‘Free cash’ will again lower tax rates on homes, but a long-promised hearing will examine need
The city will use “free cash” to lower homeowners’ tax bills for the 17th year in a row – this year, using $22.5 million to do so – but some councillors continued on Monday to question whether this state-certified pool of unallocated city funds should be appropriated to reduce residential taxes. The council decided to hold a committee hearing to answer such questions long before this time next year, when the tax rate is considered by the council again.
“It feels like a little bit of deja vu. We’re here every year having the same conversation,” councillor Quinton Zondervan said.
Objections to subsidizing homeowners who would pay an average $150 more on the year’s property tax bill led to “no” votes by Zondervan and councillor Jivan Sobrinho-Wheeler on two of city staff’s 11 tax rate proposals. “We have one of the lowest property tax rates of any city in Massachusetts, so we’re just trying to see really compelling evidence that we need to reduce it further than that,” Sobrinho-Wheeler said.
But, predictably, those two recommendations were adopted by the majority and all the others were approved unanimously. Free cash used for tax relief usually totals $9 million or so, but the amount was raised this year to correct for the coronavirus’s toll on other sources of revenue, such as parking fees, hotel and motel taxes, and meals taxes.
Raising questions as the votes were about to occur was too late to be meaningful, councillor Marc McGovern and vice mayor Alanna Mallon said.
“This is the final step. This is too late to be having this conversation about what to do with this free cash position and how we’re using it. I agree that there may be better policy tools to protect our renters and our most vulnerable residents, and I’m willing to have that conversation – poor Mr. Kale had to listen to an earful from me this morning,” Mallon said, referring to assistant city manager for finance David Kale. “I’ve been wanting to have that conversation for several years.”
Sobrinho-Wheeler proposed in a late order that the discussion be held in the Housing Committee, which he leads with councillor E. Denise Simmons. Mallon supported that.
Simmons also co-chairs the Finance Committee with councillor Dennis Carlone.
“We’ve been asking to have this in the Finance Committee for a while now, and it just hasn’t happened,” Mallon said. Even a joint hearing of the housing and finance committees, with all three chairs leading the meeting, didn’t appeal to her – “I’m not sure it’s a great idea” – but she primarily wanted the meeting to happen soon.
While Sobrinho-Wheeler also resisted putting the matter solely in the hands of the finance chairs, he agreed to a joint meeting and said he would work on “finding a date that will work as soon as possible for staff” and presenters. Simmons said it would be difficult to find time for a hearing.
Rising values, lower tax rates
The expenditures mean that 58 percent of homeowners will see a reduction, no increase or an increase of less than $100 in their property tax bill. But the dissenters and the hearing’s two public speakers felt the money could be better spent, such as on renter aid, digital equity or funding for after-school programs. Sobrinho-Wheeler said there were better policy tools to protect residential property owners who are house-rich but can’t afford tax bills left to rise along with Cambridge’s soaring property values.
Residential property values that were a cumulative $26 billion in 2018 are $35 billion now, according to a summary of the situation released Monday by city staff, yet property tax rates have gotten lower in that time, sinking from the $6.29 rate in 2018 to $5.92 for owner-occupied homes in the fiscal year 2022.
Commercial property owners carry most of the tax burden in Cambridge. Their property constitutes 45 percent of assessed value, but they will pay 65.4 percent of the tax levy for the second year in a row.
Still, the city’s total assessed value of property rises based on market activity from the previous calendar year, and total commercial property values increased by 11 percent; residential property values are up by only 2.9 percent.
To councillors’ questions about the value of the giveback, City Manager Louis A. DePasquale stressed the plight of the house-rich but income-poor and the value of providing “stability.” He defended the proposal and his record by citing some recent spending on council priorities such as affordable housing and open space. “One of the things that I have to keep on bringing home is we have not not been able to fund any priority that I’m aware of,” DePasquale said. “I do think we’re getting the best of both worlds here in being able to control our taxes, but not at the expense of addressing city needs.”
The defense was a surprising one, even to people such as Mallon who agreed that many council priorities had been funded out of free cash.
“There are other things,” Mallon said. “I’m just looking at the the awaiting reports list, right?”
She rattled off several unfunded wishes of the council, leading with a municipal broadband feasibility study that DePasquale resisted for years without explanation, finally coming out in June 2020 with one concern: a $1 million price tag. (He has not said where that estimate comes from.) In addition, there have been pushback or unexplained delays on goals such as universal pre-K, building affordable housing on city-owned lots or buying property to meet city goals, jobs programs and increasing funding for the HomeBridge homebuying program.
This is DePasquale’s final budget and tax-setting process before leaving City Hall, and he took the opportunity to note his accomplishments in building up Cambridge’s finances, starting ago under city manager Robert W. Healy.
“This is my last tax recommendation, and I’ve left this city with more money in free cash than you can imagine and the highest debt stabilization [fund]. This city is being left in an incredibly strong financial position,” DePasquale said. “I take great pride in my reputation and how I balance finances. I understand the questioning, but I want to assure the council and the public, this budget in no way, shape or form is artificially lowering taxes in a way that will affect any capital project in the future that I can see.”
Certification of the city’s free-cash position received in the past week shows $214.4 million in city coffers, up $4.5 million, or 2.2 percent, from the previous year, DePasquale said.