Wu to seek permission to temporarily raise tax rates on office buildings should assessments show big decline in their values; says move would protect residents from potentially large tax increases

Mayor Wu said today she will seek state legislation that would let the city tax owners of commercial and industrial property at a higher rate for four years, should official assessments being conducted this year show a precipitous drop in the assessed value of downtown office space in particular due to work shifts caused by the pandemic.

Wu, who said the city is already seeing some decline in commercial building values downtown, said that should the current re-assessment cycle, to be finished within nine months, show a particularly steep decline, without a change in its taxation structure, the city would be forced to charge residential property owners potentially "significant increases" to make up the difference, an increase nobody wants in a city that already has some of the highest housing prices in the country.

Wu's proposal, if approved by the City Council, the State Legislature and the governor, would likely still mean property-tax increases for owners of residential property, but at far lower amounts than otherwise Wu and her advisors said at a morning press conference. Owners of commercial and industrial buildings with lowered assessments would still see decreases in their quarterly tax bills, but not as great as they would otherwise, they said.

At issue is the way Proposition 2 1/2 works. The measure limits only increases in the total amount of money a city or town can bring in through property taxes each year, not the increases for an individual property's taxes, so short of large cuts to city services, the city would have no choice but to raise residential rates should income from commercial properties decline significantly due to reduced assessments, she said.

At the same time, the law limits the maximum amount of tax revenue that can come from a particular type of property. Wu's proposed measure would let the city temporarily change the percentage of the overall property-tax levy that comes from commercial/industrial properties from the current maximum of 175% of what it would be if the city didn't have two tax rates - one for residential, one for commercial/industrial property - to 200%.

She said it's too early to say whether the measure would be needed, because that will depend on the current reassessment effort by city assessors, but she that it's better to have authorization to make the tax changes now should reassessment show a dramatic decrease in commercial property value, then wait until right before the city might have to set new tax rates and send out bills.

If the city gets authorization and does enact the new plan, it would run for four years, with the maximum amount of taxes from commercial and industrial properties decreasing each years.

She noted that Boston has done this sort of temporary commercial increase before, in 2003, under Tom Menino.

Among the supporters of the proposal: Tom O'Brien, CEO of HYM Investment Group, which is constructing the commercial and residential Bulfinch Crossing complex downtown and working to build out the giant Suffolk Downs project on the East Boston/Revere line.

O'Brien called the proposal "a really important tool" that would mean "a lesser burden on residents" in Boston. However, he also called for work on "potential new growth and new projects." Over the past 20 years, massive new development in Boston has helped keep municipal services afloat, since the value of each new building, and its resulting property-tax income, is added to the city's overall assessment and yearly income.

Adam Chapdelaine, of the Massachusetts Municipal Association, which represents the state's 351 cities and towns, praised the proposal as a way to give Boston a way to handle property taxes in way that minimizes the impact on its residents.