Lexington taxpayers pay a Community and Preservation Act (CPA) voluntary surcharge of 3% on top of their tax bill. Originally subsidized by the state, this program has extended beyond useful state funding and needs to be reviewed by town leaders. A reduction or elimination of the CPA surcharge could offset significant new taxes proposed with the 2017 debt exclusion.
Background
In 2006, Lexington voters authorized an increase in taxation, allowing taxation under the Community Preservation Act (CPA) on top of the 2 1/2 limit. Lexington elected to set this CPA surcharge at 3%, the highest possible under Massachusetts law, while exempting the first $100,000 of property for all homeowners and exempting lower income residents.
The initial motivation for the CPA surcharge was that the Commonwealth of Massachusetts would provide match Lexington’s own taxation dollar for dollar with additional funds. In exchange for these state funds, and restrictions on use of CPA funds, Lexington would then have a large pool of funds for additional projects pertaining to open space, housing, historical structures, and recreation.
However, as additional communities have signed up for CPA, the state funds available for matching have declined. In 2017 town meeting, it was announced that matching funds had declined to $0.21 per dollar taxation, and were at risk of further decline with Boston and Springfield joining the CPA program in 2016.
Beyond Boston and Springfield, 2016 saw these towns join the CPA program: Abington, Billerica, Chelsea, Essex, Holyoke, Hull, Mendon, Norwood, Pittsfield, Rockland, Watertown and Wrentham joined. As a result, the Massachusetts Division of Local Services projected in May 2017 that the FY2018 matching rate would decline to 15%.
As the matching rate for Lexington declines below 20%, how should Lexington respond?
Options:
- Continue taxing at maximum possible CPA rate
- Continue taxing at 3% but discontinue spending beyond debt service (saving for a rainy day)
- Decrease the CPA tax rate from 3% to a lower rate
- Discontinue CPA taxation
Consider that the CPA projects often would not have competed for resources if operating under a single core budget. Lexington’s CPA process creates a second project prioritization: one limited exclusively to the small number of projects which can be classified as CPA eligible. In fact, the CPA statute requires that 10% of CPA funds be designated to each of three specific categories: open spaces, historic resources, and community housing. The result of these requirements is that in addition to a segregated prioritization for CPA funds, there are in effect three segregated sub-categories. Again, this means that projects vie for earmarked funds rather than compete against the general budget for Lexington.
When Lexington was receiving full matching funds, this additional process may have been a worthwhile sacrifice for these extra funds. But with a diminished state contribution, does this process make sense any longer?
In 2016, Lexington taxed itself $4.2 million in designated CPA funds to receive $897,000 from the state. Of this $897,000, $150,000 is earmarked as costs to administer the CPA program, leaving Lexington with a net $747,000 state benefit. In exchange for $747,000, Lexington has to engage in complex additional processes spending nearly $5.0 million, and almost certainly approves many projects which are lower priority than core services such as capital projects and educational services.
Moreover, the CPA funds have been used to make capital purchases, so CPA funds are now committed for debt services to the tune of $2.5 million/year. Therefore, the CPA process has opened up Lexington to further debt leverage, which might not be justifiable in a tightening state funding environment.
Supporting Documentation
Illustration of Decline in State Matching Funds
| FY | % Match | State Subsidy to Lexington |
|---|---|---|
| 2008 | 100% | $2,556,362 |
| 2009 | 69% | $1,927,708 |
| 2010 | 36% | $1,060,390 |
| 2011 | 28% | $858,729 |
| 2012 | 28% | $885,463 |
| 2013 | 28% | $929,507 |
| 2014 | 54% | $1,932,347 |
| 2015 | 33% | $1,230,116 |
| 2016 | 31% | $1,229,774 |
| 2017 | 21% | $897,243 |
Lexington Projects Using CPA Funds
Which projects would have been supported by Lexington without the CPA framework?
Fall 2017 Proposals
$675,000 to improve the view of town owned Chiesa Farm
Spring 2017 Proposals
- Parker’s Revenge Interpretive and Public
Education Signage and Displays: $41,350 - Greeley Village Rear Door and Porch Supplemental
Request: $56,712 - Affordable Units Preservation- Judges Road/ Pine
Grove: $1,048,000 - Willard’s Woods and Wright Farm Meadow
Preservation: $40,480 - Cotton Farm Conservation Area Improvements: $301,300
- Wright Farm Supplemental Funds: $37,900
- Stone Building Feasibility Study: $25,000
- Munroe School Window Restoration: $620,000
- Park Improvements- Athletic Fields: $125,000
- Town Pool Renovation: $1,620,000
- Park and Playground Improvements: $60,000
- Debt Service: $2,390,998
- Administrative Budget: $150,000
2016 and Earlier
A full inventory of projects can be found at CPC report.
Peer Communities
| Town | % CPA |
|---|---|
| Arlington | 1.5% |
| Belmont | 1.5% |
| Brookline | None |
| Concord | 1.5% |
| Lexington | 3% |
| Newton | 1% |
| Wellesley | 1% |
| Winchester | None |