Proposition 2½ and the Overlay
Account attack
A Primer for the uninitiated
Attack on Proposition 2½ – the Overlay Exclusion, which increases property taxes the amount that is in the city or town abatement account and can more than double the present Prop 2½ -allowed levy increase.
Text of House version, which was a floor amendment by Rep. Spilka, Kulik and Blumer to the House Municipal Relief
bill:
Section 21C of Chapter 59 of the General Laws, as appearing in the 2000 Official Edition, is hereby amended by adding the following paragraph:-
(o) The local appropriating authority of any city or town which is subject to the provisions of paragraph (b) may, by a two-thirds vote, seek voter approval to exempt the overlay account from the limits set forth in paragraph (b); provided, however, that the exemption amount of the overlay account shall equal the average amount of the previous 3 years of an overlay account established pursuant to section 25; and provided, further, that said overlay account may be increased by two and a half percent in each ensuing year without being included in total taxes assessed; provided, however, any increase in excess of two and a half percent shall be so included.
Any question submitted to the voters shall be worded as follows: - “Shall the (city/town) of ________ be allowed to exempt overlay account for the fiscal year beginning July 1st, _______ from the (city’s/town’s) limit?
Text of Senate Ways & Means Committee section in Municipal Relief bill
SECTION 13. Section 25 of chapter 59 of the General Laws, as so appearing, is hereby amended by striking out the first sentence and inserting in place thereof the following sentence:-
"The assessors in any city or town may add to the amount to be assessed such reasonable amount as the commissioner may approve although the total limit of taxation as provided in section 21C may by such overlay be exceeded, such amount to be used only for avoiding fractional divisions of the amount to be assessed in the apportionment thereof and for abatements and exemptions granted on account of property assessed for the fiscal year for which the overlay is made or of taxes in the warrant of which the overlay is part, but any balance in the overlay account, in excess of the amount of the warrant remaining to be collected or abated, as certified by the board of assessors, shall be transferred by the board of assessors upon their own initiative or within 10 days of a written request by the chief executive officer, to a reserve fund to be appropriated for any lawful purpose; any balance in said reserve fund at the end of the fiscal year shall be closed out to surplus revenue.
CLT response to House version.
Excerpt from column by Barbara Anderson
Until now, the only serious attack on Prop 2½ came in the early 1990's, when the House Ways & Means Committee chairman Tom Finneran tried to push through an exclusion to the levy limit. He wanted to raise taxes for the local overlay account outside of the limit. This was difficult to fight since most people, including most legislators, didn’t know what the overlay account was. They were told that this is just money that comes back to the taxpayers anyhow.
Well yes, it does, if a taxpayer happens to have been over-assessed and is entitled to an abatement; but this is no reason to raise everyone else’s taxes to return the overcharge.
Finneran kept trying and Governor Weld kept vetoing; finally the issue disappeared. It resurfaced in the House this month as a new kind of override, letting communities ask voters to exclude the abatement account from Prop 2 ½. Rather than hope someone explains the Overlay-abatement thing to local voters, I would just say enough with the overrides already. But things can always be worse; the Senate Ways & Means Committee version raises property taxes without asking anyone.
If it passes, Proposition 2½ will become Prop 3½, 4½, 6½ or even higher, depending upon a community’s abatement history, even before the added costs of overrides.
CLT MEMO
To: Members of the Massachusetts Senate
cc: Massachusetts House
June 10, 2003
Re: Overlay exclusion from Proposition 2½ –
Enough already with the overrides
Though CLT has generally not opposed the creation of overrides that depend upon a referendum vote, we are opposed to this because: enough is enough.
The Proposition 2½ Overlay exclusion, which raises property taxes by the amount in a community’s abatement account, is so unfamiliar and complicated that it is hard to explain to the media, and I am at least trying – unlike what will happen when supporters try to slip it by local voters.
Aside from the usual scare tactics on existing overrides, there are new trends in attempts to get voters to pass them. Local officials go back to the ballot immediately after losing, spending more scarce money for another election hoping to wear voters down.
As House Minority Leader Brad Jones said during debate on this amendment to the municipal package, cities and towns can seek an override for the amount of money in the overlay account, so this exclusion is unnecessary.
The Overlay exclusion is different than other overrides for general spending or specific projects. Proponents of it exclude the amount set aside for abatements by making the argument that "the money goes back to taxpayers." Well, yes; but only if they are first over-assessed. In order to get more money to spend, a town would be tempted to over-assess more people, in order to build up an abatement history on which the exclusion is based. After costing and inconveniencing many taxpayers who have to appeal the over assessment, the town would have its slush fund, raised outside of the Prop 2½ levy limit. Then, though the ballot language gives the impression that this is for one year only, the Overlay account could automatically increase by 2.5% every year.
If you do not understand this, call me and I will explain it further. Then imagine yourself a local reporter explaining it to your readers so they can make an informed decision on the new override.
At present, there are overrides for general government expenditures, debt exclusions, equipment, open space and affordable housing. Enough already. The Senate has been supportive of Prop 2½ over the years, and we ask you to ignore this House foolishness now. If it comes out of conference committee, we will ask the governor for a veto on the grounds that this is meant to trick the voters.
CLT MEMO
To: Members of the General Court
June 10, 2003
Re: House bills 1215 and 1217 on Proposition 2½
Whereas: the Overlay exclusion from Prop 2½ was passed by the House as a floor amendment and we didn’t get a chance to contact members about it, we are delivering a memo in opposition to it today hoping that the Senate and then conference committee will reject it.
We are delivering this memo on the two proposed Marzilli bills at the same time, just in case they pop up unexpectedly.
House 1215 excludes the local contribution for chapter 70 from the Prop 2½ levy limit. There is no requirement for voter approval and even if there were, as we said about the Overlay exclusion, there are enough different kinds of overrides already.
House 1217 is another scheme to exempt some taxpayers from the results of an override election so that they will vote for higher property taxes or stay home.
Naturally we are concerned about people who cannot afford their property taxes; this was why we put Proposition 2½ on the ballot in the first place. But passing overrides and pushing the lower-income homeowner’s share of the new taxes onto other local taxpayers is not the answer, since some of them can’t afford the override either. Local officials cannot tell from home value or income what extraordinary expenses some homeowners may have: health expenses, parental care, children’s college costs – and now their neighbor’s share of an override.
The regressive property tax is still over-used in Massachusetts, though Prop 2½ helps control it and the Legislature (except for the House Overlay vote) has done a good job over twenty years of supporting it. This is another good year to leave it alone.
Excerpt from column by Barbara Anderson about both House and Senate versions
Until now, the only serious attack on Prop 2½ came in the early 1990's, when the House Ways & Means Committee chairman Tom Finneran tried to push through an exclusion to the levy limit. He wanted to raise taxes for the local overlay account outside of the limit. This was difficult to fight since most people, including most legislators, didn’t know what the overlay account was. They were told that this is just money that comes back to the taxpayers anyhow.
Well yes, it does, if a taxpayer happens to have been over-assessed and is entitled to an abatement; but this is no reason to raise everyone else’s taxes to return the overcharge.
Finneran kept trying and Governor Weld kept vetoing; finally the issue disappeared. It resurfaced in the House this month as a new kind of override, letting communities ask voters to exclude the abatement account from Prop 2 ½. Rather than hope someone explains the Overlay-abatement thing to local voters, I would just say enough with the overrides already. But things can always be worse; the Senate Ways & Means Committee version raises property taxes without asking anyone.
If it passes, Proposition 2 ½ will become Prop 3 ½, 4 ½, 6 ½ or even higher, depending upon a community’s abatement history, even before the added costs of overrides.
CLT Response to Senate version, which contains no local referendum
CLT NEWS ADVISORY
June 11, 2003
Attack on Proposition 2½: Overlay Exclusion will
increase property taxes by amount in city/town abatement account
I know reporters are having a hard time understanding this, and that’s why the legislative leadership is doing it. If they were to file a bill called "Bill to increase property taxes by 1.87% on average, making Proposition 2½, Proposition 4.37" everyone would know what it is.
If they said "we are going to raise property taxes by $160 million dollars," everyone would see the simple tax increase.
Since the beginning of Prop 2½ in 1980, there have been no exemptions. All tax revenues, whether spent on education, public safety, public works, debt, libraries, or abatements, are limited by the Prop 2½ levy limit. The levy can go up only 2.5 % a year, plus a provision for new growth and overrides.
If this passes, the levy will go up 2.5 % a year, plus on average another 1.87 %, before calculating new growth and overrides.
If you are overcharged at Acme Department Store, then complain, the store will give you back the extra money you should not have given them. The store will not routinely overcharge all its customers to keep some money in a fund in case they overcharge you; but it has to find the money somewhere. Presumably there is cash kept somewhere so they can reimburse you immediately.
If a city or town overcharges a property taxpayer, it is required to keep enough money to return the overcharge to the taxpayer. It shouldn’t be able to INCREASE that taxpayer’s taxes, and the taxes of all other taxpayers, in order to return the money it shouldn’t have taken from him in the first place!
Other points to consider:
If the customer doesn’t notice the overcharge, then the store gets to keep the overcharge, and spend the money on whatever it wants. If the community has an abatement history and must keep money in the overlay account, and taxpayers do not apply for an abatement, the money goes into the community’s fund to be spent on whatever it wants. If this passes, it will behoove the community to over-assess often, build up the abatement history, expand the slush fund.
Keep this memo: I guarantee this will happen and I’ll be able to say I told you so.
Barbara Anderson
CLT NEWS ADVISORY
June 13, 2003
Attack on Proposition 2½: Overlay Exclusion will
increase property taxes by amount in city/town abatement account
Part 2 - In a series of however many it takes
You must have noticed that Senator JoAnn Sprague’s
amendment to remove the Overlay exclusion from the municipal aid package
almost passed (17-21), an unusually close vote for the Senate. This
alone should raise a red "news!" flag. There were similar
close votes on Proposition 2½ in the past, because raising property
taxes is a big deal.
Seventeen senators understood exactly what this is
about, even if reporters except for AP’s Steve LeBlanc (bravo Steve!)
cannot. One of these senators was the Ways & Means Chairman! Others
were state reps when the Overlay was debated in the early ‘90s. They
knew they would be voting to assault Prop 2½ and decided not to do this
– until a further amendment, which seemed to reassure some of them
though we don’t know why. The Overlay exclusion passed the Senate with
a final vote of 25-11.
The original Senate version tried to make the Overlay
exclusion seem like a minor technical adjustment. To further this
illusion, it was drafted to give assessors alone the power to do it,
without other local officials being involved. The further amendment
gives the community’s chief executive officer, instead of the
assessors, the power to hike the property tax by the amount previously
spent on abatements. But this doesn’t address the real problem.
Here is the easiest way to understand this issue.
Proposition 2½ is not about appropriations; it’s
not a spending limit.
Proposition 2½ is a TAXATION limit. It doesn’t
care how the tax money is spent: on public safety, education, public
works, the library, services for any particular group, abatements for
the elderly or the over-assessed.
Prop 2½ simply says that no matter if you spend the
money on services, or if you save it in a stabilization fund, or if you
use it to pay debts, or if you give it away, or if you cook and eat it:
you can’t increase the annual levy more than 2½ percent over the
previous year’s levy, except for new growth or overrides.
Previous year’s levy is X. This year’s levy is X
+ 2.5% of last year’s X + new growth + overrides if you can get them.
The majority of the House and 25 senators want to
increase that 2.5% so the city or town has more money to spend.