The opinions expressed below are those of Jon Keller, not those of WBZ, CBS News or Paramount Global.
BOSTON – It’s a dilemma that could spell major trouble for the city of Boston’s budget: How should we prepare for the fallout from a continued collapse in downtown commercial real estate values?
Boston Mayor Michelle Wu wants the right to raise taxes on property owners, but critics say it’s the last thing she should do.
“An Existential Issue for Boston”
“This is an existential issue for Boston,” said Greg Maynard of the Boston Policy Institute. His think tank rocked City Hall in February with a report predicting massive problems for Boston’s finances from the collapse in pandemic-era office building values, as the work-from-home craze took flight and lingered.
The pandemic may be over, but the implosion of this important source of income is not.
“This is a tool in our toolbox to protect residents,” Council Member Sharon Durkan said during today’s debate, where she and others argued for raising commercial tax rates rather than risk political backlash from tax-weary homeowners. “‘I’m not sure I can afford to live here anymore, this is crazy.’ I probably received this email 20 times in one day, over the course of an hour of updating people on their new tax bills,” Durkan said.
Why not push wealthy but tax-exempt institutions to pay more, several council members suggested. “Why is it okay for Harvard not to pay property taxes on the vast amounts of land they own in Boston, while our constituents in Roxbury, Charlestown and Hyde Park have to?” Councilwoman Erin Murphy asked.
But a development industry spokesperson warns against killing Boston’s golden goose. “Essentially, we’re kicking big property owners and commercial taxpayers while they’re in trouble, at a time when we really want to attract renters and businesses to our downtown to ensure we have a thriving and vibrant economy,” Tamara said . Klein of NAIOP Massachusetts, the Commercial Real Estate Development Association.
Mayor Wu refuses to cut the city budget
The commercial tax increase option now heads to Beacon Hill for legislative approval. But in a key test for Mayor Wu, the researcher who caused the uproar says this moment calls for maximum political creativity.
“This problem was created in a laboratory to hurt Boston’s budget,” Maynard says. “Boston is so uniquely vulnerable to this particular kind of recession. And that means that the response must be equally unique.”
The last time this happened a decade ago, as the dot-com boom came to an end, then-Mayor Tom Menino did the same thing: He got Beacon Hill to approve commercial tax increases. But Menino did something that Wu has so far refused to do: he made severe cuts to the city budget and greenlighted the development of the seaports, triggering a huge increase in city revenues.
But that boom is over for now, new construction downtown has stalled, and the fear among some is that Wu’s plan could drive investors out of Boston in search of friendlier places.
Jon Keller
