With ongoing discussions between city and state officials on a Home Rule Petition to address potential budget shortfalls in the years ahead, I continue to oppose the City of Boston administration’s plan. The administration continues to present their property tax shift proposal as the only way to prevent a significant increase to residential property taxes. However, I believe that residents have been offered a false choice since April, as the city has disregarded a number of other alternative options recommended by fiscal watchdogs, relevant experts, and the business community.
Instead, we’ve continued to engage in an exercise of pitting whether the burden should be on residents or businesses. We’ve avoided working together on a difficult issue with partners and stakeholders across the city. It may be good politics, but it’s not what’s best for the long-term economic vitality of Boston.
With the continued uncertainty in our economy due to the effects of post-pandemic inflation and higher interest rates, the city should first show our commitment to fiscal responsibility by examining areas to tighten our own belt after an 8% budget increase, implement a hiring freeze, and explore all alternative options provided by relevant experts before we even think of raising property taxes on residents and businesses in this environment.
While it is critical that we look to maintain $1 billion in emergency reserves to display our fiscal responsibility to ratings agencies, whenever our “rainy day” surplus exceeds that figure — the remainder and interest should be returned to the city budget to help us meet our obligations and stabilize both commercial and residential property taxes. As of FY23, our reserves in the city’s budgetary fund balance were approximately $1.186 billion. In their May report, the Boston Municipal Research Bureau noted that the city looks to maintain an undesignated fund balance of approximately 15% of Generally Accepted Accounting Principles (GAAP) operating expenditures. This figure represents 29% and well above that.
Moreover, despite several relevant experts calling attention to the heart of the issue being our tax structure — that Boston is more reliant on property taxes than any other city in the country — we have spent six months avoiding that long-term issue while focused solely on the administration’s proposal. We have not seen any analysis, or debated, whether a small local sales or food and beverage tax — with the burden also paid by visitors, tourists, and renters — would be less punitive than a significant property tax increase aimed at either homeowners or businesses.
For years, I continued to discuss the lasting impacts of work from home policies and the lack of foot traffic on our small businesses. I advocated to shift back toward more city business and hearings being conducted in-person. Over a year ago, I held a hearing at the Council where panelist after panelist from the administration testified that despite concerning reports on downtown office vacancies and foot traffic, there was no cause for alarm when it came to this new normal.
Fast forward to February, when the authors of a joint study indicated that Downtown Boston’s vacant office buildings could decrease in value 30% by 2029, and lead to the City of Boston collecting $1.5 billion in less revenue over the next five years, or annual tax revenues $500 million below our current levels. Our heavy dependence on property taxes may have allowed us to weather previous storms like the Great Recession; but work from home policies and falling commercial property values has unfortunately made it unsustainable. After speaking with business leaders throughout Boston and concerned residents — I did not believe that the administration’s plan was the right solution.
In March, I had called for the establishment of a Blue-Ribbon Commission on this issue which was unanimously passed as a resolution by the Boston City Council. I also called for a review of the Payment In Lieu of Taxes (PILOT) Program with large nonprofits in the City of Boston, which have absorbed over 50% of our city and continue to expand. This was simply an unsustainable formula even prior to our recent revenue concerns.
Thus far, we have fallen short of the leadership required to meet this moment. Initially, instead of confronting this challenging issue with the seriousness it required — the administration initially downplayed the report and attacked its credibility, even after filing the home rule petition on April 1.
During the budget process in May, fiscal watchdogs and business leaders noted that when Mayor Menino’s administration implemented their tax shift, which this current legislation is based on, they exercised restraint with a modest budget increase of 0.55%, while being forced to eliminate hundreds of positions, along with a hiring freeze. Some offered their own recommendations as well.
Over the summer, despite repeated concerns from fiscal watchdog groups and the business community, the city administration publicly indicated that residents should place blame on the Massachusetts State Senate if their proposal does not pass this year. While negotiations have continued, there have been discussions on an Executive Order to set aside $15 million annually for three years for small businesses. In recent weeks, I called for this hearing to discuss utilizing these funds to provide property tax relief to the very people intended to be protected by this potential tax shift — our residents.
I continue to say that while it may not be popular, our city can no longer afford all sectors of our economy to work from home indefinitely and continue to contribute towards falling commercial property values. Whether that includes compromises of a 4-day work-week in exchange for more in-person work — the City of Boston, our private sector, and nonprofit partners need to work closely together to incentivize employees and bring back foot traffic to Downtown — so that it continues to be a valuable and desirable place to do business, and remain a key driver of our city, state, and regional economy.
In times of great crisis, strong leadership can never be about pride of authorship. We can’t let our ideology cloud our judgment when it comes to practicality and what’s best for the City of Boston. Leadership requires us to have difficult conversations with our constituents. It may not be what they want to hear, but what they need to hear. Several experts have noted that the issue lies with our tax structure. It’s easy politically to pit residents against businesses. It’s a lot harder to do the work to explain the ramifications of an unfriendly climate for businesses to stay and grow in Boston, that the city we all love will suffer, and that we need to explore areas of compromise.
In the final analysis, I do not pretend to have all the ideas to respond to this once-in-a-generation fiscal challenge. What I do know, however, is that many reputable people, from the business world and otherwise, have all come to the conclusion that we should work on a compromise from a number of solutions so that we don’t harm an already struggling industry, stifle our economic growth, and perhaps lead us to becoming a less desirable place to live or do business.
It’s not too late to listen to them, reverse course, and collaborate. Boston works best when we work together.
Ed Flynn is a Boston City Councilor representing District 2
