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Thread: Where are my CPA taxes going?

  1. #1
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    Default Where are my CPA taxes going?

    ​The following was submitted by the Community Preservation Committee:

    Where are my CPA taxes going
    ?

    The CPA tax surcharge has been used to meet the objectives of the Community Preservation Act since it was adopted by the Town in 2001. The Community Preservation Fund supports preserving open space, expanding affordable housing, preserving our historic resources, and, in some cases, providing recreational opportunities. The State has matched the surcharge every year in varying amounts ranging from 100% to 27%, the current match. The amounts collected are first applied to the three objectives by setting aside 10% of the annual funds for each of the categories. The balance of the funds are uncommitted and may be used to augment any of the three objectives as well as to fund certain recreational projects.

    Wayland was one of the first communities to adopt the CPA with a tax surcharge of 1.5%. Voters recognized that this small contribution would help protect our remaining open space, expand affordable housing opportunities, and preserve our historic resources.

    Over the course of each year, the Community Preservation Committee hears proposals from citizens and groups for the application of the CPA Fund and then recommends proposals to the Town to be voted upon at Town Meeting.. Since the CPA has been in effect, the CPC has recommended 21 projects to the Town all of which have been accepted at Town Meeting. Also, the Town has approved the CPC recommendation that $1.5 million be added to the open space reserve in addition to the annual amounts reserved for that purpose. Town Meeting continues to recognize the importance of building this reserve in order to be ready to protect significant open space parcels from development.

    Some of the more well known projects that have been supported with CPA funds are the following:
    • Affordable housing and parkland at the former Nike site
    • Study to create a railroad interpretive site
    • Artificial turf at the high school athletic field
    • Acquisition of land on Brackett Road
    • Weed management on the Great Ponds
    • Acquisition of 7 acres on Reservoir Road
    • Rehabilitation and preservation of the former railroad freight house
    • Preservation and digitizing the Town’s historic documents


    Currently the CPC is recommending support for funding:
    • Habitat for Humanity affordable housing and
    • Rental housing (partially affordable) on Route 20[br]


    In addition, projects that are in the planning stages for recommendation at future town meetings include:
    • A conservation restriction on Mainstone Farm
    • A Community Farm at the Lee farm property
    • Athletic fields at the DOW property
    • A Community Boating Center at the Town Center


    The CPC will continue to support these projects and recommend them to the Town so long as it has adequate reserves in the CPA Fund to do so.

    148 cities and towns in the Commonwealth have adopted the CPA. Wayland and other towns recognized that a small contribution in the form of a tax surcharge allows its citizens to participate in protecting our remaining open space, ensuring a broad range of housing, and providing recreational options for our citizens. The CPA has been an invaluable tool in Wayland and the other communities where it has been adopted for preserving our local character, community resources, and quality of life.
    Last edited by Administrator; 02-23-2012 at 10:59 AM. Reason: fix formatting

  2. #2
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    Default From Petitioner: Answers to Questions about Reducing CPA Taxes in Wayland

    We at WaylandeNews received the following Q&A on the Petitioner's CPA Warrant Article from Lead Petitioner Jay Sherry:

    ------------------------------------


    I am proposing a roll back of Wayland’s Community Preservation Act taxes from 1.5% to .1% to provide tax relief, as described in Article #6 in the 2012 Warrant. I’ve talked over my proposal with many citizens over the past few months, and wanted to share what we’ve discussed:


    Question 1: Why reduce CPA taxes so dramatically?
    Because our CPA Fund’s revenue and expenditure are so dramatically out of balance. $9.5 million has been raised over the years, but 78% of the money remains unspent after ten years! The surplus cash stands at $7.4 million or $1855 for each of 4000 Wayland homeowners. Cutting the tax rate will give taxpayers some well-deserved tax relief, offsetting property tax increases and reducing the new money going into the CPA Fund “lockbox.” Over time the surplus will be drawn down as we approve and pay for new preservation projects. Keep in mind that our Fund is not a general savings account that Wayland can use flexibly for many purposes. Once our money goes into the lockbox, by law it can only be spent on three specific things: open space, historic preservation and affordable housing.


    Q2: How much tax relief are we talking about?
    Last year’s CPA tax raised $685,000. Cutting the rate would make it $46,000, saving taxpayers $639,000 annually townwide. This annual saving goes up as our property taxes go up over time. If your home in Wayland is assessed at $600,000, you’re paying $143 in CPA tax this year, which under this proposal would drop to $9.50 per year. So the tax relief is about $133 per year, and would accumulate to at least $1300 over the next ten years. This tax relief of $133 per year will partially offset the projected $630 property tax increase required to fund the FY2013 Omnibus Budget. Every little bit of tax relief helps.


    Q3: How did this situation get so out of whack?
    Wayland voters established the CPA rate of 1.5% back at the town election of April 2001 and we’ve never revisited it. There is no “sunset” provision in the law that automatically stops it. The CPA tax is on autopilot. It stays at 1.5% forever regardless of how large the Fund grows, unless we take explicit action. There is no elected or appointed body in Wayland responsible for reviewing our preservation needs, balancing them against other town priorities, and adjusting the CPA rate. Not the Board of Selectmen. Not the Finance Committee. And not the Community Preservation Committee, which regards the 2001 vote for 1.5% as a mandate from the people and only concerns itself with spending the Fund wisely. Only Town Meeting can act to initiate changing the tax rate.


    Q4: The $16.4 million question: what about Mainstone Farm?
    Acquiring Mainstone Farm for open space has been talked about for many years. The property was recently appraised at $16.4 million. A conservation restriction alone was appraised at $10.3 million. This would be an enormous land transaction for Wayland, when and if it occurs, perhaps the largest in our history. But until Town Meeting has an actual deal to evaluate and approve, along with its financing, it doesn’t make sense to keep stockpiling money when the Fund surplus is already so large. Once our money goes into the lockbox, by law it can only come out for the three designated CPA purposes. What happens if we subsequently can’t get a deal we like on Mainstone? We can’t spend the Fund’s money for general purposes. We lose financial flexibility.


    Q5: But doesn’t this tax reduction put our Community Preservation Committee out of business?
    Not at all. This is NOT an anti-preservation proposal. It does NOT give the $7.4 million back to taxpayers which would be illegal. It does NOT transfer the $7.4 million back to the town -- also illegal. It stays right where it is in the CPA Fund lockbox. We can all applaud the work of the Committee in vetting over 20 different projects, especially those widely beneficial to many residents, like the turf field at the High School or affordable housing at the Nike site. But we’ve spent only $2.1 million in ten years for all these projects. Given the large $7.4 million surplus, the Committee has many years of funding on hand right now to continue their work. Maybe even decades!


    Q6: Won’t we lose out on sizable state matching funds for community preservation?
    Because Wayland was among the first towns with a Fund, the Commonwealth could match our taxes nearly dollar for dollar. If we taxed ourselves $685,000 per year, we got nearly $685,000 from the state. This was a pretty sweet deal. But now there are 148 towns going after the same pot of state money. The state match has dropped to only 26 cents on the dollar, which meant $180,000 last year. Of course this state match will drop proportionally if we lower our CPA taxes. But ask yourself: should we continue to tax ourselves $685K per year, in order to get $180K from the state, when we only spend $210K per year on average? Why not give ourselves a tax break instead, draw down the surplus in the Fund and still spend the $210K?


    Q7: Won’t borrowing money for preservation projects be much more difficult if we cut CPA taxes?
    No. First, our AAA bond rating from Moody’s makes Wayland very creditworthy. Second, borrowing money always requires a two-thirds majority vote at Town Meeting. If we need to borrow money for a major preservation project (like acquiring Mainstone Farm), and enough of us like the project, and like the idea of borrowing for it, certainly a majority of us will approve of the higher CPA tax rate we’ll need to pay off the debt. As we demonstrated with our new High School, if we want to make a major new project happen, we have the political will to tax ourselves accordingly.


    Q8: Won’t Wayland’s image or property values be hurt by this tax reduction?
    Dover, Sherborn, Andover and Marblehead are among the 203 towns and cities that never accepted the CPA. Their
    reputations and home values have not suffered.


    Q9: Isn’t it really difficult to raise the CPA tax rate? We might need more money in the future.
    It takes some time, but it’s not procedurally difficult. Two votes are required, one at Town Meeting, followed by a vote at the polls at the next election. A simple majority of both votes will do it. If spending remains consistent with the last ten years, the Committee only spends $210,000 per year on average, so we have over 35 years of funding on hand now. If preservation project expenditures jump in size to $1 million per year, we still have over 7 years of funding on hand. So we’ll have plenty of time to raise CPA tax rates when necessary.


    Q10: If we’re going to cut it down to .1%, why not just go all the way to 0%?
    When we accepted the provisions of the Community Preservation Act and the state matching funds, they came with certain strings attached. One of those strings is complying with the rules and regulations of the Department of Revenue (DOR), which is specifically identified by the Act as the state agency empowered to make those rules. The DOR regards a reduction to 0% as equivalent to Wayland revoking its 2001 acceptance of the Act. Revocation by Wayland requires a petition by 5% of the voters, followed by a referendum. The petitioners for this Warrant Article picked the lowest CPA tax rate possible. We believe that bringing the proposed tax reduction to Town Meeting causes more analysis and discussion than would a referendum, resulting in a better outcome for Wayland.


    Q11: Why is the effective date of the tax reduction delayed until July of 2013?
    The DOR is now providing a written opinion to Wayland that since this tax reduction isn’t approved by all voters until the election of November 6 2012, the new tax rate can’t go into effect until the start of the next fiscal year, which begins July 1 2013. The DOR is unwilling to accept a midyear adjustment of the rates, although this is administratively possible for the Town since we pay our taxes quarterly.


    Please call or email me if you would like to discuss further. I hope that you share my concern about CPA taxes, and that you will contact the Selectmen before the Selectmen vote their positions on this Article March 28. Please also come to Town Meeting April 9. I look forward to seeing many of you there!


    Jay Sherry
    18 Pine Needle Road
    Cell 508-308-3422
    Sherry.jay@gmail.com

  3. #3
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    We received the following reply to the Petitioner's Q&A from the CPC:
    ----------------------

    The lead petitioner of Article 6 has presented questions and provided answers that are claimed to be derived from discussions with citizens. Unfortunately, most of the answers are incorrect or incomplete. In addition, the petitioner does not mention that so far not one of the Town’s boards and commissions has supported his position although he has presented his arguments to most, if not all of them.

    The CPC has the following comments in response to the answers given by the petitioner:

    1. The CPA (Community Preservation Act) fund is not “out of balance”. There is a large reserve that has been purposely accumulated to provide the Town with the capital to purchase a large transaction such as open space (real estate). Reducing the surcharge is short sighted and will impair the long term objectives of the CPA.

    2. A reduction of the rate of the surcharge may reduce the typical Wayland taxpayer’s burden by $133 per year. However, is this small amount of tax relief worth reducing the funds that will be necessary for the acquisition of open space, affordable housing, and protection of historic resources in the future? In addition, the rate reduction will correspondingly reduce the amount of matching funds the Town receives from the State every year by way of a guaranteed contribution.

    3. The Town’s citizens have complete control of the CPA fund. The Community Preservation Committee (CPC) can only recommend expenditures to the Town. This process has taken place 23 times at Town Meeting without one defeat. Rather than taking issue with hasty expenditures, the petitioner, who does notappreciate the value of reserving funds for future use,implies that the CPC has been hoarding money.

    4. Mainstone Farm is one of the open space opportunities in the Town’s Master Plan; as such it is a target of the CPC. The owner solicited the Town to enter into a transaction that would permanently restrict most of approximately 250 acres to agriculture. Negotiations are ongoing at this time. However, there are other parcels of land that the Conservation Commission has designated as vulnerable to development in its Open Space Plan that warrant protection. Protecting Wayland’s open space is a part of the Town’s Master Plan and therefore it is a long term objective of the CPC.

    5. The reduction of the surcharge rate will seriously impair the work of the CPC. If a transaction exceeds the CPA reserve the Town can elect to utilize bond financing. However, the only source of funds that the bond underwriters will accept to pay the debt service (interest and principal) on the bonds is the CPAsurcharge amount provided by the Town’s citizens. Bond underwriters will not accept the State contribution as a source of funds to repay the debt. If CPA bond financing is not available, the citizens of the Town will be requested to provide the difference between the CPA fund reserve and the purchase price of the property. This will likely be an enormous amount and be rejected by the Town.

    6. The State’s contribution of 26% should not be viewed as a minimal amount. How many of us can obtain a return of 26 cents on a $1 investment? Furthermore, it is not appropriate to average the amount expended by the Town from the CPA fund on an annual basis. The fund and its stewards, the CPC, are not a business with a balance sheet and projections. The CPC reacts to proposals by citizens and considers whether they meet the requirements of the CPA. We expect to utilize the funds over the long term using the same process.

    7. The petitioner suggests that the Town can borrow money on its triple A rating. Of course if that occurs then the citizens will have to pay the debt service on such bonds by way of additional taxation. As we previously mentioned, the bond financing available to the Town for CPA projects is a revenue bond where the debt service is already in place by drawing on the existing surcharge with no increase in taxes. Furthermore, if the Town has a substantial reserve then the amount of the bond financing necessary toconsummate the transaction will be reduced.

    8. It is a matter of opinion whether the emasculation of the CPA will affect the Town’s image or its real estate values.

    9. It may be procedurally possible to increase the surcharge in the future however it is unlikely that a land owner will wait the amount of time necessary for the surcharge to be reinstated at a rate that will support bond financing. Furthermore, it is questionablewhether the Town’s citizens will even vote for an increase in the rate of the surcharge.

    10 and 11. These are procedural questions that we will not comment on at this time.
    Last edited by Kim Reichelt; 03-21-2012 at 12:37 PM. Reason: to fix formatting

  4. #4
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    We received this additional information from Jay Sherry (we present it below with graphics embedded. They are small, but you can click on them to enlarge, and also the whole document as a PDF: 10 Year Tax Savings Document for Wayland eNews.pdf

    ------------------------------------------------------


    Figure 1

    Background on CPA Tax Revenue and Potential Tax Savings The CPA surcharge rate has been fixed at 1.5% for 11 years, from FY2002 through FY2012. But the amount of revenue it raises has increased significantly during this period. The CPA tax is a surcharge, or a tax on a tax. So as Wayland’s real estate property taxes go up, so does the CPA tax, either because assessments go up or the rate per thousand goes up. Data from Michael DiPietro, Wayland’s Director of Finance, of the revenue raised from Wayland taxpayers:


    Table 1

    Wayland’s Finance Committee analyzed the impact of Warrant Article #6 in detail. Its analysis of tax savings used the value of a single home assessed at the Wayland average of $600,000 and at the 2012 real estate property tax rate of $19.01 per thousand. Here’s what the tax savings arithmetic looks like in moving the CPA rate from 1.5% down to .1%:


    Table 2

    All this corresponds to the data shown in the Warrant, except that the Warrant didn’t address the 6% per year increase over time.

    Data from Ellen Brideau, Wayland’s Director of Assessing reveals that 90% of Wayland’s single family homes have 2012 assessments between $300,000 and $1.2 million. Re-running the same numbers as above for homes in this range reveals the picture shown in Figure 1.

    The solid line on page 1 represents the ten year tax savings over this range of home values, assuming no change in the 2012 real estate property tax rate of $19.01 or of the 2012 property assessment of a particular home. This is the minimum savings over the ten years. The dotted line represents the more realistic tax savings that can be expected, based on the 6% growth we’ve experienced in the CPA in the last five years.
    Attached Images Attached Images    
    Last edited by Kim Reichelt; 03-27-2012 at 09:00 AM. Reason: to fix spacing and formatting

  5. #5
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    Default Wayland Historical Commission opposes reducing CPA rate

    We received the following from the Wayland Historical Commission:
    ----------------------------------------

    The Wayland Historical Commission is a strong supporter of the use of CPA funds which is the only funding source for The Commisson’s projects. We have been strongly supported in the past by the CPA and would like to continue this tradition.


    We are responsible for community-wide preservation planning including built historical buildings and archeological remains from Pre-Colonial and Colonial peoples and historic vistas. Our group creates and maintains an inventory of historic assets, protects them from neglect and deterioration and provides educational opportunities for the understanding of town history.


    Wayland has a wealth of historical resources found not simply in historic structures, but also in documents, historic events and rich Native American history. The Historical Commission has completed many projects with Community Preservation Act funds which we would not have been able to complete them without funding from the CPA. Our group works with minimal funding from the town budget.


    Completed and ongoing projects include repair of historic gravestones, a study for a railroad interpretive site along the future bike path, restoration of historic markers, rebuilding of the proscenium at the Vokes Theater, rehabilitation work at the railroad freight house, and an assessment / restoration of historical town documents. More information on many of these projects can be found on the town website.


    Examples of future projects the Commission would like to undertake include creation of a rail trail interpretive site / visitor center, Preservation Planning Maps, Identification of town buildings eligible for funding, internet accessibility of historic documents, study of archaeological sites of Native Americans and the original town site, additional historical markers, restoration of the towns two stone bridges including Stonebridge Road bridge, creation of an audio tour of Wayland and reprinting of the Wayland Walking Tours book with the Historical Society.


    The Historical Commission strongly opposes reducing the CPA rate to .1% because it will remove our Commission’s ability to serve the residents of Wayland and preserve the history of our town.


    Sincerely,
    The Wayland Historical Commission

    [NOTE: The Wayland Historical Commission voted unanimously against this article. Their vote was 0 in favor, 6 opposed.
    Last edited by Kim Reichelt; 03-28-2012 at 09:10 AM.

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