Breaking News/10.23.2024
Dissension in the ranks: Not all the city’s business groups are thrilled with the deal over the Wu administration’s controversial tax plan
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It took months of heated debate and backroom negotiations to get it over the finish line.
But it looks like Boston Mayor Michelle Wu has finally hammered out a deal with a group of business and fiscal watchdog groups over her controversial plan to hike tax rates on struggling office buildings and other commercial properties.
On Wednesday, Wu and some of the city’s top business leaders announced an agreement that will shift more of Boston’s tax burden onto commercial property owners than was previously allowed under state law.
Endorsing the deal were the leaders of the Greater Boston Chamber of Commerce, the commercial real estate group NAIOP Massachusetts, the Boston Municipal Research Bureau, and the Massachusetts Taxpayers Foundation, not the Massachusetts Fiscal Alliance, as we listed earlier.
As Contrarian Boston reported over the weekend, the two sides had come within a half percentage point of striking a deal over Wu’s plan to boost commercial property tax rates. A last-minute hiccup temporarily derailed the talks.
However, now that a deal is finally at hand, not everyone is happy with it, with the leaders of two major real estate groups conspicuously absent from the announcement.
The head of the Greater Boston Real Estate Board was not listed as one of the parties to the deal and has declined comment as the group examines the details.
One major sticking point: The agreement does not require the Wu administration to reduce spending, with the city budget slated to rise 8 percent.
Also not happy: The Small Property Owners Association, which represents small landlords and apartment building owners across the city.
“No deal should be done without spending cuts,” SPOA said in an email to its members. “This is not a deal that is supported by SPOA and our members,” the email said. “We wonder, therefore, if ‘business leaders’ consider their dues-paying members as they broker this deal.”
Wu has argued the agreement is necessary to prevent Boston homeowners from getting hit with a double-digit increase in their taxes.
The city faces a looming, $1.5 billion revenue gap over the coming years as office building values crumble, wrecking what had long been a cash cow for city tax coffers, the Boston Policy Institute found in a report released earlier this year.
But the Boston mayor’s proposal has been highly unpopular with business and real estate groups. They argue that it attempts to solve the city’s financial issues by squeezing more money out of already-struggling commercial property owners stuck with half-empty office buildings.
In the end, Wu agreed to shift more of the city’s tax burden onto commercial properties over a three year period, instead of the five-year deal she had originally hoped for.
She also agreed to have a smaller proportion of the city’s tax burden getting shoved onto commercial properties than originally proposed as well.
While protesting the lack of any spending reductions, the chamber and other business groups nevertheless agreed to the deal.
“The Boston Municipal Research Bureau believes this is a wise compromise, albeit a short-term one that calls upon all of us to focus on additional measures to protect both residential and commercial property owners, such as restraining spending increases and incentivizing economic development,” said Marty Walz, interim president of the Boston Municipal Research Bureau, in a press statement.
However, the Boston Policy Institute, founded last year by a pair of veteran Democratic political consultants, also took aim at the agreement, calling it shortsighted.
For its part, BPI was the first to raise the alarm about the city’s projected $1.5 billion revenue gap with its release in February of a headline-grabbing report on the issue.
In fact, the decline in office building values is a long-term problem. This temporary shifting of the city’s tax rates onto already hard-hit commercial properties won’t solve it, the policy group contends.
“The tax shift deal announced today comes up short of what Boston needs,” BPI said in a statement. “This year’s sharp decline in commercial real estate values will continue for years to come.”
For its part, the Wu administration has brushed off concerns about the impact of the tax rate increase on downtown office buildings.
The deal inked Wednesday will also include a $45 million fund to help small businesses hurt by the increase in commercial property tax 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 Boston City Council and then onward to the State House for legislative approval. At that point, it will be up to the governor to sign off or not.
Boston and other cities set their own tax rates. However, the proposal needs final state approval since it shifts a greater percentage of the city’s tax load onto commercial properties than allowed under state law.