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September 28, 2005 GAC Update
The Council met on Monday and the GAC/Executive Speaker luncheon on Tuesday featured Massachusetts Secretary of Economic Development Ranch Kimball.
September 26 2005 City Council Meeting
New Tax Rate Set
On Monday, the City Council passed the property tax levy, which is used to set the property tax rate and thus determine taxes owed by property owners when bills are sent in October. Last year many owners of one, two, and three family houses saw substantial increases in property taxes due to increased assessment of property values. This impacted about 20% of residential taxpayers. In response, the City Council and the City staff worked to ensure that the tax impact would be reduced this year. The budget for the current fiscal year included only increases for already agreed wage increases and for health care cost increases.
Through a combination of controlling spending and growth in other revenue, such as the motor vehicle excise tax, the hotel/motel tax, and interest earnings and growth in undesignated funds, also called free cash, the final tax levy is a zero percent increase from last year. This is the first time the levy has not increased since fiscal year 1996. The tax rate for commercial was set at $17.86 per thousand dollars of valuation, a 2.3% decrease. The residential tax rate will fall to $7.38 per thousand dollars of valuation, a 5.1% decrease.
The City has also taken steps to better communicate tax information to the public. Most of the discussion revolved around how much better things are from last year, with some continued criticism of the perceived problems last year. Several Councillors still have concerns about the use of the property tax as the primary source of municipal revenues, with one suggesting that the City should work to “blow the system up.” Others noted that Cambridge, with its great wealth relative to most of the 351 cities and towns in the Commonwealth, gets little pity in the state legislature. Mayor Sullivan noted that 12 years ago the City’s excess levy capacity, the maximum amount it can tax under state law without an over-ride, was around $200,000 and that today it is $65 million.
New Taxes?
Part of the fallout from the increase in property taxes due to increased valuation of one, two, and three family residences was discussions about how Cambridge funds city services. The Commonwealth limits Cities and Towns taxing authority to real property, some personal property, and motor vehicles. Several communities, including Cambridge, also receive tax payments on hotel/motel rooms. Cities and towns can also charge fees for some services and impose fines, within statutory limits set by the Commonwealth, and can charge fees for services such as operation of a water department or other utility. Some communities also charge fees for trash collection and other services.
Several Councillors have noted that other cities around the country have broader powers to tax than allowed in Massachusetts and are interested in changing state law to allow cities and towns to levy a wider array of taxes in order to reduce the reliance on the property tax. Three orders were referred to the Special Committee on the Property Tax for review and discussion at last week’s meeting. These orders ask the Cambridge legislative delegation to draft statewide legislation allowing cities and towns at local option to tax payroll, income, and/or sales.
Next week I will provide a brief description of the statewide issues around city and town finance and actions being considered at the State level. While I think it is unlikely that the State will pass legislation providing local options for payroll, sales, and income taxes other taxes have been discussed including local meals tax and hotel/motel tax and a local surcharge on automobile rentals.
Tax Bills and Abatements
Even with the good news about the property tax rates it is possible some property owners will have need for property tax abatement. Abatements must be filed within thirty days of the postmark date on the tax bill. Abatement applications filed for omitted, revised or reassessed taxes must be filed within three months of the date that the bill for those taxes was mailed. For more information go to the City’s Web site at http://www.ci.cambridge.ma.us/~Assessor/Abatement_information.htm.
Economic Development Secretary Calls Cambridge Premier City
Massachusetts Secretary of Economic Development Ranch Kimball opened his remarks at the September 27 Government Affairs Committee/Executive Speaker Luncheon by stating that “Cambridge is the premier city of the northeast United States.” He complemented the leadership of both City government and the business community as part of his remarks on the State government’s efforts to improve the business climate in the Commonwealth.
The Secretary described many positive aspects of the Massachusetts economy, including a highly educated workforce, high rates of investment by venture capitalists, angel capitalists and banks, and the best balanced innovation economy in the nation. He said that Cambridge is among a select group of what he called Winner Cities in the northeast and cited Cambridge’s investment in new housing and commercial development and strong municipal finances.
He also identified some problems including the loss of federal Research and Development funds as research institutions in other states have become more competitive with those in Massachusetts, the slow permitting process at the state level and in many localities, and a general weaknesses in working with both out of state companies looking to locate in Massachusetts and in state firms looking to expand in the State.
Secretary Kimball said that the economic stimulus package presented by the Governor in March, is designed to address three big things: reform the permitting process, create a $200 million bond fund cities and towns can use for infrastructure improvements linked directly to job creation, and expand the States sales force to market the state to companies around the country and in Massachusetts. He concluded by stating that the objective of his office is to and to “keep Massachusetts jobs in Massachusetts.”
Upon completion of his remarks the floor was opened for questions. He was asked about the impact of housing costs on economic development. Kimball responded by complementing Cambridge for adding housing units. Statewide the number of new units being built does not even adequately replace units lost annually according to Kimball. He predicted that a substantial increase in housing supply, which would reduce housing costs, would lead to an economic boom in Massachusetts.
On the same issue he was asked about encouraging building housing near transportation nodes. He deferred to Cambridge Mayor Michael Sullivan because Cambridge has been a leader in adding housing. The Mayor said that the City has changed zoning to allow for housing in all parts of the City and that this has already resulted in residences built at Alewife and the planned residential development at North Point, two locations proximate to existing transit routes. Improved transit access is also part of the North Point plan.
Other questions included whether the Office of Economic Development had sufficient resources for its mission. The Secretary said the Department does not have sufficient resources and that he needs resources for field support and data collection and analysis. He was asked about the loss of Massachusetts headquartered companies like Gillette and John Hancock. Kimball said that the State cannot control the global marketplace but that it can decide how it works with new owners. He said that he and his staff have, for example, met with senior research and development officials at Procter and gamble, which recently purchased Gillette, and that more meetings are planned.
Secretary Kimball responded to a question about confusion in processes at the state and local levels by noting that the process can be confusing and that he is working to make the process transparent. He said that he has identified at least fifteen separate site finding services, while many states have a single source for finding sites for commercial and industrial development. He said that it is important for the State to talk to the business community and to improve how it is represented at trade shows. According to the Secretary the majority of states do a better job than Massachusetts of selling their state to businesses.
A question was asked about local barriers to development, such as down-zoning properties. He said that under the law in Massachusetts communities can choose to grow or choose to constrain growth and that, in the long run, communities that choose to grow will benefit. He again complemented Cambridge on being a community that has chosen to grow and seen the results by the services it can provide. Communities that chose to limit development will also need to reduce services such as police and fire and infrastructure.
Kelly Thompson Clark Chamber President and CEO concluded the event by thanking the Secretary for his remarks and promising that the Cambridge Chamber and the Cambridge business community will continue to work with him and the State to improve the economy in our community and in the Commonwealth.
For a listing of public meetings, visit the Public Meetings link or the Public Meeting Notices area of the City of Cambridge Web site.
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