Boston Mayor Michelle Wu testifies at a state Assembly hearing on home rule petitions regarding temporary property tax divisions. Pat Greenhouse/The Boston Globe
Boston Mayor Michelle Wu on Tuesday outlined her plan to give cities the authority to temporarily raise commercial property tax rates in the state Assembly. The controversial bill drew numerous questions and skepticism from lawmakers on the Joint Committee on Ways and Means during a nearly three-hour hearing.
Wu announced the idea in April, arguing it was a necessary step Boston had to take to prevent steep tax increases for homeowners. Empty office space created by the shift to remote work has contributed to a decline in commercial real estate values, and Wu said the plan was the best way to protect against future declines.
The tax cuts are meant to provide a “soft landing” for residents who may face higher tax rates. Homeowners will still likely see tax increases, but Wu says they're trying to mitigate the ultimate blow.
“Boston is in the midst of a housing affordability crisis, and city officials are tackling this challenge from every angle: creating more affordable homeownership opportunities for first-time homebuyers, building more affordable housing, working with the state to invest in tuition-free college programs, paying for early childhood educators' degrees, and providing grants to small businesses affected by the pandemic,” Wu said. “But all of this won't be enough if we can't also take steps to protect our residents when they need us.”
Despite strong opposition from many in the business community, the mayor mustered enough support to get the plan approved by the Boston City Council last month. He must also get the backing of state lawmakers and ultimately Governor Maura Healey.
Wu said earlier this summer he was hopeful about the state Legislature, but the bill's prospects on Beacon Hill remained unclear after the hearing.
Several lawmakers expressed concern about how the bill would affect small businesses. Wu argued that a steep rise in residential property taxes would be “devastating” for businesses that rely on residents as customers and clients. He also said that while businesses would get a tax cut under the bill, small businesses would likely see lower rents due to the decline in the value of their office buildings.
Many residents testified Tuesday in support of Wu's proposal, saying they don't want to be forced to leave the city because of higher taxes.
“We can't lose our residents,” Shirley Jones, president of Dorchester's Meetinghouse Hill Civic Association, said at the hearing. “We can't lose our homes. We can't have them have to look for somewhere else to live because of high taxes. And then we're going to end up with gentrification, just like so many of my neighbors who used to live in my area. They're not there anymore. They were pushed out by high taxes.”
Wu and members of her administration repeatedly cite the fact that Mayor Thomas Menino faced a similar challenge in 2004 and sought a temporary adjustment to the property tax formula to soften the blow to homeowners. That plan faced similar opposition then, but ultimately achieved its goals, Wu said.
But Marty Waltz, interim director of the Boston Department of Urban Research, said at the hearing that Boston's economic situation in 2024 will be very different than it was 20 years ago.
“This is not a traditional economic cycle with a quick recovery. We're living in a very new world and we have to think about, 'What are the long-term implications?'” she said.
According to BMRB testimony, the city's approach at that time differed in two key ways: In fiscal years 2002 and 2003, Boston limited spending growth to 3.8 percent and 2.8 percent, respectively. In contrast, Wu proposed an 8 percent increase in the city's budget for fiscal year 2025. Additionally, Boston cut more than 1,500 full-time equivalent positions from fiscal years 2002 to 2004. Wu's fiscal year 2025 budget projects an increase of 498 full-time equivalent positions.
State Assemblyman Mark Cusack, the committee's House chairman, questioned Wu and city officials about why they chose this approach instead of exploring other options, such as tapping into Boston's rainy day fund to help low-income homeowners pay rent.
Using some of the city's reserve funds was one of the alternatives outlined in BMRB testimony, which said curbing spending growth was probably the “most obvious” thing the city could do and that increasing the budget by 8% “was not a wise decision.”
City officials said such measures provided stability to the city and taxpayers in 2004. They stressed the stability of Boston's property tax revenues and how that is key to earning high ratings from Moody's and S&P. Boston has had to give up some property tax revenues to use reserve funds, and maintaining a good credit rating is a priority, city officials said.
“We are here because this tool is the best tool. It is the only tool that can achieve the goals that have been outlined. Believe me, I love spending time with you all. I would rather spend it in any other environment. So if there was a way that we could accomplish this without coming to you all, we definitely would have done that,” Wu said.
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