Wu pitches lawmakers on commercial property tax hike to save homeowners money

Mayor Michelle Wu faced skepticism on Beacon Hill during a hearing this week.

Boston Mayor Michelle Wu took to the State House Tuesday to pitch her plan for giving the city the power to temporarily increase the commercial property tax rate. The contentious measure was met with many questions and some skepticism from lawmakers on the joint committee on revenue during a nearly three-hour hearing.

Wu introduced the idea back in April, arguing that it is a necessary step Boston must take in order to prevent what could be a sharp tax hike for residential property owners. Office vacancies created by the shift to remote work have contributed to falling commercial property values, and Wu says this plan is the best way of preparing for future declines.

Those decreases could cause tax rate increases for residential property owners, and the idea is to give residents a “soft landing.” Residential property owners would likely still see tax increases, but Wu says she’s trying to lessen that eventual blow.

“Boston is in the midst of an affordability crisis. We at the city are tackling that from every possible angle: creating more affordable home ownership opportunities for first-time homebuyers, building more affordable housing, investing in tuition-free college programs alongside the state, paying for early childhood educators to get their degrees, providing grants to small businesses impacted by the pandemic,” Wu said. “But doing all that won’t be good enough if we also can’t take steps to protect our residents when they need it.”

Despite stiff opposition from many in the business community, the mayor was able to marshal enough support to gain the Boston City Council’s approval last month. She still needs to win over state lawmakers, and Gov. Maura Healey would eventually have to sign off on it as well.

Wu said earlier this summer that she had hope in the Legislature, but the measure’s prospects on Beacon Hill remained murky at best after the hearing.

Multiple lawmakers expressed concern about how the measure could impact small businesses. Wu argued that a spike in residential property taxes would be “devastating” for businesses who rely on residents as customers and clients. She also said that businesses would still see a decrease in their taxes under the plan, and that small businesses would likely see rent decreases due to the devaluation of office buildings.

Many residents testified Tuesday in favor of Wu’s proposal, saying that they do not want to be forced to leave the city because of higher taxes.

“We can’t afford to lose any residents,” Shirley Jones, president of the Meetinghouse Hill Civic Association in Dorchester, said during the hearing. “I can’t afford to lose my home. I can’t afford to have high taxes and have to go look for someplace else to live, which means that gentrification will happen with me, as it has happened with so many of my neighbors who used to live in my community. They’re no longer there. They were forced out by high taxes.”

Wu and members of her administration have repeatedly cited the fact that, in 2004, Mayor Thomas Menino faced a similar challenge and also sought a temporary adjustment of the property tax formula to dampen the blow to homeowners. At the time, that plan faced similar pushback, but ultimately achieved its goals, Wu said.

But Marty Walz, interim president of the Boston Municipal Research Bureau, said during the hearing that the economic landscape of Boston in 2024 is much different than it was two decades ago.

“This is not a traditional economic cycle where we will bounce back quickly. We are in a very new world, and we have to think about, ‘What are the long term consequences?’” she said.

The city’s approach was different then in two key ways, according to the BMRB testimony. In fiscal years 2002 and 2003, Boston slowed its spending growth to 3.8% and 2.8%, respectively. In contrast, Wu proposed an 8% increase in the city’s budget for fiscal year 2025. Additionally, Boston reduced its headcount by more than 1,500 full-time equivalent staff from fiscal years 2002 through 2004. Wu’s fiscal year 2025 budget projects increasing the number of full-time equivalent employees by 498.

State Rep. Mark Cusack, House chair of the committee, pressed Wu and city officials on why they chose to go down this route, instead of exploring other options like tapping Boston’s rainy day fund to help low-income homeowners pay their bills.

Using some of the city’s reserves was one alternative outlined in the BMRB testimony. Restraining spending increases is perhaps the “most obvious” thing the city could do, according to the testimony, and increasing the budget by 8% was “not a wise decision.”

City officials said that, in 2004, a move like this provided stability to the city and taxpayers. They touted the stability of Boston’s property tax revenue and its importance in getting good ratings from Moody’s and S&P. In order to use reserves, Boston would need to forego some property tax revenue, and maintaining good credit ratings is a priority, administration officials said.

“We’re here because this tool is the best tool. It’s the only one that can accomplish the goals that were outlined. Believe me, I love spending time with you all, I would rather do it in other settings, and so if there were a way to accomplish this without coming to you, we certainly would have done that,” Wu said.