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October 5, 2005 GAC Update
The City Council did not meet this week and will not meet next week. Given that there has been much discussion about municipal finances over the past year I have provided information from a report titled “Local Communities at Risk: Revisiting the Fiscal Partnership between the Commonwealth and Cities and Towns” that was released in September by the Municipal Finance Task Force.
Report on Municipal Finances
A report titled Local Communities at Risk: Revisiting the Fiscal Partnership between the Commonwealth and Cities and Towns was released in September by the Municipal Finance Task Force. The Task Force included city officials, including Cambridge Assistant City Manager for Fiscal Affairs Louis DePasquale, elected officials, and representatives from the private sector. The Task Force was created by the Metro Mayors coalition, an association of Mayors in the Greater Boston area, to” review trends in municipal finance and local aid, to understand the impact of such trends on municipal budgets and services, to enable municipalities to develop strategies and policies to better navigate these trends, and to provide recommendations to municipal leaders, the Legislature and the Executive Branch.”
The report found that state aid to cities and towns has dropped from levels in the 1980s and that communities are increasingly meeting budgets by relying on the property tax as a greater source of revenue and by reducing services. The report fund that residential property taxes represent 72% of all property taxes paid, an increase since 2000 when residential property taxes were 68% of all property taxes paid. It should be noted that the commercial sector will provide almost 64% of property taxes paid in Cambridge in the current fiscal year. The report found that the major cost increases to local government are employee and retiree health care costs, pensions, and debt.
The Task Force recommendations ask for greater stability in state aid. The report suggests that the state should establish a set share of state revenues that will go to local aid and that consideration given to changing some funding formulas and lifting the cap on lottery funds available to municipalities. The report also recommends providing communities with additional ability to control non-property tax local revenues by granting more flexibility in local option sources, including local option meal taxes, parking excise taxes, or rental car surcharges, by updating the motor vehicle excise tax, and by reviewing telecommunications taxation and hotel/motel tax issues.
The report also asks the state to give municipalities tools to control costs. The major issue is the cost of health care and the report asks that policy makers make this a top priority. The report also asks that policies be put in place that encourage regional service delivery and that clarify the roles of municipal and state government.
A copy of the report is available at: www.cambridgema.gov/CityOfCambridge_Content/documents/Final%20Report.pdf.
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 too 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.
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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