City Councilman Ed Flynn said he opposes the mayor's proposal to increase commercial tax rates. (Stuart Cahill/Boston Herald)
Boston City Councilman Ed Flynn opposed the mayor's plan to raise business property taxes above the state limit, saying such a move would harm an already struggling downtown office market.
Flynn, according to a statement from his office, chose to oppose the home rule petition presented to City Council this week by Mayor Michelle Wu after speaking with business leaders, residents and the authors of a recent report that warned the city's declining commercial tax base could lead to a budget shortfall of more than $1 billion over five years.
Wu said the measure, proposed by Council Speaker Luzhi Ruijun to the council's government operations committee at a meeting Wednesday, is necessary to curb a large increase in residential property taxes that could result from a decline in commercial property values due to vacant office buildings. He argues that commercial property taxes would still decrease, but not by as much.
“Councillor Flynn, who represents Downtown Boston and parts of the South Boston waterfront, is concerned that increasing commercial property taxes will have a negative impact on an already struggling downtown office market, where 20.1% of offices are vacant due to post-pandemic challenges and the shift to remote work,” the councilman's office said in a statement Wednesday.
Flynn, who served as the association's previous president, is “alarmed by reports that an already struggling development and real estate industry could be further exacerbated, leading to a catastrophe loop for the city. Cuts to city services will make Boston less attractive and further reduce real estate values,” his office added.
The council members' statement said Boston has experienced “tremendous growth” over the past two decades but has also “increased its reliance on property taxes,” which now account for 75 percent of the city's annual budget revenue, with 36 percent of that coming from commercial property taxes.
Flynn said he has information that supports his opposition, including from conversations with representatives from the Center for State Policy Analysis at Tufts University, which, along with the Boston Policy Institute, released a report in February predicting that the value of office space will fall 20% to 30% by 2029.
The report said this would result in a cumulative revenue shortfall of $1.2 billion to $1.5 billion for the city over the next five years, leading to a “new normal” in which annual tax revenues after 2029 will be roughly $500 million lower than current trends.
But a spokesman for Mr Wu on Wednesday disputed the report's findings, saying “falling commercial property values do not translate into lower tax revenues. They translate into higher tax rates for residential taxpayers.”
Flynn argues his opposition to the mayor's home rule petition, or “any measure that would increase commercial property taxes,” is based on previous City Council actions aimed at addressing downtown office vacancies, exploring changes to a program that seeks voluntary payments from tax-exempt nonprofits to boost revenue, cracking down on work-from-home policies for city businesses and bringing foot traffic back to the area.
“Ultimately, popular or not, our city can no longer afford for entire sectors of our economy to continue working from home indefinitely and contributing to the decline in commercial real estate values,” Flynn said in a statement. “Now is not the time to increase commercial or residential property taxes.”
It remains to be seen whether the moderate council member's opposition will be echoed by the rest of the progressive-majority City Council. Flynn was joined only by Councilwoman Erin Murphy, a fellow moderate Democrat, who voted against a resolution last week that would have reaffirmed the council's support for a separate mayoral autonomy petition to impose a 2% real estate transfer fee on transactions over $2 million.
A push for a new tax under consideration on Beacon Hill that Wu says would make the city's budget less reliant on property taxes has angered business groups.
If approved by the City Council and state Assembly, the mayor's petition would provide a statewide option to allow local governments to shift more of the tax burden from residents to businesses in the next fiscal year that begins July 1, up to 200 percent, above the state cap of 175 percent.
The petition, which mirrors a plan proposed by former Mayor Thomas Menino in late 2003 and signed into law by Gov. Mitt Romney early the following year, would gradually increase commercial tax rates to a maximum of 200% of the residential rate in fiscal year 2025, 197% in 2026, 190% in 2027, 183% in 2028, before returning to the state's standard limit of 175% in 2029.
The proposal has drawn criticism from the business community, but Wu insists there will be no adverse impact on the commercial sector, saying taxes will still be reduced and the measure is not intended to generate additional revenue.
“What we're trying to avoid here is a sudden, dramatic and concentrated shock to homeowners that could be damaging to both residents and businesses,” Wu said at a press conference about the petition last Thursday.
Mayor Michelle Wu targets commercial property owners. (Matt Stone/Boston Herald)
Source link