What is it?
A levy limit is a restriction on the amount of property taxes a taxing district can collect each year. In 1980, in Massachusetts, Proposition 2 1/2 was passed. Since then, there are limits on the property tax, and the levy limit has been a fundamental feature of the Massachusetts municipal fiscal landscape. Still some confusion about the ways in which Proposition 2 1/2 works, how the levy limit is calculated, how an override differs from a debt exclusion or capital outlay expenditure exclusion, and how new growth works.
How does it work?
The levy is the total amount of property taxes a district collects. Levy limits control the growth of property taxes by placing a cap on increases. The name tells you all you need to know: the levy limit = limit on the levy.
The limit is usually expressed in percentages. Massachusetts Proposition 2 1/2 was passed in 1980 and created a legal limit of 2 1/2 %. The limit is calculated on the overall levy — not on each individual property.
Calculating the levy can be complex, but in general, start with last year’s levy, apply the allowable percentage and raise the taxes up to the limit. Remember, a municipality raises what it needs so it may raise it up to the levy limit but could raise it less in any one year.
The levy limit can be exceeded if that action is approved by the voters. It would have to be approved every year that it is needed and usually requires a super majority of 60%.
Why do we want to know about the levy limit?
First because a levy limit can force a choice. Right here right now in South Berkshire there are towns approaching the levy limit as the pressure on the budget increases. There are the necessities of road paving and bridge repairs, a school in ill-repair, and brown water. These are serious issues that need addressing. Other towns have debt and debt service added to the problems of housing – more, better-priced housing available – but also the need to repair our older buildings.
These problems – south county bridges closed, roads that need paving, a housing problem, a regional school in poor repair, brown water and rising costs — cost money. The cost of addressing all the problems can push a municipality up against the levy limit and force it to choose what to do and what to defer.
If a town approaches the levy limit, it can ask the voters to exceed it or choose between what appears to be necessary expenditures. Or it can reach out to neighbors — us — and discuss shared resources, or finally, seek other sources of income beyond property taxes.
The levy limit keeps taxes from ballooning but may force a choice about what to do. Problem? The need does not go away and every year you defer the cost rises. The advantages and disadvantages of levy limits may come easily to mind, however. in Massachusetts it is the law.
Embrace the Complexity
Elected, appointed, and employed town workers come in all shapes and sizes. Some are brighter than others, some nicer, and some harder workers. Nonetheless, there is very little point in getting mad.
What we learn from the levy limit and other rules and regulations is that the problems are interconnected and always more complex than a quick glance suggests. These folks are not trying to thwart you, they are trying to juggle the pieces of a puzzle. So, work with the great folks who work for us and try to sort it all out and make the pieces fit.
