Fellow town residents,
Here is my reply to David Cueto’s request for comment on his discussion of HCA and taxes. I think he has laid out a very detailed and comprehensive analysis. His conclusions make sense just based on simple logic: First, new housing will bring new residents, and the town will have to provide services for them. The services the town provides (mostly education, as you point out) will cost about the same for each housing unit. Second, new, high-density housing units will be smaller than the average home in Lincoln, and will be assessed at lower-than-average valuations. So these units will pay lower taxes than the average home. Third, since the new units will pay lower-than-average taxes for the same services as everyone else, tax rates will have to rise to make up the difference. Those higher rates will apply to everyone. So one consequence of complying with the HCA will be higher real estate taxes for everyone. As I have said, I think we should try to comply with HCA. But by “try” I mean we should do our homework and determine in detail exactly where any new HCA-compliant zoning could be located, and what impacts it would have for the town, including expenses. I believe the HCA law, although it may have been based on good intentions, is very arbitrary and inappropriate for a small town like Lincoln. So I would have no problem being creative in crafting zoning rules that move us toward our goal of more affordable housing and comply with the letter of HCA, but at the same time try to minimize negative consequences for the town. The town can decide, via Town Meeting, if we want to comply with HCA, and if so, what sacrifices we are willing to make in order to do so, and whether the associated changes to the town’s environment are the direction we want to go. Best regards, Mark From: David Cuetos <davidcue...@gmail.com> Sent: Wednesday, March 22, 2023 4:23 PM To: Lincoln Talk <lincoln@lincolntalk.org> Subject: [LincolnTalk] Housing Choice Act - discussion of financial implications Dear fellow town residents, The town faces an important decision as it confronts the Housing Choice Act (HCA). While the law tries to address a real housing shortage problem in the Greater Boston area, its one-size-fits-all character could cause serious undesirable consequences for small communities such as ours. I know there is much expertise in town regarding infrastructure issues (water, sewage, roads, etc.) we will need to investigate as we decide our stance, but given the Planning Board election and Town Meeting ahead of us, I would like to shed some light on the financial aspect It is important for residents to understand that the town is mostly self-reliant when it comes to its finances. If we look at the current fiscal year’s budget, 95% of our revenue comes from our own funds, and only 5% from the Commonwealth. While the laws are dictated by the State, if we decide to be compliant, the financial burden would be shouldered by local taxpayers. When looking at our budget, we need to separate fixed and variable costs. By far the biggest variable cost any Massachusetts town has is education. The cost of educating a high-school student is very straightforward. Our annual bill from Lincoln-Sudbury is derived from a linear formula tied to our enrollment and comes up to a bit over $23,000 per student. The cost of educating an additional student at the Lincoln Public School is a bit more difficult to derive, but we can make some reasonable estimation if we split the cost structure between fixed and variable. While small fluctuations in student count can be absorbed without changes in the cost structure (e.g. teachers), the magnitude of the potential student population increase required to be compliant with HCA cannot. Adding up town appropriations and state grants, the FY23 budget is just over $30,000 per LPS student, not including debt service costs tied to the school building. Less than 3% of those funds come from state grants tied to our student enrollment. Approximately 78% of those costs consist of personnel expenses (including benefits). There are 128 FTEs working in our school. Looking at the school’s budget detailed FTE table, we can easily see that the vast majority of those FTEs (110 out of 128 by my count) are teachers, content specialists, teacher assistants and tutors, which would by necessity grow if we added hundreds of students to our student body like compliance with HCA would require. If we assume that those personnel costs would grow at the same pace as enrollment, and also assume that 30% of non-personnel costs are variable in nature, we get an incremental ~$22,000 per LPS student, net of state grants. As to other town expenses (General Government, Public Safety, Public Works, Human Services, Culture & Recreation and the rest of Pension & Insurance), I assume 30% are variable and tied to our population. We can refine this a lot more, but we should keep in mind they amount to less than 1/5 of the education costs in my model. I would also note that I am not contemplating any capital expenses, which is not realistic. To begin with, if we added 563 units and the corresponding number of children, we most likely would have to expand our school, which was designed to accommodate up to 650 children – we have space for another 100 based on today’s enrollment. In terms of incremental revenues, I have assumed new properties are assessed at $400k on average, which is higher than the assessment per unit for a typical condo association in Lincoln Station today. I have also budgeted other local receipts at the same percentage of property taxes as budgeted for FY23 (2%) and increased our pro-forma state aid in line with our population increase. I have assumed that the incremental 563 units (this is the new number of units as per Select Board meeting) would be in-line with average household size in Middlesex (2.56) and have an average 0.89 children. The children count derivation is detailed in the table. This is not an aggressive assumption, Hanscom has 1.80 children per household according to the US Census. The main takeaway of my analysis is that under the assumptions discussed above, property taxes for existing owners would need to climb 18% in order to balance our future budget (an average of ~$3,500 per household), most of which would go to pay for high-school students at L-S and hire more staff at LPS. The actual figure would be dependent on the number of units that are eventually developed, their average assessed value and the number of children per unit. I would also note that the average unit would have to be assessed at $1.3M (which is just $100k less than our current average assessed value) for the rezoning not to have negative fiscal consequences, which is of course far from a realistic or desirable value, given the goal is to increase housing affordability. Non-compliance with HCA would cause the town to lose access to some state grants. We have never collected any money <https://lincolnsquirrel.com/2022/01/not-complying-with-multifamily-housing-requirement-could-risk-millions-in-potential-state-grants> from any of those programs though, and the total amount disbursed through them is a tiny portion of the Commonwealth's budget. As to the recent threat of the State forcing towns to become compliant, I would just note that most of our neighbors are still below the 10% statutory limit on subsidized housing inventory, 54 years after Chapter 40B’s <https://www.mass.gov/doc/subsidized-housing-inventory/download> passing. I do not want to go into much depth on this issue, but the tax increase would also have a material price impact across all properties. As a first order effect, it would depress the demand curve (fewer potential buyers at lower prices to account for higher property taxes) and shift the supply curve upwards as affordability decreases and residents exit, reaching a new lower price equilibrium and driving a property tax rate increase greater than the headline 18%. For rezoned areas, property owners would be big winners given potential for adding units would increase value of land, and renters would risk displacement as properties are torn down to build those new units. We would not be able to determine how fast or how many those units would be developed, but potential buyers of existing housing would not be appreciative of the cloud of uncertainty. It is my view that our priority should be to continue our dialogue with the Commonwealth and explain that while we are committed to alleviating the housing shortage problem, the State needs to fund this program, providing some real positive fiscal offsets to communities that want to do their fair share, and adjust their density demands for communities such as ours that lack the necessary utility infrastructure. I want to emphasize that I wholeheartedly agree with the goal to build more housing, both as a moral imperative and as good economic policy. HCA's goal is fair but the means are not and the result is policy with large negative side effects. I encourage Planning Board candidates Mark, Lynn and Craig to provide their views on this matter and state what they see as their red lines (financial and non-financial) are with regards to HCA compliance. If people have in-the-weeds questions about the model, I would prefer to address those via private email to spare everyone else (Andy Wang I am looking at you 😊). David Cuetos 145 Weston Rd Demographics School costs LPS incremental cost per student derivation Lincoln Station - net tax impact Lincoln town appropriations $12,655,921 Number of households 563 Children age % # children Cost per child Total cost Per household Enrollment-tied grants $464,087 Dwellers per household 2.56 0-4 22% 112 $0 $0 $0 METCO $637,773 Population 1,441 PK-8 56% 279 $21,583 $6,019,294 $10,691 Benefits and insurance $2,955,719 High school 22% 112 $23,283 $2,597,330 $4,613 Total budget $16,713,500 Families by # children % # children Total school costs 502 $8,616,624 $15,305 Enrolled students (including PK) 549 0 40% 0 Cost per student $30,444 1 33% 186 Other costs (excluding debt service and school costs) 2 25% 282 FY23 spending ex-education, debt service and capex $17,729,699 LPS Personnel expenses $10,053,110 3 2% 34 Average spending per capita $3,727.86 Benefits $2,955,719 Total children 502 Variable spending % 30% Fully loaded personnel expenses $13,008,829 Children % 35% Incremental spending per capita $1,118 Children per household 0.89 Total $1,611,554 $2,862 # total FTEs 128 less Hanscom (reference only) Total additional expenses $10,228,177 $18,167 Administration 7 Hanscom population 2,119 Maintenance staff 1 Hanscom households 531 Revenue Custodians 8 Dwellers per household 3.99 IT Staff 2 Children % 45% Average assessed property value $400,000 FTEs tied to enrollment 110 Children 954 Total assessed value $225,200,000 % tied to enrollment 86% Children per household 1.80 FY23 property tax rate per thousands 13.92 Additional property tax $3,134,784 $5,568 Other expenses $3,704,671 Other local receipts as % of tax levy 2% Variable percentage 30% Additional local receipts $62,696 $111 FY23 state grants ex-enrollment tied grants $1,825,863 Incremental personnel expense per student $20,404 State grants per capita $384 Incremental other expenses per student $2,024 Additional state grant $553,210 $983 Total incremental expense per child $22,428 Total additional revenues $3,750,690 $6,662 Grant per student $845 Net incremental spend per student $21,583 Revenue shortfall $7,030,698 Current tax levy $36,213,284 PF Tax levy (current plus additional revenues) $39,348,068 PF tax increase 18% Average property tax $19,373 Average tax increase to existing residents $3,462 Revenue shortfall per household $12,488 Minimum assessed value to guarantee breakeven $1,297,121
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