax bill you recently received in late December, you could expect to see your tax bill increase by (roughly) 2.04%. The tax impact of the debt exclusion is spread uniformly across all taxpayers based on the assessed value of their property.
Some “real” numbers for you to consider. For FY23, the average single family tax bill in Rehoboth was $5,998 based on an average value of $517,996 (the tax rate being $12.11 per thousand of assessed value.) This means a debt exclusion to pay for the BP project would add $122.36, or $30.59 per quarter, to that average tax bill, had the debt exclusion passed previously.
Naturally, if your house is valued more than that “average single-family home” you would pay more – and likewise, if your house is valued less, you would pay less. And again, it is important to reiterate that $122.36 is based on the capital assessment “today” which reflects a 5.4% enrollment figure, so if our enrollment went down, the $122.36 would be less (and likewise could be more, if enrollment goes up.)
We are legally obligated to pay for our portion of the costs associated with the new BP building project. That legal obligation takes precedence over other town expenses. We must pay the BP capital assessment, even if it means we have to make cuts in town services and layoffs of town personnel (personnel costs being the largest component of the town’s budget.)
A rural, bedroom community such as Rehoboth has limited ability to raise additional revenue. This means, unfortunately, tax increases are the principal source of additional revenue the town has to look at when it comes to large increases in its budget – whether its operational budget, or its capital assessments. Although the town does have an economic development committee, that tree has sprung no fruit over the years in terms of identifying new sources of revenue for the town to tap.
Those of you who know me, know I have worked diligently over the past 13 years in my positions as a member of the Finance Committee and a Selectman to keep our taxes low by controlling the increase in municipal spending to within our anticipated year-over-year increases in our revenue sources.
During these years, I am glad to say I have never had to address town meeting and say a tax increase was necessary to fund operational increases in the municipal budget. Even the acquisitions of two new buildings – a new Town Hall, and the Francis Farm community complex – we were able as a community to achieve with no tax increase, for the benefit of all the residents.
However, we as a community also have an obligation to maintain our existing buildings and infrastructure, and sometimes that requires us to increase taxes to allow us to spread the cost of that project over several years to minimize the impact on the town budget and residents. An example of this are the various capital projects I supported for Palmer River and Beckwith which required a debt exclusion vote and I spoke in favor of on town meeting floor.
The BP project is one of those times where it is necessary to pass a debt exclusion to support the project. Not only is this necessary because the town cannot absorb the astronomical increase we would see in our capital assessment within the scope of our normal year-over-year Proposition 2 ½ levy limit increase, but also because we have a moral and ethical obligation to provide a safe, well-maintained infrastructure for the children we as a community educate.
As always, if any resident has a question or comment, you are welcome to reach out to me via email at Michael.P.Deignan@gmail.com, or via telephone at 401-556-5062.
Michael P. Deignan
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a minor mistake on my part... the tax rate is $11.58 per thousand of assessed value currently, not $12.11.
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