Letter to the editor: Debt Exclusion vs. Mortgage – What’s the difference?

Town Meeting is in the middle of its Annual Sessions and preparing to vote on the proposed FY2026 budget. As someone new to local governance—and grateful for the public information—I wanted to better understand how municipal borrowing impacts our local taxes.

When we bought our house, we borrowed from a bank and learned about mortgage repayments and the long-term commitment required to live in a place like Lexington with its rich history, natural beauty, strong community, and excellent schools.

Similarly, when the town needs to build or repair major facilities, citizens are asked to approve borrowing. Because residential taxes fund most of the town’s budget, tax rates may temporarily rise during repayment. If the increase exceeds 2.5% over the prior year’s taxes, assuming stable property values, voters must approve a “Debt Exclusion” to allow the higher levy.

Debt Exclusion vs. Mortgage

Both end once the debt is fully repaid.

Since we moved to Lexington in 1998, our town has approved seven Debt Exclusions for various capital projects, with ~4% interest rates and repayment terms of 18–30 years.

Since exact terms of the financial commitment weren’t available at the time of writing, I used estimates aligned with the preliminary FY2026 Budget and Financial Plan. Standard mortgage formulas were applied to model constant annual payments.

The plot shows the cumulative financial commitment from multiple borrowings, as older debt phases out. The horizontal axis spans 1998 to 2056; the vertical axis shows millions of dollars. The current year, 2025, is marked with a gray dotted line.

As of 2025, citizens are repaying debt for:

• Police Station ($32.4M, 2023, gray)
• Children’s Place / Hastings / Fire Dept. ($102.5M, 2018, dark red)
• Diamond / Clarke ($71.7M, 2017, green)
• Bridge / Bowman / Estabrook ($51.8M, 2012, purple)
• Public Works Facility ($27.5M, 2008, cyan)

Older projects—Schools / Roads / Lincoln Park ($42.5M, 2003), Schools ($52.2M, 2000), and Pine Meadows Golf Course ($11M, 1989)—have been fully repaid.

The proposed borrowing for the new Lexington High School (Bloom) appears in black: $645M total, with $100M reimbursed by the state. The Debt would be repaid over 30 years at 4% interest, ending in 2056.

What does this mean for taxpayers?
If approved in late 2025, the Town would commit to ~$30M in annual debt payments. By 2027, total repayments would reach ~$50M, adding Bloom’s $30M to the existing $20M.

The impact on households depends on the size of the overall tax base. The chart above shows the Town’s annual debt repayment as a percentage of the total tax levy over the past 20 years, illustrated by a thick red line (historical tax data can be found in the FY26 Budget).

If the Debt Exclusion is approved this fall, the debt portion of the tax levy could rise from 8% to 20%—an increase of approximately 12 percentage points. In dollar terms:

• A $20,000 annual tax bill could rise to ~$22,400
• A $50,000 bill could increase to ~$56,000

Actual taxes will also depend on property assessments and future town/school budgets.

Note:
This article is for educational purposes and aims to raise awareness of Town Meeting decisions. Figures are estimates, not exact. One nuance: the Town’s been contributing to Capital Stabilization Fund (CSF), which may reach $50M by the first LHS loan repayment. These funds are expected to help ease the initial tax impact.