Boston Mayor Michelle Wu proposed a $4.6 billion budget to the City Council with a reminder of her intertwined proposal that would seek to absorb the “shock” of higher residential property taxes by taxing businesses beyond the state limit.
Wu rolled out her recommended city budget for fiscal year 2025, per a correspondence filed with the Council on Monday that details an 8%, or $344 million, increase in spending from the current fiscal year that ends on June 30.
In the letter to councilors, Wu touts the city’s “solid revenue growth driven by property tax collections, excise and interest earned on investments,” but warns of the forecasted fiscal cliff Boston could be facing in the next and future fiscal years driven by declining commercial values and vacant downtown office space.
“As we continue to gain greater understanding of the long-term economic impacts of the pandemic and prepare for shifts in the value of commercial real estate through the scheduled revaluation cycle this calendar year, we are also seeking legislative tools to guard against the immediate rate shock to residents and take protective action so that future tax bills for all property owners — commercial and residential — are similar to those in recent years,” Wu wrote.
The mayor was referring to the home rule petition she proposed late last month, that, if approved by the City Council and state lawmakers, would provide a statewide option allowing municipalities to shift more of the tax burden from residents to businesses, exceeding the state cap of 175% up to 200% in the next fiscal year that begins on July 1. The tiered rate would return to 175% in FY29.
Wu has stated that her petition would not harm businesses since commercial taxes would still decrease, although not by as much, but it has proven to be unpopular with the commercial sector, and is already opposed by at least one city councilor.
Property taxes make up roughly 75% of annual budgetary revenue, and a recent policy report released prior to the mayor’s proposal warned that the city’s eroding commercial tax base would lead to Boston cutting its budget by 10%, which the Wu administration has stated it will not do, or raising residential taxes by roughly 30%.
In her Monday letter, Wu cites steps her administration took to craft the city budget “to plan responsibly through shifting economic patterns and resulting impacts” by prioritizing “sustainable investments that set us up for continued stability.”
Those steps, the mayor said, include supporting the city’s workforce “through innovative collective bargaining agreements, to safeguarding needed resources in public education, and honoring long-term commitments to meet pension requirements and debt obligations to ensure continued long-term stability in city finances reflected” in its AAA bond rating.
She highlights the “revenue-neutral” transfer of staff and functions from the Boston Planning and Development Agency to a new planning department, the city’s first in seven decades that is budgeted at more than $32.7 million.
The mayor also plays up education investments, given that the Boston Public Schools takes up a huge chunk of the budget at roughly $1.5 billion — spending that will require separate approval from the City Council.
She cites housing affordability investments — the mayor’s office of housing is budgeted at $53.59 million with another $459,026 for “fair housing and equity” — and public health and safety.
For the latter, she plans to build on her administration’s effort to clear the troubled Mass and Cass zone by adding another $1 million to “support the city’s approach to managing substance use and homelessness through low-threshold housing.”
Wu also puts a big focus on “promoting equity and opportunity.” The two cabinets largely dealing with those matters, equity and inclusion and economic opportunity and inclusion, are budgeted collectively at more than $27.26 million.
Her budget touts a big investment in city services, including more than $763 million for public safety between the police, fire and emergency management departments; roughly $193.2 million for streets which includes the transportation and public works departments; and just over $63 million for operations which includes property management, public facilities, and inspectional services.
She further cites her commitment to climate and family-friendly initiatives, saying that her recommended $4.6 billion city budget and $4.7 billion FY25-29 capital plan “work to build on our steady progress to make Boston a home for everyone.”
