Boston Mayor Michelle Wu speaks to reporters following her State of the City speech on Jan. 9, 2024.

Boston Mayor Michelle Wu speaks to reporters following her State of the City speech on Jan. 9, 2024. Photo by James Sanna | Banker & Tradesman Staff

Back at the State House seeking approval for a time-sensitive plan to temporarily alter the division of property tax burden between commercial and residential owners, Boston Mayor Michelle Wu found herself Wednesday explaining and defending her administration’s approach to budgeting.

The city’s $4.64 billion annual budget was put under the microscope at the state level as the Revenue Committee held its hearing on Wu’s renegotiated and refiled request for a special law that would shift a greater share of the city’s property tax levy onto commercial owners for up to three years as a way to cushion the blow of an anticipated tax increases on residents.

Wu is up against a tough deadline. The mayor said she needs the tax shift legislation to be “signed by the governor within the next two weeks” as the city prepares its January 2025 tax bills, and her office has forecast a nearly $500 increase in property taxes for the average homeowner without action.

That deadline could be met, provided legislators act quickly. The Revenue Committee and the House Ways and Means Committee gave the bill favorable reports Thursday morning, but the bill ran into a procedural roadblock in the full House of Representatives due to its so-called “informal session” rules that let even one legislator stop a bill.

Legislators Query Spending Increase

After Wu laid out for the committee the proposal that reflects a compromise she struck with business leaders and Boston Rep. Rob Consalvo mentioned the similar action Mayor Tom Menino sought in 2004, Chairwoman Sen. Susan Moran raised the subject of Boston’s budget, which grew 8 percent from fiscal 2024 to fiscal 2025, rattling some taxpayers who are facing rising tax bills.

“You mentioned Mayor Menino, and from what I understand and remember, there were many other avenues that were tried — most particularly a focus on lowering the budget, lowering expenditures — and that happened for quite a few years before the mayor took the extraordinary tact of raising taxes, or, you know, on businesses,” Moran said, asking Consalvo and Wu to compare the situation two decades ago to today’s dynamic.

Wu pointed out that some of Menino’s budget cuts were due to midyear state cuts in local aid and said the city is currently dealing with a post-pandemic “market reset” related to jobs and wages.

She also said all 48 union contracts the city maintains had expired around the pandemic and needed to be renegotiated and implemented in the latest budget. She cited 7 percent growth, attributing the additional percentage point is due to the absorption of the revenue-generating Boston Planning & Development Agency.

“There’s been a lot of attention to why we were at 7 percent budget growth … but our 7 percent reflected the first time that police, fire, EMS and many other larger contracts were fully absorbed into our budget,” Wu said. “And it’s in line with the type of growth that other cities and large agencies had to experience in adjusting, in making that market adjustment through the pandemic as well. So we were at 7 percent, the city of Brookline was at 6 percent, Cambridge was an 8 percent increase, and the MBTA was at 11 percent increase.”

Wu: City Making Few New Investments

She said the city’s fiscal 2025 budget has “less than half a percentage point of new investments in this budget compared to last year,” and that the new discretionary money in the budget is for adding 12 new EMTs, updating permitting software for business licensing, and a small investment in affordable housing and housing acquisition.

“In the years ahead, we do not expect that the budget growth will be at the level that it was at as we were adjusting up basically every single union contract,” the mayor said Wednesday.

City spending was also a hot topic when the City Council held a committee hearing on the tax shift proposal in late October. Councilor Ed Flynn, a South Boston Democrat who has been discussed as a possible challenger to Wu in next year’s mayoral election, disagreed with administration officials who said city spending and revenue “are matched.” Flynn has voted against both versions of the mayor’s proposal.

“We do have a spending problem in the city,” he said last month, taking issue with the costs for Boston Public Schools transportation.

Chief Financial Officer Ashley Groffenberger told legislators Wednesday that the Wu administration is “seeking, really not to solve a revenue problem, but an allocation problem that is happening in this moment as a result of changing work patterns and commercial valuations.”

Commissioner of Assessing Nicholas Ariniello used the same term as he explained to the committee that the proposal “is not a catchall solution to solve all of the city’s problems with the economy. It’s really an attempt to address a very, very specific problem, which is an allocation problem, and it’s not a revenue problem.”

Lou Murray, a conservative media commentator with ties to the 2016 and 2020 Trump campaigns, called the testimony from Wu’s administration “a case of a fairy tale.”

“I have another fairy tale that I’d like to tell you. It’s called, Mayor Wu wants to spin straw and make it into gold with a tax increase … That’s Rumpelstiltskin. I believe that she is actually killing the goose that laid the golden egg. This is the state capital, you are state representatives and senators, you must hold the city accountable and have more budget cuts,” Murray said. “That’s what every family is doing.”

Report Urged More Diverse City Income Streams

In a report that touched on revenue diversification, the Boston Municipal Research Bureau reported this month that property taxes accounted for more than 71 percent of the city’s operating revenue in fiscal 2025, up from just under 56 percent in fiscal 2006.

Wu reminded the committee that Boston lives within the restrictions of Proposition 2 1/2, the state law that limits the amount of revenue a city or town can raise from property taxes. Groffenberger said the city is not and has never sought a Prop 2 1/2 override, and the mayor suggested that municipalities will soon want to have a conversation with Beacon Hill about revenue opportunities.

“There’s a very tight belt around cities with Prop 2 1/2, we are limited [to a] 2.5 percent property tax increase. In the 43 years since that has been the law, that has been, on average, 25 percent below inflation every single year. And so we’re always scrambling to try to find new revenue sources,” Wu said. “And, unfortunately, we’ll probably be back at some point in the future to talk to you all about that.”

An earlier version of the home rule petition cleared the House but got stuck in the Senate. The Revenue Committee held a very similar hearing on Wu’s original filing in July and gave that version a favorable report. The version now working its way through the Legislature reflects a compromise struck with four Boston-based business groups after Senate President Karen Spilka pushed for more conversations.

“I remember being here last time. I was actually trying to conceal being pregnant, so it was that long ago. Now I can’t hide it anymore,” the mayor, who is expecting her third child in January, said Wednesday.

Panels Give OK to Wu Tax Deal as Mayor Defends City Budget Jump

by State House News Service time to read: 5 min
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