A view of the South Boston skyline seen from Squantum in Quincy. (Matt Stone/Boston Herald, File)
A proposal to raise the commercial property tax in the City of Boston would be the plan that killed the proverbial golden goose, according to the President of the Greater Boston Chamber of Commerce.
A home rule petition offered by Boston Mayor Michelle Wu to raise the commercial tax burden beyond the state mandated limit is aimed at fending off potential sharp increases in the property taxes paid by city residents, which could come in response to a predicted drop in commercial real estate values and taxes.
But taking more from commercial property owners, according to Chamber President and CEO Jim Rooney, would further stifle an already struggling commercial real estate landscape still reeling from the pandemic and a shift toward work from home.
“Let’s take a step back and talk about the importance of commercial real estate in Boston, as it relates to the city’s budget,” Rooney told WBZ’s Jon Keller.
“It’s the golden goose,” he said.
About 70% of the city’s budget is paid with property taxes, Rooney said, and the way things are organized now the city’s relatively few commercial property owners bear an outsized burden compared to homeowners, covering nearly a third of the full budget.
“One of the reasons our residential property taxes in Boston are so low — among the lowest in the Commonwealth — is because the commercial tax rate is proportionately higher,” he said.
However, approximately 20% of the city’s commercial properties are currently vacant, unused while workers labor at home, according to Rooney. The prospect of having no one to occupy their rentals has led some owners to offload their Boston properties, sometimes at cut rate prices, which Rooney said is driving down the value of other properties. Interest rates, he said, are making it hard to build new inventory.
Wu’s plan to raise the commercial real estate burden, Rooney said, even if it’s meant to help homeowners, would in fact kill the already struggling “golden goose.”
“You’re not nurturing the golden goose. You are strangling the golden goose,” he said.
Rooney’s comments come after the release of a report by The Center for State Policy Analysis that showed the city’s eroded commercial tax base could leave Boston with a $1 billion budget shortfall in five years.
“As a result of the ongoing collapse in office values, Boston is likely to face a cumulative revenue shortfall of more than $1 billion in the next five years,” the report projects. “With no clear prospect for recovery, such shortfalls could persist for decades, triggering a long-term decline in public services and economic vitality.”
Mayor Wu has pushed back on that report, saying that it’s “false information” there might be a budget shortfall, as the report seemed to indicate. Instead, she said, if there isn’t enough commercial property tax — either because they are paying less due to a drop in value or because the proposal to up their taxes failed — then the burden will automatically shift to the residents of the city.
Current state law allows the municipal tax burden to be shifted toward commercial property owners. The mayor’s home rule petition, if approved by the City Council and state lawmakers, would allow all municipalities to shift more of the tax burden from residents to businesses, exceeding the current state cap of 175% up to 200%. Doing so would protect home owners from bearing the burden of a tough commercial real estate market, according to Wu.
Wu’s plan would require the approval of the state legislature, and it’s not clear she’ll find the support she needs there.
Speaker of the Massachusetts State House Ron Mariano, during an appearance on WCVB on Sunday, said that he understands Boston’s plight, but that he couldn’t see himself supporting a move to allow more disproportionate taxing across the entire commonwealth.
“Not as a blanket,” he said.
It’s not even clear the mayor’s plan will clear the Boston City Council. Boston City Councilor Ed Flynn, who represents the commercial-property heavy Seaport, earlier this month came out in opposition, citing the report in saying that such a move would negatively impact an already struggling downtown office market.
