The Finance Committee, comprised of the entire membership of the City Council, conducted a public meeting on Wednesday, May 12, 2010 at six o'clock and twelve minutes P.M. in the Sullivan Chamber.
The purpose of the meeting was to provide a summary to community leaders of the city's current and proposed budget and an explanation of how state and federal budget allocations have impacted the city budget.
Present at the meeting were Councillor Marjorie C. Decker, Chair of the Committee, Councillor Leland Cheung, Vice Mayor Davis, Councillor Kenneth E. Reeves, Councillor Sam Seidel, Councillor E. Denise Simmons, City Manager Robert W. Healy, Deputy City Manager Richard Rossi, Assistant City Manager for Fiscal Affairs Louis DePasquale, Assistant City Manager for Community Development Beth Rubenstein, Assistant City Manager for Human Services Ellen Semonoff, Budget Director David Kale, Public Works Commissioner Lisa Peterson, Police Commissioner Robert Haas and Donna P. Lopez, Deputy City Clerk.
Also in attendance was Charlie Marquardt, 10 Rogers Street, Marilyn Garlington, 15 Lambert Street, Kathy Podgers, Risa Mednick, Transition House and Gordon Calkin, Heading Home.
Councillor Decker opened the meeting and explained the purpose. This meeting is to explain how the budget is developed, the City Council goals and how tax dollars are reflected in the budget to community leaders. Cambridge, she said, is in a good financial situation. She requested City Manager Healy to give an overview of the budget.
Mr. Healy stated that the budget is conservative. He explained that expenditures "less than" projected and revenue "more than" projected equals "free cash". The budget contains the capital and operating budget and the five year projections for capital projects. Sixty-eight percent of the revenue to operate the city comes from property taxes. The commercial sector pays 2/3 of the property taxes while residential sector pays 1/3. Cambridge has the lowest residential tax rate in the Commonwealth and the commercial rate is the second lowest. The formula used to determine the property tax rate is the total dollars needed from the property tax divided by the tax value. The city works hard to keep the tax increase predictable. Ultimately, the tax rate is determined by the budget, which sets out the total dollars needed for the fiscal year. The budget narratives explain how the city departments operate and achieve the City Council goals. Cambridge has received awards for the budget. He explained that this was his thirty-sixth year with the city and his twenty-ninth year as City Manager. In 1980 Proposition 2 ½ was adopted to limit property taxes. The fiscal year 1982 budget had to be reduced by 12 ½ percent due to Cambridge being twenty-five percent over the Proposition 2 ½ limit. In fiscal year 1983 the budget was supposed to be cut an additional 12 ½ percent, however in November 1982 Cambridge voters passed a referendum not to cut the budget by 12 ½ percent. The bond rating was suspended which meant that the city had no ability to borrow money from 1981 - 1984. Cambridge has received a AAA bond rating for the last eleven consecutive years.
Mr. Healy explained the budgetary process and schedule. City staff works on the budget all year long. Revenue is reviewed continuously
- In December the City Manager holds a departmental meeting to give a briefing on budget guidelines;
- In January department heads submit their departmental budgets;
- In February and March the City Manager holds departmental budget hearings at which budgets are reviewed to ensure that the goals of the City Council are met;
- In April the City Manager submits his proposed budget to the City Council;
- In May the City Council holds budget hearings; and
- In late May the City Council adopts the budget for the next fiscal year.
He further added that this current budget contains a three percent salary increase negotiated through collective bargaining; no increase occurs in 2011. Revenue from the hotel/motel tax is down. The water department is supported from money received from the water bills.
At this time Assistant City Manager for Fiscal Affairs Mr. DePasquale distributed a hand out (ATTACHMENT A). He highlighted items in the attachment. He stated that the total assessment is made up of 61 % residential property that pays 33% of the property tax and 39% commercial property that pays the remainder of 67%. Less than 1% of the tax bills sent out requested abatement. The Free cash balance is $84.6 million. The city does not use free cash that it cannot replenish. The use of $9 million in free cash decreased the tax rate. Public facility project bonds used $24 million. The Robert W. Healy Public Safety Facility, War Memorial renovations, CRLS renovations, Library and the Mayor Sheila Doyle Russell West Cambridge Youth and Community Center were five major projects funded. In the school stabilization fund $2.8 million will be used in the current budget leaving a balance of $7.1 million. In fiscal year 09 the Health Claims Trust Fund balance was $17.6 million and the Parking Fund balance was $11.8 million. The Reserve Fund balance is $60.4 million. The Water Fund balance is $6.4 million. The Water Fund money is used for sewer work.
Mr. Healy spoke of the principal employers in the city. Harvard and MIT are the two principal employers in the city. Novartis, he stated, was persuaded to stay and expand its operations in Cambridge. The ten top taxpayers were listed in the attachment. MIT is the top tax payer in Cambridge. Kendall Square houses the life science industry that grew from a risk taken by Boston Properties in the l970's. He discussed the ability to generate non property tax supported revenues. New growth and new development is important to the city. The current budget is down l position and down 28 positions in the last five years. The Police and Fire Departments staffing levels have returned to their pre 2 ½ levels. The state budget reductions to Cambridge over the last five years have been significant. Cambridge has absorbed the reductions with a reasonable property tax increase. The budget contains four statutory categories. Mr. Rossi chairs the capital committee and the process for capital expenditures is the same as the budgetary process.
Mr. Rossi outlined the Capital process. Projects costing $50,000 or more with a five year life are capital projects. Departments assess their needs and desires then the needs are prioritized. The city is focusing on energy improvements and will realize savings in the operating budget with the improvements. The Capital Committee meets and reviews the capital requests, looks at what the city can afford and then makes a recommendation to the City Manager. At this time Budget Director Mr. Kale spoke of the City goals.
Mr. Kale provided a month by month outline of the work on the financial, budgetary, CPA, Capital and narrative work for the preparation of the Annual Budget document. This included a description of how budget guidelines are developed and an overview of the budget process.
Councillor Reeves asked Mr. Healy how much time does the City Manager and the Superintendent of Schools spend on the budget.
Mr. Healy responded that he meets with the Superintendent in December after work has been completed on the school budget. The School Committee adopted the school budget. There is a $3.9 increase in the school budget. The city swallowed the Chapter 70 state cuts of $367,000.
At this time Assistant City Manager for Community Development Beth Rubenstein gave a departmental perspective of the budget development process and guidelines. She told the life of her department for a year and at the programmatic level in preparing the budget. Budgetary expenditure is put together with the goals. Money is being saved through the use of e-mail rather than snail mail. Savings are also realized by work done by in house staff rather than through the use of consultants. New priorities are reviewed.
Mr. Healy stated that the budget is up 3.1% due to the fact that there are fifty-three Thursday pay periods in the current budgetary period for the Fire and Police Departments. This will occur next year also for the employees who are paid on Fridays. He stated that Fiscal Year 2012 will be rough. State Aid will decline because the ARRA money is used up. He does not foresee revenue from casinos.
Councillor Decker thanked the City Manager, Deputy City Manager and the Fiscal Team for their work. The goal of this meeting was to get community leaders together with the city administration to explain how the budget is prepared. Her hope is to encourage more community involvement in the process. This is the beginning of that process. At seven o'clock and fifty minutes PM she opened the meeting to public comment from community leaders.
Gordon Calkin, Heading Home, stated his agency provides shelter services primarily to the homeless. He stated that this meeting was helpful. He is seeing a change in their clientele. The homeless now are the working poor caused by the economic downturn.
Risa Mednick, Transition House, stated that her agency is a domestic violence prevention agency. She also sees a shift in their clientele. She sees an increased need for supported housing and it involves skilled providers to provide needed services. There is a more coordinated cohesive need.
Charlie Marquardt stated that East Cambridge has seen a significant amount of development. People want to age in place. Better sidewalks are needed. It is hard for residents of East Cambridge to get to the new library. The city needs to build housing that does not require automobiles. He spoke of the lack of a food market in East Cambridge and its need. He asked what would become of the Court House site in the future.
Vice Mayor Davis spoke about the resistance met to implement new initiatives. She cited the aging in place as a new initiative that has no performance standard. Mr. Rossi stated that as items become a City Council policy in time they will become a reality.
Councillor Decker thanked all attendees.
The meeting adjourned at eight o'clock and eight minutes PM.
For the Committee,
Councillor Marjorie C. Decker, Chair