Despite an uncertain economic future, Watertown remains on solid ground, City Manager George Proakis said during Monday’s State of the City Address. He and City Council President Mark Sideris went into depth about the economic factors impacting the City during the annual address.
Proakis concluded the presentation by saying, “Even as we face uncertainties, the State of the City remains strong.”
The uncertainties, he said, come in the health of the Boston area’s economy, as well as state and federal funding. Plus, the City has a request to the Legislature to give some Watertown an exception to the state’s regulations and provide some tax relief to residents.
“The key thing here is that we are facing uncertainties ahead. The combination of the situation surrounding the residential/commercial tax split, the circumstances about the slowing of new growth that has funded a lot of the program growth we’ve been able to do, the school buildings we’ve been able to do in the last few years,” Proakis said. “Some of the challenges with cost inflation and our inability to hold that down, the continuing increases in costs in various areas.
“And looking around at the communities around us that have really struggled with finances and lean towards the overrides and debt exclusions when we really have tried to lean away from that, I think it’s more important now than ever to ensure we’re making strong fiscal decision making, and being very thoughtful about the way we do those decisions and make sure that decisions we make look forward in our financial strategies for the next 5, 10, 20 years and beyond.”
During the question and answer period after the presentation, they were asked about cuts in federal and state funds. Proakis said Watertown’s municipal departments do not rely on direct federal funds and grants, and while the opportunities for federal grants are fewer and farther between, Watertown recently was awarded an $800,000 transportation grant.
The biggest concern with federal grants comes for the Watertown Public Schools, which receive direct funds for some programs. Proakis is also concerned about indirect cuts in federal funds that would flow through the State Legislature to the City.
Sideris said that Governor Maura Healey has asked for the authority to make mid-year cuts in the state budget, which could cause cities and towns to lose state aid and make reductions of their own. Proakis said those are difficult decisions.
“The only thing more challenging than cuts to city government aid is mid-year cuts to city government,” Proakis said. “You have already budgeted the line item using the money. You’re halfway through the year, and then they’re like you have to cut this much. You almost have to cut twice as much to cover the gaps because of just the nature of the fact you’re cutting that over a short time period.”
The federal cuts that could have the biggest impact are in areas such as funding for scientific research, Proakis said.
“My greatest worry about federal financing, that if federal funding towards life sciences research continues to be cut, that is actually a greater risk to Watertown than just about any direct grant to us,” he said. “Because that funds the companies that move into the buildings that are the basis of our commercial tax base, that keep things growing here. And a reduction in funding for education and for things like NIH grants, are a worry because that structure and that pipeline, along with the venture capital money, is the thing that builds the businesses of the most significant industry cluster in the greater Boston area, and within Watertown itself.”
Proakis also talked about the effort to get approval from the State Legislature for a Home Rule Petition that would allow Watertown to shift more taxes from the residential properties to the commercial, industrial and personal properties.
“There is a very obscure regulation in our state laws that caps the portion of our tax base that we can raise from the commercial side of the line. And what that essentially means is that, absent a fix to that, if commercial growth grows what happens is that you end up pushing a lot of the tax growth onto the residential side, and then the residential side sees larger percent increases,” Proakis said.
Watertown got a three year exception to this regulation that runs through Fiscal Year 2026. The Home Rule Petition would make the exception permanent. Sideris noted that the request is not the same as the one made by the City of Boston.
“Want to stay where we are,” Sideris said. “We’re not asking for anything additional. We just don’t want to have to go backwards.”
If Watertown’s request is not approved, the City Council will have some decisions to think about, Proakis said.
“If we don’t extend that Home Rule Petition, we are going to face some really challenging situations where our choices are either a significant spike in residential taxes, or a need to make an adjustment in how we choose how much to tax — whether or not to go to the Prop. 2 1/2 cap,” Proakis said. “I have a lot of faith in our local delegation that is working hard at the State House.”
More details will be provided when Proakis makes the preliminary budget presentation on Oct. 14. Unlike some recent years, he said that he does plan to propose many staff additions in the City government.
“I hear people ask about why did you add so many staff? In Fiscal Year ’24 we had robust new growth here. We had a lot of items in the budget policy guidelines that were growth related items, and we positioned and established a team the way we did, in order to address those particular issues,” Proakis said. “We had a smaller addition in Fiscal Year ’25. I went into the ’26 budget without the plan to add staff at all. The Council came back with a concern about the ambulance, and we ended up adding just the Fire Department positions to address the ambulance situation. As I looked at Fiscal Year ’27 I don’t see a big staff earth here on the city side. That’s not in the cards.”
Follow Watertown News for more coverage of the State of the City, including the City Manager’s new goals and the upcoming Charter Review.