Coletta Holds Hearing on Mayor’s Proposed Legislation Regarding Property Tax Classification

Special to the Sun

Boston City Councilor Gabriela Coletta (District 1) chaired a Government Operations committee hearing last week to discuss a petition for a special law regarding property tax classification in the City of Boston. This Home Rule Petition was sponsored by Mayor Michelle Wu and is a temporary tool seeking to protect residents from property tax increases to mitigate potential revenue shortfalls from declining commercial valuations. 

Boston’s proposed FY 2025 operating budget totaling $4.46 billion dollar budget is largely funded by increased property tax growth. Boston receives 71% of its revenue from property taxes. Of the 71%, 58% of that is funded by commercial property taxes. Recent reports illuminate a potential nationwide decline in commercial property valuations due to slow economic growth following the pandemic and shifting dynamics in downtown cores. This makes Boston’s fiscal buoyancy uniquely vulnerable due to the fact that we are heavily reliant on commercial property tax revenue to fund day-to-day operations and city services. 

The proposal seeks to regulate the property tax classification limits in the City of Boston to increase the percentage of tax burden that may be shifted to commercial properties. This is an effort to ensure that homeowners and residential property owner’s taxes will not increase by upwards of 30 to 40% in one fiscal quarter. The legislation is stipulated to go into effect this upcoming fiscal year until fiscal year 2029 only if the current minimum residential factor would result in residential properties paying a higher percentage of the total property tax levy than what they paid the year prior. 

Councilors shared concerns during the hearing about the success of raising commercial property taxes and potential unintended consequences. Some raised questions about finding alternate financial strategies to avoid the increase in property taxes. Additionally, Councilors raised concerns over how increasing taxes on commercial property owners could impact small business owners. 

“This proposal by the Mayor is well-intentioned to protect our residents from exorbitant increases in their property taxes and generally support relieving pressure on our seniors who are usually house rich and cash poor,” said Councilor Coletta.  “I am concerned that additional taxes, especially on smaller commercial property owners, will unintentionally stifle necessary economic growth within our City.”

“While the 2003 proposal was largely categorized as successful, we must consider the long-term impacts of our changing economy and impacts the pandemic has had on workplace vacancies and tenancy. Boston must prioritize additional sources of revenue as part of a suite of solutions for a long term plan. I look forward to continuing the conversation with my council colleagues and the administration to ensure Boston has all the tools in our toolbox to protect residents while assisting in our overall recovery.”

In 2003, residential property values were increasing more quickly compared to commercial properties. This gap led to a significant increase in the residential class’s share of the tax burden in many communities. To address the gap, Boston Mayor Menino and the City Council filed a Home Rule Petition requesting a temporary increase to the percentage of tax burden that could be shifted to commercial properties. The following year, in 2004, the State passed legislation that adjusted the split tax rate formula which allowed  a temporary increase in shifting the tax burden to commercial classes.

The passage of this legislation was successful in limiting residential tax increases for adopting communities, with 62 percent experiencing below-average increases in the 2004 single-family tax bill. Boston saw the largest increase in the average bill at 14 percent due to decreased values in the city’s large commercial class and the rapid appreciation in the residential class.  

Councilor Coletta highlighted the need for additional tax data as the council continues to review the proposal. Public testimony was offered by various organizations such as the Boston Municipal Research Bureau and the Greater Boston Real Estate Board who shared concerns about Boston’s commercial real estate market following the COVID-19 pandemic and the need for the city to diversify revenue sources. Written testimony was also provided by the Boston Chamber of Commerce and the National Association of Industrial and Office Properties (NAIOP).

Members of the administration present included: 

• Ashley Groffenberger, CFO of the City of Boston

• Nicholas Ariniello, Commissioner of the City of Boston Assessing Department

Councilors in attendance included Councilors At-Large Ruthzee Louijeune, Erin Murphy, Henry Santana, Julia Mejia and District Councilors Ben Weber (District 6), John Fitzgerald (District 3), Brian Worrell (District 4), Ed Flynn (District 2), Liz Breadon (District 9), and Sharon Durkan (District 8). 

A recording of the hearing can be found here: 

City officials indicated that they were looking to send the Home Rule Petition to the State Legislature before the end of the formal session, July 31, 2024. The home rule petition first needs approval from the Boston City Council then it would be sent to the State Legislature who also needs to approve it before it can take effect.

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