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One betterment schedule(see Figure 1) is designed to
<br /> BETTERMENT CHARGES maintain fixed annual payments at a lower rate than other
<br /> I-Iow they could work in Falmouth schedules or options. Assuming a principal of$30,000
<br /> Betterment charges are fees assessed on properties with a 2.5% interest rate over a 50-year term, an annual
<br /> that undergo a specific improvement that ultimately betterment fee of$1,058 is assessed when payments are
<br /> improves property values. Betterments are charged fixed. This rate will not change for the duration of the
<br /> schedule since it is calculated, like a fixed rate mortgage,
<br /> to help offset the cost of infrastructure improvements.
<br /> to be a steady,fixed payment.
<br /> In Massachusetts, betterments include 5%interest
<br /> charged to homeowners. Alternately,the Board of Payment scbedulefor betterment withprincipal of
<br /> Selectman can choose an interest rate for better- $30,000 at 2.5%over 50years
<br /> ments based on the interest rate of bond financing Year Principal Interest Payment Balance
<br /> used to finance project, plus 2%.This generally 1 $308 $750 $1,058 $29,692
<br /> meets or exceeds 5%. New legislation passed in
<br /> 2008 allows towns pursuing sewer projects to in- 10 $384 $673 $1,058 $26,552
<br /> crease the payment term from 20 to 50 years. This 20 $492 $566 $1,058 $22,139
<br /> model proposes a $30,000 principal betterment as- 30 $6301 $4281 _$1,0581 . $16,489
<br /> sessment as illustration. 40 $8061 $2521 $1,058 $9,257
<br /> 1
<br /> Looking at real numbers,this circumstance means 50 $1,0321 $261 $1,0581 $01
<br /> fora betterment of$30,000 at 5%interest for 20
<br /> years,the average annual cost would be $2,850 for Figure I
<br /> the first five years. Increasing the payment term to A betterment charge of$30,000 is only one option,and
<br /> 50 years lowers that average annual cost to $2,040. the principal charged and corresponding fixed annual
<br /> I-lowever, if special legislation is passed in Falmouth, payment could be less if betterment principal amounts
<br /> the interest rate could be lowered to 2.5%, resulting were less.
<br /> in an annual fixed payment of$1,058 over 50 years.
<br /> It should be noted that betterments typically."stay" Variable Betterment Principals
<br /> with the current homeowner. Thus,when a house
<br /> is sold,the financing agency usually requires the Principal Amount Fixed Annual Payment
<br /> remaining balance on the betterment to paid off as $30,000 $1,058
<br /> part of the sale. $25,000 $881
<br /> $20,000 $705
<br /> $15,000 $529
<br /> $10,000 $353
<br /> $5,000 $176
<br /> Figure
<br /> Even with betterment fees at$30,000 per home, there
<br /> would not be sufficient dollars to pay for the project over
<br /> time. Thus,some kind of taxes would also have to be
<br /> levied.
<br /> Taxes on a$400,000 home, at a tax rate of$7 per$1000
<br /> of value and assuming a betterment principal of$30,000,
<br /> would increase 6.8% ($192) for all Falmouth residents.
<br /> ks However, this would require taxes for every property in
<br /> Photo by Kathy Sharp Frisbee Q2010 town to increase. The following chart indicates different
<br /> combinations of betterments and taxes. Along with debt
<br /> service management this could pay for the overall project.
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