The Debt Service appropriation provides funding for the principal and interest costs associated with capital projects approved by prior Town Meetings. Borrowing allows payments for major infrastructure improvements or large equipment purchases to be spread over multiple years to make them more affordable and require that future taxpayers, who benefit from the use of the asset, pay a share of the cost. State law defines the purposes for which a town can borrow and sets a maximum maturity for each type of project.
A traditional municipal debt schedule has equal principal payments with the interest on the balance declining each year. In addition to lower total interest cost, this type of debt schedule recognizes that a town will continue to need to invest in capital improvements. As debt service payments decline, new debt can be added.
Typically, the first principal and interest payment is one to two years after the project is approved. None of the projects recommended for approval by this year’s Town Meeting will impact the debt expense in FY2022 budgets or the tax rate. They will become fixed obligations for future years.
Non-Exempt Debt $7,992,014
Funded with property taxes and other general fund revenues available within Andover’s Proposition 2 ½ Levy Limit
New non-exempt debt does not increase property tax bills
New non-exempt debt reduces the amount available within Proposition 2 ½ for future operating budgets or other capital projects
Water and Sewer Debt $5,338,221
Funded with water or sewer revenues
New water or sewer debt could affect water or sewer rates
New water or sewer debt could impact water or sewer operating budgets or funding available for other water or sewer projects
Exempt Debt $3,065,539
Funded with property taxes outside Proposition 2 ½ Levy Limit
New exempt debt increases property taxes
New exempt debt does not impact operating budgets or funding available for other purposes