CPA Fund explanation 6-5-14 — File 197116

1 CITY OF SOMERVILLE, MASSACHUSETTS COMMUNITY PRESERVATION COMMITTEE COMMUNITY PRESERVATION ACT FUND EXPLANATION The Community Preservation Act (CPA) Fund was established after the voters of Somerville adopted the CPA (M.G.L. Ch. 44b) by an astounding margin of 76% in November 2012. The CPA creates a new funding source for the City to invest in historic preservation, affordable housing, and open space and recreation projects. The Fund has three key revenue sources: 1. A 1.5% surcharge on net property taxes, which generated $1,316,187 in FY2014 through May 29th. 2. Discretionary appropriations into the Fund by the City. Mayor Joseph A. Curtatone requested, and the Finance Committee recommended, that the Board of Aldermen appropriate $1,355,671 from Unreserved Fund Balance to the Community Preservation Act Fund in FY2014. 3. Annual distributions of state funds that match total local funding (surcharge revenue and City appropriation) for the previous fiscal year. The Department of Revenue’s current estimate of the FY15 base match rate is 23%. The state also rewards communities that collect the maximum allowable CPA revenue (3% of net property taxes) by increasing their match rate, and the Mayor’s requested appropriation would bring the City to this amount, thereby maximizing the matching funds the City receives from the state. The state is also considering transferring additional revenue into its CPA Trust Fund, which could increase the base match rate to an estimated 44%. The following table provides estimates of the match Somerville could receive from the state under these four scenarios: Estimated State Match in FY15 (to be disbursed in November 2014) Without City appropriation With $1,355,671 City appropriation Difference Low base match rate (23%) $302,723 $662,621 $359,898 High base match rate (44%) $579,122 $1,255,773 $676,651 In its FY2015 CPA Fund budget, the Community Preservation Committee conservatively assumes the low base match rate of 23% and estimates the following revenues, depending on the outcome of the Mayor’s appropriation request: MEMBERS Michael A. Capuano, Chair Dick Bauer, Vice Chair Tanya Cafarella Elizabeth Duclos-Orsello Michael Fager Arn Franzen Ezra Glenn Courtney Koslow Uma Murugan STAFF Emily Monea JOSEPH A. CURTATONE MAYOR

2 FY15 CPA Fund Estimated Revenue w/ $1,355,671 FY14 City Appropriation w/o FY14 City Appropriation Surcharge revenue $1,316, 187 $1,316, 187 Estimated state match of FY14 surcharge revenue and City appropriation $662,621 $302,723 Total $1,978,808 $1,618,910 The budget for the Community Preservation Act Fund is largely determined by the CPA legislation, which:  Requires that the City spend or reserve at least 10% of annual estimated revenue for each of historic resources, community (affordable) housing, and open space (including recreation).  Allows the City to appropriate up to 5% of annual estimated revenue for the Committee’s administrative and operating expenses, the majority of which is accounted for by the salary of the Community Preservation Act Manager, who carries out all work related to the Act and the Committee.  Allows the City to place the remaining estimated revenue in a budgeted reserve. The Committee’s FY15 budget is therefore as follows, depending on the outcome of the Mayor’s appropriation request: FY15 Budget w/ $1,355,671 FY14 City Appropriation w/o FY14 City Appropriation 10% reserve for open space and recreation $197,881 $161,891 10% reserve for historic resources $197,881 $161,891 10% reserve for community housing $197,881 $161,891 5% appropriation for admin/operating expenses $98,940 $80,946 Budgeted reserve $1,286,225 $1,052,292 Total $1,978,808 $1,618,910 Community preservation projects, which must receive approval from the Board of Aldermen upon recommendation from the Community Preservation Committee, will be funded out of the reserve accounts and the Fund’s balance of unspent FY14 revenue.