148 State St./File photo courtesy of Colliers International
Attorneys for a downtown Boston office landlord and the city of Boston sparred over whether the court system should decide if the Assessing Department engaged in alleged systematic inflation of commercial property valuations.
During a hearing Wednesday in Suffolk Superior Court, attorneys for the city of Boston argued that the dispute over valuations should be handled by the state Appellate Tax Board on a parcel-by-parcel basis.
Judge Peter Krupp appeared open to at least one argument in the plaintiff’s lawsuit: that the city of Boston has violated the First Amendment rights of landlords by increasing valuations of those who challenged their assessments.
“You don’t think it chills the opportunity of every taxpayer or owner to seek an abatement if the city of Boston has a policy of artificially increasing the assessments of those properties where there was an abatement sought?” Krupp asked Boston attorneys during the 30-minute hearing.
The Pioneer New England Legal Foundation and attorneys from Sullivan & Worcester are representing the owners of 148 State St., which was acquired in 2017 for $41 million.
The lawsuit claims that beginning in 2024, assessors cards included “ATB” notes on commercial properties that filed state appeals, and that such properties’ assessments were adjusted to previous year’s higher values.
It seeks an injunction halting the alleged practices and restitution including tax refunds, damages and attorney’s fees.
Property taxes pay for nearly three-quarters of Boston’s budget, but the commercial sector’s share has been declining in recent years due to rising vacancies. The commercial sector’s share was expected to comprise under 54 percent of tax collections, the lowest in over four decades, Boston financial officials estimated in December.
Thomas Broom, senior assistant corporation counsel for the city of Boston, argued the plaintiffs haven’t proven a widespread practice of inflating property values that would prompt the court to intervene.
“I don’t think there’s any dispute that the validity of the tax scheme of the city of Boston is not implicated by an isolated series of potential overassessments,” Broom said.
But an attorney for the owners of 148 State St. said commercial property owners are being penalized by the city for pursuing the state appeal route.
“This is a city that’s kind of developing a record for retaliation, and it’s hard to stand up,” said Nicholas O’Donnell, a partner at Sullivan & Worcester. “My client is the only one standing up right now with his name on the front, and that took a lot of courage.”
State tax appeals often take at least five years for a ruling, O’Donnell said after the hearing.
The State Street property, like others that have challenged assessments to the state board, saw its tax assessments “artificially inflated,” according to the lawsuit.
Before attorneys for the two sides made their arguments, Krupp asked why the parties wouldn’t prefer a blanket ruling on the city’s alleged practices, rather than a series of individual appeals by property owners to the state board.
In a motion to dismiss submitted Feb. 6, city attorneys stated that the plaintiff failed to demonstrate substantial injury.
“Plaintiff’s alleged damages amount to approximately 3.45 percent of their total tax liability across the two year period, which is clearly insubstantial and does not support a grant of extraordinary relief here,” the filing states.
Krupp took the arguments under advisement, but did not indicate how long he would deliberate before issuing a ruling.
