BOSTON MAYOR Michelle Wu and business groups on Tuesday faced off through dueling panels in front of House and Senate lawmakers as her administration seeks approval for the power to temporarily shift a greater share of the property tax burden to commercial building owners, who are already paying more than 2.5 times the rate of residential taxpayers. The move could help soften a possible spike in residential rates, according to Wu and city financial officials.
The Wu administration is pursuing the legislation – a home rule petition that cleared the City Council but needs sign-off from Beacon Hill – because Boston has a unique setup in its tax base. Property taxes make up 70 percent of revenue, with roughly 60 percent already coming from the commercial side and 40 percent from residential taxpayers.
City Hall is seeking to keep that 60-40 balance and mitigate an increase next year in homeowner tax bills that could come as valuations for commercial property fall, driven by the downtown still seeing less foot traffic, on top of office vacancies and some continuing to work from home in Covid pandemic’s aftermath.
The Wu administration is hoping lawmakers pass the bill before the Legislature adjourns formal sessions for the rest of the year July 31.
But Mark Cusack, a Braintree Democrat who is the House chair of the Revenue Committee, which heard the bill, said he was skeptical about the legislation. The position of Sen. Susan Moran, a Falmouth Democrat who chairs the Senate side of the committee, was harder to discern. “I’d say we just heard some interesting testimony from both sides and there’s a lot to think about,” Moran told reporters after the three-hour hearing wrapped up.
Several Boston homeowners, and union leaders representing city workers, testified in favor of Wu’s measure, saying they cannot handle such a spike in residential taxes. About a dozen members of the community action group called Mass. Senior Action Council held up signs imploring legislators to support the bill, saying “Don’t Tax Us Out of Our Homes.”
Phineas Baxandall, a top analyst with the think tank known as the Massachusetts Budget and Policy Center, called Wu’s proposal “economically prudent and moderate.”
Business groups, like NAIOP Massachusetts and the Greater Boston Real Estate Board (GBREB), disagreed. Gregory Vasil, GBREB’s president and CEO, said commercial property owners are not positioned “to bear such a disproportionate burden of city spending” as they face falling property values and high vacancy rates.
“Boston needs a long-term plan to support its operations, keep businesses and residents happy, and generally thrive in a world where office buildings are less valuable and less able to support the financial needs of city government,” he said in his testimony. “Higher residential rates could be a core part of that package, and need to be at least explored by City Hall.”
But Wu and her team argued that residential taxpayers could see their bills go up by 33 percent next year, a “devastating” spike in a city that already has high housing costs. “That’s the number that keeps me up at night,” she told lawmakers.
The commercial property tax rate is lower than it was a decade ago, as well as two decades ago, Wu administration officials added. They project that for Class B and Class C commercial office space, which is suffering more than Class A office space, would see a 7.6 percent drop in property taxes under the Wu proposal. If the Wu proposal doesn’t pass, their property taxes go down 13 percent.
On the residential side, the current average single family tax bill, which for fiscal year 2024 has been $5,522, would increase to $6,432, if the proposal doesn’t pass, according to the Wu administration.
“This is clearly an issue that we need to deal with because we can’t have a 33 percent property tax increase,” said Rep. David Linsky, a Natick Democrat, after hearing the numbers. “That’s going to hit a lot of families pretty hard.”
Joining Wu was Rep. Rob Consalvo, a Hyde Park Democrat who was on the Boston City Council in 2004 when Thomas Menino, then in his third term as Boston mayor, pushed through a similar measure that had commercial property owners taking on more of the burden as the city made its way through a downturn. It worked then and it will work again, said Consalvo, who is the bill’s main sponsor on Beacon Hill.
But Cusack, the House chair, pushed back on both that argument, saying the pandemic’s effect is different from the economic downturn that hit 20 years ago.
“This affects Greater Boston economically, but then [it is] also setting a precedent across the state for other cities and towns to seek a similar way to relieve pressure on residents,” he said of the Wu proposal. “That being said, I just want to draw a line that this is not 2004. There’s not many parallels to that legislation or the economics this time. So it’s not as simple as saying ‘we’ve done it before, let us do it again.’”
He also questioned the 33 percent figure. Wu administration officials say 16.5 percent is an estimate of the average increase year over year, but Boston has a quarterly billing system, meaning the first two quarters’ bills are based off the prior year, while the next two quarters are based on the updated tax rate.
The 33 percent spike is what residents would experience between the second quarter bill and the third quarter bill if the legislation does not go through, according to the city’s chief financial officer, Ashley Groffenberger.
With the legislation’s passage, homeowners would see something closer to a 9 percent increase, Wu officials said.
After testifying in front of lawmakers, Wu told reporters that the administration was “going to continue making our best case” for the legislation.
“There are many other people lined up to testify who are also going to make their respective case as well,” she said. “We will engage with any legislator who wants to learn more and help explain the impact this would have on our residents and also the businesses that rely on residents being able to stay in the city.”
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