The Mayor’s just published financial projections predict a $1.6M deficit in FY 2021, which grows to $26M by FY 2029 if we stay on our current path of spending and taxation. This is clearly not sustainable, so what to do?
In the survey I posted earlier, I asked the 321 respondents which options they would consider to bolster the city’s finances.
The most popular choice of these respondents by far was:
- Increasing the tax base with more commercial development.
Options gaining middling support were:
- Paying down the unfunded pension liabilities sooner (not sure how we will do that if we are soon to be in deficit territory)
- Passing a tax override
- Passing a debt exclusion for capital projects
Options with some support were :
- Increasing the Community Preservation Act tax surcharge from the current 1% of property taxes to up to 3%
- Increasing the tax base with ultra-high-end housing
Least popular option:
- Cutting city programs and services
These are just 321 data points, however, and there are also some great suggestions in the comments section of the survey. What do those of you who didn’t take the survey think of these options and what other options would you support?
Tax overrides are not the solution. Our city leaders going back
to David Cohen want to build very expensive new buildings but
do not have sufficient revenues. Taxes at all levels of gov’t keep going up but problems are not finding solutions.
Politicians must stop making promises they can not keep.
They must stop adding new programs which are unsustainable.
I grew up during times where people were more self sufficient.
We had less money but were able to live satisfactorily with much
less and still achieve success. Yes, we might have to solve problems with less spending but it can be done.
Just to clarify: is $26M by 2029 deficit or total debt?
The Mayor’s letter says, “this forecast transparently and knowingly shows a gap in each year between revenues and expenses. This gap grows from approximately $1.6 million in FY2021 to as much as $26 million in FY2029.”
Sounds like an annual budget deficit to me.
The Mayor lists these options to bridge the gap:
“The Fuller Administration will continue to identify cost saving measures throughout the departments and look for opportunities for additional revenue. Additional revenues may come from new growth or redevelopment, state aid, sales taxes on retail marijuana sales, permitting fees, and/or interest income, to name the most likely sources. Reductions in expense projections may be possible in areas such as medical costs and utilities.”
Certainly, NO Overrides.
Thank you for this important thread Laurie. The Citizens Advisory Group report from 2009 is still relevant today and worth a read. On this topic they noted, “New development is not the magic bullet that some proponents assert; it will not allow the City to grow itself out of its budget issues.”
I quoted this from the report at the city council debate on Sunday:
“Like many municipalities, the City of Newton is unsustainably living beyond its means. We are simultaneously underfunding some of our needs and aspirations while continuing to make service commitments in both our municipal and school operations beyond our willingness to pay for them.”
This is scary – mighty SCARY!
I was focusing on the OPEB unfunded liability, but this ANNUAL DEFICIT outstrips even that lurking time bomb.
Time (past time) to stop living beyond our means. Time to focus on nuts and bolts — not excessive new projects that could be handled in better ways with real focus and restraint
Case in point: the mission creep that morphed from Improving the senior center to construction of a massive multigenerational sports and activities center. Aside from all of the other issues with the Mayor’s NewCAL proposal (and there are many issues with site, etc) where are the $$$ supposed to come from not only for the $16M capital costs (before inevitable cost overruns) for an outsized multigenerational activities center, but also for the significant annual operating (staff and building) expenses for this new edifice?
What we (desperately) need is a comprehensive renovation of the senior center — not a multigenerational sports And activities facility to compete with the Y and the JCC. And to duplicate sports facilities at the NNHS, etc., that course be used under Jim Cote’s “Olympic Village” alternative.
Here is another datapoint on the consistent fiscal blind spot of some of our City Councilor (other than Emily Norton and Jim Cote — who are among a handful of responsible Councilors).
I attended the candidates debate on Sunday. One of the questions about candidates’ views on development noted that the Avalon apartments on Needham Street is something like $800,000 net NEGATIVE (!!!) on taxes paid versus cost of school services for the children of residents in that rental apartments complex. That doesn’t even include other City services (Police, Fire, DPW, etc.) So that’s one heck of a massive annual subsidy we residential taxpayers are already paying for that project that is highly profitable for the developer. I’m guessing that the developers and the City Planning Department projected that Avalon would be tax positive, so I can’t wait to see how “accurate” the projections for Northland, Washington Place and Riverside will prove to be…..NOT!!
Abe – Do you have a source for the figure of an $800k shortfall besides the question posed at the debate? I’ve looked at the fiscal impact analyses available on the pages for the Northland and Riverside special permits, and both show a net positive fiscal impact to the city when property tax revenue is taken into account.
If we’re talking about ways to raise additional revenue, one thing we should look at is how we price our assets. I was happy to see that the council voted to approve increases to parking meter rates and give the planning department the power to set rates based on location and time of day, according to demand. This will provide additional revenue for the city and free up more parking in front of businesses that can be used by customers as well as hopefully persuading employees and owners of businesses to commute by other means.
>Increasing the tax base with ultra-high-end housing
Adding housing does NOT increase tax revenue. Per state law, the real estate tax rate is recalculated each year based on the City budget.
Our “leaders” lack new revenue ideas, so we’re stuck with a system based on ever increasing property taxes. We need more creative thinkers to step up with new ideas…
1.] Electricity aggregation should have been used to create revenue for the city, but it was co-opted into an environmental program. If the City became the distributor of electricity for all of Newton, it would generate million$.
2.] The City should have a municipal bank that serves the banking needs of Newton residents and businesses.
3.] Cultivating the air-rights over the Mass. Pike could meet more than 10% of Newton’s annual budgetary needs.
Has the city shifted away from pensions for newly hired employees? Do they have 403bs instead?
The most obvious starting point by a mile: Replace the proposed NewCAL Multi-Generational Athletic/Community Center with a true Senior Center using existing city owned structures and/or with the West Newton Armory and existing Senior Center.
For clarification, the deficit between the tax revenue from Avalon and the cost to educate the students living there is actually over $1,000,000. This point was raised by Pam Wright, running for Ward 3 Councillor at Large.
@Jim Epstein…DING DING DING!!!
@David M: Adding new housing certainly *does* allow the city to increase property tax revenue. This is referred to as “New Growth” and is described in detail on page 8 in this document:
https://www.mass.gov/files/documents/2017/09/08/levylimitsprimer.pdf
Now it’s valid to question whether the new tax revenue exceeds the expenditures brought on by the new development. But for ultra luxury housing, the tax revenue would most likely exceed any expenses.
I’d like a Porsche…but must forgo to save for our child’s college education.
Spend within our means – whether that means a more reasonable NewCAL or not buying back Webster Woods. The latter will not be a popular opinion but unless you all want an override, the monies for the buy back simply isn’t there.
Mike Striar- Does Newton own the air rights over the Mass Pike? I suspect it does not. How could energy aggregation have been made a City revenue source? As it is, the uptake rate for that program has been “slow” — if the City added a revenue siphon to the program I suspect it would be dis-economic for residents to sign up for. A “municipal bank” sounds like a very complex concept — I don’t see how the City could be adept at that (highly regulated) venture or could compete with the many banks that have established branches in Newton.
John Fitzpatrick _ thanks for the clarification/answo to Brenda Keegan’s question. That $1M deficit is even more stunning. Gives me even less faith in the projections made for Northland, Riverside and Washington Place, etc. Did the City and developer project it would be a $1M drain to allow Avalon to be built? I doubt it. So if those projections were so defective I expect the same shabby approach is taking place for the new development proposals — drowning us in more red ink subsidies to profit developers.
Jim Epstein – Right on, man! Enough with the NewCAL edifice complex. The Mayor probably harbors dreams of having the place named in her honor. It’s the City’s deficit that should bear her name and be her legacy.
I’d like to see what the drivers are for increasing the budget deficit in 2021 from $1.6M (already shocking enough), to a whopping $26M only 8 years later. Given this shocking increase I would’ve expected more discussion on this in the mayors letter rather than having it buried in paragraph number 14. However, I sincerely hope that the city Council takes this up seriously instead of taking the politically popular stance of promising more things than we are Willing or able to pay for.
While I support adding affordable housing, I have to say that this revelation increases my support for more commercial development that brings in a lot more tax revenue than it needs in services. It also makes me wonder if the focus on having fewer tear-downs might be taking away from our tax base as well. Those mansions bring in a lot more tax revenues than the smaller homes they replaced. It seems like we need to balance our need for more affordable housing with the need to have more tax revenue, given the dire straits we will soon be in. We’re going to have to make some very tough choices, very soon.
SARAH – Quite right. How can there be so little regard by the Mayor and her finance team for a massively mushrooming deficit? This deficit spending is going to consume us alive.
EMILY NORTON hits the nail squarely on the head with the quote she wrote about: “the City of Newton is unsustainably living beyond its means.” At least somebody on the City Council is fiscally responsible.
BRENDA KEEGAN – Today’s TAB reports that the smart meters needed for sensitizing parking rates will cost $1.5M. What’s the payback period on this technology investment?
Also today’s TAB reports Newton businesses are “flabbergasted” by the possibility of parking rates as high as the authorized maximum of $3.75. Even at lower rates businesses are concerned that this demand pricing will damage their businesses by making high demand areas instantly low demand. And that those customers who are not dissuaded from parking to shop in the first instance will make their shopping visits shorter thereby cutting down on purchasing and eatery visits.
The model of parking rate sensitivity makes sense in NYC and Boston where there is plenty of public transit. Newton is NOT walkable. Who is going to walk 1, 2 or 3 miles to Newton Centre to shop or eat? Nobody.
This move give a real boost to The Street/Chestnut Hill Mall at the expense of local small businesses. (And will make the Walgreen’s parking lot and the one behind the new Chase Bank/Wellesely Bank branches high traffic areas.
If anybody thought too many bank branches in Newton Centre were robbing the zone of vibrancy, try this one on for size as the best way to chase customers away.
How can anybody forget that the now deceased Atrium Mall Had to go to great lengths to convince potential customers that the in-building parking was free? When the Chestnut Hill Mall built it’s parking structure they had to slap on big signs notifying customers that the parking was still free?
How much study went into assuring that we are not (further) damaging our commercial tax base and local businesses?
Fellow senior citizens: Make sure to get your $6 annual parking stickers before the next genius move is made to increase the fee…
If Avalon is a substantial net loss in terms revenue for the city, why in the heck would any city council member, candidate, civic leader or resident want ANY new family or kid oriented housing (more affordable or whatever) squeezed into Newton???
I’d certainly like to hear from the added housing proponents about this SPECIFIC issue.
Let’s be honest with ourselves please:
1) we’ve had far fewer overrides than our neighboring communities, and we’ve been kicking the can down the road on major projects.
2) we’ve spent far less on maintenance on our buildings/roads/sidewalks/trees than we should have for decade, and we’ve been kicking the can down the road until recently.
3) our commercial base isn’t easy to grow, and developers aren’t going to just build spec office buildings in Newton because we wish they would.
4) our pension deficit and health care costs continue to grow, and we continue to kick the can down the road.
5) We are a community with a range of incomes, and an override/tax increase has real and painful effects on a broad swath of our community.
6) We are a community with multiple unions without contracts, with more labor pain to come before we have labor peace.
Despite the fact that accessed values on real estate have doubled over the past 20 years, we’ve been unable to close any of the structural gaps above.
This isn’t one mayor’s fault. One city councilors fault. This is a collective action problem, a long term problem, and as it took us 4 decades to build this mess, it will take us decades to fix.
I think it is inevitable that we will need an override. I would propose one to finish updated the schools, fix the roads, and build NewCal, as well as fill some portion of the gap mentioned above in a concrete and dedicated way.
Folks tend to get caught up in smaller pieces and miss the whole. I get that city councilor raises causes some angst, that additional housing causes worries about additional kids in the schools. But assuming you blocked both raises and new housing, 99% of the structural deficit and long term issues would still be here, no?
@fignewtonville, you are right that an override will probably be put on the table since there seems to be little appetite in Newton for cutting programs, services or compensation/benefits for city employees.
However, one override won’t cover it. Our current taxes total $352M. An override of 2.5% will bring in an additional $8.8M. I don’t know if their projections for a $26M deficit in 2019 are in today’s dollars or not, but in any event, there is a big delta between $8.8M and $26M. There will either have to be multiple overrides or debt exclusions, massive commercial development that will increase the tax base (as opposed to multi-family which is typically budget-neutral at best) or budget cuts. Most likely some combination of these things.
The question is which combinations will the public accept?
Fig, before considering any override, (1) since new household housing is now proven to be a substantial net loss in revenue, put a stop on all new dense housing developments such as Riverside and Northland, replacing them with substantial net revenue generating commercial — there’s still time to do this and (2) get the Mayor’s commitment to scope down the multi-generational NewCAL athletic/community center to an actual senior center.
The above two pre-conditions to floating any override seem no-brainers.
Jim:
I think that is fine to say, but harder to do. Commercial office/retail combos of any size usually aren’t undertaken without serious pre-leasing.
This is like the discussions we all have about building over the Pike. I’d love to. But the numbers never work out. And to make them work out, you’d need such height and/or incentives that the community will never accept it.
But I do acknowledge your point. Commercial would be better for the tax base. But with office space, if you build it, they don’t always come. There is a building opposite New Balance on the Pike that is a prime example of that. And lenders don’t lend on such projects. And commercial rents need to be able to support the debt and project cost. Easy to do that in Newton with mixed use and residential only. Very difficult with pure commercial.
But even if you build commercial, we’d still need an override. Laurie is right. I hate that we need it, but we do. Or we need to cut services/staff/salaries. But our neighboring communities are not doing that. So that’s a difficult road forward.
The bulk of the budget goes to pay and benefits for city Employees. I looked at the budget the mayor just posted, and on page 19, it says the schools have added around 300 employees since 2013 (24% increase) and other municipal employees Have increased by around 60.
I remember that the last override promised to add more teaching staff to reduce class sizes. Did we know it would be this many? This report says school enrollment is projected to decline, so will the number of school employees decline as well? Why did we add so many other staffers in other departments outside the schools?
School enrollment will decline while Newton is on a massive densification binge aimed at increasing the City’s population by 10% in 5 years? I don’t think so. …
More major net tax negative developments will just increase the City’s structural budget deficit.
@fig– Recent record setting prices of commercial real estate transactions along Washington St indicate that Pike air-rights are more viable than any time since the 1960s. Would it require tall buildings? You bet! The bigger the building the more they pay in property taxes. Would you rather be looking at productive buildings that contribute housing and jobs to our city, or the traffic whizzing by on the Pike?
Pike air-rights are in-effect the largest undeveloped parcel of land in the city. The property taxes that could be mined from air-rights development are immense. The tax revenue would not only solve a huge funding problem for Newton, it could be used to hold down residential property taxes and make Newton more affordable.
@Abe– I am not the originator of the Municipal Bank concept. They exist. I think Newton would benefit. Personally, if Newton had a municipal bank that benefited the City, I would do my business with that bank. If given the choice, I think a lot of other Newtonians would do the same.
Why aren’t businesses whose methods for turning a profit based on rent receipts from apartments not taxed as commercial enterprises?
What’s the difference between income from apartments or office sq footage ?
They are both businesses and should be taxed as such !
And shouldn’t profits generated from the sale of condominiums be locally taxed somehow ? Taxes generated from individual apartments obviously don’t pay their own way on a residential basis . Things have to change .