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 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 much faster rate. In recent years especially, utility costs, construction and vehicle costs, and inflation have far outpaced growth under Prop 2 1/2.

Certain prior overrides have also made targeted additional investments in certain program areas, such as education, senior transportation, or road and sidewalk improvements. Still, in the nearly 40 years of Proposition 2½, there have been only five operating tax overrides. The 2019 override was stretched further than anticipated due to the influx of American Rescue Plan Act (ARPA) funding received by the Town.

As a result of being an only 5.5 square mile community with a number of water bodies, parks and open spaces that is largely built out with a limited commercial and industrial tax base (~6%), there are limited opportunities for significant New Growth, with redevelopment through building up often being the only real growth opportunity.

Source: Massachusetts Division of Local Services Municipal Databank

The chart above shows how Arlington compares to its comparable communities with respect to New Growth for Fiscal Year 23-Fiscal Year 25. Compared to the 351 cities and towns in the Commonwealth, Arlington regularly ranks in the bottom third of communities. In Fiscal Year 2023, Arlington ranked 278th out of the Commonwealth’s 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 2024, Arlington ranked 271st in the same metric.

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 unpredictable fluctuations in State Aid, which is the second largest source of revenue for the Town’s budget, the Town has had to rely on periodic tax overrides to sustain service levels.

To read a recent overview about the Town’s fiscal planning and budget, read the Budget Message of the FY2027 Town Manager’s Annual Budget & Financial Plan.

Presented to Select Board on February 12, 2026
Long Range Financial Projection
Long Range Financial Projection with Override

View the FY2025 Public Annual Financial Report (PAFR). The PAFR is a brief, four-page report that provides a snapshot of the Town’s basic financial condition and trends. It also contains summarized financial schedules and tables.

For a more comprehensive view, you may read Arlington’s past and present budgets at arlingtonma.gov/budget