With her proposal to address the impending increase stalled in the Senate, Mayor Wu’s office said city residents’ taxes could increase 28 percent – a large quarterly jump but less than originally estimated – unless senators on Beacon Hill act on her plan to shift more of the city’s tax burden onto businesses by late November.

“It affirms that this tool is needed, and this is the direction that we are seeing valuations change,” Wu said at a media briefing last Wednesday (Oct. 9) organized by her office, held to announce the first assessment estimates and to continue to push for the authority to temporarily shift a higher share of property taxes onto commercial owners instead of residential owners if declining commercial values trigger a sudden revenue shortfall.

[On Tuesday, the mayor sent a lengthy letter to the City Council wherein she proposed an executive order that would limit the amount and duration of the shift in tax rates for different classes of property. She also committed to relief for small businesses: $45 million to ease the impact of taxes and a higher exemption for “personal property.” She said the changes could be made without altering the language of the home rule petition.”]

Wu originally predicted residential property taxpayers could see as much as a 33 percent increase in their taxes come January, as commercial properties have seen a reduction in taxable value as fewer employees have returned to downtown offices and some employers have downsized their footprints in the wake of COVID-19. About 60 percent of Boston’s property tax revenue generally comes from commercial property taxes.

The administration wants to get approval for the tax shift before it has to send tax bills out to residents – and clocks are ticking. The House has already gotten behind the idea, but it needs approval from the Senate and the governor. Wu said it will need to be done by late November or else the city will have to send Boston residents bills that include the tax hike.

If the bill doesn’t pass, the average single-family home valued at $838,000 receiving a residential exemption would see its tax levy go up 27.8 percent. That same home’s taxes would still go up 9.9 percent in January even if Wu’s plan passes, according to the numbers her office presented.
The difference in those numbers in real dollars is a $273 tax bill if Wu’s plan passed, and a $768 bill without the home rule.

A $5 million commercial property would see a 6.7 percent decrease in their property taxes next year if the mayor’s plan does not go into effect; but would only see a 0.5 percent dip in the tax bill due to decreased value of the property if Wu’s plan was enacted. In the example her team gave Wednesday morning, that was a difference of about $7,800 out of roughly $120,000 in taxes on the hypothetical $5 million property.

Wu met with Senate President Karen Spilka and members of the Senate’s Boston delegation last month after the mayor and Senate president traded jabs through the media. Asked about that meeting Wednesday, the mayor said she’s “answering as many questions as possible for anyone who needs more information.” She added that “if there’s a way to improve this process that makes it feel more predictable or accommodating to the business community, while also protecting residents, we are all for making those kinds of changes.”

She highlighted one piece of the bill, a so-called trigger window. The home rule petition had language that allowed the city to start the clock on the tax shift at any time in a three-year window, as officials did not know when the property valuations would shift significantly.

“We’re now sure that we would need it this year. So we’re very much willing to, for example, remove that language or be clear for predictability that it would be used this year, and not subject to, sort of, any time within the next three years,” Wu said.

The city filed the mayor’s plan as a home rule petition for approval at the State House. Home rule petitions cannot be amended by lawmakers, nor sent back to municipalities for changes.

The House passed the bill on the last day of formal legislative sessions this July, shortly after it emerged from the House Ways and Means Committee chaired by Aaron Michlewitz of Boston’s North End, who is an ally of the mayor. On the day the House voted in favor of the plan, Wu announced she’d sign an executive order trimming the duration and scope of the tax shift, plus committing city dollars to offset impacts on small businesses.

The informal agreement to amend the home rule petition after it makes its way through the process on Beacon Hill is somewhat unusual. A spokesperson for Wu did not answer a question about how the mayor planned to make the changes she said she proposed to senators, like striking the trigger window language, when the home rule petition cannot be amended.

The mayor could add more conditions onto her promised executive order or file a new home rule petition to the State House, though it would need to start the process from scratch, starting at the City Council.

Wu did not directly answer a question about whether she had been in touch with Gov. Healey about the proposal or has the governor’s support. Healey’s signature is the final hurdle the proposal would need to clear to go into effect. “Those are the types of conversations we’re having at every level,” Wu said.

Opponents of Wu’s plan, including members of Boston’s business community, have argued that the city should slow budget spending growth, tap into its reserves, or spend city dollars on affected homeowners rather than realigning the tax scheme.

A Boston Municipal Research Bureau report about the city’s property tax proposal released in May recommended “taming the budget,” which will increase 8 percent next year.

“The administration and City Council must now start to take proactive steps to ensure that city services are delivered efficiently and cost-effectively. This involves paying close attention to upcoming collective bargaining negotiations and placing a high priority on productivity and operational efficiencies. While it may be tempting to introduce new programs and policies that expand Boston’s budget, both the mayor and City Council must exercise restraint,” the report said.

City officials said cutting the budget to account for the commercial shortfall would essentially meaning cutting the levy and cost the city $265 million. The city would have to lay off about 2,200 employees, and services would be significantly impacted, Wu said.

“Public education and public safety make up the lion’s share of what we’re spending on, so if you are needing to make reductions, these are the areas that have, you know, that are the largest expenditures,” city Chief Financial Officer Ashley Groffenberger said.

The Boston Municipal Research Bureau, however, said that a more modest cut would go part of the way toward solving the problem.

A one percent reduction in the city’s $4.64 billion fiscal year 2025 budget would trim $34.1 million; a two percent reduction would cut $68.1 million while still growing the budget over fiscal year 2024, according to the Bureau’s most recent data.

“The Research Bureau has put forward important and well researched alternatives to the home rule petition that would address the potential increase in residential property taxes without the negative consequence of increased taxes on commercial property owners and their tenants and we look forward to continuing to discuss those alternatives,” said Bureau President Marty Walz.

The executive order that Wu promised to issue would direct the city’s chief financial officer to seek appropriations of $15 million per year for three years to support small businesses. According to Michlewitz, those “tax protections” will be limited to employers with 50 workers or fewer or an annual revenue of less than $5 million. The city will also move to expand a personal property tax exemption for small businesses.

Boston City Councilor Ed Flynn proposed an alternative plan at a council meeting last month, to keep the current tax scheme but use the $15 million instead to help residents most impacted by the increase in their bills.

Wu rebutted the idea. She called giving rebates directly to homeowners “illegal. Aside from figuring out where exactly that money would come from, that actually raises a number of other state law and potentially constitutional issues,” Commissioner of Assessing Nicholas Ariniello said. “That’s a solution that isn’t actually addressing our problem. And then secondly, it has major, major legal implications, and we don’t think it’s actually viable.”