Debt Exclusion

Here are two terms we will hear a lot about in the very near future.

Override and Debt Exclusion.
What is the difference?

I found a clear answer at this website. I have paraphrased it below.
“An Override is a permanent increase in taxes whereas a Debt Exclusion is a temporary increase in taxes. Each requires a majority vote at the ballot box.
An Override is usually expressed as a percentage. For example, a 3 % override would increase property taxes by 3% permanently. A Debt Exclusion is usually expressed as an amount.

Proposition 2½ allows the City Council to increase property taxes by up to 2.5% per year. This is often referred to as the statutory limit. A majority vote of the 9 member Council is required. The 2.5% limit is designed to cover annual cost increases such as modest pay raises, energy costs, health insurance, etc.

A Debt Exclusion is a tax increase to cover the payments for borrowed money. In our case this includes funds borrowed for the High School buildings. Taxes to pay for these loans will decrease over time until the loans are paid off. ”

The entire cost of the upgraded High School should be a debt Exclusion item. This would allow us to maintain our Bond rating and maintain our Stabilization fund while paying for the needed Capital improvement that the High School upgrade represents.

The current monetary policy of the City of Methuen does not have the funds to pay for the needed upgrade. An override and debt Exclusion both require the Voters of the Community to choose the new taxes.

We have already spent, committed to, $2,000,000 for a Feasibility study. We have hired someone to manage the project and someone to design the project. All of those funds, especially in these economic times, should have gone to the voters this year. Instead the Council approved these fundings.

The entire project should have been listed on our Capital improvement Plan and should have been sent to the voters for approval. What we see happening is that the City is committing funds and in the future, 2011?, will get around to asking the voters to approve a tax override or exclusion. The argument will be that we have already spent $2,000,000 plus and it would be a waste to not continue.

No one wants more taxes or an increase in existing taxes. The city needs to better define their Capital Improvement plan. They need to create a process that guides the City government in choosing the best option for funding these projects, be that Override, grants, or debt exclusion.

As seen in Hull, Massachusetts, I agree “we need a policy where we do not borrow money for large projects without asking for a Debt Exclusion vote. A ‘yes” vote guarantees payments for the loans, prevents service cuts and leaves our Stabilization Fund to tide us over during tough times such as we have now. A “no” vote means no project and no loan payments. Methuen voters should be given the opportunity to decide at the ballot box.

admin posted at 2009-10-9 Category: School

One Response Leave a comment

  1. #1Kathleen Corey Rahme @ 2009-10-14 21:23

    I have enjoyed reading your blog. You provide valuable information to the reader. Thank you.

Leave a Reply

(Ctrl + Enter)