City officials say the compromise temporary tax hike to make up for empty office space post-COVID is necessary, though critics say a long-term solution for city revenue is needed.
A plan to temporarily shift more of Boston's property tax burden onto commercial owners is headed back to Beacon Hill after the City Council approved a revised version with a lone objection.
The council voted 12-1 Wednesday to approve a new home rule petition that would enable the city to move more of the city's property tax burden onto commercial owners for up to three years, which Mayor Michelle Wu and her deputies say would limit an all-at-once increase from hitting residents as soon as this winter.
Councilor Ed Flynn, who voted against the original version of the petition and has been floated as a possible mayoral challenger against Wu, cast the lone no vote.
The council's action puts the measure back on the Legislature's plate after an earlier version cleared the House and stalled in the Senate amid opposition from business groups.
Last week, Wu and business leaders announced a compromise that sanded down some of the original proposal, including a three-year shift instead of five and a smaller maximum change. The mayor filed an updated petition with the new terms.
Wu and other supporters are hoping for quick action from the Legislature. The mayor has said that she needs state approval on the final legislation by November to factor the changes into January 2025 property tax bills.
Politics
Without action, her administration estimates the average homeowner will face a nearly $500 increase in their bill.
Councilors praised the compromise between Wu and business groups, and some said they would support the measure as a short-term solution but wanted additional action to address broader financial factors pressuring the city.
"There's been a lot of work done here to get to where we are. This compromise is one that brings together NAIOP, the Boston Chamber of Commerce, the Mass. Senior Action Council, everybody working on the same team," said Council President Ruthzee Louijeune. "We as a city, we are on the same team. It's all about: how do we make sure we get the balance right?"
State law allows municipalities to tax residential and commercial real estate at different rates, and to push the commercial rate as high as 175% of what a single, unified rate would have been.
Wu's original proposal would have increased the maximum commercial shift to 200% and reduced it back to 175% in year five. The updated version would allow a maximum shift of 181.5% in fiscal 2025, 180% in fiscal 2026 and 178% in fiscal 2027, a three-year timeframe.
It also calls for the city to appropriate up to $15 million per year in small business relief during that span and to raise the personal property tax exemption threshold for small businesses from $10,000 to $30,000.
Flynn on Wednesday reiterated much of the criticism he raised at a committee hearing on Tuesday.
"We have rushed this process to provide the residents of Boston with an update on the administration's latest proposal to raise the city's commercial tax rate beyond the commercial limit," he said. "I believe that no matter how tight deadlines are, we cannot simply adhere to the values of transparency only when it's convenient."
Several of his colleagues disagreed, noting that the topic has been in the spotlight for more than six months.
Councilor Rebecca Coletta Zapata, who chairs the council's Committee on Government Operations that recommended passage of the measure, said the governing body will also get a chance to vote on setting the actual tax rates, the personal property tax exemptions, and appropriations for the small business relief.
"Yesterday, during the hearing, I was hearing overwhelming support from colleagues and the public. Any objections for this particular proposal would have been entertained, but the objections were not on the merits of this proposal," Coletta Zapata said. "It was about any perceived bureaucratic or political slights. And so for me, as chair, I am obligated to review the merits of any proposal. Because of that, I felt like we had a fair proposal. The bottom line is, and I said it yesterday: if we do nothing right now, we help no one."
Flynn also contended that the city, whose fiscal 2025 budget is about 8% larger than the prior year, should have sought to cut spending and freeze hiring to help manage a property tax revenue shortfall.
"We have falling commercial property values due to remote work policies that studies show may cost us $500 million per year. Our budget is now over 70% reliant on property taxes, and 50% of our land is absorbed by large, nonprofit partners in the PILOT [Payment in Lieu of Taxes] program, which are non-taxable entities that continue to expand," he said. "That is simply an unsustainable formula."
Councilor Brian Worrell, who chairs the Ways and Means Committee that oversees city spending, called the property-tax rebalancing plan a "responsible compromise" in the short term while councilors continue to think about long-term options.
"For those of you who attended the more than 100 hours of budget hearings we held or the six working sessions or dozen [of] public testimony, none of these revenue conversations are a surprise and none of them are rushed," Worrell said. "Matter of fact, this body has filed numerous hearing orders on revenue and declining commercial values. I also want to point out that during the budget process, councilors had the opportunity to either vote for or put up amendments to reallocate funds in the budget."
It's not yet clear how quickly lawmakers will take up the plan or whether any legislators will try to stall its final passage.
Senate President Karen Spilka kept the original version on ice for several months, preventing it from reaching Gov. Maura Healey's desk, while discussing it with Wu's team and business leaders. Spilka last week praised the parties for reaching an agreement, but stopped short of pledging to advance the compromise.
Twenty-four House Republicans voted against the first iteration. If Democrats opt to bring forward the update during an informal session without a quorum present, a single Republican objection could stall the updated bill's movement.
