how does the CPA work?
Updated: Mar 28
The Community Preservation Act (CPA) allows communities to add a surcharge of up to 3% on our property tax bills and to use the revenue generated to pay for projects related to affordable housing, historic preservation, and open space and recreation. In fact, communities are required to spend at least 10% of the funds in each of these categories.
"Property taxes traditionally fund the day-to-day operating needs of safety, health, schools, roads, maintenance, and more. But until CPA was enacted, there was no steady funding source for preserving and improving a community's character and quality of life." Source: Community Preservation Coalition
The state provides a matching contribution. The matching amount is determined by the funds available in the CPA Trust Fund. The communities that have adopted a 3% surcharge are eligible for a higher percentage of the available state matching funds.
The CPA Trust Fund revenues are derived from a surcharge placed on all real estate transactions at the state's Registries of Deeds. The surcharge for most documents filed at the Registries is $50. Municipal lien certificates are subject to a $25 surcharge. Depending upon how the real estate market is doing, the $50/$25 fees add up to approximately $60 million per year state wide.
How much has the state contributed to Williamstown?
In the first years of the CPA program in Williamstown, the state matched our contributions dollar for dollar. Over the life of the program we have seen an average 44% match. For every $1 we contribute to the program, the state grants us $0.44. It's a great way to leverage our community's financial resources particularly when we use these funds to offset the costs of initiatives that are Town priorities. Since 2003, Williamstown has collected $4.8 M from its residents and businesses and the state has granted us $1.8 M.
Each year, we have about $300,000 to spend. It varies due to property evaluations, and state match. Some of the funds have been committed to debt service for housing projects. The state match shows up in the year following its calculation. So 2003 match is applied in 2004.
Where has the money been spent?
There is a wealth of information about all the communities that have participated in this program since its inception in 2000 on the Community Preservation Coalition website. The chart below summaries where CPA monies have been spent in Williamstown since 2008. Source: CPA Expenditures by Municipality Since 2008.
Williamstown has spent a significant portion (61%) on affordable housing, 24% on historic preservation, and 14% on open space and recreation.
Williamstown has spent significantly more on Affordable Housing than other Massachusetts communities as a percentage of our overall CPC expenditures (61% compared to 16%), but we've spent much less on Open Space (13% compared to 30%) and Recreation (1% compared to 20%)
If you want to know more about projects funded in Williamstown, most of them are listed in a searchable database located here.
How much does this cost me?
The community preservation surcharge is calculated as a percentage of your tax bill. If the Town has a adotped a surcharge of 2%, then you are charged 2% on top of your property tax bill. But, the CPA gives communities an opportunity to relieve some of the financial burden associated with the surcharge through various exemptions. The most commonly used exemptions include:
$100,000 residential exemption,
$100,000 commercial/industrial exemption and
a low income exemption.
Williamstown adopted a 2% surcharge through a vote at Town Meeting, (maximum allowable surcharge is 3%), along with the $100,000 residential exemption. Williamstown has not adopted the $100,000 commercial exemption or the low income exemption.
How is the CPA surcharge calculated?
Surcharge = assessed value of the property - $100,000 residential exemption x property tax mill rate x 2% surcharge.
Let's assume the mill rate is $16/$1000. In that case, a $400,000 property would be assessed ($400,000-$100,000) x $16/$1000 (assumed mill rate) * 2% surcharge = $96.
Without the residential exemption this property would have been charged $128.
The effective surcharge in this case is 1.5 % rather than 2%, due to the exemption.
The $100,000 residential exemption results in a median surcharge of 1.4% or approximately $80/property when we consider all properties in Williamstown, ranging from 0.15% to 1.96% surcharge and less than $5 to about $1500 per household. The residential exemption has the effect of making this tax more progressive than most property-related taxes. Lower valued homes pay a lower percent surcharge than higher valued homes.
Should we consider the low income tax exemption?
Williamstown has not taken advantage of the low income exemption. Persons and families whose annual income is less than 80% of the area-wide median income (AMI) and those 60 years old or over whose annual income is less than 100% of the area-wide median income qualify as low income and could be eligible for an exemption.
Its worth noting that over 80% of Towns that have adopted the CPA have adopted the low income exemption.
Where do we go from here?
I would like to engage in a conversation around the CPA to ensure that we are maximizing its potential benefit to our community and that we are distributing our contributions equitably. Food for thought:
should the surcharge be raised? lowered?
are we selecting the best projects?
are we using the best process to select projects?
should we adopt the low income exemption?
how do we share information about this program?
how do we evaluate outcomes?
What do you think? Share your thoughts in comment section or send me an email.