Mayor Michelle Wu fends off questions from lawmakers about compromise tax shift plan

Boston Mayor Michelle Wu faced at times skeptical lawmakers Wednesday morning as she tried to convince them to advance a proposal to raise tax rates for commercial property owners in an attempt to ward off an immediate hike on residents as the city navigates the post-pandemic era.

A hearing at the State House on her proposal came only days before Boston plans to set its tax rates and as the Legislature finds itself near the end of its session, when recorded votes are typically not allowed on major proposals and any single lawmaker can block legislation.

Wu said Beacon Hill legislators needed to act soon on the measure in order to stave off a nearly 30% jump in January bills for residential taxpayers, a spike that would be “devastating not only for our residents but for all of Boston’s businesses that rely on our residents as customers.”

“We all know that for our city to thrive, our economy has to thrive. We need great jobs in our city. We need a healthy workforce, and we need residents to have enough money in their pockets at the end of every month to be able to go out and support our businesses and enjoy all that our city has to offer,” Wu said.

The revised plan, which is under review by the Legislature’s Revenue Committee and comes as Wu put forward a 7% general budget increase, was met with questions from Democratic state senators, including the co-chair of the committee, Sen. Susan Moran of Falmouth.

Moran, who plans to depart the Legislature for another elected post next year, said former Mayor Tom Menino took “many other avenues,” including cutting costs, before seeking a tax shift in 2004.

“That happened for quite a few years before the mayor took the extraordinary tact of raising taxes on businesses. How would you compare those times?” Moran asked Wu and Rep. Rob Consalvo, a Hyde Park Democrat who filed the bill on behalf of the city.

Wu said the “initial spark” to consider altering tax burdens came from officials who previously served with Menino and worked on the matter roughly two decades ago. She also countered that Menino’s cost-cutting and tax shift had nothing to do with each other.

And times are different now, the Boston Democrat said. Wu said she walked into office in 2021 with all 48 of the city’s union contracts expired, a situation that culminated in salary adjustments for city workers who had not seen an increase during the four years of the pandemic.

“Our 7% reflected the first time that police, fire, EMS and many other larger contracts were fully absorbed into our budget, and it’s in line with the type of growth that other cities and large agencies had to experience in making that market adjustment through the pandemic,” she said.

But Moran continued to press Wu on whether the long-term effects of the tax shift would put a “monkey wrench” into state officials’ efforts to make Massachusetts more competitive.

In response, Wu said the City of Boston has never made a budget cut mid-year with the exception of when state officials have reduced local aid.

“Even in the midst of the Great Recession, the Dot Com Bubble Burst, times of true economic crisis and stress across the board, that was often reflected in the years to come because our budgets, once they’re set, are really workforce funding, and you can sort of try not to hire some of the positions that were allocated, but those have a direct impact even on the budget themselves,” she said.

Sen. Michael Brady, a Brockton Democrat, asked Wu directly if she considered cutting the city’s budget instead of raising taxes to cover spending. Wu tossed the question to Boston Chief Financial Officer Ashley Groffenberger.

Groffenberger said the city’s budget attempts to “true up” a lot of union contracts, which led to higher spending needs.

“We are just seeking, really not to solve a revenue problem, but an allocation problem that is happening in this moment as a result of changing work patterns and commercial valuations,” she said. “I think we view this as a temporary measure to kind of get us to what will probably be our new normal.”

Greg Maynard, the executive director of the Boston Policy Institute, said the deal between Wu and the business community provides temporary relief for homeowners while “doing nothing to address the budget crisis that Boston faces.”

He said the city pulls in more than 70% of its revenue from property taxes while dealing with a $1.5 billion commercial property tax shortfall over the next five years due to falling office values. But even with the tax shift, residential property owners will still face a double-digit increase in their bills.

“This home rule petition is not a long-term solution for anyone hoping to shield Boston’s homeowners from rapidly increasing property taxes. Boston’s budget crisis is complex, and decades in the making. Addressing it requires a much broader, more data-driven conversation than has occurred thus far,” he said.

Wu and business leaders in the city struck a deal a few weeks ago after an earlier measure was left gathering dust in the Massachusetts Senate.

The proposal would shift more of the property tax levy onto commercial and industrial property owners — from 175% to 181.5% in fiscal year 2025, 180% in fiscal 2026, and 178% in fiscal year 2027. The amounts in the agreement are lower than Wu’s original proposal.

The bill landed at the State House this fall during informal sessions, a stretch of the Legislature’s two-year session when any one lawmaker can block advancing legislation unless Democrats coalesce in enough numbers to overcome the roadblock.

Consalvo said he is not worried about the measure running into resistance because it is a compromise and cleared the House earlier this year “overwhelmingly with bipartisan support.”

“I’m very confident that given all the work the mayor has put in and the great input by the business community, we should be able to move forward,” he told reporters.

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