Town Meeting:Proposition 2½ and Overrides

The statute MGL Chap. 59, Sec. 21C, commonly known as "Proposition 2&frac12;," states that the tax levy cannot exceed the maximum levy limit for the preceding fiscal year, as determined by the State Commissioner of Revenue, by more than 2.5%. Exceptions are for property added to the tax rolls and property which has had an increase in its assessed valuation over the prior year's valuation, other than as part of a general revaluation. The Selectmen have the sole power, by a majority vote, to call for an override vote. The vote may be called before or after Town Meeting. It should be noted that even though a Town Meeting may vote funds contingent on an override, if the Selectmen do not vote to hold the override vote, then the appropriations in the articles revert to the non-contingency values.

The Massachusetts Department of Revenue, Division of Local Services has published Levy Limits: A Primer on Proposition 2&frac12; which provides a comprehensive and legible guide on this topic.

Operating Budget Overrides
The citizens may vote to override the allowable levy limit to a higher amount. If approved, the levy limit is increased by the amount of the override to establish the new levy limit, on which the 2&frac12;% is calculated for the following fiscal year. If Town Meeting votes funds contingent on an override vote for the operating budget and a majority of the Selectmen vote to hold an override vote, then an override election is held. The question to be placed on the ballot must state the purpose of the override and the dollar amount. To pass an override requires a majority vote of approval. The Town's tax levy base will be permanently increased by the override amount if the override is approved.

Debt Exclusions
Citizens may also approve a debt exclusion, which is an authorization to issue debt that will be serviced using funds that are "excluded" from (in excess of) the tax levy limit. The Selectmen must first approve a debt exclusion by a two-thirds vote, after which an election is held. The ballot question must state the purpose for which the proposed debt is to be issued, and may not specify the size of the appropriation. If a debt exclusion is approved, the Selectmen are authorized to increase the tax levy above the levy limit to fund the debt service on the specified project.

Town Meeting may appropriate funds requiring a debt exclusion prior to a debt exclusion election, in which case the appropriation will be contingent on voter approval. It is also possible to hold a debt exclusion election prior to the appropriation by Town Meeting. If the voters have already approved a debt exclusion, then the appropriation will have no contingency.

To pass a debt exclusion requires a majority vote of approval. The Town's tax levy base is not changed if the exclusion is passed. The debt service payments will be added to the Town's tax levy base only for the life of the debt.