This article from the Massachusetts Department of Revenue’s Division of Local Services’ newsletter.  Medfield opted to not adopt the Community Preservation Act, and as a result we leave the state matching money on the table every year.    –

State Releases FY2014 Matching Funds for Community Preservation
Lisa Juszkiewicz – Director of the Municipal Databank

On November 15^th, the Division of Local Services (DLS) processed the annual distribution of state funds to the 148 communities that adopted the Community Preservation Act (CPA) statute and collected the local surcharges during FY2013. The state match totaled $54.9 million and was funded through the traditional Registry of Deeds revenue collections and a one-time infusion of $25 million in state surplus revenue. The combined revenue sources allowed for a first round match of 52.22 percent. This is the first time the first round state match has been over 50 percent since FY2010. Without the additional revenue added to the trust fund this year, cities and towns in the program would have received a first round match of less than 31 percent and total state funding of $32.7 million.

According to the Community Preservation Act, there are three potential rounds for distributing the state match. 

• Round 1 distributes 80% of CPA trust fund balance to all CPA participants
• Round 2 equity distribution (only for those with 3% surcharge)
• Round 3 surplus distribution (only for those with 3% surcharge)

When there are sufficient available funds in the trust fund to match the net surcharge committed, the CPA statute requires the Division to provide a 100 percent match. For the first six years of the program, the revenue stream into the trust fund was enough to provide for a 100 percent match. In those years when the trust fund balance is not sufficient to provide for a 100 percent match, the Commissioner of Revenue has discretion as to whether all of the three rounds will be used. In FY2009, the first year that there was not enough money to provide a 100 percent match, the Commissioner chose to distribute matching funds using only the first and second rounds. By holding back the Round 3 surplus distribution, we were able to reserve a little additional funding for FY2010, decreasing the rapid reduction in the state match slightly. Since FY2010, DLS has calculated the state match using all three rounds.

In FY2013, 148 communities assessed the surcharge on property tax bills making them eligible for the state match in FY2014. Of the 148 communities eligible, 75 have adopted the CPA at 3 percent making them eligible for all three rounds. There are a number of communities that have adopted the surcharge at three percent and continue to receive a 100 percent state match. Of the 75 communities that adopted the maximum three percent surcharge, 23 are receiving a 100 percent state match. These communities collectively account for only $3.5 million of the total $92.5 million committed statewide by all communities that have adopted the surcharge. In addition to the 23 communities with a 100 percent match, there are five communities with a state match over 90 percent and another five communities receiving between 80 and 89 percent state matches.

The table below details the annual state match, the number of communities participating and the first round match for each year of the program:

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Funding for the state Community Preservation trust fund comes from fees imposed at the Registry of Deeds or in Land Court for recording various documents. These fees are deposited into the trust fund monthly and are used to calculate the state match for the local surcharge imposed on property tax bills. In the last several years, the transaction fees have decreased as a result of the downturn in the real estate market. The decrease in registry revenues, combined with the increased number of communities participating, has resulted in a significant drop in the percentage of the state match since FY2008, the last year the Commonwealth matched 100 percent of the net surcharge committed.

In an effort to restore funding to the CPA program, language contained in the FY2014 state budget (Section 145 of Chapter 38 of the Acts of 2013) provided for supplemental funding of up to $25 million. This funding was to come from the Commonwealth’s general fund surplus, provided that the state surplus was sufficient to accommodate this transfer. The State Comptroller’s office reported in early November that there were sufficient revenues in the state’s FY2013 surplus to allow the full $25 million to be transferred to the Community Preservation trust.

As the chart below illustrates, there has been a significant drop in the amount of the state matching funds in comparison to the amount of the surcharge cities and towns have committed. Without the additional revenue added to the trust fund this year, cities and towns in the program would have received less than a 31 percent state match. This slight increase reflects an uptick in the amount of fees collected at the Registry of Deeds and Land Court, which is consistent with reports of increased property sales.  Another factor is that with the distribution date changed from October 15^th to November 15^th, there was an additional month of collections included in the state fund for distribution month.

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As we have done in the past the Municipal Databank has posted the current state match on the Division’s website. An Excel file with the details by round can be downloaded from the following link:
http://www.mass.gov/dor/docs/dls/mdmstuf/cpa/fy14cpapayment.xls.

This file also includes the data used to create the tables and charts appearing above, as well as the historical state matching funds by community since the beginning of the program.

Email from Mike Sullivan, forwarding notification of the state approval of our tax rate set by the Board of Selectmen last night, and certified by each of us by means of electronic signatures at the DOR website after our meeting  –

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fy14 tax rate of $16.12 was approved this morning. I guess your electronic signatures did the trick. Happy Thanksgiving. Mike

Sent: Wednesday, November 27, 2013 10:43 AM
Subject: Tax Rate Approval Notification

Massachusetts Department of Revenue Division of Local Services
Amy Pitter, Commissioner
Robert G. Nunes, Deputy Commissioner & Director of Municipal Affairs

Medfield Assessors                Date: Wednesday, November 27, 2013

Dear Assessors:

The Fiscal Year 2014 tax rate has been certified by the Bureau of Accounts for Medfield.

The four pages of the tax rate recapitulation form and the levy limit worksheet (not
applicable to districts) are available on the Division of Local Services website:

Tax Rate Recapitulation Form

Levy Limit Worksheet

Page one of the tax rate recapitulation form includes the Director of Accounts’ electronic
signature and the date of approval. This letter is your notification of approval pursuant to
Massachusetts General Laws Chapter 59, section 23. Please forward copies of this notification
to other officials as you deem appropriate.

We wish to thank you for your cooperation and assistance in the tax rate setting process.

Sincerely,
Gerard D. Perry
Director of Accounts

BOARD OF ASSESSORS
Fiscal 2014 Classification Hearing

No Shift Factor:

At no shift with a preliminary projected rate of$16.12 on residential property valued at $600,000 is $9,672.00.

A preliminary projected rate of $16.12 on commercial/industrial property valued at $600,000 is $9,672.00. .

The impact of 150% shift in the tax burden for Fiscal 2014 150% Shift Factor:

Tax rate of$15.63 for residential/open space on property valued at $600,000 is $9,380.00

Tax rate of $24.18 for commercial/industrial/personal property valued at $600,000 is $14,508.00.

A shift for RJO would save the residential taxpayer $292.00

A shift for C/VP would increase the commercial tax by $4,836.00

Please note: For purposes of this hearing the tax rate is an example only. The final rate will be determined after the Department of Revenue has approved the Tax Recap. Any rate spoken or written about is an estimate!

Sent: Tuesday, November 26, 2013 11:10 AM
Subject: Freecash Approval Notification for Medfield

Massachusetts Department of Revenue Division of Local Services
Amy Pitter, Commissioner
Robert G. Nunes, Deputy Commissioner & Director of Municipal Affairs

Tuesday, November 26, 2013

Joy Ricciuto
Town Accountant
Town of Medfield

Re: NOTIFICATION OF FREE CASH APPROVAL – Medfield

Based upon the unaudited balance sheet submitted, I hereby certify that the amount of available funds or “free cash” as of July 1, 2013 for the Town of Medfield is:

This certification is in accordance with the provisions of G. L. Chapter 59, §23, as amended.

Certification letters will be e-mailed to the mayor/manager, board of selectmen, prudential committee, finance director and treasurer immediately upon approval, provided an e-mail address is reported in DLS’ Local Officials Directory. Please forward to other officials that you deem appropriate.

Sincerely,
Gerard D. Perry
Director of Accounts

This information from the Massachusetts Department of Revenue newsletter.  Medfield got about $1.8m. from auto excise taxes in the most recent year –

What’s Happening with the Motor Vehicle Excise?
Municipal Data Management and Technical Assistance Bureau

With all of the recent discussion around transportation funding, we thought it would be an opportune time to review the role of the motor vehicle excise (MVE) in municipal finance. In the analysis that follows, we examine the recent performance of this local receipt in terms of both budget estimates and actual collections and discuss some of the underlying reasons for recent trends. We evaluate whether lackluster performance of the MVE foreshadows a long-term trend where this revenue source continues to decline in prominence or whether recent declines are the natural result of the recession and will rebound as the economy improves.

Pursuant to MGL c.60A, the motor vehicle excise is imposed for the privilege of registering a motor vehicle in Massachusetts. Although most people view Proposition 2 1/2 as a limit on property taxes, the initiative petition approved by Massachusetts voters in 1980 also lowered the motor vehicle excise rate from $66 per thousand to the current $25 per thousand rate. The amount of the excise is calculated by multiplying the value of the vehicle by this $25 per thousand tax rate. The valuation for a particular vehicle starts with the manufacturer’s suggested retail price rather than the actual sale price and then this value is multiplied by the percentage in the statutory depreciation schedule shown below: 

In the year preceding the year of manufacture: 50%

In the year of manufacture: 90%

In the second year: 60%

In the third year: 40%

In the fourth year: 25%

In the fifth and succeeding years: 10%

It isn’t hard to see a potential problem with this depreciation schedule as the valuation decreases sharply from 90 percent in the first year to 60 percent in the second year. In order for the MVE to be a steady, reliable revenue source for municipalities, new cars must be purchased at a rate at least roughly as great as the year before. When this doesn’t happen, revenues from MVE decline and become a less significant factor in local budgets. To illustrate, though MVE revenue contributed 3.44 percent of total estimated municipal revenues statewide in FY2003, by FY2013 this revenue had become less important dropping to 2.59 percent as a percent of total estimated revenues.

Although the MVE may be declining as a revenue source, it still comes with a significant workload at the local level. For example, most municipalities annually issue approximately one MVE bill per resident. Of the state’s 351 communities, 221 issued at least one bill per resident, with the island community of Chilmark being the only community in the state to issue two bills for every resident. The other towns on Martha’s Vineyard and Nantucket follow closely behind Chilmark in this ranking. Other communities high on the list tend to be on Cape Cod or in the Berkshires. In these locations, numerous vacation homes where vehicles may be garaged tend to drive up the bill numbers. In the majority of the state’s largest cities, where parking may be limited and public transit is a viable option, the number of bills issued may be as low as five or six bills for every ten residents.

Next, we look at the data on estimated and actual MVE from FY2003 through FY2013 (See chart below). Noteworthy is the fact that the FY2013 estimated receipts from MVE totaled $605.9 million statewide, yet this level still lagged previous estimated totals from this source used in setting tax rates from FY2005 through FY2009. Actual motor vehicle excise collections over the ten year period from FY2003 through FY2012, peaked in FY2006 at $694.3 million, but by FY2010 actual revenue from this source statewide had decreased to $605.2 million. Compared to the FY2006 peak, this was a decrease of close to $90 million or 12.8 percent and was the low point for the ten year period. Revenues gradually rebounded in subsequent years, hitting $637.1 million in FY2011 and $644.5 million by FY2012. Despite this growth, actual FY2012 revenues did not match the peak performance of this receipt between FY2005 and FY2008 in 338 of the state’s 351 communities. (See spreadsheet for detail)

Although common sense dictates that people will defer large purchases such as motor vehicles when the economy is poor, a review of the average age of motor vehicles offers empirical support for this axiom. A review of data from the Registry of Motor Vehicles reveals that the state average vehicle age in calendar 2003 was only 8.13 years, though by calendar 2011 this average had risen to 11.18 years, an increase of more than three years. 

  Year         Average Vehicle Age
FY2003                8.13
FY2004                8.43
FY2005                8.65
FY2006                8.87
FY2007                9.80
FY2008               10.09
FY2009                9.89
FY2010               10.30
FY2011               11.18
FY2012               10.03

These findings are reflected in national markets as well. According to automotive market research firm R. L. Polk, the average age of all passenger cars and light trucks in the United States reached an all-time high in 2013 of 11.4 years.(1) Polk projected this trend will continue for the next few year, but forecast growth for vehicles that were zero to five years old, in part reflective of pent-up demand for new vehicles given the decline in new vehicle registrations over the past five years. When assessed in the context of the depreciation table shown earlier, the increasing average age of vehicles highlights an underlying issue that may impact the future performance of MVE revenues.

Though the economic recession that began in the fall of 2008 explains some consumer reluctance to replace their vehicles, are there other influences at work here as well? One factor is that vehicles actually last longer now than they did in say the 1960s and 1970s. It was not uncommon for the bodies of cars of this vintage to “rust out,” often well before mechanical systems failed. Now, with better undercoating and anti-corrosive protection, this seems to happen much less frequently even with the high use of road salt during New England winters. Environmental regulations around emissions have also forced automakers to “reduce the amount of oil being used by the engine to reduce the oil that reaches the catalytic converter.” At the same time, materials used in engines now frequently use extremely hard “carbon finishes” to minimize wear on engine parts.(2) Given that the average age of vehicles has been trending up since 2000, well before the recession began, indications are that longer lasting vehicles are likely a contributing factor to this trend as well.

Recent national sales reports signal that August 2013 was a very strong month for auto sales. When these sales are projected on a seasonally adjusted annualized basis, new auto sales in 2013 are expected to come close to or equal the pre-recession 2007 level. (3) While this is promising news, it’s too early to tell if this represents a one-time event reflective of low interest rates for new cars and pent up demand left over from the recession years or if it reflects a more sustainable trend for future years.

Conclusion

Although the MVE is considered a general fund revenue that may be spent for any lawful municipal purpose, it isn’t hard to make a connection between this revenue source and local transportation needs. However, analysis shows that the MVE is not a recession proof local receipt and that underlying market factors such as longer lasting vehicles may limit future growth of this revenue given the current depreciation schedule. While the MVE is often viewed by assessors, tax collectors and taxpayers alike as a nuisance, reconsideration of the depreciation scale set out in the statute may be in order. Recognizing that recently manufactured vehicles are more durable and have longer useful lives, a more gradual depreciation of the valuation would strengthen the long-term outlook for this revenue.

1.) R. L. Polk and Co., “Polk finds Average Age of Light Vehicles Continues to Rise,” August 6, 2013
2.) Dexter Ford, “As Cars Are Kept Longer, 200,000 Is New 100,000,” New York Times, March 16, 2013
3.) Angelo Young, “August 2013 US Auto Sales: Detroit Three Sold 662,669 Vehicles in US Last Month”, International Business Times, September 4, 2013