Cambridge and Somerville are gearing up to send tens of millions of dollars out the door in interest payments as a wave of big public projects comes due. This fiscal year, Cambridge is on the hook for around $109 million in interest while Somerville will pay about $25 million. Those eye-popping totals have neighbors wondering whether the cities are leaning too hard on borrowing, and why they are borrowing at all instead of just cutting checks from cash reserves.
The numbers, along with the logic behind them, were broken down in a Boston Globe Camberville newsletter that walks through recent bond sales and the projects they helped bankroll. The cities have used debt to cover everything from bike lanes and sewer upgrades to Cambridge’s roughly $320 million Tobin Montessori and Darby Vassall school complex, and Cambridge recently locked in a true interest cost below 2.2% on nearly $163 million in new borrowing, according to The Boston Globe.
Somerville's financing details
Somerville’s own financial report lays out the gears behind all that borrowing: a mix of short-term bond anticipation notes and long-term general obligation bonds. The city’s Annual Comprehensive Financial Report lists $92.3 million in BANs outstanding as of June 30, 2024, and records $112.9 million in Massachusetts School Building Authority reimbursements tied to the Somerville High School project, equal to about 75.3% of the approved construction costs. The schedules and footnotes are spelled out in Somerville’s ACFR.
Why cities borrow even when they could pay cash
City officials and finance staff say the strategy is about spreading the burden of long-lasting projects over the many years they serve residents. As The Boston Globe reported, spokespeople frame it as an issue of intergenerational fairness, arguing that “it’s important to spread the cost of big projects fairly across the generations.” That principle is a basic rule of municipal finance, even in cities that have sizable savings in the bank.
Cheap rates and top ratings
There is also a technical upside. Cities with stellar credit can borrow at unusually low interest rates, which takes some of the sting out of those big numbers. Cambridge has held AAA ratings from the major agencies for years and sold roughly $160 million in general obligation bonds last year at favorable costs, something officials say helps keep borrowing cheaper for residents. A City of Cambridge statement highlights the top-tier ratings and recent bond sales.
The trade-offs
Still, debt service is a bill that arrives every year, whether people are excited about the projects or not. Interest and principal payments are dollars that cannot be spent on day-to-day services, staffing or new programs. Somerville’s debt-service schedules show how those annual payments stretch out for years, which is why officials constantly juggle borrowing against reserves, grants and the tax impact on residents. The long-term payment tables appear in Somerville’s ACFR.
What to watch
Anyone who wants a front-row seat to the next round of borrowing should keep an eye on City Council budget hearings and capital-planning updates from the finance offices, where bond schedules, BAN rollovers and sale notices are typically aired. Cambridge’s public materials on its ratings and recent general obligation sales are a solid starting point, and both cities post budget calendars and debt documents on their finance pages. For more, check the City of Cambridge site and your city’s finance page.
