The city budget Mayor Michelle Wu unveiled last week calls for a 4.4 percent increase – down from 8 percent in the current fiscal year and the lowest since the mayor took office in 2021. iStock photo

Vindicated.

That’s what the Boston Policy Institute’s Greg Maynard now feels a year after city officials dismissed his warnings about a looming fiscal blowout in Boston.

Boston Mayor Michelle Wu’s proposed $4.8 billion budget notes the threat – and now impact, as well – of falling office tower values on city tax revenues.

The acknowledgement, such as it is, still arguably downplays the severity of the fiscal crisis that Boston faces as half-empty office buildings sell for a fraction of their previous value.

And the mayor, in her public comments, has chosen to focus attention on the more politically convenient threat of the Trump administration’s threatened cuts to federal aid, with nary a mention of the problem that looms as large as the office towers personifying it.

But it is still a big difference from where we were a year ago.

Budget Acknowledges Problem

Back in February 2024, the Wu administration dismissed a report commissioned by BPI that warned that Boston faced the loss of hundreds of millions in tax revenue over the coming years from crumbling office tower values.

“We have not seen any indications from the real estate markets that would translate to a loss of revenue to the City,” Nick Ariniello, the city’s tax chief, said at the time in a statement to GBH News.

Ariniello went on to say that “we don’t feel that the current real estate environment is going to lead to budgetary concerns,” and cited the city’s “vibrant downtown and a strong mix of commercial and residential property.”

Ariniello did, though, promise to keep an eye on things.

That’s about as reassuring as being told by the fire department, as smoke fills your house, to call back when the flames reach the second floor.

Well, the proposed city budget Wu unveiled last week calls for a 4.4 percent increase – down from 8 percent in the current fiscal year and the lowest since the mayor took office in 2021.

Wu’s decision to throttle back did not go unnoticed by the nonprofit BPI and Maynard.

“While Mayor Wu and her top budget officials dismissed BPI’s concerns in 2024, it is clear that falling office values are now driving the City’s budget decisions,” Maynard said in a statement.

The mayor doesn’t quite put it like that in her budget, but it doesn’t take too much to read between the lines.

“Overall property value growth slowed due to lingering high vacancy rates in the commercial office and lab markets,” the mayor’s proposed budget reads.

The Wu administration, in turn, has lowered its estimate for new growth in property tax revenue to $60 million, down from $120 million a couple of years ago.

Wu Still Lacks Urgency

That said, city officials are still arguably attempting to downplay the downtown Boston office market bust and the effects of its fallout on city finances.

Let’s just say it’s not an issue that Wu and her top officials go out of their way to talk about.

And they are aided by the fact that tax assessments of commercial and residential properties are essentially a lagging indicator, with the city tax bills that went out in December based on 2023 values.

While 2023 was no picnic for office tower values, 2024 was even worse and 2025 is already shaping up to be a doozy, with the One Lincoln tower selling for a mere $400 million, or less than half of what it was refinanced for just a few years ago, as Banker & Tradesman has reported.

By contrast, the mayor and city officials are at no loss for words on the potential threat to city finances from threatened cuts by the Trump administration.

Scott Van Voorhis

“We are having, most of all, to plan for the unplannable,” Wu told GBH News’ Boston Public Radio.

BPI’s Maynard says the mayor and city officials “want Boston’s budget [debate] to be DC focused, not locally driven.”

He noted that the “anemic growth” the city is seeing has nothing to do with “concerns about chaos in Washington D.C. or questions about how much of the $300 million in federal money in the [fiscal year 2026] budget will actually reach the City.”

Instead, the Wu administration needs to take some of that urgency and channel it into dealing with the office market collapse.

“With Boston’s office vacancies still at historic highs, and more buildings selling for fractions of their pre-COVID value, this City’s leaders need to take urgent action or face even more serious fiscal challenges in the years ahead,” Maynard said.

Scott Van Voorhis is Banker & Tradesman’s columnist and publisher of the Contrarian Boston newsletter; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.