For several years, Watertown’s City has operated comfortably on a budget built on the 2.5 percent property tax increase allowed by the State and the added tax revenue from new developments. A mixture of economic uncertainty and the unknown of whether the State Legislature will approve Watertown’s tax relief request means residents could face a major tax increase next year.
City Manager George Proakis presented the Preliminary Fiscal Year 2027 Budget to the City Council on Monday night, which has total forecast expenditures of $226.2 million and includes a shortfall of at least $3.6 million. He also told the Council that his aim is to “maintain options and flexibility” in the City’s budget.
He stressed the budget figure is an estimate, adding that the numbers are based on the approval of the Home Rule Petition submitted by Watertown to the Legislature. The legislation would allow Watertown to put half the tax burden on residential properties and half on commercial, industrial and personal property.
“If that does not pass and we cannot fully tax to the cap in Fiscal Year 27. Our rough estimate is that the average estimated residential tax bill will go up about $1,300, or about 18.4 percent,” Proakis said. “So this is why the tax split Home Rule is so important, and why addressing it and working with our legislative delegation on it, is so important to us.”
The other option, if the Home Rule Petition does not pass, is to tax below the Proposition 2 1/2 cap, Proakis said.
Looking at Fiscal Year 2026, the property taxes went up 2.5 percent, while the City’s operating expenses rose 4.2 percent.
“New growth has to cover the difference between those two things,” he said.
Future new growth numbers, and cuts in other revenues, concern Proakis. In recent years, most of the new projects in town were life science lab buildings. Last year, however, the biggest portion of the new growth came from utility company upgrades, which is unusual, Proakis said. The future for biotech companies is not as bright as previous years.
“The biotech industry, it is still growing in the greater Boston area but at a slow enough pace that it is not resulting in new construction,” Proakis said. “I do have my set of concerns that when on the national level, there are cuts to funding for scientific research, that that could result in that industry starting to contract rather than growing at a slow pace.”
Other areas where decisions in Washington, D.C., could impact Watertown are reductions in federal grants. Tariffs and inflation could also impact new development, he said.
“We’ve seen increases in municipal operating costs, inflation, general expenses, insurance costs are also a concern, and we’re at a bit of a risky moment,” Proakis said.
Proakis said the City builds the budget based on expected increases in municipal department budgets of 2.5 percent, an increase in the education budget of 3.5 percent, increased cost of waste disposal of 5 percent, and insurance and employee benefits going up by 7.5 percent.
If the Home Rule Petition does not pass, Watertown’s history of solid financial planning will help weather the shortfall, Proakis said. The City could first look at not funding stabilization funds for the general budget, open space, the Senior Center and other areas.
“We can skip a year of doing that, or two years, or three years, or 10 years,” Proakis said. “While it impacts the ability for us to achieve key goals that are in the budget policy guidelines, it doesn’t impact the day-to-day operations of the City. I don’t have to cut operational services. This is what I’m talking about when I refer to the issues of having the flexibility to be able to address these things.”
Even with those cuts, Proakis estimates that the tax increase for residents would still be higher than if the Home Rule Petition is passed. He estimated the tax increase would drop from 18 percent to 11 percent.
Proakis also discussed options that would allow the City to proceed with the full renovation or reconstruction of Watertown Middle School. He said the decision on whether to do the full renovation or a smaller scale upgrade project would need to be made soon. City Council President Mark Sideris said in coming weeks the City Council will meet to discuss how to proceed.
Follow Watertown News for more information about the Fiscal Year 2027 Preliminary Budget Overview.
See the slides from the presentation by clicking here.