Proposition 2 ½ refers to a Massachusetts law enacted in 1982 that strictly limits the amount of property tax revenue a community can raise through real and personal property taxes. This revenue is technically called the Tax Levy  ̶  or usually simply the Levy. The maximum amount a community can levy in any given year is called the Levy Limit. 

Under Proposition 2 ½, a community’s levy limit increases automatically by an incremental increase of 2.5% of the prior year’s levy limit (hence the law’s nickname).

An operating override is a voter-approved measure to permanently increase property taxes by a fixed amount beyond the state-imposed levy limit, which is ordinarily capped at 2.5% of the prior year’s limit, plus a dollar amount derived from the value of new construction and other growth in the local tax base since the previous year called “new growth.” 

Each year, for many years, the Town of Arlington has had a structural deficit whereby the growth in revenues (limited to 2 1/2% + new growth) has not kept pace with the growth in costs necessary to provide and maintain service levels. One such example is health insurance, which generally increases at a faster rate. In recent years especially, fuel, construction costs and inflation have far outpaced growth under Prop 2 1/2.  

As a result of being an only 5.5 square mile community that is largely built out with a limited commercial and industrial tax base (~6%), there is limited opportunities for significant new growth, with building up often being the only real growth opportunity. Further, due to the small commercial/industrial sector with which to share the tax burden, there is a heavier tax burden placed on the residential sector. Due to these limitations, and fluctuations in State aid, the Town has had to rely on periodic tax overrides to sustain service levels, and make targeted additional investments in certain program areas, such as education or pedestrian infrastructure. See the chart to the right to see how Arlington compares to other comparable communities with respect to new growth for fiscal years ‘19-‘21. In fiscal year 2022, Arlington ranked 317 out of the Commonwealths 351 cities and towns in new growth applied to the levy limit as a percentage of the prior year’s levy limit. In fiscal year 2023, Arlington ranked 278th in the same metric.    
 
Still, in the nearly 40 years of Proposition 2½, there have been only four operating tax overrides. The most recent override was stretched further than anticipated due to the influx of American Recue Plan Act (ARPA) funding received by the Town. In the past year, Town leaders reviewed the need for an operational override and determined one is needed. The Select Board set the date for November 7, 2023 and pledged the following commitments to voters.  
 
To read a recent overview about the Town’s fiscal planning and budget, read the Budget Message of the FY2024 Town Manager’s Annual Budget & Financial Plan.