In his newsletter to constituents, Councilor Jake Auchincloss said what many people have been thinking since Mayor Fuller delivered her Long-Range Financial Forecast & Five-Year Financial Plan and the Five-Year Capital Improvement Plan last week.
Every year, the mayor delivers three foundational reports to the city council. In April: the operating budget for the upcoming fiscal year. In October: the long-range financial forecast, and the five-year capital improvement plan.
The financial forecast and the capital plan are complements: what can we afford to spend? and what should we spend it on?
What was said…
Last week, Mayor Ruthanne Fuller delivered the financial forecast and capital plan. The most important thing said is that, for decades, Newton signed employee health-care contracts for which it didn’t pay, and now the bill is due. Until mid-century, the next generation will be paying about ten percent of our budget for services rendered to the previous generation. I explained the issue in-depth last year, and the basic math hasn’t changed much.
…and what will be said
But the most important takeaway is actually not what the mayor said, but what she’s going to say. First, she called attention to the $100M price tag to rebuild Countryside and Franklin elementary schools. She also noted the significant expense to upgrade Ward elementary.Then, the mayor said that the city does not have the money for these “necessary and important” projects. Finally, she offered that she plans to work with her staff, the city council, and the school committee to propose a path forward over the coming months.
–> This is how mayors prepare the groundwork for Proposition 2 1/2 overrides.
My expectation is that, before her first term is up, Mayor Fuller is going to ask the voters to raise taxes to reconstruct Countryside, Franklin, and Ward. Newton has an impressive recent track record of building state-of-the-art elementary schools on time and on budget, with the exception of the relocation of Horace Mann. I expect the mayor is going to ask voters to approve a Prop 2 1/2 override to keep that momentum going. (Emphasis mine — GS). I will explain more generally about Prop 2 1/2 overrides in future emails. In brief: it’s a referendum to raise property taxes beyond what the state normally allows. You can learn more here.
Two questions to consider
If an override is proposed, opponents of redevelopment may cite it as an example of new construction straining our infrastructure. That argument is best treated with two questions. The first question is: on net, for the city as a whole, are these projects net revenue positive?The answer is yes. The commercial and retail elements of Northland and Riverside, even though carved back during negotiations to reduce traffic, are substantial tax generators that would more than cover the costs of additional schoolchildren. The record of mixed-use, infill development in general is fiscally positive. And for these projects in particular, fiscal studies indicate millions in net revenue for the city. Indeed, from the perspective of school capacity and funding, the problematic aspect of Riverside is the reduction, not the increase, of the footprint, since that reduction stripped out commercial tax dollars.
[And for those interested in digging deeper into how budgets scale with density, I recommend two interesting reads: the first is Strong Towns, an online publication with thoughtful writing on local planning, challenging both the typical pro-development and anti-development arguments; and the second is Scale, a book (and lecture) by eminent physicist Geoffrey West of the Santa Fe Institute, who proposes a scientific model of cities.]
The second question to answer about redevelopment and infrastructure is: what is the specific impact to the project’s educational and traffic catchment area? Schools and traffic are ‘lumpy’ phenomena: the 400th kid in a school may add little cost, but the 401st requires a new school. A transit-oriented project may improve traffic regionally, but worsen congestion on the local road.
Here is where negotiation is so important. For Northland, the city council has pushed—and is still pushing—hard on the developer’s bottom line to reduce car trips onto Needham Street. It also secured $8M+ from the developer for area improvements, plus $1.5M for Countryside (with an assist from the mayor.)
On Riverside, the neighborhood group has been negotiating with the developer even before formal hearings. And they are getting substantive concessions, like the reduction in commercial footprint to ease traffic, that reflect a tension between mitigating local impact and boosting city-wide tax dollars. There isn’t a right answer; it’s a balance. The city council, for its part, will seek rehabilitation of the Charles River watershed and other area improvements; a site design that promotes the MBTA’s Green Line and Commuter Line planned upgrades, and the insulation of Grove Street from excessive traffic.
). I will explain more generally about Prop 2 1/2 overrides in future emails. In brief: it’s a referendum to raise property taxes beyond what the state normally allows. 
My first take is that it is outrageous for the Mayor to seek to fund an expanded NewCAL (from senior center to community athletic complex) and simultaneously seek to raise taxes!!! (I realize that funds for different things come from different accounts, bla bla bla — but money being fungible means more expense, more tax.)
There is no surprise here. This year, every time a parent asks Matthew Miller on Facebook about later start times for the high school or longer lunch periods and more recess, he conters with asking them if they’d be willing to vote for an override. All in the spirit of transparency. They must have been talking about this since she took office. Perhaps they could have played a better long game with the voters, though. They’ll need the votes of the parents that they alienated with the acrimonious equity discussion.
We need to wake up. Newton has a $1 BILLION unfunded pension liability. This isn’t our only budgetary crunch but it is the biggest.
There are alternatives to raising taxes, including building more mixed-use/commercial projects. But can we get out of our own way on that one? Raising taxes may be an inevitability.
I appreciate Jake’s candor: “This is how mayors prepare the groundwork for Proposition 2 1/2 overrides.”
In other words: when faced with a long-term structural deficit (retiree healthcare liabilities), the trick is to tell voters that money is acutely needed for a sympathy-provoking poster child (new schools). It’s for the children! Well, no: actually, it’s for retirees.
All the money is muddled in one pot, and with it, the rhetoric and the truth.
This is dishonest. We have always paid taxes with the expectation that some of our money would be wisely set allocated for maintaining and rebuilding our schools. That is one of the most fundamental responsibilities of a city.
It will be a perverse result if city residents with poor healthcare coverage–or maybe no coverage at all–must pay even higher taxes so that public retirees can continue with Cadillac plans.
If unfunded health benefits are the true driver for an override, the mayor should explain this candidly and not conceal it. Only then can voters express how they truly feel about the issue.
Tax overrides are forever. They accumulate; they never recede. Newton will never say: “this year we managed to reduce our per-capita budget to what it was 2 years earlier; we’re going reduce your taxes”.
This talk of overrides has been going on for decades.
When David Cohen spent $200 million to rebuild Newton North
which was built in the 1970s not the 1920s. Our city began its
very costly over spending practices. No wonder our debts mount
rapidly each year and at a faster pace thanks to recent overrides.
Property owners simply can not afford new excessive tax increase. Childcare costs are outrageous for young couples.
People fear going to their doctors because of high deductibles.
State and federal taxes have gone up for many.
RuthAnne has inherited much local debt from Cohen and Setti.
Newton can not afford to rebuild 3 more schools at a cost of
$200 million. Horace Mann Parents moved into Carr school which cost the city $20 million to renovate several years ago.
The parents are full of complaints because the school isn’t up to the $50 million standard. Horace Mann is not even on a list for a brand new school and they they are full of petty gripes.
With all the new apartment rentals hundreds of new non residential home owners will demand new schools and more teachers. Then what? Overrides are not the solution, nor are $50 million elementary schools. Wake up politicians the old ways don’t work anymore.
It depends on what you want – your priorities. A 21st century education doesn’t happen in facilities built in the mid-20th century, well before the passage of the Americans with Disabilities Act or the inception and growth in technology in schools, just to name two game changers in how a school facility is used.
If you don’t want to be competitive with comparable communities, then keep the dilapidated buildings that don’t even have the basics of a decent educational facility. A few weeks ago, Lincoln-Eliot teachers were thrilled to hear that the asbestos abatement had been approved. That’s okay with people?
Guess what, Michael Singer, it is for the kids – to provide them with the best education possible. If you think that’s a terrible thing, then let’s agree to disagree.
It’s interesting that Jake understands school funding would likely be the principal driver behind a potential tax override, because he seems far more concerned about parking issues associated with new development like Northland, rather than the impact such projects will have on Newton’s schools. I haven’t heard him say a word about the ridiculously low offer of $1.5M school impact mitigation from Northland.
@Mike
According to NPS projections, there won’t be nearly as many students generated by these projects as you and many others seem to think. I think trading a small number of new students (as if that is a bad thing?) with millions of dollars of new yearly revenue would be to the overall benefit of the city.
@Jane–how dare you try to vilify me and suggest that I am somehow against the kids? That is untrue. This is not a morality contest.
If you had any idea what good I have personally done for education, you would not be so quick to criticize me.
We just happen to disagree about the facts. You say that this override would be for the kids. I say that it’s a wolf in sheep’s clothing: a retiree bailout dressed up like a schoolhouse.
Jane,
IMHO, how much money being spent per student is not primarily what counts for “good” education, nor the condition of the facility. The city can throw all the money it can at the schools, the buildings, for teachers, but so long as the education continues in the path of the soft new-fangled “politically correct” social sciences with the frequently hostile-American, hostile-Western civilization bias, as well as math where the Mathnasium business is flourishing, education will fall short. This is evidenced by the high percentage of Millennials and Post-Millennials favoring socialism over capitalism (no understanding of history). And I’m certain, Newton being Newton, rates high on that scorecard.
Newton Voters will not approve an Override. Therefore, Newton’s elected officials should start preparing for cuts.
Peter,
Reminds me, the last time there was a “contentious” override close to defeat, there was this: https://www.bostonmagazine.com/2006/05/15/there-goes-the-neighborhood/
I’d vote for an override (said in a quiet voice). And I’ve been saying one is coming for a while.
@Jim Epstein – The last “contentious” Override battle essentially ended the political career of a former Mayor.
The funds from a debt exclusion override must be used for the project it is written for. A DE to build new schools will build new schools.
Not to mention, what do people have against retirees? You know, those people who ran the city for decades? The retirees entered into an agreement with the city decades ago, and had deductions taken out of every paycheck. To imply that this is a “retiree bailout” is way out of bounds. It’s the same as calling Social Security an “entitlement”.
As I’ve said before, the aging of the baby boomer generation is going to be very expensive for the entire country.
I’m with Fig, I’d vote for an override.
The following statements are true:
Virtually everybody wants a first rate public education for children in Newton.
First rate public school buildings cost a lot of money.
The City is obligated to pay pensions and benefits that it promised to its retired employees. They earned them.
Funding the unfunded liabilities for pensions and benefits will cost a whole lot more money.
Nobody wants to pay higher taxes.
To provide Newton’s kids with a first rate education and pay off the city’s unfunded liabilities for pensions and benefits to its retired employees, the city needs to pass an override/debt exclusion.
Everybody wants to go to Heaven, but nobody wants to die.
Can someone please educate me? What is the difference, if anything, between a debt exclusion override and a tax override?
Am I following that the Mayor would be proposing raising new taxes to fund schools, while using existing funds to fund NEWCal? If so, seems like a disingenuous move to avoid having the public weigh in on NEWCal. And when I say NEWCal I mean a community recreation center NOT a Senior Center
@Ryan– I’ve seen and heard many projections over the years. Sometimes they’re right. Sometimes they’re wrong. None of them come with a guarantee…
As a 61 year old dude who’s lived in Newton nearly my whole life, I have the advantage of long term perspective. I’ve seen how much impact one large apartment building can have on a school like Countryside. You should a walk or ride by there. Those boxes bolted to the side of the school are called “modular classrooms.” They will tell you how foolish it is to value projections above common sense…
The impact of the residential component of Northland will be deep. A lousy million and a half bucks aint gonna fill it. City “leaders” have completely rolled over for Northland. They should be demanding 15K sf of onsite educational space. But it’s just so much easier for councilors to ask for shuttle buses and parking allocations, declare victory, and try to con their constituents into thinking they’re actually tough negotiators.
Mike,
Shuttle buses? LOL
Does anyone remember Nexus?
(And new residential at Northland apartments are a giant NET LOSS IN REVENUE to the city, just add in the education cost per student.)
I wouldn’t have moved to Newton if the schools were not excellent. To me, that means paying teachers and building schools.
The median tax rate in Massachusetts is $15.48.
Newton’s rate is $10.45, the 40th lowest of 342 cities and towns.
This is a lower rate than most of our neighbors, most with highly ranked schools, and most with high property values.
For example, Wellesley $11.57, Needham $12.39, Weston $12.59, Wayland $18.28, Waltham $12.66, Watertown $12.88, Dover $12.93, Belmont $11.67, Lexington $14.12…
https://patch.com/massachusetts/boston/ma-residential-property-tax-rates-each-community
I’d vote for an override.
I believe the override passed last time because Mayor Warren convinces us that the city had made some prudent financial changes and could be trusted to spend the money wisely.
This time, I think most people are going to think the city wants money from an override primarily to expand the schools so they can add thousands of new students. It will be interesting to see how much of a priority that is for voters.
Ben,
And that’s precisely why such a high percentage of new residents at Northland will have school age children. They believe that the schools are “excellent” — or at least believe better than most other communities.
Again, new residential at Northland apartments are a giant NET LOSS IN REVENUE to the city.
@Jim,
Jake says the projects are substantial tax generators that would more than cover the costs of additional schoolchildren, the record is for positive revenue, and that for these projects in particular, fiscal studies indicate millions in net revenue for the city.
You say they will be a giant NET LOSS IN REVENUE.
I’m personally not a development expert.
I hope Jake is right, if only because my layman guess is a project of some sort with housing at Northland is getting built.
https://village14.com/2019/09/21/northland-project-alternatives
But if he’s wrong and you are right… I still support teachers being paid and schools being built in Newton, and would still vote for an override.
Ben,
I should clarify, ONLY the residential aspect of Northland. That is, tax revenue received attributed to residential minus city expenditure attributed to residential portion, is a NET loss to the city.
I’m not saying I oppose teachers being paid and schools being built. I’m only saying that when you add the additional school and teacher cost needed for the new residential students, added to all other additional expenses generated by the new residences and occupants, that’s a NET loss in revenue to the city.
The obvious answer would be, have much MORE commercial (which is taxed at twice the residential rate and a giant net gain in revenue) and much LESS residential (which is a net loss in revenue), comprise Northland.
I think a debt exclusion override to fund specific, necessary projects is a sensible way to go. That would permit us to take advantage of the current low interest environment to pay off the “mortgage” on these facilities. In terms of economic cycles, it’s an excellent time to do this, saving millions compared to periods of high interest rates. Of course, people would have to be persuaded that the projects are indeed, necessary; but if we look at the age and condition of existing facilities and the clear demographic need to serve students and seniors, I think the case can be made. Indeed, I would combine the school reconstruction program with a senior (not community) center to create the most political support for this kind of override.
@Ben, Jake is very smart, very quantitative, and very much a straight shooter. I trust his word on this.
Jim,
This discussion has gone way off topic from my original point, and I think I’m just reiterating myself now, so I’m probably not going to continue after this post.
I don’t think anyone disputes that commercial development generates more revenue than residential, only what specific ratio is net positive.
My opinion is:
1. Revenue is clearly not the only consideration. Even you aren’t making an argument for 100% commercial
2. I don’t know what the “correct” ratio is
3. If the city and the developer can’t come to an agreement, there appears to be a risk of much more housing from 40B development than the current proposal
4. All possible outcomes don’t change my opinion that schools should be built and teachers should be paid. I’m glad you agree with me on this!
Cheers.
Ben,
I thought I was being precisely on your topic.
And I don’t know the exact ratio, suffice to say new commercial is a substantial net gain, and new residential (with students) is a substantial net loss, in revenue.
And if that new residential requires more spent on schools, and that tips the scale for an override, why the heck are we building more new residential when we can be building more new commercial, at Northland???
@Ben, thanks for that.
Here’s top 8 Mass schools with tax rates:
https://www.masslive.com/erry-2018/02/1b24ce2b81/the_top_50_school_districts_in.html
#1 Wellesley Public Schools. $11.57
#2 Lexington Public Schools. $14.12
#3 Newton Public Schools. $10.45
#4 Westford Public Schools. $16.56
#5 Cambridge Public Schools. $5.94
#6 Belmont Public Schools. $11.67
#7 Weston Public Schools. $12.59
#8 The Public Schools of Brookline. $9.37
The only school systems with lower tax rates then Newton are Cambridge and Brookline. This of course is only correlation, so I’m curious to see how closely tax rates can positively impact education. (Feel free to call into question the methodology of the school system rankings, I just did a quick and dirty search)
I supported the last override because its targets were clear and the need for improvements in infrastructure indisputable. The city used the funds raised as promised, with goals met across the board. I have faith that the same will hold true this time. Therefore, I will support an override should the mayor request it.
Other authors have pointed out that Newton’s tax burden, compared with that of comparable suburbs, is lighter. Becauses of McMansions and developments like Austin Street with two-bedroom units renting for $6000/month, incoming residents will push Newton’s median income even higher. For example, a recently completed McMansion around the corner from me is renting for $12,000 a month! The new residents will easily afford to pay the higher rate of local taxes.
Over time, Newton will become more homogeneously affluent as seniors on fixed income move away and wealthier families take their place; that’s what happened around the corner. This affluence results from both city policy and market forces, and, apparently, no one truly wants to reverse the trend. Thanks to the new wealth, the Garden City will have the means to meet its obligations to both its citizens and its employee retirees.
Mayor Fuller touched upon the impact of new developments on school enrollment over the next decade previously in her email to the community.
But don’t let professional demographers fool you with actual analysis and data versus “truthiness”…
https://www.nnchamber.com/news/newton-schools-can-accommodate-new-developments
“An in-depth demographic study of how the four proposed large developments would impact the Newton Public Schools shows that the new housing (1,775 units) would create only a small amount of new enrollment. The study forecast only 83 additional students district-wide over the next decade.
Why is there such a small impact from 1,775 new units?
The study commissioned by the Newton Public Schools shows that with no new development, enrollment would drop by more than 200 students over the next decade.
The number of new students is now leveling off after 13 years of steady growth which saw 1,417 additional students or a 13 percent increase since 2004-2005 to 12,685 students this year.”
I like Jake Auchincloss … but that giant photo in the post above is kind of freaking me out.
Because the commercial property tax in Newton is up to 175% of the residential rate, I get why many people think we should encourage commercial development uber alles. This is short sighted.
Residential property values are assessed as a function of their market value. The assessed value reflects comparable sales of similar properties in the same district. In Newton, those values remain stable or consistently increase.
Commercial property values, on the other hand, are generally assessed based on income. In other words, it is based on rental income. If you overdevelop commercial properties, such that the supply exceeds demand, assessed values go down because the rental income declines when there are vacancies. Commercial property values are not necessarily as stable with the new economy that depends on online commerce.
It is too simplistic to think that if we simply increase commercial space that Newton will take in more revenue. Online commerce is killing brick and mortar. So retail is not necessarily the way to go. Developing more office space faces the same type of challenges, since many people can work from home or can share space rather than have dedicated space for their businesses. And commercial development generates WAY more traffic than residential.
So, be careful what you wish for. You may get it.
@Ted Hess-Mahan – A related question, which I know there’s no clear/hard answer to, but all things being equal … If I’ve got say a 5 acre plot and I develop an apartment building or an office building that’s the same size. Any idea how the comparative tax revenue would stack up.
@Jerry Reilly, there is an answer, I am sure, but that is above my pay grade. I am a pundit not a financial analyst. But there are real experts who can figure that stuff out. When I was chair of the land use committee, I advocated for financial impact analyses for every project to estimate what the net economic impact of a project would be. These analyses are overseen by the planning department, but paid for by the developers.
Ted H-M, you make some good points. But don’t forget that offices, retail and other commercial don’t send kids to school.
@Colleen – a debit exclusion over-ride means the money goes to the specified purpose (in this case, school renovations) and ends when that’s paid for.
@Ted – whether or not l agree with your comment, you get a like for that great song!
@THM, You are spot on about the impact of online commerce on brick and mortar, but we also need to consider the impact of the work-from-home movement, teleconferencing, etc. These all reduce the demand for commercial space. That said, demand for commercial buildings will always exist in some capacity, but with these pressures come the ability of business owners and boards to select from a wide variety of locations to locate their business/offices. They can be picky. If we want to attract them, we need to offer everything a business needs to thrive, which includes housing. If varied levels of housing, from affordable up to high end, are not available they will continue to select locations where these resources exist. Public transportation helps as well, but in order to see the massive investments needed on that front, we do have to expose ourselves to some risk by creating the additional demand through residential and commercial growth first. I wish it were the other way around, but if a handful of communities have both the need and the demand through increasing density and development, and we only have the need, you know where those dollars will ultimately go. Back to the topic at hand. Development can help the finances in the long term, but lack of development will certainly hurt the finances sooner rather than later. Elementary School enrollment is coming down quickly. Overall enrollment is edging down, and it’s the large class sizes making it through the middle and high schools which are keeping the total enrollment relatively stable. Once they graduate, our total enrollment numbers will decline quickly. Look at the elementary school enrollment by grade. Chapter 70 state aid is complicated and beyond me, but I know enrollment is a major factor. Less students, less money. The vast majority of communities in the Commonwealth have been experiencing declining enrollment for years. Newton has been protected from this due to a high quality educational system, but the birth rate in this country is the lowest it’s been in 30+ years and it’s still declining. This is a long way of saying that if we don’t allow for smart growth, which includes a mix of residential and commercial, we will continue to lose school enrollment which will reduce state aid, which will then force the need for a operating override or a reduction in services. State aid was appx $25M this year, so it makes up more than 10% of the annual school budget. The bottom line is that we need smart growth in Newton or we will be forced to either cut services, increase taxes, or both. As for an override, I would support a debt exclusion override. In that option I know exactly where the money is going, there’s a tangible result in the end, and when the term of the loan ends so do our payments.
What about other revenue sources? Why do we have to automatically look to raise taxes on residents? What about cannabis store agreements and taxes if we eventually open 8 stores? How about a local tax on hotels or restaurants? And as someone else mentioned, don’t really see anyone discussing a good hard look at current expenditures and finding cuts instead of tax increases. I’m sure there is plenty of waste to be found…
Colleen- A debt Exclusion Override is project specific. So, if a DE Override is needed for Horace Mann the override goes 100% towards HM. The entire city pays for it, but the Override revenue only goes towards that one project and might take 20 years to payback. For some people that is paying higher taxes for as long as they are in Newton. The problem with passing a DE Override is getting people from other parts on the city to vote for it, as they want the money to be spent in their ward and their local projects. I don’t know if it’s legal or not, but some people feel that bunching projects up in different parts of the city would help overcome that type of thinking.
A general Override lasts forever and is permanent. It is generated through the cityside/schoolside budgets. If Insurance goes way up and inflation goes way up, etc it might generate a vote for an override to maintain quality of services, the alternative would be to cut/reduce services. The override number for a general override will be a flat number ie $10 million, a certain percentage (it used to be 70%) automatically goes to the schoolside budget, while the cityside would get the remaining 30%….now it’s different).
I hope this helps the discussion on the differences of the two overrides.
On a side note, I thought Jake’s article was terrific and I love his analytical thinking.