Needham residents concerned about the Pollard Middle School project’s impact on their annual tax bill can now crunch numbers through the town’s new Property Tax Calculator.
The calculator, available on the town website since Sept. 1, allows residents to enter their home address and receive estimates on the impact Pollard debt will have on their property tax bills over the life of the Pollard debt, which will extend from 2028 to 2062.
Not surprisingly, that impact will be substantial. For an average single-family home at the assessed value of $1,541,061, the debt will add $40,854 to total property taxes over the course of 35 years, an average of $1,167 per year.
The impact starts slowly, as the town will not be making significant debt payments until the project is nearly complete in 2032. What starts out as a $77 bump in 2028 reaches four figures in 2031, when it is expected that Pollard debt will add $1,218 to that year’s average tax bill.
The Pollard effect peaks in 2034, when it will account for $2,065 of that year’s average property tax bill, after which the Pollard portion gradually decreases every year.
Dave Davison, deputy town manager and director of finance who spearheaded the calculator’s development with the help of Finance Committee member Joe Abruzese, noted to the Select Board at its Sept. 8 meeting that the calculator is applicable for both residential and commercial properties in Needham.
“When one goes to the calculator online and types in their property address, they will see what the estimated tax impact will be for their property, based upon today’s values,” Davison said. “The business community will also be able to enter their property address and see what they would be looking at in terms of a tax bill.”
This chart conveys the impact of debt from the Pollard project on the real estate tax bills of homeowners at five property valuation levels – properties valued at $1 million, $1.25 million, $1,541,061 (the average single-family value), $1.75 million and $2 million.
The year-by-year numbers represent the portion of the bill attributable to Pollard debt for that year only. These numbers are NOT cumulative.
The line in bold notes the tax year (2034) in which the Pollard portion of the annual tax bill peaks.
The calculator focuses mainly on the town’s “excluded debt,” the category Pollard debt will fall under should voters approve the proposed debt exclusion override question in November. The override would authorize the town to exceed the limits of Proposition 2½ to borrow the money necessary to finance the $325.4 million school project.
Voters need to approve the override for the town to add the Pollard debt to the amount it otherwise could levy under Prop. 2½. The additional amount lasts only for the life of the debt.
The calculator accounts for the town’s current excluded debt accrued from past major projects such as the Sunita Williams School, the public safety buildings and other school projects. It then adds the impact of the Pollard project, offering the year-by-year tax impact through 2062.
The calculator was launched last week to inform residents ahead of votes on the project at the Oct. 19 Special Town Meeting and the debt exclusion vote on Nov. 3.
“The calculator is an effort to make sure that Needham residents and property owners are equipped with information about understanding the debt exclusion question that will be before them Nov. 3,” said Town Manager Katie King in the Select Board meeting, emphasizing results from the calculator are only estimates.
“Of course, estimates and the reality can change for a variety of reasons,” she said.
“Be mindful that these are based on reasonable assumptions, but of course we’re not predictors of all of the variables in the future.”
The calculator does not reflect changes in reimbursement rates, future Town Meeting appropriations to pay down debt service or potential federal and utility credits and rebates. The calculator also does not reflect other sources of debt that will impact residents.
“Calculated results are exclusive to the Pollard Middle School project and do not account for regular tax increases that occur under Proposition 2½, changes in property valuations or the shifts of property taxes between residential and commercial valuations,” the website states.
Model assumptions Davison used to build the tax impact calculator are outlined on the town’s web page.
All estimates are based on current-year dollars and current-year property valuations, and assume the 35-year debt period. Davison noted that for the first seven years of this debt period, additional taxes for homeowners will increase. After 2034, the rate of increase will start to decline, assuming no additional debt is issued.
Tax calculator estimations also assume the maximum reimbursement rate from the Massachusetts School Building Authority, which recently pledged up to $80.6 million toward the Pollard project. Total project costs are assumed to land at $325.4 million and total construction costs at $322.6 million. The calculator estimates the MSBA will share $79.7 million of those construction costs, leaving Needham to borrow the remaining $243 million.
Davison noted that money for the Pollard project will be borrowed in increments, not all at once.
“At no time is the town borrowing for the MSBA share,” he said to the Select Board. “What the MSBA does is, as we submit our project cost to them on a monthly basis, they audit those bills. They identify all the eligible costs and they reimburse the town a few weeks later.”
The first issuance of a bond in 2027 to pay for the project is assumed at a 6% interest rate. All other bonds are assumed at a 7% interest rate. Short-term financing (Bond Anticipation Notes) assumes a 4% interest rate.
Davison added that tax impact calculations are based on the split tax rate between residential and commercial, industrial and personal properties. Adopted by Needham in 1988, the split rate shifts taxes from residents onto the commercial sector. The calculator assumes a residential rate of $10.83 per $1,000 and commercial-industrial-personal property rate of $21.09 per $1,000 — the maximum shift allowed under a split tax rate for Needham.
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