WU’S TAX SHIFT RAISES QUESTIONS ON COUNCIL
Boston Mayor Michelle Wu’s plan to increase property taxes on businesses beyond the state limit is continuing to receive skepticism, with the City Council the latest to express concerns on how the proposal could do more harm than good.
City officials tried to assure the council’s Committee on Government Operations on Tuesday that the mayor’s proposal, which would also need state approval, seeks to level the playing field for all taxpayers, both residential and commercial, without creating hardship to either side.
But councilors and community stakeholders say that while Wu’s plan looks to replicate an action executed under the Menino administration in 2003-04, it’s crucial for officials to understand the city is in a different position than it was 20 years ago.
The mayor’s petition, if approved by the City Council and state lawmakers, would provide a statewide option allowing municipalities to shift more of the tax burden from residents to businesses, exceeding the state cap of 175% up to 200% in the next fiscal year that begins July 1.
Mirroring what was proposed by former Mayor Thomas Menino in late 2003 and signed into law early the next year by Gov. Mitt Romney, the petition would provide a tiered shift of the commercial rate — from up to 200% of the residential rate in fiscal year 2025, 197% in FY26, 190% in FY27, and 183% in FY28 before returning to the standard state limit of 175% in FY29.
Wu’s request comes in response to the steady decline in commercial values across the city that’s expected to lead to higher taxes for homeowners. A new tax, the mayor has said, would ease the city budget’s reliance on property taxes, which now generate 75% of the city’s annual budgetary revenue — 36% of that amount comes from commercial property taxes.
“I worry that we end up saying ‘We’ll put the burden on the commercial properties and they’re going to make up the delta, but really, we’re going to have to increase residential, anyway,” councilor John FitzGerald said. “And both sides end up feeling the burden, and you have neither side happy with you.”
Nicholas Ariniello, the city’s commissioner on assessing, said the way the proposal is set up allows for residential properties to get more acclimated to the new costs while businesses are shouldering a heavier load at the beginning of the “smoothing in,” and vice versa in the later years.
“The whole system is not about raising additional revenue,” Ariniello said. “It’s just really about tweaking who’s responsible for what portion at what period of time.”
Wu has proposed a $4.6 billion budget, and referenced her proposal that she says would seek absorb the “shock” of higher residential property taxes by taxing businesses beyond the state limit.
Her FY2025, includes an 8%, or $344 million, increase in spending from the current fiscal year that ends on June 30.
Chief Financial Officer Ashley Groffenberger told Councilors the 2004 legislation helped the city stay away from being forced to cut $100 million from its budget. She called Wu’s proposal a “finetuning” so harm isn’t done to the city’s spending plan this time around.
But Marty Walz, interim president of the Boston Municipal Research Bureau, countered that Menino made “notable cuts” in spending when he introduced his plan, and the Wu administration has yet to make such moves.
“I’m not here today to advocate that big budget cuts should be made, but increasing taxes at the same time there are notable increases in spending is sending a message about a lack of fiscal restraint,” Walz sai. “There’s no message around shared sacrifice. The message from this proposal is essentially a message of selective sacrifice.”
The Boston Policy Institute issued a report in February that projected the value of office space is expected to decline 20-30% by 2029.The drop, according to the study, will leave the city with a cumulative revenue shortfall of $1.2-$1.5 billion over the next five years, and will result in a “new normal” where annual tax collections starting in 2029 will be roughly $500 million below the current trend.
Property owners also questioned the proposal.
“Boston’s leaders should be focused on making the economy more competitive, attracting businesses, and boosting foot traffic throughout the city, not increasing taxes on commercial properties,” Greater Boston Real Estate Board CEO Greg Vasil said in a statement. “Remote work has dramatically altered the landscape for commercial property owners, and to not have their tax burden reflect the value of their buildings could do irreparable harm to an already struggling industry.”
Councilor Julia Mejia is called for private institutions, specifically colleges and universities, to be included in Wu’s proposal. The organizations participate in a payment in lieu of taxes program, and those with taxexempt property in excess of $15 million make voluntary payments amounting to roughly 25% of what they would have paid in real estate taxes.
In fiscal year 2023, private institutions with tax-exempt status collectively contributed just 76% of their requested payment. The council has begun looking at ways to modernize the program.