Votes necessary to seek approval from the Massachusetts Department of Revenue of the tax rate for FY2024

To The Honorable, the City Council:

The establishment of the Fiscal Year 2024 (FY24) property tax rate by the Board of Assessors, subject to the approval of the Massachusetts Department of Revenue, is the final step in the fiscal process that begins with the submission of the annual budget to the City Council. The City’s Operating and Capital Budgets, property classifications, and property valuations are major factors in determining property tax bills. This memo includes recommendations for the required votes which will help minimize taxes on residential properties. In addition, there are analyses of the FY24 property tax levy, property values, and other supporting information.

OVERVIEW The FY24 Adopted Operating Budget is $883.8 million which is an increase of 10% (or $82.3 million) over the FY23 Adopted Budget. It should be noted that a significant portion ($24.6 million) of that increase represents a shift of funding for the Affordable Housing Trust from the Capital Budget to the Operating Budget. This does not impact the overall levy, however it is a more appropriate accounting of how funds are allocated towards affordable housing.

Excluding the shift of affordable housing funds, the FY24 Operating Budget represents an increase of $57.8 million or 7.2% over the FY23 Adopted Budget. While this is still a significant increase, the Budget responds to Council goals, feedback, and input, which is reflected in funding commitments across several key priority areas.

The FY24 Budget adopted by the City Council in June 2023 projected a property tax levy increase of $48.8 million, or 9.2%, to $580.3 million in order to fund operating and capital expenditures. With approval of the recommendations in this memo, the actual FY24 tax levy required to support the FY24 Budget is $575,418,489 which is an increase of $43.9 million or 8.3% from FY23.

This increase is lower than the estimated increase of 9.2% projected in June 2023 as part of the Adopted Budget, due in large part from higher than projected investment earnings, hotel motel taxes, and building permit revenue. The property tax levy increase of 8.3% is above the FY23 increase of 7.45%. The property tax levy increase is also above the five-year (FY20-FY24) annual average increase of 7.03%, and the ten- year (FY15-FY24) annual average increase of 5.77%.

The Budget process for FY24 began in the fall of 2022. The FY24 Operating ($883.8M) and Capital ($185.2M) Budgets were formally adopted by the City Council on June 5, 2023, and include

2

significant investments in many programs and initiatives that are directly related to City Council goals. The FY24 Budget is guided by policy direction set by the Council, based on City Council meetings, policy orders, and consistent communication which has allowed for feedback on existing initiatives and department operations, and helped to identify key city priorities. The FY24 Budget includes over $41 million in funding for affordable housing.

As part of the FY24 Budget and consistent with previous years, the City has committed to using building permit revenue ($10.2 million) to support affordable housing. In addition, $14.1 million of General Fund revenue and $300,000 in short-term rental impact fees will be used to provide funding to the Affordable Housing Trust. This totals $24.6 million in the FY24 Budget to directly support the development and preservation of affordable housing.

These funds will be supplemented by FY24 Community Preservation Act (CPA) funds ($16.5 million).

The City has also committed significant funding to supporting the unhoused community with a total of $15.9 million in FY24 primarily driven by investments in maintaining the City’s shelter capacity as well as programs that support those who are not stably housed in our community including programs on eviction prevention, rental assistance, legal services, the winter Warming Center, and transportation for homeless children.

The City has continued to make major investments in universal pre-kindergarten (UPK) as we prepare to go-live in the fall of 2024. Total funding is $34.4 million in FY24. There was a Free Cash allocation in FY23 of $10 million toward a stabilization fund which will help mitigate the budget impact in FY25 of implementing UPK, which is projected to be approximately $20 million.

There was also $1.2 million of new full-time positions added to the Office of Early Childhood (formerly Birth to Third Grade Partnership) to support program roll-out and operations and $5.1 million of capital investment in Just-A-Start’s Rindge Commons project to build new pre-kindergarten classrooms. The City increased property tax support for the School Department by 6.1% or $12.6 million. The City is making substantial investments towards our Climate Net Zero goal.

The City recognizes that to accelerate our transition to carbon free, we will need to invest in technical assistance to assess and plan transitions across hundreds of buildings, which is reflected in the FY24 budget. The City has allocated $18 million in FY24 toward reducing building emissions, vehicle electrification, and investments in renewable energy with significant City ordinances and programs rolling out this year.

Within Climate Resilience, there is funding of $47 million in FY24 which will support major sewer and stormwater projects and investments in roofs and drainage to ensure the city will be prepared for greater extreme weather events. There is also funding included for open space ($13.2 million), zero waste goals ($7.6 million), and urban forestry ($4.1 million).

Making streets safer is a key priority for the City and is reflected in investments in infrastructure to repair damaged roads, improve accessibility, and address dangerous intersections. Infrastructure investment includes $70.6 million in FY24, primarily driven by the Mass Ave Partial Reconstruction project, which is being allocated $50 million in capital funding to be spent over FY24 and the following years.

This will be the largest infrastructure investment related to the Cycling Safety Ordinance and was presented in the FY23 five-year capital plan.

3

The FY24 Budget includes 54 new full-time positions related to the ongoing expansion and increasing demands of important city programs and initiatives, such as within human services, library services, infrastructure, facilities, equity and inclusion, human resources, economic opportunity, zoning, inspectional services, public and community safety, and housing.

General Fund revenue for the FY24 Capital Budget ($3,865,000) supports important investments in Pay as you Go capital projects, E-Gov projects, and Participatory Budgeting. Based on a revised property tax levy of $575,418,489 the FY24 residential tax rate will be $5.92 per thousand dollars of value, subject to Department of Revenue approval. This is an increase of $0.06, or approximately 1% from FY23. The commercial tax rate will be $10.46, which is an increase of $0.08, or 0.7% from FY23.