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One betterment schedule (see Figure 1) is designed to
<br /> BETTERMENT CHARGES maintain fined annual payments at a lower rate than other
<br /> How they could work in Falmouth schedules or options. Assuming a principal of$30,000
<br /> Betterment charges are fees assessed on properties
<br /> with a 2.5% interest rate over a 50-year term, an annual
<br /> betterment fee of$1,058 is assessed when payments are
<br /> that undergo a specific improvement that ultimately improves property values. Betterments are charged fixed. This rate will not change for the duration of the to help offset the cost of infrastructure improvements, schedule since it is calculated, like a fixed rate mortgage,
<br /> to be a steady, fixed payment.
<br /> In Massachusetts, betterments include 5% interest
<br /> charged to homeowners. Alternately, the Board of Payment schedule for betterment with principal of
<br /> Selectman can choose an interest rate for better- $30,000 at 2.5%over50years
<br /> ments based on the interest rate of bond financing
<br /> used to finance project, plus 2%. This generally Year Principal Interest Payment Balance.
<br /> meets or exceeds 5%. New legislation passed in 1 $308 $750 $1,058 $29,692
<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 $630 $428 $1,058 $16,489
<br /> sessment as illustration. 40 $806 $252 $1,058 $9,257
<br /> Looking at real numbers, this circumstance means 50 $1,032 $26 $1,058 $0
<br /> for a 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.
<br /> However, if special legislation is passed in Falmouth, the principal charged and corresponding fixed annual
<br /> payment could be less if betterment principal amounts
<br /> the interest rate could be lowered to 2.5%, resulting
<br /> 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 Principal Amount Fixed Annual Payment'
<br /> is sold, the financing agency usually requires the
<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 2
<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 /> However, this would require taxes for every property in
<br /> Photo by Kathy Sharp Frisbee©zoto 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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