Fiscal 1990 Figures Show Revenue Shift

Stung by this summer's loss of more than $3 million in state aid, Cambridge may be unable to raise sufficient funds to maintain basic city services without steep tax hikes, city officials said last week.

Although tax officials and members of the City Council said Cambridge will not have a problem raising revenue this year, they added that they are worried about the city's financial health for the 1990s.

"We are very worried about the future under Proposition 2-1/2," said Vice Mayor Alice K. Wolf said, of a state regulation limiting the rate at which local governments increase residential taxes to 2-1/2 percent per year.

A city tax revaluation for fiscal year 1990, which began this summer, found that the value of taxable property increased by 16 percent over last year, jumping from $7.3 million to $8.5 million.

A report on the revaluation released at last week's City Council meeting raised speculation about how the city will acquire revenue in the coming years.

Because of Proposition 2-1/2, only 35 percent of $109.5 million in taxes to be levied this year will come from personal property, while commerce and industry will bear 65 percent of the tax burden, said Kevin T. McDevitt, one of the city's two principal assessors. He added that residential property will make up the lowest percentage of the tax base in recent history.

But residential taxes will go up by almost 10 percent for the average single-family homeowner from $2663 last year to $2920 this fiscal year, McDevitt said.

"The slowdown of the local economy means that the city can no longer depend upon continued increased in state aid and increased tax levy limits due to new construction, two factors that contributed greatly to the financial strength of the 1980's," City Manager Robert W. Healy wrote in a report delivered to council last week.

Healy added that the city might face "difficult choices in the coming years" if last year's trend of reduced state aid and shifting tax burden--among other things--continue.

Healy has already instituted a plan to "reduce unnecessary spending, such as travel outside the city by city officials, a freeze on hiring personnel and other budgetary items, while increasing revenue with additional service fees and promotion of growth," according to McDevitt.

But the assessor said he was optimistic about the city's ability to gather the necessary revenue. "The growth rate in Cambridge is very favorable, it has consistently gone up. There are many unfinished properties out there, and that means money coming in."

Property taxes for Harvard, the city's largest landowner, will also go up this year, McDevitt said.

Harvard pays approximately $4 million in property taxes annually, but most of the University's academic buildings are exempt from property taxes. Harvard gives the city "in-lieu-of-tax" payments for these holdings.

Sheldon G. Tandler, controller of Harvard Real Estate--which manages the University's non-academic holdings--said he could not accurately assess the impact of the fiscal 1990 increase on the University because he has not yet received this year's tax figures.