O votes necessary to seek approval from the Massachusetts Department of Revenue of the tax rate for FY2026

To The Honorable, the City Council:

The establishment of the Fiscal Year 2026 (FY26) 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 FY26 property tax levy, property values, and other supporting information.

OVERVIEW The FY26 Adopted Operating Budget is $992.2 million which is an increase of 3.8% (or $36.6 million) over the FY25 Adopted Budget. The FY26 Budget responds to Council goals, feedback, and input, which is reflected in funding commitments and investments across several key priority areas. With approval of the recommendations in this memo, the actual FY26 tax levy required to support the FY26 Budget is $678,852,471 which is an increase of $50,463,718 or 8.0% from FY25.

This increase is consistent with the estimated increase of 8.0% projected in June 2025 as part of the Adopted Budget. The property tax levy increase of 8.0% is lower than the FY25 increase of 9.2%. The five-year (FY22-FY26) annual average increase is 7.53%, and the ten-year (FY17-FY26) annual average increase is 6.72%. In FY26 we are beginning to experience tangible impacts of a changing macroeconomic environment and federal policies.

The levy increase for FY26 is lower than the previous levy increase and is consistent with targets that were set beginning in fall 2024. The Budget process for FY26 began in the fall of 2024 and culminated with the formal adoption of the FY26 Operating ($992.2 million) and Capital ($151.1 million) Budgets by the City Council on June 2, 2025.

Throughout the FY26 Budget process there was discussion regarding unfavorable macroeconomic trends facing the region and the city that may impact the City’s fiscal health, including declining values in the commercial real estate market and a slow-down in development. Federal actions have added further uncertainty to our economic outlook. To address these concerns, we established targets to moderate budget growth for FY26, as well as

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future years. These targets were set in recognition of the relationship between budget growth and projected increases in the property tax levy that are required to support the budget. The 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 FY26 tax levy supports an FY26 Budget that was developed within the framework of a multiyear approach which will allow us to sufficiently fund existing commitments and priorities such as affordable housing; early childhood education; school department funding; investments in our infrastructure; public safety; climate initiatives and support for our most vulnerable residents.

At the same time, we are cognizant of the need to maintain our fiscal strength and flexibility which allows us to have resources to invest in important programs and initiatives. The FY26 Budget includes over $24.6 million in direct support to the Affordable Housing Trust. In addition, the Community Preservation Act (CPA) allocation for affordable housing in FY26 is $18 million, totaling approximately $42.6 million in support to the Affordable Housing Trust in FY26.

In response to the impact of American Rescue Plan Act (ARPA) funding transitions as well as both impending and potential federal funding cuts, the Adopted FY26 Budget includes an increase of $1 million for Municipal Supportive Housing Vouchers (MSHV).

In addition, the City, through the Department of Human Service Programs, will contribute $497,250, along with continued ARPA funding, for Housing Navigation and Stabilization services that include housing application assistance, housing search and placement support, and other services that help individuals maintain permanent housing tenancies.

In FY26 the City will continue to invest in the Cambridge Preschool Program (CPP), which at its launch in 2024 welcomed more than 800 4-year-olds and 3-year-olds into classrooms across 23 Cambridge preschool providers affiliated with the program. In FY26, the Cambridge Office of Early Childhood (OEC) will focus on efforts that strengthen the CPP system through collaboration with early childhood providers and families.

The Department of Human Service Programs’ preschool division, a CPP provider, will open two new preschool locations in FY26: the DHSP Alewife Preschool will have 4 classrooms and the DHSP Tobin Preschool will have 3 classrooms. The Department of Public Works uses the Five-Year Sidewalk and Street Reconstruction Plan to design and construct Complete Streets that safely accommodate all users: pedestrians, bicyclists, motorists, and public transportation users of all ages and abilities.

Additionally, the Cycling Safety Ordinance (CSO), enacted on April 8, 2019, and modified on October 5, 2020, sets an ambitious timeline to implement a 25-mile network of separated bicycle lanes network across the city by 2026. Significant projects for FY26 include the Port, Massachusetts Avenue in Central Square, and Mass. Ave. Partial Construction (from Harvard Square north to the Arlington town line).

The City also continues to make major investments in sewer and stormwater infrastructure and maintenance through the FY26 Capital and Operating budgets. Funding will go toward projects to remove infiltration/inflow sources impacting the Alewife Watershed, planning and design of a future floodwater storage tank on City land on Sherman Street, and ongoing repairs of existing sewer and drain infrastructure.

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A Municipal Facilities Improvement Plan (MFIP) allocation of $11.1 million in FY26 will fund ongoing deferred maintenance projects and implementation of Building Energy Use Disclosure Ordinance (BEUDO) requirements. Accessibility improvements at City Hall include new railings at building entrances and the main stair, a new accessible counter at the cashier’s office, and modifications to various office entrances and doorways.

Construction of the Tobin Montessori and Darby Vassall Upper Schools Complex was completed in 2025 and includes new facilities for Special Start and Department of Human Services Programs preschool and after school programs. A major renovation at Fire Headquarters at 491 Broadway is under construction.