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Louis Depasquale, the city’s assistant city manager for fiscal affairs, talks with the City Council on Monday about Cambridge’s free cash. (Photo: Marc Levy)

Louis Depasquale, the city’s assistant city manager for fiscal affairs, talks with the City Council on Monday about Cambridge’s free cash. (Photo: Marc Levy)

Property in Cambridge became worth more over the past year, but thanks to the city again using free cash and other money for relief – this time totaling some $14.7 million – most homeowners will either pay less in property taxes (42 percent of homeowners) or see an increase of less than $100 (30 percent) in the upcoming 2015 fiscal year. Only 15 percent of homeowners will see an increase of $250 or more in their tax bills.

The City Council took a series of votes Monday so the city manager could lock in those figures with the state Department of Revenue.

But upon hearing the news from the City Manager Richard C. Rossi and finance officials, some city councillors said there should be more effort made to hold onto the city’s economic diversity, keeping or adding more lower-income and middle-class property owners among its 21,611 parcels.

Redirecting funds

093014i residential tax billsCouncillors Dennis Carlone and Nadeem Mazen wanted to explore letting the tax rate rise slightly to redirect money toward housing for those who can’t afford Cambridge without the help.

“Already we’re the lowest tax rate residentially around here, and one of the lowest business-wise,” Carlone said. “I understand for the bond rating it looks more positive if we’re putting money back in to reduce the taxes, but I think it would also if we were tackling middle-income housing.”

Careful like Carlone not to offend by seeming to criticize the city’s financial approach and accomplishments – which has indeed resulted in years of triple-A bond ratings allowing the city to borrow huge amounts of money for unceasing community improvement projects – Mazen said that “in the near or middle term it might be appropriate to talk about where we want to go with the money we could have but never really flirt with because we think the budget is good where it is.”

Institutional contributions

Vice mayor Dennis Benzan saw another way to bring in money to help lower-income and middle-class residents: Asking more from the city’s biggest institutions and especially Harvard, where the endowment recently hit $36.4 billion. While extracting more from institutions in taxes or payment in lieu of taxes is a perennial suggestion, Benzan gave it a sense of urgency.

“If we don’t act on some of these issues in the next couple of years, we’re going to lose Cambridge,” Benzan said. “We’re losing a little bit of Cambridge every day.”

Rossi dampened expectations, noting to Benzan:

We have in-lieu-of-tax agreements, and those agreements have built-in inflation. MIT’s a different kind of institution from Harvard – there are two MITs. There’s institutional MIT and a real estate MIT, and the real estate MIT pays more taxes than anyone else in the city … Harvard and MIT pay the highest water and sewer bills in the city.

“I’m not going to sit here and say they can’t contribute more, there are ways,” Rossi said.

“Thirty-six point four billion dollars,” Benzan said, interrupting.

“I’m just saying they have not been unwilling to come work with the city when requested,” Rossi continued, crediting the schools with being ready to help with education and job efforts centered around so-called STEAM issues of science, technology, engineering, arts and mathematics.

Other avenues

Rossi said he was wary about the “interesting” conversation proposed by Carlone and Mazen, though, because it could inspire a flood of other funding needs. “No question it’s an excellent goal. What if there are 10 other great ideas?” Rossi said. “We can all sit here and say, ‘Boy, we can add more money to this and more money to that.’ Again, I think it is a balance and we’ve done a really good job trying to create a fair and equitable tax rate.”

A meeting of the council’s Housing Committee at 3 p.m. today looks at some of the other ways the city tries to encourage economically diverse housing. The meeting is to look at affordable-housing wait lists, “inclusionary” bonuses for builders of affordable units and separate “linkage” payments by developers, a study looking at both approaches and the future of three buildings where units may lose their affordable status.

Mayor David Maher felt there was more money to be squeezed from some of the city’s largest and most expensive properties, pointing to a significant gap between the valuation of properties worth millions but with sale prices coming in even higher. Mazen and councillor Leland Cheung saw an opportunity to ask taxpayers doing well financially to contribute money to others, possibly by suggesting they round up tax, water and sewer payments.

Helping already

Councillor Marc McGovern, chairman of the council’s Finance Committee, agreed with the city manager that the city’s tax relief contributes already to letting middle-class earners stay in their homes. A comparison of residential tax rates from nearby and similar communities showed Cantabrigians paying about $4,900 a year on an $800,000 home, compared with Brookline (about $2,000 more), Somerville ($3,500 more) or Arlington and Watertown (each about $6,000 more).

McGovern’s example:

My grandmother has a house that’s worth a lot of money, but she’s on a fixed income. I live there, my cousin lives there, my great-aunt lives there. If she was paying what other communities pay, we would have been gone from this city a long time ago. Although there are fewer and fewer of those families around for various reasons, it is important to always keep in mind that you do have a lot of people with property [who are] lower- and middle- and working-class people who, if they had to pay another $6,000 a year, might not choose to live here, or be able to live here.

The finances

Rossi and other officials summed up the city’s fiscal year 2015 tax position:

bullet-gray-smallProperty values rose in the past fiscal year, with single-family homes up about 7 percent on average year to year; condominiums and multi-family dwellings up around 10 percent; and two- and three-family buildings up about 12.5 percent. “This is not unusual … It’s a very vibrant city, as we’re all aware,” said Robert Reardon, director of the city’s  Assessing Department, noting also that construction from the year will bring in another $18 million in taxes, while tax relief means that “even with the increases in value, we’re not seeing a dramatic increase in the number of people that are seeing spikes in their tax bills.”

Councillor Tim Toomey credited that construction and other business and institutional payments  as “paying for most people to live in Cambridge,” but said there was still a need to raise the residential tax exemption, as Somerville has recently done. He said he intended to propose a matching exemption of 35 percent in the coming weeks for some homeowners.

bullet-gray-smallThe increases bring the actual property tax levy to $341.4 million, reflecting an increase of $13 million from the current fiscal year, a 3.9 percent increase that is “significantly lower than the estimated increase projected in June and what was presented to the rating agencies in January,” Rossi said. The property tax levy puts the residential tax rate at $7.82 per thousand dollars of value, a decrease of 56 cents (or 6.7 percent) and the commercial tax rate at $19.29, down $1.15 (or 5.63 percent), the second consecutive year the city has reduced both tax rates.

bullet-gray-smallFree cash – officials prefer the term “undesignated fund balance” because it’s less likely to make people think money is available for uses for which it isn’t really intended – is rising to $160.5 million, a record for at least the fourth year in a row. (Last year it was $142 million, before that $115.8 million and before that $100.2 million.) “We will be using approximately $24.65 million of that right off the top,” Rossi said, referring to such uses as tax relief. Last year the city spent about $3.7 million after the tax rate was set on capital improvements, mainly around information technology, but this year that spending will emphasize open space projects over technology, he said.

bullet-gray-smallFree cash will also be tapped to bring the city’s debt stabilization fund to $33.3 million – smoothing out debt service on all the money borrowed to rebuild city schools and other large projects. In the seven years ending in 2012 the city did about $260 million of tax-supported debt, said Louis Depasquale, the city’s assistant city manager for fiscal affairs, “and we were able to control the tax rate increase annually to about 4.3 percent. Based on where we’re seeing we’re going over the next six to eight years in terms of all the potential projects, we felt it was really important to build up that reserve account. With this number, that $33.3 million, we’ve positioned ourselves in good shape.”

After the long recital of good financial news, Toomey said he found it telling that not a single resident showed up for the public comment portion of the hearing.

“I find that astounding. The citizens have become – I don’t want to say complacent, but they know the city’s well run and that they’re getting value for their dollar. I don’t think there’s any other community where you would set the tax rate and there isn’t some disgruntled individual at that meeting,” Toomey said. “It says a lot.”