Boston Mayor Michelle Wu directly pitched Beacon Hill lawmakers Tuesday on her plan to allow the city to avoid a potentially dramatic tax hike for residents by temporarily placing more of the burden on commercial property owners.

Legislators on the Joint Committee on Revenue pushed Wu on the idea, with questions about the effect of the policy on small businesses; whether it would negatively affect those in communities outside of Boston who go to the city to work, shop and eat; and comparisons between a similar policy employed 20 years ago and the current economic environment.

The mayor says her plan would protect residential property owners from larger increases in taxes due to declining commercial values.

Under the current scheme, 60 percent of Boston’s property tax revenue comes from commercial properties, and 40 percent from residential owners. But as the world has changed in the wake of the COVID-19 pandemic, fewer and fewer companies have returned to downtown offices, pushing down commercial property values.

The Wu administration wants to get approval for the tax change before it has to send tax bills out to residents. And since there has been controversy around the idea, Wu likely wants to see it passed in formal sessions – which end July 31 – before any single lawmaker’s objection could block the plan from moving forward during informal sessions in the final five months of 2024.

The mayor says if state officials don’t sign off on the plan that she and the Boston City Council both approved, city residents can see as much as a 33 percent jump in their taxes next year.

“That is the number that keeps me up at night,” Wu said.

Dispute Over Size of Tax Increase

Opponents of the measure – many of which are members of Boston’s business community – say the mayor’s office is mischaracterizing how large of an increase residents would face.

Boston keeps its first and second quarter tax bills flat, a 0 percent increase from the previous year, meaning the jump between second and third quarters could reach up to 33 percent, if Wu’s plan doesn’t get approval on Beacon Hill. These opponents say it’s more accurate to say it’s a 16.5 percent increase for residential taxpayers.

Commissioner Nicholas Ariniello of the Boston Assessing Department said replied that this tax collection system is laid out in the city’s statute to prevent “over-collecting”, and Wu added that it would still be a shock for residents to see a 33 percent increase from one quarter to the next, and that even a 16.5 percent increase is incredibly expensive.

“We cannot afford to become an even more prohibitively expensive place to live,” she said.

If the city does not shift the tax burden, commercial property owners will see a 13 percent decrease in their taxes. If they employ Wu’s plan, these property owners would still see a 6 or 7 percent decrease in their bill, she said.

“I want to emphasize that we’re not trying to increase the amount of taxes that businesses will pay. Overall, business taxes will still go down under the proposal that we’re putting before you. But we’re just making it so that it’s not going down by as much as it would have otherwise, because we want residents not to go up by as much as they would have otherwise as well,” she said.

Fear for Senior Homeowners

The average single-family tax bill in Boston in fiscal year 2024 is $5,522, according to Ariniello. That would increase to an average $6,432 next year without shifting the burden.

The majority of the people who testified in favor of Wu’s plans were Boston residents, including a number of senior citizens who said their fixed income can’t absorb a large tax hike.

Joanne Chambers, a longtime Roxbury homeowner and member of the Massachusetts Senior Action Council, said she survives on her Social Security checks.

“I can’t imagine it being 30 percent, 33, 16 – whatever it is, I don’t have it. And I know the other seniors, they don’t have it. We don’t have it,” she said.

Marty Walz, interim director of the Boston Municipal Research Bureau, said she doesn’t deny that it would be a large jump for residents, but that there are other options the city could explore before shifting higher taxes onto businesses.

She recommended that the city dip into its $1 billion-plus reserves, or rainy day fund, to cover the potential rise in property taxes.

“The city could use a modest portion of those reserves in the next year or two to set up a fund to provide relief to homeowners below a certain income level who need assistance in paying their property taxes. We recognize that for some homeowners a tax increase of 10 percent or more may be a substantial burden. Creating a fund like this would provide short-term relief to those homeowners, just as the home rule petition would do, but without the negative consequences on local businesses,” she said.

Conflict Over City’s $1B Reserves

The city’s chief financial officer, Ashley Groffenberger, said that Boston needs that reserve fund to maintain its AAA bond rating. In fact, she said, a recent Moody’s report said Boston needed to increase that rainy day pot to compete with other cities of similar sizes.

Another member of the committee indicated that she didn’t think it was a good idea to use the rainy day money.

Sen. Lydia Edwards, who represents parts of Boston including downtown, said she sees those funds as needing to be reserved for an emergency.

“I think that the rainy day fund is for those extreme moments when there’s no alternative and time is moving fast,” Edwards said.

Walz replied that there was a “philosophical difference” in how to determine “whether or not it’s currently raining.”

“There are many who would argue, if they’re struggling businesses, it’s raining,” she said. “So what we’re suggesting is using a portion, not all of it. There’s a billion dollars sitting there.”

Walz also said the situation is an example of why Boston needs to diversify its revenue stream, which more than any other large American city relies on taxes from its commercial property base.

Legislators ‘Conflicted’ on Bill

Edwards said she was “conflicted” about the bill.

“I do want to see downtown, we do need more foot traffic. We do need a vibrant commercial environment. At the same time, the backbone of the city, and the reason why we have community, are these people, middle class and working class people, the city workers,” she said.

Rep. Francisco Paulino of Methuen repeatedly challenged the Boston mayor about how the change would affect small businesses.

“So if I spent billions of dollars, or millions of dollars, to have an office building… because I believe in Massachusetts, then I should be penalized? Be taxed at a higher rate? Because I believe in Massachusetts, because I am so committed?,” Paulino said to Wu.

Wu again emphasized that businesses would still be seeing a decrease in their taxes under her plan. She added that with the devaluation of office buildings, small businesses would also likely see rent decreases thanks to many tenants’ triple-net leases that bundle property taxes into the rent.

Asked by reporters after her testimony if she felt, by the reaction of the committee members, if her petition has sufficient support in the state legislature, Wu was noncommittal.

“We are going to continue making our best case and there are many other people here to testify, who are also going to make their respective cases as well. And we will engage with any legislator who wants to learn more and help explain the impact that this would have on our residents,” she said.