The mayor’s revised plan to raise commercial tax rates easily passed the Boston City Council Wednesday, and will now be sent to the state Legislature for consideration with the clock ticking before rates are set by the city next month.
The City Council approved the mayor’s revised home rule petition, filed last week by Michelle Wu after a compromise she reached with business leaders who opposed her prior plan, via a 12-1 vote.
The plan seeks to fend off a 28% quarterly increase in January for the average-single family homeowner, and a 14% annual increase next year. Instead the average homeowner would see an 18% quarterly increase and 9% annual spike, which the Wu administration says is in line with the past several years.
“This modest temporary shift is crucial in stabilizing residential taxes during a time when our commercial real estate sector is experiencing a transformative shift,” Councilor Sharon Durkan said. “This administration’s proposal is a pragmatic balance, and it’s a compromise that reflects the interests of our city.”
“This tax shift provides the stability we need to protect residents during this time of economic uncertainty,” Durkan added. “With housing unaffordability as a central challenge in our city, it is our responsibility to find solutions that prioritize residents while ensuring the long-term fiscal health of Boston.”
Three councilors who voted against a prior version of the mayor’s plan last June, John FitzGerald, Erin Murphy and Brian Worrell, opted to vote in support this time around, as did Julia Mejia who voted “present” last time. Councilor Ed Flynn, a critic of the plan, was the lone dissenting vote.
FitzGerald noted that his “yes” vote didn’t eliminate his prior concerns around the plan, and the impact it may have on a struggling commercial sector that is dealing with falling property values and vacant office space — a dynamic that is creating the commercial revenue shortfall in the budget that the mayor’s plan seeks to resolve in the short term.
“It’s important to stress that the 28% increase that residents are worried about seeing this year is still coming, just spread out over three years,” FitzGerald said. “So the fears folks have still loom, and we allow it to loom while potentially doing irreparable harm to our business community.”
“While I will vote in favor of this home rule petition today,” he said, “I commit to making it more affordable for people to stay in their homes, whether it’s increasing their residential exemption, the elderly exemption, veterans exemption and looking at cutting spending.”
Flynn, who proposed two alternatives to the mayor’s plan, spoke to what he felt was a rushed process to fast-track the revised petition for a vote, and what he has described as private negotiations that excluded the City Council and public.
“It did not have to be this divisive, pitting residents against businesses, or public disagreements with the state and business community,” Flynn said. “We should have listened to fiscal watchdog groups and experts to compromise months ago, before waiting until the 11th hour.
“We could have done more to compromise by cutting spending and tightening our belts after an 8% budget increase,” he added. “Otherwise, we might be back here to do this all over again next year.”
Councilor Gabriela Coletta Zapata, who chairs the committee that held a hearing on the plan Tuesday, rejected the notion that the process was rushed.
“I think we have done our due diligence,” Coletta Zapata said. “Facts matter and facts show that we have spent seven months talking about this proposal and variations of it. It’s been widely publicized.”
The new petition is the result of a deal struck last week between Mayor Wu and the heads of the Greater Boston Chamber of Commerce, Boston Municipal Research Bureau, Massachusetts Taxpayers Foundation and NAIOP Massachusetts.
The four business leaders withdrew their long-standing opposition to the plan — contingent upon a lower shift of the city’s tax burden on to commercial properties, beyond what is allowed by state law, that the mayor included in the new petition.
The compromise plan would implement a higher shift of the tax burden onto businesses for a three-year period. The first year would feature a 181.5% shift, followed by a 180% and 178% shift in the remaining two years, with the shift returning to the standard 175% limit in the fourth year, fiscal year 2028.
The mayor had initially proposed a five-year plan, with a 200% maximum shift, last March.
The revised plan targets $45 million in tax relief over the three-year period to small businesses to offset the potential impacts of the commercial tax rate increase, and triples the personal property tax exemption threshold for small businesses, from $10,000 to $30,000 — features included in a prior compromise with the House.
The legislation will now move on to Beacon Hill, where a prior version stalled in the Senate. Wu has stated the Legislature would need to act by late November, to allow the city to make its deadlines for setting tax rates and securing Council approval by late next month, and sending out third-quarter tax bills in January.
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