Q & A: Funding for the Community Preservation Act

Questions related to the funding for the Community Preservation Act

Who pays what for CPA?
Are there any exemptions to the CPA surcharge?
How can you justify raising taxes on Norwood residents?
Won’t the tax surcharge on commercial properties drive some away from Norwood?
Won’t the CPA give Norwood residents and officials less control over spending?
When is the surcharge ordinarily billed and due?
Can a taxpayer who is eligible to defer their property taxes also defer the CPA surcharge?
Are amounts generated by the CPA surcharge subject to the levy limitations of Proposition 2-1/2?

Who pays what for CPA?

There are two revenue sources for CPA. One is a surcharge on the fees assessed whenever anyone purchases or refinances real estate. This has been in place for a decade and a half, since CPA was first passed. It feeds revenue from the entire state into one pool – the Community Preservation Trust Fund – which is then distributed to towns participating in CPA. (In recent years, the legislature has also added additional monies to the Trust Fund, taken from the budget surplus when there is a surplus.) Norwood has been paying money into the Trust Fund all along. By participating in CPA, Norwood will finally, for the first time, receive money from it.

2015 CPA Money paid by some towns.
See a map of communities that have adopted the CPA.

The other revenue source is a 1% surcharge on local property taxes. (There are exemptions. See details below.) Our estimate is that the surcharge would cost the average Norwood homeowner about $33 a year and would raise more than a half a million dollars a year.

See the estimate was included in the handout presented at the Town Meeting that approved the CPA.
Back to Top

Are there any exemptions to the CPA surcharge?

Under the measure being proposed on the November ballot, the first $100,000 of value will be excluded from the surcharge for all residential, class three commercial, and class four industrial properties.

In addition, a complete exclusion will be available for any home occupied by people who qualify for low-income housing or low- or moderate-income senior housing. Under MGL Chapter 44B, Section 2, households – individuals, couples, families, roommates – qualify if they have (a) combined income less than 80% of the area-wide median or (b) a head of household aged 60 or older and combined income less than the median. The median annual household income is the income level at which 50% of households earn more and 50% of households earn less. The official median income is calculated by the U.S. Department of Housing and Urban Development.

Any household’s income can vary from year to year. People retire or change jobs. Students leave for college or move away from home. Aging parents move in. That is why an application for an exclusion is for one year. If you receive an exclusion, you still need to apply next year for another one. If you do not receive an exclusion, you may be eligible next year, for example, because you retire and your income goes down.

Norwood’s income thresholds are based on income data from the Boston-Cambridge-Quincy area (where “area” is a combination of the Census Bureau’s Metropolitan Statistical Area and HUD’s Metro Fair-Market-Access Area). Median household income can also vary from year to year. Some people get raises or promotions. Some may leave the area, while others move to the area. Therefore, the low- and moderate-income thresholds also are revised each year, and Norwood will receive those revisions from the Community Preservation Coalition or an appropriate state agency. For 2016, income thresholds for Norwood are different for seniors (aged 60 or older) and everyone else, and also vary based on the number of people living in the home.

Senior (aged 60 or older) owns a home and lives:

alone : $68,670
with 1 other person also living there: $78,480
with 2 other people also living there: $88,290
with 3 other people also living there: $98,100
with 4 other people also living there: $105,948
with 5 other people also living there: $113,796
with 6 other people also living there: $121,644
with 7 other people also living there: $129,492

Someone under age 60 owns a home and lives:

alone: $54,936
with 1 other person also living there: $62,784
with 2 other people also living there: $70,632
with 3 other people also living there: $78,480
with 4 other people also living there: $84,758
with 5 other people also living there: $91,037
with 6 other people also living there: $97,315
with 7 other people also living there: $103,594

Homeowners aged 60 or older can qualify for a low- or moderate-income exclusion if their household income is less than the appropriate threshold shown above. But most people aged 65 or older and many people aged 60 to 64 are retired, and in retirement, incomes tend to drop significantly. We therefore estimate that a large majority of senior households will qualify for a low- or moderate-income exclusion.

Norwood will develop an application form that will ask for the combined incomes of everyone who lives in the home, for a specific year or group of years that will match with the data used to calculate median household income. Total income is shown on line 22 of your IRS Form 1040, and applicants will probably need to provide copies of some tax forms to support their applications. Applicants will also need to report the total number of people living in the home. Homeowners applying for a senior exclusion probably will also need to report their date of birth.”
Back to Top

How can you justify raising taxes on Norwood residents?

Projects to preserve Norwood and enhance its desirability as a hometown are a cause truly worthy of our support. And at a cost of less than 10¢ a day for an average homeowner, the property tax surcharge is eminently affordable.

There is no question that we would have benefited by joining CPA earlier. We could have gotten state funds for projects like the Town Hall renovations, the structural repairs to the St. Gabriel’s Chapel at Highland Cemetery, and any number of other worthy projects that we eventually – after considerable delay and rising costs – have acted on. We could have acquired some open space land as recommended in the town’s Open Space & Recreation plan, which would have delivered value to the town and also strengthened our case under the 40B 1.5% rules for affordable housing.

But we don’t get a do-over. The question we must address now is whether the current version of the program is a good deal.

The answer is a resounding yes! A town-wide automatic savings model, built on a local property tax surcharge and some additional state funds, is an affordable approach that will support a much-needed fund to pay for otherwise orphaned projects that will benefit all of Norwood.
Back to Top

Won’t the tax surcharge on commercial properties drive some owners away from Norwood?

Clearly, if your property is worth a great deal more than the average home, then your property tax will be considerably higher and the surcharge will be higher as well. But a 1% surcharge on your property tax – whatever your property tax may be – is not a large enough change to guide a major decision about where to locate and is not enough to change Norwood’s very favorable low-tax-rate position compared with neighboring towns. If you do the math, this concern does not stand up. If this were a legitimate concern, some of the 160 communities that already have adopted CPA would have dropped out, but to date, no community has rescinded its adoption of CPA.

Businesses will also benefit from the projects CPA supports, which will make Norwood more attractive to potential employees and customers. Norwood will be a nicer place to work in, visit, shop in, as well as live in.
Back to Top

Won’t the CPA give Norwood residents and officials less control over spending?

No. All CPA expenditures must be approved by Town Meeting, the same as with all other expenditures from tax revenues.
Back to Top

When is the surcharge ordinarily billed and due?

The surcharge will be included in the quarterly billing for real estate taxes and will be due at the same time as the basic property tax bill is due.
Back to Top

Can a taxpayer who is eligible to defer their property taxes also defer the CPA surcharge?

No, the surcharge cannot be deferred.
Back to Top

Are amounts generated by the surcharge subject to the levy limitations of Proposition 2-1/2?

No, they are not.
Back to Top