Over 70% of the city’s budget comes from property taxes. High office vacancy rates reduce commercial real estate values, which in turn negatively impacts commercial real estate tax revenues. At the same time, as residential real estate values rise, homeowners will face higher property taxes to make up the difference. Otherwise, the city would face drastic budget cuts and would no longer be able to collect the full amount of property taxes it is allowed under state law. .
At a press conference Wednesday, city officials released their preliminary property valuation data showing the average homeowner will face a double-digit property tax hike next year, but it won’t be as high as experts feared. It was shown that
The city had previously projected that residential real estate would see a 16.5% year-over-year increase, based on the assumption that commercial property values would fall 10% and residential values would rise 5%. Early data shows the split was not as wide as expected, with commercial values falling by an average of 7 percent, while residential values rose by 4 percent.
On Wednesday, the administration gave two examples of how it would affect both the average Boston homeowner and a $5 million commercial property.
Officials said the average single-family home owner worth $838,000 paid about $5,500 in property taxes in fiscal year 2024 with the maximum home exemption. That number is expected to increase by just under $770 in fiscal year 2025, the city said. But Wu aims to keep the increase for the average single-family home at $270, which would represent an increase of about 5% from a year ago.
The owner of a commercial building valued at $5 million paid about $126,000 in property taxes in fiscal year 2024, but that amount will decrease by about $8,400 in fiscal year 2025, the city said. But Wu wants Congress to approve a plan to reduce the drop in commercial real estate by an even smaller amount, from 6.7% to 0.5%, to ensure homeowners pay less property tax increases. I’m thinking.
Officials emphasized that these examples are based on preliminary data and are subject to change as assessments and property tax bills are finalized.
The City of Boston is already halfway through its 2025 fiscal year, which began on July 1st. As a result, the property tax increase will only be reflected in the January and February quarterly bills, rather than being spread over the four quarterly bills of the fiscal year. April property tax bill. City officials say residents will likely face sticker shock after seeing a 28% increase from their second-quarter bill in January to their third-quarter bill.
For months, Mr. Wu has pushed for the power to temporarily shift the burden of property taxes to commercial property owners beyond what state law currently allows, to soften the blow for homeowners. A home rule petition to do so was approved by the City Council and passed by the state House this summer after last-minute negotiations in which Wu agreed to various compromises on the proposal.
But the bill has since stalled in the Senate. Business groups say the measure will hurt small businesses, place an undue burden on the already struggling commercial real estate industry, further deteriorate commercial real estate valuations and threaten the city’s long-term financial stability. It faces fierce opposition from real estate groups and real estate groups.
Wu further doubled down on his assertion Wednesday that he does not see it as a viable alternative to preventing soaring property taxes for homeowners, as proposed by business groups and fiscal watchdogs. Ta. He added that the city must also choose not to collect the full amount of property taxes allowed by state law.
“It would be very fiscally irresponsible to do so, because we are already behind with the 2.5% inflation limit, and going further back would mean we have no idea how to be able to fund city services. Because it just means trying to find the “future,” Wu said.
But Marty Walz, interim president of the Boston Bureau of City Research, said the alternatives presented by the financial watchdog group include cutting the operating budget by 1 to 2 percent, applying to the city’s free cash balance, or reducing or reducing taxes. He said that he would provide such things. Direct payments to the lowest-income and vulnerable homeowners should be taken seriously.
“This city has never faced a situation like today, so the current environment requires modern, creative thinking and the most equitable way to move forward,” Walz said. .
Wu met with state Senate President Karen Spilka, the Boston state Senate delegation, the Boston Bureau of Investigation, and business and real estate groups in late September, but her proposal has not advanced in the Senate since then. Wu said earlier this week that while he was open to continued dialogue, no new talks were planned.
Time is running out for Wu to complete his proposal on Beacon Hill. The City Council must vote in November to approve both the resident tax credit and the tax rate. Wu’s bill needs to pass by the end of November, so it could be finalized before tax bills are mailed in early January.
Niki Griswold can be reached at niki.griswold@globe.com. follow her @nikigriswold.
