FY17 City Manager Budget Message & Hearing Schedule

I am pleased to submit for your consideration my final proposed Operating and Capital Budgets for the City of Cambridge for FY17 as well as the proposed FY18-21 Operating and Capital Plans. This Operating Budget of $574,562,125 represents an increase of $26,338,821, or 4.8%, over the FY16 Adjusted Budget. The proposed Capital Budget is $83,863,070.

The FY17 Budget sets a bold agenda for the City that closely links with the priorities established by the City Council. Cambridge is a place where families should thrive – through creating and preserving affordable housing, offering diverse learning opportunities, and advancing sustainability efforts to ensure that our community remains equitable, vibrant, and resilient for generations to come.

The City will continue to advance affordable housing by directly offering affordable rental and ownership opportunities to residents, working with affordable housing providers to advance plans for new affordable housing, and planning for the preservation of affordable housing at-risk. A key component of the FY17 workplan will be to advance recommendations for changes to the City’s inclusionary housing provisions. Through FY16, the City has appropriated a total of $124.4 million in Community Preservation Act funds for affordable housing initiatives. Since FY05, the City has created 1,176 units of affordable housing and preserved an additional 1,130 affordable units throughout Cambridge.

This year, we will fully develop the early childhood strategic plan and begin building the system to expand services to families and supports to early childhood providers. Baby U and the Center for Families will continue to engage families and foster children’s learning and development. Our STEAM Coordinator is working with many community partners to find a variety of educational, work-based, and enrichment opportunities for students at all grade levels. In addition, the Office of College Success will continue to support students as they transition to college and work with local colleges to improve on-campus support for Cambridge students.

The City has won national recognition from STAR Communities for our efforts to build a more sustainable and resilient community. Cambridge not only achieved the highest possible rating of 5-Stars, but also set a new national standard by becoming the highest-scoring community to date. Last year, the City launched Envision Cambridge, a comprehensive, multi-year planning process to create a shared vision for the community. It will develop a strategic framework that addresses a broad range of issues, including mobility, housing, land use, urban design, climate resiliency, social equity, economic development, and open space. The end result will be a shared vision that will expand opportunities for residents, maintain a high quality of life within the community, and contribute to a healthy environment. As a City, we will be discussing a community shared solar project at the First Street Garage, designing the eastern part of the Grand Junction Greenway, and working with the state and neighboring communities to move the MBTA green line extension forward.

We remain committed to making Cambridge a safe and desirable place to live, work, and visit. In 2015, crime in the city reached a 50-year low, thanks to the dedicated men and women of the Cambridge Police Department (CPD). CPD has been recognized as a national leader in promoting police legitimacy and procedural justice, and has been invited by the Commonwealth to develop a training curriculum to be used across the state. CPD is also incorporating a trauma-informed approach to its internal training, which will focus on enabling officers to manage their own stress and trauma, as well as learn how to promote self-care, wellness, and resiliency in others who have experienced trauma. We will also continue to search for the best solutions to the opioid crisis in collaboration with City, state, and nonprofit partners.

These initiatives highlight the variety of exciting programs and services the City will continue to implement in FY17. I encourage readers to review the City Council goals, the key initiatives, each department’s budget narrative, and the list of this year’s capital projects to gain a deeper understanding of our FY17 objectives.


The proposed Operating Budget of $574,562,125 includes the following:

• A total property tax levy of $376,448,690 to support the General Fund Operating and Capital Budgets. This is an increase of $22,017,937, or 6.2%, from the FY16 property tax levy. The actual tax levy is determined in the fall as part of the property tax and classification process. In addition, the City can make adjustments to budgeted revenues as part of the process. As in past years, the City may be able to use increased non-property tax revenues at a higher level than what is included in the FY17 Budget, once actual FY16 receipts and final state aid figures are known. 
• $2,000,000 in overlay surplus balances accumulated from prior fiscal years will again be used to lower the tax levy increase.
• A 2.0% cost of living adjustment for all non-union employees and for those unions with settled contracts. A 0% increase in health insurance, 0% increase in dental, and 5.85% increase related to pensions. The 0% increase in health insurance is due to fewer high-cost, chronic claims and employees taking advantage of preventative programs.
•  21 full-time positions have been added to the FY17 Budget to provide appropriate support for the growth in programs throughout the city. New positions include:
  
  • Six positions in Public Works: a four-person street cleaning crew to clean up the squares from 4am-12pm, a dedicated custodian at the Alice K. Wolf building, and a Clerk of the Works to perform private development inspections and assist with street and sidewalk reconstruction projects. 
  • Five positions in Public Safety: a Police Crime Analyst, an Emergency Communications Deputy Director, a Sanitation Inspector, and two Electricians. 
  • Four positions in Finance: a Business Analyst to support financial software applications, a Budget Analyst to assist with Participatory Budgeting and the annual budget process, and two positions in the Information Technology Department.
• An OPEB contribution of $2,000,000, which is consistent with the FY16 allocation. 
• The Health Claims Trust Fund is providing $8,920,000, an increase of $120,000, to support the health insurance budget.
• Collaboration between the City and School fiscal staffs once again resulted in a successful School budget process. The City increased property tax support to schools to 6.85%. The School Committee adopted the School Department budget of $172,793,980 on April 5, 2016. 
• A 0% increase in the water rate and a 3.2% increase in the sewer rate, resulting in a 2.4% increase in the combined rate as adopted by the City Council on March 21, 2016. This is the sixth consecutive year that the City has been able to produce a 0% increase in the water rate. 
• Parking Fund revenues will provide $9,262,860 to support the operating budgets of various departments.
• The City Debt Stabilization Fund will provide $1,700,000 to cover debt service costs.
• The City will recommend using $10,180,000 in Free Cash to lower the property tax levy increase, which is consistent with the City's financial plan.

The proposed Capital Budget of $83,863,070 includes the following:

• The continuation of sewer and stormwater projects at Agassiz ($2,410,000), Alewife ($9,262,500), Harvard Square ($2,000,000), and The Port ($8,500,000); remedial construction ($1,000,000) and capital repairs ($3,500,000); streets and sidewalks ($5,201,295); Harvard Square surface improvements ($3,500,000); renovations for the Harvard Square Kiosk and Plaza ($2,000,000); completion of the Cambridge Common renovation ($500,000); and the comprehensive municipal facilities improvement plan ($7,500,000).
• Bond proceeds of $20,000,000 will be used to fund construction services for the King Open and Cambridge Street Upper Schools & Community Complex. Other school projects include exterior masonry repairs at the Fletcher Maynard Academy ($2,500,000), roof replacement and photovoltaic array at the Kennedy Longfellow ($2,200,000), and boiler replacement at the Amigos School ($500,000). 
• A $5,680,000 Pay-As-You-Go Public Investment allocation, which includes $3,480,000 in IT projects as part of the IT E-Gov initiative, $1,600,000 for City Capital projects, and $600,000 for the winning Participatory Budgeting projects. This represents a $1,478,000 increase in property taxes. 
• Water service charges of $5,000,000 to cover all water-related capital projects. 
• On March 1, 2016, the City sold $34,990,000 in General Obligation Bonds to finance capital projects such as the King Open and Cambridge Street Upper Schools & Community Complex, sewer reconstruction, street and sidewalk reconstruction, and other municipal and school building renovations. The City’s AAA bond rating allowed the City to sell these bonds at the true interest cost of 1.8%. The $34,990,000 included $12,740,000 in sewer bonds. 

OUTLOOK

FY15 was another remarkable year financially for the City. Our sound financial practices have left the City with substantial reserves, including $192,690,567 in Free Cash, $155,041,795 in excess levy capacity, $14,783,834 in Parking Fund Balance, and $11,687,672 in Water Fund Balance. It is anticipated that the City will also end FY16 in a very strong financial position.

The City has used $41,300,645 in Free Cash to date. Major appropriations include $9,000,000 to lower the property tax rate, $2,450,000 for E-Gov IT initiatives, an $8,000,000 transfer to the Debt Stabilization Fund, a $16,630,990 transfer to the Mitigation Revenue Stabilization Fund, and $3,300,000 for the citywide planning process. I anticipate requesting appropriations before year-end to cover winter snowstorm expenses, the School operating deficit, School capital improvements, municipal and school building security systems, playground renovations at the Morse School and Clarendon Avenue Park, and a new customer relationship management system. The City may also acquire and renovate a building to provide space for growing operations.

We will continue to use our five-year financial and capital plan, debt, and reserve policies and the City Council goals as a guide in our long-term planning to maintain stability and predictability in our budgeting and financial planning processes. Our financial projections indicate that we will be able to produce future budgets that will reflect a moderate growth in the property tax levy, which is our primary revenue stream. In addition, the City is projecting stable valuations in the near term with moderate increases in the out-years based on new construction, appreciation in values of existing property, and major rehabilitations.

Major priorities that will impact the budget in the near term include bonded projects such as the King Open and Cambridge Street Upper Schools & Community Complex; municipal building expansion opportunities; recommendations from citywide planning efforts, the Broadband Task Force, and the Public Safety IT Study; increases in the School’s Operating Budget; and increases related to health insurance, pensions, and collective bargaining agreements. We recognize that not all capital projects are in our five-year plan, but we will continue to review and update the plan to ensure it reflects the needs and priorities of the community.
While overall economic conditions are steady, some uncertainty remains around possible federal and state budget reductions. The long-term outlook for Cambridge continues to be very strong as long as we continue to efficiently manage operations. This has been confirmed by our consistent AAA bond rating. We have been able to absorb operating and programmatic costs associated with expanding services, cover increased salary and fringe benefit costs, and manage debt service costs with an aggressive capital plan.

CONCLUSION

The City Council and City Administration understand that choices made today impact future spending decisions. Our effective short and long-term financial, economic, and programmatic planning strategies will help ensure that Cambridge can continue to provide the level of services that residents desire while maintaining the modest tax implications taxpayers have come to expect. I believe that the initiatives and spending priorities recommended in this budget submission reflect not only the goals of the City Council, but also the priorities of the residents and taxpayers of Cambridge.

Since my appointment as City Manager three years ago, one of my priorities was to ensure that when I retired, each department would have a strong leadership team that was well prepared to be an asset to my replacement. We continue to invest in leadership development and will focus on our mid-managers for the second round of training. Our next City Manager will inherit a workforce that is highly professional and committed to working hard and achieving the City’s goals. At the same time, I’m proud of the changes we have made to help employees balance work and family. The City’s new Parental and Sick Leave Policies went into effect in November 2015 and allow greater flexibility for all staff to take time off to care for new members of their families as well as for those who are ill.

It has been an honor and a pleasure to serve this great City for 45 years. I am proud that Cambridge will continue to benefit from the dynamic leadership, strong financial position, sustainable infrastructure, and spirit of cooperation we have cultivated. I want to thank the City Council, City staff, our residents, businesses, universities, community organizations, and other partners for all that we have accomplished together to make Cambridge the truly remarkable community that it is. 

Very truly yours,

Richard C. Rossi
City Manager

Link to FY17 Budget Hearing Schedule

Download City Manager Message and Key Initiatives

Download FY17 Submitted Budget Document