Boston City Council sets property tax rates, effectively approving 13% residential hike

The Boston City Council voted unanimously to place as much of the city's property tax burden to businesses as allowed by state law. But that still locks homeowners into a 13% increase for the coming year.

It’s the second consecutive year of double-digit tax increases for the city’s homeowners, and it will cost them $780, on average. Renters, too, could feel the downstream effects. Meanwhile, despite the shift passed by the Council Wednesday, the average high-end office buildings will see tax bills drop by 4.4%, or an average $210,000 as commercial property values continue to decline.

Councilors voted on two key measures Wednesday. One kept the commercial property tax burden at 175% of what the residential property tax burden. The other authorized a 35% exemption for homeowners whose primary residence is in Boston; that will provide the average homeowner with a $4,354 break on their tax bill, according to Councilor Brian Worrell.

For years, the council has voted to hit both maximums, as set by state law, to lower costs for homeowners.

“It's the routine vote” on tax rates, council President Ruthzee Louijeune said at the body’s final session of the year.

For two years, Boston Mayor Michelle Wu has proposed easing the pressure on residents by lifting the state's cap on shifting the tax burden toward commercial properties. Rather than paying 175% of what residents pay, the commercial sector would temporarily pay 181% and return to the original level after three years. It would allow residents to see a 9% year-over-year increase in property taxes, rather than a 13% bump. That change, which requires legislative approval, has been rebuffed by state senators.

“There’s a relationship to the home rule petitions that have made their way to the State House but have not gone any further in the Senate,” Louijeune said.

To rub salt in the wound, a quirk of the calendar means that residents will face a 26% jump in taxes in January as the increases of the last two fiscal years overlap, then will go to 13%.

Property taxes cover more than 70% of the city’s $4.8 billion budget. But commercial property values have been in decline for years, while housing values continue to rise. The challenge for the mayor and council is how to navigate the state’s strict formula for setting tax rates. According to the Wu administration, residential values rose 2% in the past year, while commercial values fell 6% as many downtown offices remain empty.

Councilor Erin Murphy said Wednesday’s vote was separate from Wu's stymied efforts to get the legislature to approve her plan.

Murphy described the council’s action as “not a policy change, not a shift in a tax burden, and not connected to any broader political debate.”

Louijeune, leading her final meeting as city council president, agreed with Murphy and warned that the commercial share of the tax burden is eroding.

“If you look at what's happened over time, we're coming very close to a point where residents are shouldering 50% of the total property taxes that are collected by the city,” she said.

While Wu's proposal has found backing in the state's House of Representatives, Sens. Nick Collins and Will Brownsberger have blocked her bill. The pair have offered alternative tax relief legislation, after raising concerns about the impact of Wu’s tax shift on an already struggling commercial sector. The senators have earned support from large developers, the Small Property Owners Association of Massachusetts and other business groups.

But the path forward for those bills is unclear because the House and Senate have been unable to agree on basic procedural hurdles like committee hearings, according to the State House News Service.

Meanwhile, there’s pressure from some for the city to crack down on spending.

“It is time for us to demonstrate fiscal discipline, accountability, transparency and positive leadership,” said Councilor Ed Flynn, a frequent Wu critic. “We need to have an honest conversation about our budget, and the right level of services, and the taxes to fund that budget.”

The Wu administration is calling for all city departments to find 2% budget cuts in the coming year. Any further cuts, she said, would jeopardize city services.