Wu, Business Leaders Reach Deal To Soften Commercial Property Tax Hike

After negotiating with business and real estate leaders over how much Boston's commercial property tax rate should rise to make up for declining office values, Mayor Michelle Wu on Wednesday announced an agreement with support from industry groups. 

The new proposal would increase the tax burden for commercial property owners to 181.5% that of residential property owners. 

Commercial owners currently pay 175% of the rate that residential owners pay, and Wu had previously called for increasing that to 200%. Her plan passed the city council and the state's House of Representatives but failed to pass the Senate before the end of the legislative session this summer. 

Wu continued to push for the increase in recent months and hosted a town hall to rally support from residents about the tax shift proposal, the Boston Business Journal reported. She also met with business leaders about how to make the proposal more palatable. 

On Friday, four business groups, including NAIOP and the Greater Boston Chamber of Commerce, sent the mayor a letter saying they would accept a shift to 181.5%, the BBJ reported. 

In response, Wu drafted new legislation over the weekend that put the shift at 182%, but business leaders told the BBJ they would oppose that. The mayor ultimately brought it down to the level business groups had sought, and they voiced support for the plan. 

“This compromise acknowledges the crisis facing the commercial real estate sector, and as we look ahead we must work together to encourage economic growth and development in the City of Boston to ensure a strong future for all who live and work here,” NAIOP CEO Tamara Small said in a statement. 

The 181.5% commercial tax burden would just be for fiscal year 2025, and it would step down to 180% in FY 2026 and 178% in FY 2027. Wu had previously proposed a five-year step-down period. The plan would also raise the personal property tax exemption for small businesses from $10K to $30K.

The mayor plans to file a home rule petition that needs to be approved by the city council, both chambers of the state legislature and signed by the governor before it can take effect. The proposal needs to be signed by late November so the city can certify it and mail out updated bills by January 2025. 

Wu proposed the temporary shift to protect Boston residents from a major increase in their property taxes due to dropping office values. The city heavily relies on property taxes to fund its budget each year.

“For Boston to be a home for everyone, our residents and businesses depend on each other to thrive,” Wu said in a statement. “As we continue working together on the challenges facing our communities and economy, I’m grateful for the strong leadership and partnership from across our neighborhoods and business community to plan for our shared future and economic growth.”