A City Hall watchdog revived its warning that empty office buildings could leave Boston with a $1 billion budgetary shortfall in a bombshell Wall Street Journal report that said city homeowners would be left picking up the tab.
The WSJ story, published Monday, keyed off a report issued by the Boston Policy Institute in February 2024 that received widespread attention upon its release in local media outlets, including the Herald.
It projected that declining office values were eroding the city’s commercial tax base at a rate that would lead to a more than $1 billion shortfall in the operating budget within the next five years. The Journal report takes that analysis a step further, by stating that the shortfall would be entirely borne by homeowners.
“Continued downward pressure on commercial values would shift more than $1 billion of Boston’s tax burden to homeowners over the next five years, according to a report from the nonprofit Boston Policy Institute,” the WSJ report states. “Those increases would be on top of additional tax hikes many owners face because their homes have risen in value.”
BPI’s report led to a prolonged spat between the watchdog and City Hall, which downplayed its findings, and continued to do so after Mayor Michelle Wu cited declining commercial values as the reason she was seeking Beacon Hill’s approval shift more of the tax burden onto businesses and by extension, hopefully lower residential tax bills.
Wu said that temporarily changing the city’s tax structure would stabilize the budget in a way that would soften the rate for Boston homeowners. The city derives roughly three-quarters of its revenue from property taxes.
BPI has disagreed with that assessment, saying that the commercial real estate woes are projected to continue “for a long time.” The mayor’s tax shift legislation would have been in effect for three years.
“The rise of remote work and the corresponding decline in office values is eroding the tax system in a way that seems likely to last a long time,” the BPI report states.
For the relatively new fiscal watchdog, which made its first big splash with its empty office buildings report last year, the Wall Street Journal’s attention to its findings served as validation after the prolonged blowback it has received from City Hall.
“The article highlighted that the total assessed value of Boston’s commercial property fell from FY24 to FY25, going from $63 billion to $61.2 billion, a decline which the report’s author, Evan Horowitz of Tufts University’s Center for State Policy Analysis, told the WSJ: ‘is basically unprecedented, outside of recessions,” BPI said in a Monday statement.
“This article is also more evidence that it was Mayor Wu – not BPI — who was peddling ‘false information’ about the state of the City’s budget.
In her FY25 budget speech on April 10, 2024 Mayor Wu attacked BPI’s report, saying: “To point to some false information that the city might be experiencing a billion-dollar shortfall — that is just simply not true.’
“More than a year later both assessed values and the actual sales price of Boston’s downtown office buildings are falling and there is no plan from City Hall to reverse that decline,” BPI’s statement concluded.
Wu, who is up for reelection this year, is trying again on her tax shift legislation, which has been approved by the City Council three times but stalled in the state Legislature. Her most prominent challenger is Josh Kraft, a son of the billionaire New England Patriots owner Robert Kraft and longtime philanthropist.