The town borrows money to pay for major expenditures, such as rebuilding a school, and pays the loan back over 20-30 years.
The source of this data is the audited financial statements for the town.
Definition of some terms:
- Current liabilities (excluding debt) – payables or other obligations that are due within one year, not including long-term debt instruments such as municipal bonds or unfunded pension liabilities.
- Noncurrent liabilities (excluding debt) – debts or other obligations that are not due within one year, , not including long-term debt instruments such as municipal bonds or unfunded pension liabilities.
- Current debt – debts which are due within one year, such as long-term debts coming due in the next year, or short-term borrowing.
- Noncurrent debt – long-term debts which are not due within one year.
Hopkinton’s General Government Debt Profile
Hopkinton finances most major construction, improvement, and large capital equipment purchases through the issuance of municipal bonds. As of [insert date here] the Town’s total debt was $105.0 million, with $86.6 million (82%) tied to general government projects.
To see a breakdown of total debt by all funds, click here.
To see a breakdown of fiscal year 2022 principal and interest payments on total debt by all funds, click here.
To see a timeline of the Town’s General Fund Debt Repayment of Principal and Interest, click here.
Large General Fund projects with outstanding debt include $30.4 million for construction of the Marathon Elementary School, $16.5 million for construction of the Department of Public Works Facility, and $8.6 million for the Public Library renovation. These three projects account for 64% of all current General Fund debt outstanding. To see the complete list of general government debt projects and associated payment information, click here.
To see a schedule of future payment for General Fund debt, click here.
Hopkinton’s ability to incur debt for public projects is limited by a provision of Massachusetts law (MGL Chapter 44 Section 10, link here), which limits debt to 5% of assessed valuation. With a current assessed valuation of $4,504,452,122, Hopkinton has a debt limit of $225.2 million. With a current debt level of $105.0 million, Hopkinton is at 47% of its statutory debt limit level. The statutory limit on additional new debt at this time is an additional $120.2 million.
It is noteworthy that projections for future school construction spending have been discussed by the School Committee with some spending scenarios approaching and perhaps hitting Hopkinton’s statutory debt ceiling, depending on the timing of proposed expenditures.
Impact of Spending on the Individual Property Owner
An individual property tax bill is impacted by three factors: 1) the assessed value of the individual property, 2) the total assessed value of all property within the Town, and 3) the budget passed by the Town meeting; in this relationship:
(Assessed value of individual property / Assessed value of all taxable property in Town) * Amount to be raised from property tax = Individual property tax amount
By the formula, each taxpayer is billed for a share of the total amount to be raised from property tax based on the proportion of the Town’s total pool of taxable property that they own. Three specific things impact a tax bill: 1) whether the taxpayer owns property with a higher or lower assessed value; whether the value of all the property in Town is growing or shrinking, which impacts the share or proportion of tax that each individual property owner is responsible for; and, 3) the amount of funding that the Town Meeting decides to raise from property taxes.
-Share of a new expenditure to the average taxpayer ($655,500 value home): $655,500 valuation / $4,504,452,122 total valuation = 0.01455%. Restated, the “average” taxpayer would be responsible for $14.55 in annual property tax for every $100,000 in additional Town spending funded by property tax.
-Amount one cent on the Tax Rate Raised in fiscal year 2021: $76,939,042 raised / $17.08 tax rate = $45,046 for every penny added
-Year 1 cost of $10M in new 30 year Borrowing Costs in Principal & Interest @ current 1.86% interest: $758,969; $110 for the average taxpayer ($655.5K home); tax impact 1%
-Year 1 cost of $100M in new 30 year Borrowing Costs in Principal & Interest @ current 1.86% interest: $7.59M; $1,100 for the average taxpayer ($655.5K home); tax impact 10%
Long Term Liabilities Other Than Debt:
Town of Hopkinton employees do not participate and are not covered by Social Security. Instead, they participate in the Middlesex County Retirement System, which provides retirement, disability and survivor benefits to approximately 5,000 retirees and 10,000 active employees of 31 Towns and 39 Districts and Authorities within Middlesex County.
Hopkinton currently has 166 retirees in the system, and 345 active enrolled participants. In a substantial financial benefit to cities and towns, the Commonwealth assumed responsibility for teacher pensions, so the Town liability excludes teacher pension costs. The latest report on the system, based on a biennial valuation as of January 1, 2020, shows that current and former employees have earned benefits with an estimated present value of $77,788,522 while net assets in the plan to cover those future costs are $50,770,346, with a total unfunded pension liability of $27,579,300. In fiscal year 2022, Town Meeting approved a pension contribution of $2,910,419 which included $962,721 to cover the benefits earned by current Town employees in the current year and $1,999,418 to pay down the unfunded liability that had accumulated over many decades. With continuation of these aggressive contributions, actuarial forecasts estimate that the pension plan will be fully funded in 2037. To see the latest Middlesex County Retirement System pension actuarial report, in which Hopkinton is covered in alphabetical order on page 45, click here.
Other Post-Employment Benefits (OPEB) refers to post-employment benefits other than pensions. OPEB generally takes the form of health insurance and dental, vision, prescription, or other health care benefits provided to eligible retirees, and in some cases their beneficiaries. OPEB is part of the compensation that employees earn each year, even though these benefits are not received until after employment has ended. Therefore, as benefits accrue, they are treated as a cost of providing public services today, and are presented that way on the Town’s accounting statements.
In 2012, the Town established the OPEB Trust Fund and began funding it in FY 2014, with the idea of accumulating funds to offset future costs as benefits are earned by employees. OPEB Actuarial Valuation Reports have been completed and updated periodically. In the last report, the liability for benefits earned as of June 30, 2021 was $40,020,304. As of March 31, 2022, Hopkinton’s OPEB Liability Trust Fund had a reported balance of $4,416,389 and the May 2022 Annual Town Meeting appropriated an additional $420,250 to the OPEB Liability Trust Fund, for a funding level of 12.0% of the liability, leaving an unfunded OPEB liability of $35,183,655.
Funds being accumulated for this purpose are invested with a moderate risk/return profile, reflecting the long-term nature of the investment; with 54% in common stock, 35% in bonds, and 11% in hedge fund investment. The actuary retained by the Town to support OPEB planning has determined that the current contribution level of $420,250 for FY 2023, escalated by 2.5% per year, would result in full funding of the OPEB liability in 2058. To see a summary of the OPEB Report, click here. To see the full actuarial report on the OPEB liability, click here.