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Mayor Michelle Wu wants the power to temporarily increase the commercial property tax rate in order to help residential property owners. The proposal still requires approval from state lawmakers.
The Boston City Council voted Wednesday in favor of Mayor Michelle Wu’s plan to temporarily give the city the power to increase the commercial property tax rate beyond what state law allows.
The measure, which has drawn vocal opposition from the business community, was approved by an 8-4 vote. Councilors John FitzGerald, Ed Flynn, Erin Murphy, and Brian Worrell all voted against it. Councilor Julia Mejia voted present.
Councilors also approved a series of changes to Wu’s proposed budget during Wednesday’s meeting.
When she introduced the property tax proposal in April, Wu argued that giving the city this power is necessary to offset the impacts of Boston’s declining commercial property values.
“Boston’s housing crisis means that residents are already struggling to afford to stay in our neighborhoods, and we cannot increase the burden on homeowners and renters due to an automatic shift caused by the short-term challenges in certain parts of the commercial office sector.” Wu wrote in a letter to the City Council in April.
Most of the city’s services are funded through property taxes, and state law outlines the specific parameters of commercial and residential tax rates. Despite the council’s vote, legislative approval is still needed, and Wu’s home rule petition faces an uncertain future in the State House.
The plan would follow a five-year schedule, allowing for an increase of the commercial tax property rate by up to 200% in the first year followed by gradual decreases before returning to the current parameters. Wu said she mirrored the home rule petition on language from a precedent set by former Mayor Thomas Menino’s administration in 2004. It was a success in preventing a “shock” to residential taxpayers at the time, she said.
Councilor Gabriela Coletta Zapata, chair of the City Council’s Government Operations Committee, oversaw two hearings and one working session on the topic. In these meetings members of the Wu administration acknowledged that, even if the changes go into effect, residential property owners would still see tax increases. The goal is to give them a soft landing, and administration officials advocated for moving proactively.
Coletta Zapata praised the strategy, saying that the main beneficiaries would be those who own property, people that are “house rich but cash poor.”
“This allows us the ability, generally, and the flexibility within specific guardrails to move swiftly should we need to, to protect Bostonians. Otherwise, we’re going to be back here, having the same discussion, but on an even more expedited timeline. And next time, with potentially hundreds of calls from residents wondering why the council did not act to keep their property tax bills as low as possible,” she said.
Flynn said he was opposed to any measure that would raise commercial property taxes. Boston’s already-struggling downtown office market would be further hamstrung as it fights to rebound from the pandemic, he said. These office buildings could be assessed at lower values, providing the city with less tax revenue. Flynn warned about the potential for an “urban doom loop,” where cuts to city services would decrease Boston’s desirability and further drive down property values.
Greg Vasil, CEO of the Greater Boston Real Estate Board, echoed these worries.
“Increasing taxes on commercial properties, an industry that has long fueled Boston’s budget, and an industry facing existential challenges, is incredibly misguided, fiscally short-sighted, and ultimately will be proven to be economically problematic,” he said in a statement. “Instead of increasing the commercial property tax rate, city and state leaders must focus on boosting the region’s competitiveness and attracting businesses. We urge officials on Beacon Hill to reject this deeply flawed policy and focus on reforms that do not punish any one industry.”
Murphy urged officials to hear from more constituents and said that the plan from the Wu administration was “politically expedient.” She linked this debate to other controversial actions taken by Wu, such as the failed plan to move the O’Bryant School to West Roxbury and work to overhaul White Stadium in Franklin Park.
These are “governance problems,” Murphy said, while drawing attention to long-simmering tensions between Wu and the city’s business leaders.
“I understand the politics of it, that it plays great to the base to snub and insult the business community,” she said. “But we’re one city, and the employers are an important part of that broader community.”
Multiple members of the City Council on the other side of the debate stressed the need to add another “tool” to their “toolbox” that can be used if necessary.
Councilor Sharon Durkan read an email she received from a resident in early January who saw their property taxes increase by more than 13% over the previous year. That resident was doubtful that they could remain in Boston amid these financial headwinds, and Durkan said she has received many similar emails.
“I hope you can hear the anger in my voice, that people aren’t willing to consider this, and people aren’t willing to consider a shift here,” she said. “This is incredibly important … Because if we don’t [pass it], we are going to get a lot more emails like that and we’re going to have a lot more people that cannot afford to live in the city, cannot afford to stay in their homes.”
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