10.19.2024/Breaking News
Cease fire: After months of sparring, Boston mayor cuts deal with city business leaders over her controversial tax hike plan
One of the most heated clashes in decades between a Boston mayor and local business and real estate leaders is over, for now anyway.
Boston Mayor Michelle Wu has given a green light to a compromise proposal by local business leaders, ending a months-long standoff over her hotly-contested plan to hike tax rates on struggling office buildings and other commercial properties, according to emails reviewed by Contrarian Boston that detail the agreement.
Under terms of the deal, city officials will have the ability over the next three years to shift more of the city’s tax load onto commercial real estate than currently allowed, though less than what the mayor had initially pushed for.
Boston, like other major cities, faces a looming revenue crisis as office building values crumble amid the shift to remote work, with a potential gap of $1.5 billion over the next few years.
The agreement will spare Boston homeowners from an expected 14 percent jump in their tax bills, reducing the increase to roughly 9 percent.
After months of high-stakes negotiations and increasingly contentious debate, the leaders of Boston’s major business, real estate and fiscal watchdog groups signaled, in a letter on Friday to state Senate President Karen Spilka, that they were prepared to relent in their opposition to Wu’s commercial tax hike plans.
The mayor, in turn, agreed to the proposal put forth by the business leaders, the key piece being her willingness to accept a somewhat smaller commercial tax hike than she had originally demanded, according to emails from Wu’s intergovernmental affairs chief that were reviewed by Contrarian Boston.
However, even as they agreed to cut a deal, leaders of the Greater Boston Chamber of Commerce, the Boston Municipal Research Bureau and other groups remained highly critical of the Boston mayor’s handling of the tax and revenue crisis facing the city, according to their letter to the Senate president.
The business leaders reiterated their stance that Wu could have avoided having to jack up tax rates on half-empty office buildings by reducing city spending and dipping into reserve funds, noting the crisis is a “problem not of our making.”
Instead, city officials have plowed ahead with a $4.64 billion budget that represents an 8 percent increase in spending - more than double the increase in the state budget, the business leaders noted.
Small businesses, from restaurants to retailers to companies renting office space would also take a hit, since they are often on the hook for real estate taxes as part of their lease agreements, critics of the mayor’s plan have warned.
“City officials should have anticipated how this budget approach would impact both residential and commercial taxpayers in light of the downward trajectory of commercial property values,” city business leaders wrote to Spilka, the Senate chief, who will have final say over the deal.
The letter was signed by James Rooney, president and CEO of the Greater Boston Chamber of Commerce, Doug Howgate, president of the Massachusetts Taxpayers Foundation, Tamara Small, CEO of NAIOP Massachusetts, and Martha Walz, interim president of the Boston Municipal Research Bureau.
For its part, the Wu administration has brushed off concerns about the impact of the tax rate increase on downtown office buildings, while proposing a $45 million fund to help small businesses hurt by the increase in rates.
In addition, city officials recently added another sweetener, with a proposal to raise the tax exemption threshold for personal property that belongs to small businesses, such as restaurant equipment, barber chairs and the like.
The deal will now have to go before the state Senate for approval, with the chamber likely to give an ok now that city officials and business leaders have come to an agreement.
While Boston and other cities set their own tax rates, the proposal in question needs final state approval since it shifts a greater percentage of the city’s tax load onto commercial properties than allowed under state law.