Lexington’s proposed new high school will be the single largest capital expenditure in the town’s history, but we can lessen the project’s impact on Lexington taxpayers with this one weird trick. Bear with me and try it yourself.
Go to the High School Project Tax Impact Calculator and enter 1000000000. You read that correctly: one billion dollars. What you’ll see is a year-by-year breakdown of the additional taxes a hypothetical one billion dollar residential property would contribute to paying off the high school project debt. The result table will show debt service contributions of our hypothetical property that add up to $31 million over the lifetime of the bonds.
Am I suggesting someone build a one billion dollar mansion? No — for obvious reasons. But primarily no because we don’t have to: it’s already happening in the form of new multi-family housing developments, some of which are already coming online and increasing our residential tax revenue over what they’re replacing, sometimes by a factor of ten.
Reports and memos written by the Town Meeting Appropriation Committee, as well as independent third-party consultants hired by the Select Board, describe the financial implications of new housing growth from recent Town zoning changes. One takeaway from these studies is that the sum of the property tax assessments from new multi-family homes could reach one billion dollars. That one billion dollars of valuation will work roughly the same as if it was for a single, gargantuan home. The High School Project Tax Impact Calculator shows this, and conversations with town staff confirm it. In the words of the Appropriation Committee’s report to Special Town Meeting 2025-02, “new growth will spread the remaining debt burden over a larger base, thereby lowering the tax impact on individual properties.”
When you have a fixed-cost capital expenditure of any magnitude, whether it’s a one million dollar fire truck or a $650 million dollar high school, the more people paying for it, the less everyone has to contribute individually. Adding one billion dollars to the existing residential base of around $16 billion raises the base by about six percent. Assuming the debt-exclusion levy stays fixed, every other homeowner’s share of that fixed amount will fall by roughly the same amount. That’s the real cheat code: growing the residential property tax base, spreading the debt service for the high school project across more taxpayers, and lowering existing residents’ share of the tax burden.
As sure as the sun rises tomorrow, someone in the replies to this letter will remind us that new multi-family housing also represents a cost to town services, specifically the education cost of new students. This is not wrong but needs to be considered with two things in mind: 1) costs to the school system are based on assumptions and projections that run counter to recent school enrollment trends, and 2) regardless of how many new students we welcome into our world-class school system, the high school project debt service does not change, and all taxpayers will be saving about six percent on their portion of the bill to pay for it.
Before we vote to take on this debt, it is worth seeing the full fiscal picture. New housing does not just bring new neighbors; it brings new taxpayers who share the cost of what we have already decided we value. When we think about affordability, we should remember that adding homes is one of the few levers we have to make Lexington’s investments more affordable for everyone.
Jay Luker
Town Meeting Member, Precinct 1
Jay’s “weird trick” omits 2 critical issues, which together make his statement that “New housing does not just bring new neighbors; it brings new taxpayers who share the cost of what we have already decided we value.” wrong. The reality will in fact be the exact opposite, as a result of #1 and #2 below, combined.
1. Jay’s single “$1 billion house” would indeed pay what the tax calculator says, but per cell AF2 of https://docs.google.com/spreadsheets/d/11zfp3k01F-AJOIYZRJdvFC28tMA5quj3/edit?usp=sharing&ouid=116971253884586510151&rtpof=true&sd=true, the real 1,000s of rental apartments that Jay tries to model via that “$1 billion house” will pay only 36% of what the tax calculator says, because it calculates taxes ONLY for single-family dwellings, NOT for rental apartment complexes (nor for condos).
This “36% problem” has been so far ignored by our Town leaders, either because they don’t understand it, or because they don’t understand how major its implications are for Lexington’s budgets 5-10 years out. These implications will be dire because the vast majority of our 1,000s of new MBTA units (I predict 5,750) will be rental apartments (of the 1,150 already known units, 88% are rental apartments and 12% are condos).
2. Those 1,000s of new housing units will generate kids in the schools that we will have to educate, so besides having to pay for the CAPITAL costs to house them, Bloom (if Bloom is large enough, which I believe it will not be, but that’s another story…), which Jay looked at, our school OPERATING budget will grow by leaps and bounds, which Jay ignored in his “weird trick”.
The 4 tabs of my https://docs.google.com/spreadsheets/d/1s_I7RFfVAdjIUpE8YOAFl7M3OA2SwF0j/edit?usp=sharing&ouid=116971253884586510151&rtpof=true&sd=true analysis of these issues provide more details on #1 and #2 above.
Good morning, Patrick!
I think you misunderstand how the calculator works and are confusing tax assessment with tax rate. Apartments have lower assessments because the calculation is based on revenue instead of land + improvements value. Once the assessments are determined everything is taxed at the same rate whether it’s a detached house, a condo or an apartment building. In other words, your “36% problem” is already baked in.
Since others have asked, my method of getting to $1 billion involves combining the table at the end of the Fougere report showing estimated new assessments on the properties they studied totaling $445 million, plus this statement from page 2 of the AC memo: _”The Fougere Report was limited to considering 1,117 new units, **but this represents less than half of the total growth that can be anticipated** under the current Section 7.5 zoning bylaw…”_
If anything I’m wrong in the other direction. I’m leaving out that many of these projects are mixed-use and will therefore be generating commercial tax revenue as well. In addition, the Fougere group only analyzed “comparable” rental properties in Lexington. Because we have effectively banned apartments for so many years, there are very few of these to use as input, and the most recent of those (Avalon) is already twenty years old. New rental apartments coming online in nearby peer towns are being assessed at sometimes twice the value per square foot.
Jay:
I tried to email you last night my comments instead of first posting them here publicly, but I could not because you blocked my gmail and patrick4lex.org email addresses, therefore my comment above.
So please unblock me (or call me on 781-367-2229), and I will explain (privately for now) how what you wrote above, except for your 3rd paragraph, makes no sense and/or is wrong — unless I am missing something, which I would then like you to explain, because having reread your first 2 paragraphs several times, I still don’t understand what you mean (e.g. what does “baked in” mean, etc). And please be sure I fully understand what tax assessments vs. tax rates are, and a touch more.
Thank you. These are VERY important issues, so thanks for raising them. It’s impossible for 2 people (you and I) to discuss them seriously if one person blocks the other’s email — assuming you believe I know some math, and do my research seriously (as in https://docs.google.com/spreadsheets/d/10kFzr88It-EqSjvh5u_b_WDZXB5hwYtT/edit?usp=sharing&ouid=116971253884586510151&rtpof=true&sd=true, whose column L may highlight the root cause of this “36% problem”: the commercial method [the “income method”, the most commonly used of the 3 methods mandated by DOR] appears to be broken, to the advantage of owners of rental apartment complexes, like say AvalonBay).
One last (important) point: the Fougère report is wrong on school costs. Using the ratios in $s per student Fougère used, and multiplying them by our actual number of students (non-Sped, and SPED) you will find (see https://docs.google.com/spreadsheets/d/16_pHruKbMDhByNsYDVOenq7N5L9qUkID/edit?usp=sharing&ouid=116971253884586510151&rtpof=true&sd=true) that Fougère ignored about 1/2 of our $240 million annual school budget (including health costs and debt service for school employees and buildings). So the $49,000 Fougère report is not worth the paper it’s written on.
Hi Patrick! Let me know when you move to precinct 1 and I’ll remove my email filter.
This is a Town-wide issue, not a Pct 1 issue.
It’s your right to not want to communicate directly with me, but the fact remains that you are wrong since per cell AF2 of https://docs.google.com/spreadsheets/d/11zfp3k01F-AJOIYZRJdvFC28tMA5quj3/edit?usp=sharing&ouid=116971253884586510151&rtpof=true&sd=true rental apartments in Lexington pay in taxes per per sq ft only 36% of what single family houses pay.
So whatever is “baked” or not “baked” in whatever else (I still don’t understand what you meant), this 36% is a huge problem: contrary to your using a “$1 billion house” to model many apartments, you should then multiply what you find by 0.36 if you want to be correct.
Trying to keep things simple and stay close to a word limit meant omitting some nuance in my original letter, so let me expand on a few things while also trying again to address Patrick Mehr’s concerns.
As I wrote in an earlier comment, the $1 billion was arrived at by reading together the Fougere report’s combined new assessment estimates of multi-family housing projects ($445 million), plus the Appropriation Committee’s observation that what the Fougere group studied represented “less than half” of expected new multi-family growth. If you accept those two things as true, $1 billion seems like a reasonable ballpark.
A few quibbles are fair. One project in the Fougere sample, 231 Bedford St, has since been withdrawn, which would reduce the sum of their assessments by $5 million. The Community Preservation Act (CPA) surcharge exempts the first $100,000 of residential value; applying that across roughly 25 new developments trims another $2.5 million. The multi-family developments aren’t happening all at once, so the actual impact curve of our hypothetical $1 billion will be more spread out over time than the calculator shows. Some of these projects might not even happen. As an Appropriation Committee member pointed out to me, “the actual pace of future development is far from certain these days”. Very true! On the other hand, six months ago the pace of development was seen as so alarming by some residents, including the AC, the Town was forced to drop everything and hold a Special Town Meeting to undo the zoning reforms meant to allow these projects.
Getting back to the point Mehr is arguing, again I maintain he is mixing up assessments with tax rate. Yes, the taxable value (assessment) of rental apartment properties is determined differently than ownership properties. Lexington assessors use what’s called the “income capitalization approach”, which estimates taxable value from the rental income stream rather than comparable sales. Yes, this results in lower assessments. How much lower depends on what comparable rental properties the assessors analyze. Mehr’s 36% number includes properties (Captain Parker, Battle Green) that were built in the 1960’s and have per square foot valuations far lower than new construction. For example, the per square foot valuation of Avalon Ridge is $188, while newer, class-A suburban rentals built in the last decade typically assess anywhere from $300 to $450 per square foot.
I’m not going to bother coming up with a competing number to counter Mehr’s 36% because it doesn’t matter. These are assessments, not tax rates. As Robert Lent, Lexington’s Director of Assessing, wrote to me, “Residential tax rates apply to apartment buildings, regardless of valuation methods we may use.” Once you arrive at an assessment value, the same tax rates apply. A hypothetical 6-unit condo building and a hypothetical 6-unit rental building are going to be assessed differently, but when you take those valuations over to the high school project tax calculator it’s going to behave correctly in both cases.
The Fougere group estimated the new assessment values of the properties they studied (see page 31 of their report), and I assume they used the same income capitalization approach that the Town’s assessors use. That’s what I mean by “baked in”. Their assessments add up to $445 million and they already reflect whatever valuation discrepancies result from the rental assessment method. If Mehr thinks there was a flaw in their assessment method he should take it up with them.
Lastly, I agree with Mr. Mehr that this is a town-wide issue. However, I am not a town-wide official. I signed up for Town Meeting to represent Precinct 1 residents and I make myself available to them as much as possible. I’ll engage on public forums like this, but I got tired of being included in his non-stop emailing, forwarding, cc-ing and bcc-ing shenanigans and so I opted out in the form of an email filter.
Jay:
You can rewrite what you wrote umpteen times, but you are still wrong, e.g. in your “I’m not going to bother coming up with a competing number to counter Mehr’s 36% because it doesn’t matter. These are assessments, not tax rates.”
The 36% is NEITHER about assessments, NOR about tax rates (repeat “rates”). It’s about the $s actually paid in TAXES (repeat taxes, not assessments, and not tax rates; tax rates are the same $12.23 per $1,000 in FY25 for your house, for AvalonBay and for Captain Parker Arms and for all rental apartment complexes we have in Lexington per https://www.lexingtonma.gov/526/Tax-Rates, as Robert Lent taught you per your citation).
Since single-family houses and rental apartment complexes all pay at this same $12.23/$1,000 rate, the fact that the latter pay only 36% in TAXES than the former for the same size (in sq ft) means that the assessments of the latter are far too low compared with the assessments of the former.
Exhibit A of that is the ONLY sale of an apartment complex in Lexington in the recent past, Captain Parker Arms, which was sold for $31,600,000 on 9/18/15, yet was assessed only at $18,164,000 in FY2017 (to account for the 2-year delay from sale to the first assessment supposed to reflect that sale for single-family houses), or at 57% only of its sale price.
Per https://docs.google.com/spreadsheets/d/10kFzr88It-EqSjvh5u_b_WDZXB5hwYtT/edit?usp=sharing&ouid=116971253884586510151&rtpof=true&sd=true, column L, most rental apartment complexes across Massachusetts that were sold in calendar year N were also, like Captain Parker Arms at 57% only of its sale price, vastly under-assessed in Fiscal Year (N+2).
I am sorry you don’t understand these basic facts about how taxes are computed, but since you don’t want to communicate with me, I can’t continue talking to “a wall”.