Should voters approve the construction of a new elementary school at Town Meeting and Town Election next month, property owners can expect project costs to drive their taxes dramatically higher, though not as high as initially feared.
According to the latest School Building Committee estimates, as the town begins to pay for the completed school in 2021, property taxes would jump 11 percent above fiscal 2018 bills and drop to an 8.1 percent increase in 2026. The owners of a median-priced $563,500 house in Harvard would see their annual tax bill increase by $1,062 in 2021, falling to a $787 increase by 2026. It is estimated that the tax bill for a median-priced house this fiscal year is $9,664. These latest numbers are well below the back-of-the-envelope 16 percent increase predicted when the project was first studied a year ago.
These numbers and a host of other projections were among the findings presented to roughly three dozen attendees at a public forum Tuesday night in Volunteers Hall by members of the School Building Committee. In 37 slides, SBC members walked attendees through details of the proposed new school construction budget, approved Tuesday by the Massachusetts School Building Authority; the manner in which MSBA determines its reimbursement; the consequences of a no vote; and the steps that remain, including the approval of voters at both Annual Town Meeting and Town Election in May.
To compute the impact on an individual’s property taxes of the $34.8 million that the town would need to borrow, it’s necessary to know the estimated mil rate, the amount property owners would be taxed for each thousand dollars of the property’s assessed value. New numbers provided to the Press Wednesday by SBC member Alice von Loesecke indicate that the amount would be $1.97 in fiscal 2021, a number that remains fairly constant through 2025, spiking to $2.09 in 2026 before falling again. Individual property owners can calculate their own tax impact by multiplying the assessed value of their property—shown on their fiscal 2018 tax bill—by $1.97.
From the beginning, the aim has been to take the sting out of the first five years of school debt payments. In 2026, principal and interest on a number of existing projects will be paid off, lowering the total amount of debt the town carries. But from 2021 through 2025, the combination of school and existing debt would boost taxes another 2 percent.
School, CPIC money reduce tax spike
To hold the increase at 11 percent, the school and capital committees have pledged to contribute $1 million apiece spread over the first five years of the project. Money from the school department would be drawn from its Devens fund; the capital committee would recommend that money be transferred annually from the town’s Capital Stabilization and Investment Fund. The total impact of that plan can be seen in the table and graph that accompany this story.
While $2 million in upfront cash contributions makes a significant difference to early debt payments, the borrowing plan is key to holding down the long-term costs to the town. All of the numbers presented Tuesday night depend on the town’s being able to issue a 25-year bond as soon as possible. The plan is for the town to issue a one-year $5 million bond anticipation note (BAN) at 3 percent interest, to be followed by a $34.8 million fixed rate 25-year bond at 4.25 percent interest. With rates expected to rise over the next two to three years, issuing the bond sooner rather than later is in the town’s best interest, everyone seems to agree. If voters approve the project, the town would issue the BAN in July, with first payments due in 2020. The SBC says construction would begin in May, 2019, and wants the 25-year bond to be in place by July 2019, with first payment due in fiscal 2021.
One piece of the puzzle
Paying for the new school, however, is only one piece of Harvard’s financial puzzle. Over the next five years, the capital committee has approved a restoration of the historical front entrance to the old library, and will consider requests for an expansion of Hildreth House, a rebuild of the DPW facility, and the purchase of two fire trucks. The old library project awaits a source of funding, but the remaining projects must be approved by the town. The capital committee anticipates they would all be paid for with excluded debt, adding a few more percentage points to the total increase in taxes over the next 25 years. Von Loesecke says the good news is that a new school would not crowd out those projects.
Missing from this analysis, however, is the growing cost of operating the town, which results each year in a 2 to 3 percent rise in the operating budget to pay for resident services and the salaries and benefits of its paid professionals. This outlook will be the subject of a future Press article.
Tuesday’s presentation was broadcast live and recorded by Harvard Cable TV. The recording will soon be available at the Harvard cable TV site. And the slides will be posted to the HES Building Project webpage (https://bit.ly/2GQaTi1).
