Sunday, July 14, 2024

The $299 million Tobin School and Vassal Lane Upper School under construction on June 4. (Photo: Marc Levy)

A period of austerity that’s been warned about for years has arrived, and elected officials have to start setting priorities for what projects get a go-ahead for the next five to 10 years and what must be scaled back or halted, Cambridge staff said Tuesday.

The effort to avoid crashing through debt ceilings may look different for wealthy Cambridge than for many communities, but officials will have to consider everything from fewer “bells and whistles” on buildings or award-winning school designs to shutting down hopes for city-owned Internet, according to discussion at a Finance Committee hearing of the City Council.

Another meeting is expected for January that may bring more specifics about revenue expectations and a framework for deciding what goals fit within them.

The hearing is a new way to bring the public into the city’s annual budget process – focused on the capital budget that builds projects rather than on the operating budget that supports such things as salary and benefits, co-chair Patty Nolan said. It just happened to premiere during a budget cycle likely to see far tighter spending that Cambridge is used to.

“In terms of fiscal year 2025, a lot of the projects that we have to fund are already underway. So there’s not much discretion that we have,”assistant city manager Owen O’Riordan said. While that loosens up for fiscal year 2026, “we have very little extra capacity over the next number of years. That’s why we want to have discussions with the City Council about how we begin to create priorities.”

The concern is not just for one year, O’Riordan said, but “rather over five- and 10-year periods, because that’s ultimately how we’re going to think about getting things done.”

Past years have seen bonds issued for street repairs, work at municipal buildings such as fire stations, parks and open space, sewer and stormwater projects and especially schools – the $95.5 million Martin Luther King Jr. School, the $160 million King Open/Cambridge Street Upper School & Community Complex and $299 million Tobin School and Vassal Lane Upper School.

More bonding to come

Current projects still have some bonding to go – somewhere in the realm of $160 million to $180 million that will be refined over the next couple of weeks, O’Riordan said. That will nudge Cambridge toward bursting in the middle of the 2027 fiscal year what the bond industry sees as safe maximum debt service ratios as a percentage of total budget. A presentation from staff shows that among communities in the area, Cambridge has the second-highest debt service ratio, behind only Brookline.

“We’re really coming right up against our ratios,” City Manager Yi-An Huang said. “We’ve gone from essentially authorizing $86 million a year to $146 million,” he said, comparing five-year averages for the fiscal years 2014 to 2018 with one starting in 2019. Huang has been city manager for around a year and a half.

O’Riordan made the issue of debt service clear: “The slope of this graph is not flattening out. It continues to increase,” he said. “There are some profound decisions that we’re going to have to make.”

Rather than pay for projects outright – plunking down, say, $299 million at a time – communities sell bonds for needed funding, then pay back the bonds over a set number of years. Cambridge’s stellar credit rating allows it to pay off the bonds at very low interest rates.

In addition to the existing capital project categories due for more spending, there are several projects councillors have called for. Those include helping businesses and residents go carbon-free; improvements at the First Street and Green Street parking garages; upgrades or a relocation of the Central Square library branch; a Danehy Park refresh; and municipal broadband.

Competing projects

Every project looked suddenly at risk Tuesday, and in competition with each other. The list, filling the final column on a presentation slide, was not even meant to be exhaustive.

“Not to make matters worse – but I will, for a minute,” councillor Marc McGovern said, pointing to a city-owned building on Western Avenue that’s been “sitting there for a decade in the middle of a neighborhood falling apart” and support for the unhoused community such as a day center. Homelessness has become all but an obsession for residents in and around Central Square; a community meeting held Dec. 6 was dominated by the topic even though the crime that was the topic of the meeting had nothing to with homelessness.

“If it doesn’t make it onto the list, it will be left off the list and we’ll forget about it,” McGovern said.

A major additional expense to be considered: land purchases, often with the goal of using it to build badly needed affordable housing.

Councillors quickly began to think of strategies for goal setting and to avoid the money crunch entirely, though also to grapple with what it would mean to face financial constraints unknown for decades. That included paring down Cambridge’s often top-tier approach that leads to award-winning projects, such as the Main Library or King Open complex. “We may have to scale down some of the bells and whistles,” McGovern said. The city can also do more with less, or as Nolan put it: “A project that’s a couple million dollars, that’s very different than if it’s a project that’s $50 million.”

The city manager acknowledged the principle: “Some of these are really significant investments that will cost tens of millions of dollars. Some are much smaller,” Huang said. “There is a real conversation about all of the expressed priorities of the council, and then how we actually fit that into into the amount that we can actually bond for.”

Raising taxes

Councillor Dennis Carlone noted that many cities surrounding Cambridge use far more of their taxing capacity – more like 99 percent, rather than Cambridge’s roughly 68 percent, he said – and believed residents might agree “to pay $3 more a week on the average house or residence for $150 more per year, which equals $20 million more in the budget, which should pay off bonding to renovate every school.”

With lower-income residents paying less as it came to a vote by residents, “I’m pretty certain they would say yes,” Carlone said. “I’m not for raising taxes incredibly, or overnight, but for a slow buildup of our capacity to meet the needs that we have.”

O’Riordan was skeptical the approach would make enough of a difference, and staff were similarly quick to poke holes in simply building projects that cost less (because Cambridge has built in limitations that raise prices, including traffic and parking that scare off lower-bidding contractors) or letting bond ratings slip lower for what look like little additional costs but add up over time.

Stretching the dollar

Councillors had other areas they wanted to explore.

“How can we bring the private sector more into this game – because at the end of the day, a lot of the things that we want, they also want and are also good for them?” councillor Quinton Zondervan asked. “If we limit ourselves to the established economic models and finance models, then we’re going to be stuck in this box for quite some time to come. And so as much as possible, we have to take advantage of the unique situation that we do have in Cambridge.”

This approach is already used, whether it’s the completed MBTA train stop in North Point, underway improvements to the Kendall Square T stop headhouse or expected bridge over train tracks near Alewife, assistant city manager Iram Farooq said.

A related tool called tax increment financing was raised by Carlone – a funding approach in which public infrastructure is paid for directly by tax increases on the private construction that will use it. Carlone said the approach has been rejected by the city repeatedly as he’s brought it up in his work as a politician who is an urban planner and architect.

That resistance may have changed too. Tax increment financing “is certainly a possible tool that the city could use. I’m mulling over whether it creates a different curve,” Farooq said. “It is still banking on the same set of taxes that are that are going to be yielded just in that area. It may be limited to a geography, and it actually doesn’t change the baseline numerical basis that we’re talking about.”