The next annual budget for the city of Cambridge will surpass $1 billion. That’s despite City Hall staff saying they held year-over-year growth to an austere 4.1 percent and each department finding 2.1 percent in cost savings.
For years, the city benefited from being where everybody wanted to be, including deep-pocketed biotech companies and real estate developers. Operating budgets over the past five years have grown an average 6.5 percent; two fiscal years ago, the growth was nearly double at 8.1 percent.
Cambridge, though, isn’t immune to the problems afflicting the rest of the country, and in some ways has had it worse. Policies from the White House have struck at the foundations of the science and higher education that underlie much of the city’s riches.
“This budget was really developed in the context of a challenging economic and political environment. This is really highlighted by falling commercial values, a decrease in development activity, weakening economic trends and increased uncertainty, especially due to federal actions and policies,” budget director Taha Jennings said Monday in a presentation to the City Council.
The biggest single allocation is, as usual, to the school district: $294 million, or 28 percent of the total. That’s a 13.3 percent increase, almost all of it in salaries, wages and benefits, and parallels a 19.4 percent growth in salaries, wages and benefits on the city side. With these and some other, much smaller, increases such as debt payments for city projects, the total increase for the year is $40.8 million.
It could have been worse. The city paused out-of-state travel, managed to limit debt service growth and enlisted the help of a health insurance broker to help identify savings, Jennings said.
Looming tax burden
Paying for the budget, which will be discussed in May and voted in June, leans significantly on the tax bills that go to the city’s property owners. This levy is the most significant source of revenue to the operating budget, making up 70 percent of it, and is projected at $725.6 million.
It pays for all of the things “that make Cambridge such a special place to live, work and visit,” Jennings said. “We’re not setting the targets just to set targets. We want to maintain our financial strength and flexibility.”
Financial stress will continue and may affect Cambridge in several ways, including greater dependence on property taxes – and more of that landing on the backs of residential payers rather than the commercial base, as has been the city’s practice.
That could happen in two years, city manager Yi-An Huang said, explaining a remark that hinted at what is happening now in Boston:
“State law allows us to have a differential tax rate between commercial and residential. Not every community has that … this year we’re still able to actually maintain those different tax rates. What we’re anticipating is, when we come back here in FY28, that we won’t be able to further shift more of that burden onto commercial, and we’ll end up seeing a much higher residential tax rate as a result.”
On the bright side
Brought forward but not discussed Monday were a series of big-ticket expenses Huang wants ready to go when Cambridge adopts a budget: $28.5 million for municipal facilities improvements mainly at Public Works facilities, municipal offices, youth centers, libraries and fire stations; $12.8 million for financing school building upgrades; $13 million for the reconstruction of various streets and sidewalks and $10 million for improvements along Massachusetts Avenue and the vicinity between Bigelow and Sidney streets; $14 million to remediate and improve Gold Star Mothers Park in East Cambridge; $8.4 million for sewer and drainage infrastructure in the Baldwin neighborhood, $7.5 million for a combined sewer overflow control program – to keep waste from spilling into public waters or backing up into people’s homes – as well as $2 million for repairs and replacement of water distribution infrastructure and $1 million for a Harvard Square sewer separation and stormwater management program. Also requested: $12 million to begin the yearslong process of replacing PeopleSoft, the city’s quarter-century-old personnel, management and payment system, which still has employees walking from office to office with paper printouts.
“It’s a challenging year, and yet, pretty much every other municipality in the state we have seen is not in a position where the budgets are actually growing. We are not facing a deficit for this year and having to change things midstream, which many cities in the commonwealth are,” said Patty Nolan, who is co-chair of the council’s Finance Committee with Ayah Al-Zubi.
They’ve been working with city staff on shaping the budget since October. The council’s identified priorities make up $290 million of the operating budget, staff said.
General budget hearings, in which city councillors identify which department spending plans they want to ask about, are planned for May 5 and May 12. The school district budget has a dedicated day for questions May 6. A backup meeting date of My 14 is set aside in case the earlier three days aren’t enough. The expected date of adoption is June 1, and the next fiscal year starts July 1.
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