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Proposition 2 ½ is a Massachusetts law enacted in 1980 that strictly limits the amount of property tax revenue a municipality can raise through real and personal property taxes. This revenue is called the “tax levy.”
Prop 2 ½ limits how much the tax levy can be increased from year-to-year. The maximum amount a community can levy in any given year is called the “levy limit.”
Prop 2 ½ also caps the tax levy at 2.5% of the total full and fair cash value of all taxable real and personal property in Hingham. Because our tax levy is nowhere near this “levy ceiling,” the Town does not need to worry about this restriction.
Under Proposition 2 ½, a community’s levy limit increases automatically by two factors:
The 2.5% increase and the new growth number are both added to the prior year’s levy limit to reach the current year’s levy limit.
A community can exceed its levy limit with voter approval. Prop 2 ½ gives communities flexibility to permanently increase the levy limit through overrides to support municipal and school operations.
An override is a voter-approved, permanent property tax increase. It is designed to provide a community with the ability to generate sufficient revenues to fund recurring costs that are likely to continue into the future, such as annual operating expenses for educational and municipal services.
A “general override,” a “Proposition 2½ override,” or an “operating override” are all different names for the same thing.
By passing an override, the Town can assess taxes in excess of the automatic annual 2.5% increase and any increase due to new growth. An override results in a permanent increase in the levy limit and allows the Town to fund services and programs we believe the community expects and desires.
While an override results in a permanent tax increase that is used to fund recurring operational expenses, debt exclusions result in a temporary tax increase to pay the debt service from bonding for a specific capital project, such as building a new school.
For debt exclusions, the debt service costs are added to the levy limit for the life of the debt only (typically between 10-30 years). Thus, unlike overrides, debt exclusions do not become part of the base used to calculate future years’ levy limits.
Hingham voters approved three debt exclusions in 2022. The debt exclusions will fund a new elementary school to replace the Foster School ($113 million), a new Public Safety Facility on Route 3A ($47 million), and a new Town Pool located at the South Shore County Club ($8 million).