“Moderation” was mentioned repeatedly during Monday’s joint roundtable meeting of the Cambridge City Council and School Committee, as city administrators presented their preliminary plan for FY 2028’s budget. Citing the economic headwinds that have defined the city’s last two budget cycles, the city’s financial team said it plans to limit tax levy and budget increases to 5.5 percent.
The bulk of tax increases may come out of homeowner pockets. And even with an expected $57 million operating budget increase, services will likely be reduced. Cambridge must adjust city staff salaries for cost of living and pay debt on capital projects, while facing a development environment slowed by high interest rates and continuing drops in commercial property values.
To keep services at their current level would result in a $6.7 million deficit. City officials said they were looking to cut $7 million from current spending. “We are continuing to experience this multi-year economic slowdown,” said Claire Spinner, assistant city manager for Fiscal Affairs.
“The most critical action that we can take really is for us to work towards moderating our budget growth.”
Services could be cut, but not jobs
No possible cuts were specified, but City Manager Yi-An Huang said that staff reductions were unlikely.
Commercial property holders have seen the bulk of recent tax increases combined with a two-year trend of drops in property values. Meanwhile, residential property values have increased moderately, and residential tax rates are proportionately lower. Officials presented scenarios where residential property taxes will go up by 10 to 15 percent per dollar of assessed value, with the higher percentage coming if commercial property values fall by more than expected.
Cambridge still has room to raise tax rates, but concerns were raised about what middle-class Cambridge homeowners can afford. In FY2027, residential rates on average increased seven percent. That meant “there are thousands of people across the city whose bills went up $1,000 or more,” said Councillor and Finance Committee Co-Chair Patty Nolan. While wealthier homeowners can take the hit, she said, and people in subsidized housing don’t have to worry about property taxes at all, “it’s all those people in the middle that we know are the most crunched.”
Owners of single-, two-, and three-family buildings will likely be hardest hit. Such properties have appreciated the most in value in recent years. The average assessed value of the city’s condominiums has remained more constant.
Property taxes make up more of the budget than in previous years, as other sources of city revenue, like charges for services and fees collected on licenses and permits, have grown slower than the budget. The city’s free cash reserves have dropped 20% in the last two years. The city will still tap free cash to meet next year’s budget obligations, including covering a 53rd paycheck city employees will receive thanks to a quirk in 2027’s calendar. But Spinner said it was important to avoid using the reserves for recurring costs.
“We’re getting down to sort of close to the minimum amount of undesignated free cash that is advisable for us,” Spinner said.
More Harvard funds possible
One potential source of increased revenue could come from the city’s Payment In Lieu of Taxes (PILOT) agreement with Harvard University. PILOT is a voluntary agreement entered into by universities, which are tax-exempt, to help contribute to their communities. The last PILOT agreement between the city and Harvard was signed in March 2025 for $6 million. The city’s current projections assume another agreement of the same amount, but Huang said Boston has made updates to some of its PILOTs that he called promising.
Despite operating at a deficit last year, Harvard’s endowment surged to $68 million this year, thanks to a 27% investment return.
Huang said he hoped to have an agreement on the table soon.
Councillor E. Denise Simmons urged city administrators to come up with a way to prepare homeowners for next year’s reality.
“No matter [what], bad news is bad news is bad news. It’s not going to get better,” she said. But if residents aren’t told ahead of time “it makes people feel worse.”
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