Belt-tightening time has arrived for Cambridge, putting projects in competition with each other
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.”
They over spent even though they we warned time and time again about what would happen. They continued to over spend relying on developers and development to continue on while they vilified developers and tried to ban labs. Now they want the two out going councilors want to convince the next council to raise taxes on everyone to continue to pay for their excess. 6.32 square miles and they spend $1B/yr … it boggles the mind.
It’s kind of obvious that the city needs to increase the corporate/commercially held properties tax rate, which is obviously set too low. Last that I checked, we were below the state’s median and the rate had been lowered from 2022 to 2023 (which considering the needs of the city should not have been done).
Who needs schools and libraries or even public transit? Let’s spend it on more bike lanes!
Cambridgejoe: unfortunately, we can’t raise commercial taxes any higher because we are already at the limit for how much of the tax burden we can legally shift to commercial property. Until and unless we also raise residential taxes, we are restricted from collecting more tax from existing commercial property. (The rules don’t apply to new commercial development, which is why the city has pursued new commercial development so relentlessly). But the city and the Council knows that voters won’t tolerate massive tax increases to fund their pet programs, so now we are supposed to live without all the capital projects that they promised us over the years? Sounds like a setup to me. How about we look at the operating budget instead, given that it’s more than 80% of the overall budget.
“award-winning school designs”
Those aren’t academic awards.
Shocking, just shocking!?!
And NOW councillors want to “save” money on over-the-top projects?? These are the folks that approved some of the most costly new school buildings in the country, meanwhile the CPS student population has shrunk, while Cambridge outspends all MA cities on expense per student. Additional full-time aides, new electric vehicles for all city departments, charging stations, state of the art buildings for city staff, etc. And the wildest spend – ten million plus dollars for just one mile of bike lanes plus the cost of constant upkeep for said lanes including additional equipment and more city employees on payroll with pensions. If the typical property-tax paying resident spent like this they would blow their budget in minutes. “Save, reduce, reuse” – they tell US. It’s so easy to spend other’s money.
Even if the good times continued to roll, the analysis/report from earlier this year about creating a municipal broadband network shows it to be far too expensive for the good it would do.
According to initial model cited in the report, the project would require $194 million over a five year construction period, including $150 million upfront with no expected financial return. That’s just to build it, not to operate it.
When that report came out, a knowledgeable respondent (whose name I regretfully forget) pointed out that to achieve the primary goal of providing broadband access to lower income households, a much cheaper and more cost-effective alternative would be to pay existing providers for broadband connection to those households. That seems to me to make great sense, not only from a cost point of view (e.g., the bulk-purchasing power of the City could lower the subscription cost, and no capital investment required), but also because it could be implemented far faster and with more flexibility.
While some may think it’s desirable for the City to get into the broadband business, do we really want or need yet another extraordinarily expensive project whose cost far outweighs its benefits? Or do we need a more practical, realistic and flexible way to economically extend broadband access to those who otherwise can’t afford it? Even in good times, the latter is a smarter choice.
Mr. Huang.
By far, the largest liability that the city has is its post retirement pension and health care costs.
Nothing is remotely close in terms of size.
The city councilors are basically ignorant about crucial financial matters; they only know how to spend. It’s up to you to set them straight.
Take five minutes and look at the applicable footnotes to the balance sheet and I think you’ll see what I’ve been talking about on this site for the past several years. Namely, that these actuarial assumptions for retirement costs are overly optimistic and will need to be drastically changed to more realistic numbers. You can’t keep kicking this unfunded liability down the road.
In planning for the city’s financial situation for the next five years, you should take into account that the city will have substantial costs to make up this deficit.
We need to raise taxes on everything asap so we can turn ALL streets into “Expert designed and built Garden street”!
Heck some of the most expensive new schools in the country and half the poor children can’t even read.
Anyways I digress…not a chance for belt tightening. We need to turn all the streets into parking lots like n Cambridge has become. More quick builds – more pylons – more red war paint!
Do we really need things like this at $40,000 each, when the city is going to be faced with “strained finances”?
“Cambridge Arts, the City of Cambridge’s arts agency, is looking for artists to design mosaic-murals for the Fire Department Headquarters, which is being renovated, and a new Tobin Montessori and Vassal Lane Upper Schools Complex. Four artists will be selected to collaborate with a custom mosaic fabricator to turn their designs into custom mosaic-murals. One artist will design two mosaic-murals for the Fire Department Headquarters, and three artists will design three mosaic-murals for the Tobin Montessori and Vassal Lane Upper Schools complex. Each artist will be paid approximately $40,000.
To paraphrase what the late Senator from Illinois, Everett Dirksen, is purported to have said: A million here, a million there, and pretty soon you’re talking real money.
Councillor Dennis Carlone “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.”
Help me Dennis. If the census said there were 54,000 housing units in Cambridge, how do you get to 20 million if each housing unit pays $150?
Is my arithmetic incorrect or is yours? Or, did I once again miss something? Wouldn’t be the first time.
@concerned 43: Yes, we do need public art. Cambridge spends 1% of the total cost of a new building on art for that building. I look at that art every time I pass a school and enjoy it. Cutting the art would not make the difference.
I do think it would be better if our new city buildings were less expensive though.
I hope the city develops a good process for the public to give input on which goals to prioritize, and not just get input from the councilors.
@concerned43 I have not checked this with him but he undoubtedly assumes a ~double contribution from commercial taxes. So if every household pays an additional $150, that is ~$8 million; add another $16 million from commercial and you’d raise $24 million…
Ultimately bonds are just future taxes and so the distinction between operating and capital budgets is artificial. To spend more you have to raise more, simple as that. My preference would be a 1% marginal income tax for Cambridge above $x/year, where $x would be comfortably high, e.g. $250,000 or something like that, but that requires a homerule petition that would undoubtedly go nowhere…
For the record I voted against the new $300 million Tobin school. I can’t for the live of me figure out why we’d want to spend that kind of money on a school building. Contrary to fake news comments above, however, we are not in any kind of financial trouble. Future councils just have to decide what to spend on what when. It was always thus…
Concerned43, I have a couple of thoughts about possible answers to your questions.
1. Those murals are being done as the legal required one percent for art. That’s one of the few laws Cambridge feels bound to follow.
2. I believe what’s being left out of your calculation is that raising the residential tax rate would allow the city to raise the commercial tax rate as well, which is where the rest of the money will come from.
Quinton
You said:” My preference would be a 1% marginal income tax for Cambridge above $x/year”
Spoken by a true socialist.
You said: ” Contrary to fake news comments above, however, we are not in any kind of financial trouble.”
Why don’t you spend five minutes looking at the footnote in the city’s balance sheet that reflects the. post retirement benefits to city employees.
Then tell us if the actuarial assumptions are too optimistic or not.
The current contribution to the pension and health retirement plans is one of the city’s largest operating expense. It is also, as I’ve said, by fat the largest liability that the city has. Underfunding a retirement liability eventually leads to an unexpected operating expense. The city can’t tax its way out of it.
You’re a socialist, so you must know something about finances. Reading the footnote is not an esoteric undertaking, so I know you can do it.
Why is it that so many people on the City Council have refused to face up to a looming problem which will eventually cause a major disruption with the finances of the city?
@ HeatherHoffman
You said: “I believe what’s being left out of your calculation is that raising the residential tax rate would allow the city to raise the commercial tax rate as well, which is where the rest of the money will come from.”
Of course raising the residential tax rate would change the commercial tax rate.
Is that really what the citizens of Cambridge want; increased residential taxes? What about an alternative i.e. lower expenses.
To paraphrase PatrickWBarrett: 6.32 square miles, 117,000 citizens, and a billion dollar budget. It really does boggle the mind.
We have a top heavy city work force. Most of the workers that I’ve had contact with during the last thirty-four years are good and dedicated. They are paid well, and have great working conditions (all those holidays and all those Fridays for “administrative conferences”) while they work, and incredible post retirement pension and health benefits.
The last 5% of anything administratively usually can be cut without anyone really noticing. Do we really need a Peace Commission?
Do we need to do this for private businesses (see below)?
The businesses that I helped run, and others that I know of, paid for these programs. The City government is paying expenses for private businesses? Does the city government become a partner in those businesses, so that it can earn some of the profits?
Retail Interior Accessibility Program
Approved projects are now eligible for 90% reimbursement, up to $25,000. Eligible projects include bathrooms, countertops, shelving, and tables built to accessibility codes.
I enjoy art… but this? Do we really need to have a mural costing at least $40,000?
Help Pick New Public Art For Cambridge. The City of Cambridge is looking for artist selection committee members for two upcoming percent-for-art projects. One project will pick an artist to paint a mural across a three-dimensional ribbon arch in Carl Barron Plaza that will become a gateway to Central Square. A second project will commission artists to create two lenticular murals on a fence along the future Grand Junction Multi-Use Path. Artist budgets range from approximately $40,000 to $50,000 for each project. Selection committee members will be paid a $300 honorarium.
Despite Quinton’s statement ” Contrary to fake news comments above, however, we are not in any kind of financial trouble”, very shortly this city is going to be in financial trouble unless residential taxes are raised significantly. And even then, it is not going to solve the problems unless continuing expenses are reined in.
I was unaware that there is a state law that sets a specific rate balance between residential and commercial property in a city. It’s not something that a quick google search produces when looking into the subject or which I have seen in the newsletters that the city sends us.
Complaining about ongoing projects that have already been budgeted, contracts negotiated etc. will not solve any of the stated problems.
The City needs to find new forms of revenue. Since a change in the current taxes seems to be something unlikely to be easily achieved, then perhaps a need for deeper enforcement of existing legal statutes and fines needs to come into play.
I wonder how many residences are being used to run “home” businesses out of that are not properly registered with the state and city? And some of these are likely to not be actually used as residences at all?
We need to carefully evaluate what we are getting for our tax dollars across the entirety of our municipal budget. For example, the public safety budget, at more than $188,000,000, invests, on average, more than $6,000 for a family of four, per year.
Of course, as a homeowner, i would pay an additional $150 a year to gain $24,000,000 in revenue. I would insist that a line item review of our city budget be undertaken as well.
The widely supported community budgeting program, which this year puts some limited control over $2,000,000, has not resulted in any greater involvement of residents in our one billion dollar budget, but rather it serves as a diversion from our responsibility to pay attention to how our tax dollars are spent.
This MAY just be a temporary blip on our path to becoming a truly world-class city. Alternatively, this may be the first sign that the inevitable, cyclical shift back towards the suburbs is beginning. Councilors start throwing around talk of new income taxes, on top of property tax increases, and pretty soon the executive class who run all those Cambridge tech companies start thinking it might be time to decamp for Route 128 and the surrounding bedroom communities. Probably doesn’t help that we can’t seem to get public education right, no matter how much money we throw at it, crime and homelessness are on the rise, and lab rents are at an all time high. We think Harvard and MIT keep us safe from eventual decline, but even Harvard is looking elsewhere for its future growth, and they don’t even pay taxes. This Council needs to be careful or they may be the ones to kill the Golden Goose.
It must be a Christmas miracle as I half agree with Bergman. A line by line budget audit is exactly what’s called for. I wouldn’t agree to pay another cent though until we understood what we are paying for. If anything though I’d increase police spending. Participatory budgeting is the loudest waste of public funds. It should be reduced to $500k and only highschool seniors get to vote. As for the “golden goose” I think it’s pretty clear our council doesn’t respect that at all. I am hopeful however that this new council has a better grip.
It sounds like as an initial act, we should increase property taxes to the maximum allowed under Prop 2.5.
It stinks that we had to rebuild one of the newest schools in Cambridge, Tobin, and spent twice as much as we did on a similar ground-up rebuild of King Open that also included a public library, swimming pool, underground parking garage, and administrative offices for the school district.
Meanwhile, my kids’ school was leaking during yesterday’s rain, and we apparently ran out of money to do much less expensive but much-needed renovations to all of the other schools.
Increasing property taxes without investigating how it is we spend $1B on a “city” that’s only 6 sq miles? Why should anyone agree to pay more without understanding what we get for that $1b? Also if we levy up it’ll all fall on the residential base. It’s kind of amazing to me that people are so casual about the money we already spend. It’s also pretty telling that the only “ideas” from outgoing councilors is to tax more or file home rule petitions to tax more. When you legislative strategy is based on a penny in a wishing well (see also: home rule petition) it’s really just another way of saying you’ve no ideas at all.