Boston Mayor Michelle Wu speaks to state lawmakers at a Revenue Committee hearing on Wednesday, Oct. 11, 2023. Photo by Chris Lisinski | State House News Service
After meeting with Boston’s delegation of state legislators Monday, Mayor Michelle Wu said she’s holding out hope that her plan to shift the city’s property tax burden to avoid a residential tax hike could pass through the State House before a quickly approaching deadline.
“Most likely there will be a hearing next week on this,” Wu said during the “Ask The Mayor” segment of GBH Radio’s “Boston Public Radio” on Tuesday.
Wu’s plan — which got approval from the City Council and now sits before the Joint Committee on Revenue as a Rep. Rob Consalvo bill (H 4805) — seeks permission to tilt a bit more of the city’s property tax burden onto commercial owners instead of residential owners for a few years.
The mayor says her plan would protect residential property owners from larger increase in taxes due to declining commercial values.
“We are still working very closely and, in fact, just yesterday we had a briefing with the state Legislature, the Boston delegation of state legislators, about our residential tax relief proposal and that was, I think that was very helpful. They had a lot of questions that we went through and really helped to explain,” Wu said Tuesday.
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 some 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.
Mayor Cites ‘Misinformation’ About Tax Rate Change
The mayor said there’s “misinformation” about her plan, that shifting a huge increase away from residential property owners would put that same large hike onto commercial properties.
“That is actually not the case,” she said, adding that most commercial property owners would still see a decrease in their tax bills over last year.
The mayor’s plan would be revenue-neutral and would not change the city’s total property tax levy, only the share of the total that the residential and commercial sides would each cover.
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 renewed leases for downtown office space, curbing the income downtown office buildings generate – the typical basis for assessing a commercial building’s value. Without a bustling workforce in downtown and other neighborhoods, small businesses such as restaurants and retail have also suffered and commercial properties are expected to see a reduction in values in this year’s assessment.
Under Wu’s proposal, commercial tax rates would spike 17.4 percent to $29.66, while the residential tax rate would decline 7.8 percent to $10.05 in the first year according to tax consultancy Ryan. While office buildings with falling vacancy rates could see lower taxes in total if their property values fall, the tax increase would also hit other commercial property types like retail real estate, and may be passed on to retail tenants via common “triple-net” leases.
Residential Payers Could Face Big Increase
The mayor said Monday that, without the policy change, there could be a 33 percent increase on residential property taxpayers, which she called “unaffordable” and said “would be at a scale that would be devastating to our residents.”
“If we were able to use a tool to avoid that by tweaking the ratio, the total amount of commercial taxes collected would still be less than it was the year before, because we would use the tool if values go down,” she said. “And so we’re really talking about avoiding the shock on residents by having commercial properties have less of a decrease than they otherwise would.”
Even if the shift was implemented, the Greater Boston Real Estate Board claims residential property taxpayers, which include apartment landlords, will still see a 40 percent increase in their tax bills over the next four years.
Wu said Monday that her administration is trying to get the tax shift approved prior to bills going out to residents.
When former Mayor Thomas Menino sought and received a similar law from the state legislature in 2004, Wu said, Boston property owners each got two bills and were told to wait to see if the legislature approved the reclassification before paying.
“We’re actually trying to avoid that last minute unpredictability, the confusion, the fear, frankly, that it will inspire,” she said. “So we’re trying to do it ahead of time.”
The News Service reached out to the offices of all 22 lawmakers who represent parts of Boston to ask for their opinion on the home rule petition, after Wu said they or their staff met with her team earlier this week.
Only one lawmaker replied with a comment – Consalvo of Hyde Park. Consalvo was on the Boston City Council when Menino moved to shift the tax burden in 2004 and filed the home rule petition on Wu’s behalf.
“I was happy to file this legislation for the Mayor. As a former Boston City Councilor who has worked on this in the past, I understand the importance of this issue to the City of Boston. I look forward to a thoughtful and productive hearing and discussion on this legislation in the near future,” he said.
Banker & Tradesman staff writer James Sanna contributed to this report.
