Boston residents face a sharp increase in property taxes or risk $400 million of budget cuts if state lawmakers reject a plan to shift the burden to commercial buildings, Mayor Michelle Wu said in an interview with Bloomberg News.
The proposal would allow Boston to temporarily increase the tax-rate ceiling for commercial properties in order to offset a historic slump in office building values. It’s drawn sharp opposition from the real estate industry and received a lukewarm reception from key Massachusetts lawmakers. Boston’s fiscal health is particularly vulnerable to the decline, with about a third of its revenue tied to commercial property taxes.
Wu’s approach aims to keep the city’s revenue stable and maintain funding for services without forcing homeowners to stomach what her administration has estimated could be as much as a 33% jump in levies.
The Greater Boston Chamber of Commerce and the Boston Municipal Research Bureau have said fiscal constraint also needs to be part of the city’s approach for addressing the impact of declining commercial property values. Wu has proposed a $4.6 billion budget for fiscal 2025, an 8% increase from this year’s spending plan.
Boston would have to cut about $400 million of spending in order to avoid the sharp spike in residential property rates if the city can’t rebalance the tax burden with commercial buildings, Wu said. The precise numbers may fluctuate as the city completes its property value assessment process later this fall.
“That scale of that is quite staggering,” Wu said. “It’s like the police department or one of our major city services.”
Such severe cuts aren’t realistic as they would undermine Boston’s progress on curbing gun violence and ultimately be detrimental to the city’s business community, Wu said. Boston has had four homicides so far this year, down about 80% from the same period in 2023 for the largest year-over-year decline among major metropolises, according to data from AH Datalytics.
Many cities are facing challenges right now, and “there’s often a spiral that gets connected in with businesses lacking confidence because foot traffic is down and because public safety is a real concern,” Wu said. “In the long run, in terms of Boston’s overall financial health, we have to make sure that we’re funding city services,” she said.
In Massachusetts, cities and towns have limited local taxing authority, meaning they can’t easily supplement property taxes with other revenue sources. Massachusetts House of Representatives Speaker Ronald Mariano has expressed skepticism that there would be much appetite among state lawmakers for tax policies that bolster revenues.
Should state lawmakers spurn the mayor’s push to adjust commercial property levies, the alternative spike in residential tax rates would be “politically unpalatable,” according to Greg Vasil, head of the Greater Boston Real Estate Board. “It’s a huge problem and one that you look back in hindsight and say, ‘Shame on Boston for becoming so reliant on property taxes and not pursuing other revenue streams,” he said. This outsize dependence means that “she’s going to have no other way to get this money,” he added.
Wu would be up for reelection as mayor in 2025, although she hasn’t yet officially confirmed she’s seeking a second term. The city’s backup plan is to re-appeal to the state in January, armed with property assessment data that should underscore the strains on commercial real estate and make the tax question more urgent, Wu said.
“Or we just absorb it and taxpayers would have to find a way to make that happen, which would be quite devastating for the city,” she said.
This article was provided by Bloomberg News.