To: Town Council
From: Mike McGovern
Re: Tax Rate Impacts of Harriman and SBAC Proposals
Date: June 17, 2024
Last week, we had a meeting with our Bond Financial Advisor Joseph Cuetara and I asked him to update the amortization schedules for the project. The primary change from the earlier amortization schedules is that the interest rate is now estimated at 3.75% instead of 3.5% as I asked him for the projected rate if we borrowed “now”.
The amortization schedules are based on level principal and interest with bonds to be sold on November 1, 2025, with the first interest due on May 1, 2027 and the first principal and interest payment on November 1, 2017.
I then looked at the current estimated town valuation and estimated a 1% increase in town valuation each year. I also estimated a 4% tax increase next year for purposes other than for the bond issue. There are no bond payments on the proposed project projected for the current fiscal year. Beginning with a base of a projected tax rate in the new budget of $11.00 per thousand valuation and $3,800,000,000 in local town valuation brought us to a $11.44 tax rate next year and a valuation of $3,838,000,000 next year.
The amortization schedule for the Harriman proposal results in the following projected tax increases:
- FY 2027. 1.94%
- FY 2028 5.56%
- FY 2029 3.28%
- FY 2020 -0.01%
The impact in cumulative increase from FY 2027 to FY 2029 is 10.96% or $1.25 per thousand valuation. The remaining 26 years of amortization would have the tax change approximately +- 1 cent per year. For the proposal from the School Building Advisory Committee, the cumulative tax rate impact is 10.40% or $1.20 per thousand valuation.
Thus, the difference in the peak year is 5 cents per thousand valuation.
Once the increase is fully in place, the average (median) tax payer at $720,000 valuation would pay $900 annually for the Harriman Proposal The average (median) tax payer at $720,000 valuation would pay $864 annually for the SBAC Proposal.
These projections are for the new debt service for the project and do not account for any savings from the retirement of prior debt service.