Property Tax Levy

Section I - Financial Summary: Property Tax Levy

The Property Tax levy is governed by Massachusetts General Laws (MGL) Chapter 59 and is made up of several individual components. The levy is made up of the total levies for each class of property as well as a reserve for abatements.

Proposition 2½

The passage of Proposition 2½ in 1980 has been the largest single factor affecting the property tax levy for municipalities in Massachusetts. Despite having been in effect for more than thirty years, Proposition 2½ is still not well understood by many in The Commonwealth. The basic element of Proposition 2½ is that it limits the amount that a city or town can raise through the property tax levy as well as limits how much the levy can increase annually

Levy Ceiling

Proposition 2½ limits the property tax levy in a city or town to no more than 2.5% of the total fair cash value of all taxable real and personal property, which is known as the Levy Ceiling. This limit changes annually because the value of property in the municipality is determined by the Board of Assessors and those values are based on the market values.

Levy Limit

The Levy Limit is calculated annually by the Department of Revenue (DOR) as part of the Tax Rate process. Growth in the levy limit is constrained to no more than a 2.5% increase over the prior year’s levy limit plus any growth from new construction.

Override

Communities are able to assess taxes in excess of the limits imposed under Proposition 2½ by passing an override as long as the limit remains below the levy ceiling. The amount of the override becomes a permanent part of the levy limit base. Overrides are placed before the electorate for approval and must be presented in dollar terms with a specified purpose.

Debt Exclusions

Proposition 2½ also includes a provision for overrides to either permanently or temporarily increase the levy limit. A temporary increase to the levy limit is often referred to as a Debt Exclusion.

New Growth

New Growth adds to the Levy Limit and is typically driven by development in the community. There are only a few possible sources of New Growth, primarily: properties that have increased in value since the prior year due to development or other construction, exempt property that becomes no longer exempt, new personal property, and new subdivision parcels and condominium conversions.

Tax Rate

Due to the requirements of Proposition 2½, municipalities do not directly set the rate of tax. Proposition 2½ limits the growth in the total levy, as explained above. The Assessors are tasked with determining the full and fair market value of property, which is independent of the limitations imposed under Proposition 2½. Every year, prior to the issuance of the third quarter tax bill, the tax rate is set with approval from DOR. The process involves the certification by DOR of the assessed values and the levy limit, then the tax rate is calculated in order to raise amount needed, including the amounts needed for any debt exclusion and/or override, given the total assessed values. The rate is expressed in dollars per thousand of property value.

Levies by Class

The annual property tax levy identifies all the taxable real and personal property in a community as of January 1st.