Wu defends $4.6b spending plan

Mayor rejects notion of big tax shortfall

Boston Mayor Michelle Wu sought to reassure the public and city officials that Boston is not facing a dramatic drop in tax revenue that could impact the next year’s budget as she gave a broad overview of her $4.6 billion spending plan for the next fiscal year Wednesday.

“To point to some false information that the city might be experiencing a billion-dollar shortfall, that is just simply not true,” Wu said at an event on the budget. “The city is in a very strong position and we are going to be as vigilant as possible about understanding the waves ahead . ... To suggest that we need to take drastic action or impose a hiring freeze or put some major changes on the table is simply irresponsible. We are in a position to support our city workers, to deliver the services that our residents need.”

Wu’s proposed spending plan would boost city spending by 8 percent, or $344 million, over the current fiscal year.

Governor Maura Healey has instituted a hiring freeze for many state positions as tax collections continue to fall below projections and the state struggles to meet exploding demand for its overburdened emergency shelter system. Earlier this week, City Councilor Erin Murphy filed a resolution calling for a hiring freeze for city workers, but on Wednesday withdrew the measure.

While Wu expressed a positive outlook for the city’s economic position, she has also filed a measure with the City Council seeking approval to raise tax rates on commercial real estate for up to five years in case there is a drop in commercial property values, to prevent homeowners from experiencing a spike in residential property taxes. The measure requires approval from the state Legislature. About threequarters of the city’s budget is funded by property taxes, around two-thirds of which comes from commercial properties.

Some budget watchers expressed reservations about Wu’s approach.

Marty Walz, interim president of the Boston Municipal Research Bureau, said it is notable that Wu still proposed a spending increase for the next fiscal year while simultaneously seeking to boost commercial tax rates.

“When there’s a request for people to pay more in taxes, it suggests that there needs to be sacrifices made and things to be changed to reduce the impact of those sacrifices,” Walz said. When then-Mayor Tom Menino sought a similar change in 200304, the city cut more than 1,200 positions from the payroll, she noted.

“There was an effort made by the city to reduce expenses and therefore reduce the impact of the classification proposal, and the mayor here is not taking that path,” Walz said.

Evan Horowitz, the executive director of the Center for State Policy Analysis at Tufts University, worked on a report released earlier this year with the Boston Policy Institute that said Boston could lose between $1.2 billion and $1.5 billion in tax revenue over five years should office values drop by 20 percent to 30 percent.

“The city has some options to deal with the fact that they face a real shortfall .... But pretending that this isn’t a problem is not one of the options, at least it’s not one of the viable options,” Horowitz said. “There’s no formula that can fix the city budget without raising taxes in some way. So what we’re really talking about is how we’re gonna raise taxes or cut spending, there’s no way around that.”

City officials looked into cutting expenses in order to prevent any tax increases, but determined that cutting hundreds of millions of dollars from the city’s budget would have an outsize impact on city operations and services, compared to what property owners would save on their tax bills, according to a city spokesperson. Wu also said the economic outlook for downtown Boston is far from bleak.

“The indicators are very strong,” Wu said. “Unemployment is low, way lower than the national average, home values continue to go up and experience solid growth, which is the driving force behind our revenues for city services, and foot traffic downtown, commuter rail ridership, T ridership have all been steadily increasing.”

As councilors and other Boston officials enjoyed coffee and pastries at the annual budget breakfast at City Hall Plaza Pavilion on Wednesday morning, Wu and her cabinet officials focused on key items in the budget, and the $4.7 billion capital plan for the next five years.

Wu described the budget as a “vehicle” to deliver on her vision to “make Boston a home for everyone,” and said it would expand on her administration’s efforts to address housing affordability, climate sustainability, public safety, resources and support for youth and families, quality schools, and delivering “excellent” city services.

“In the last two budget cycles, we put in place many of these cornerstones and now we are building upward on those pieces thoughtfully and sustainably ... to protect stability for Boston’s residents and families,” Wu said.

Among the key expenditures officials highlighted:

• an additional $1 million for rental assistance and decarbonization efforts

• $1 million for low-threshold housing to combat substance use and homelessness

• $1.3 million to pay for 12 new EMT positions

• and an additional $20 million for inclusive education programs at Boston Public Schools, including support for students with special needs and English learners.

Ashley Groffenberger, Boston’s chief financial officer, on Wednesday said the largest contributing factors driving the 8 percent increase in Wu’s plan over last year’s budget are more money for Boston Public Schools and costs related to city personnel. Of the $344 million increase, $110.6 million would go towards raises and salaries for city employees, more than $80 million would be dedicated to BPS, and $60 million would be allocated to the city’s pension and debt obligations, she said.

About $42.4 million of the budget increase would pay for the employees and operations of the new city planning department, which starting July 1, will take over the role and responsibilities of the Boston Planning & Development Agency. However, that cost will be offset by $42.4 million in revenue the BPDA will collect from leases on city property, Groffenberger said. She also added the city is still working on a memorandum of understanding that would outline the logistics of how that revenue will flow over to the city from the BPDA.

At $1.5 billion, Boston Public Schools represents the largest portion of the mayor’s proposed spending plan, which includes $81 million more in city funds compared to last year, in part to replace the loss of federal pandemic relief dollars.

Boston is legally required to have a balanced city budget, Wu said Wednesday, before Groffenberger broke down what revenue streams would fund the $344 million budget increase. About $158.7 million of that would come from property taxes, $70.1 million would flow from interest on city funds, and $71.9 million would be generated by departmental revenues that come from licenses and permits, in addition to the anticipated $42.4 million of BPDA revenue.

‘To point to some false information that the city might be experiencing a billion-dollar shortfall, that is just simply not true.’

BOSTON MAYOR MICHELLE WU