City Council - Ways & Means Committee Hearing on Docket #2045

Meeting Date: December 08, 2025 at 10:00 AM Governing Body: Boston City Council - Ways & Means Committee Type of Meeting: Public Hearing Attendees:

• Councilors: Brian Worrell (Chair), Erin Murphy, Ruthzee Louijeune (Council President), Gabriela Coletta Zapata, John Fitzgerald, Liz Breadon, Edward Flynn, Henry Santana, Enrique Pepén, Sharon Durkan, Julia Mejia, Benjamin Weber
• City Officials: Ashley Grafenberger (Chief Financial Officer), Nicholas Garanello (Commissioner of Assessing)
• Public: Michael Caine (Director, Mass Alliance of HUD Tenants), Jerry McEachern (Seaport Resident), D.B. Reif (Brighton Resident)
• Absent: Councilor Weber (initially, later joined)

• Sponsor: Councilor Brian Worrell
• Referral Date: December 3, 2025
• Purpose: To adopt tax classification and the residential homeowners exemption for FY26.
  • Grant the full 35% residential homeowners exemption.
  • Set the residential rate at the lowest possible rate allowed by state law compared to the commercial rate.
• Urgency: Passage by Wednesday, December 10, 2025, is critical for printing tax bills by January 1st. Failure to pass would result in a default to a flat tax rate of $15.40 for all properties.

• Ashley Grafenberger, Chief Financial Officer:
  • Stated that the city historically maximizes both the residential exemption and classification under current state limits.
  • Mentioned a pending home rule petition at the State House to adjust maximums further, but current action is under existing limits.
• Nicholas Garanello, Commissioner of Assessing:
  • Supported Docket #2045 to allow for a split tax rate and residential exemption.
  • Explained that without passage, the city would revert to a single flat tax rate.
  • Provided estimated tax rates for FY26 under different scenarios:
    • Flat Tax Rate (no classification/exemption): $15.40 for both residential and commercial.
    • 35% Residential Exemption (no classification): Residential rate $18.62, Commercial rate $15.40.
    • 175% Shift & 35% Residential Exemption (current law): Residential rate $12.40, Commercial rate $26.96.
    • 180% Shift (pending legislation): Residential rate $11.99, Commercial rate $27.73.
    • 181.5% Shift (pending legislation): Residential rate $11.86, Commercial rate $27.96.
    • 200% Shift (previous legislation): Residential rate $10.33, Commercial rate $30.81.
  • Noted that the Council has historically chosen the maximum shift available to benefit residents.

• Timeline: Confirmed the goal is to vote on Docket #2045 on Wednesday, December 10, 2025, to allow for tax bill printing by January 1st.
• Process Consistency: The process for adopting tax classification and residential exemption is fundamentally the same each year.
• Impact of Failed Home Rule Petition (last year):
  • The home rule petition introduced last year was unsuccessful at the State House.
  • The city adopted the maximum 175% shift under state law.
  • Residential property taxes increased significantly:
    • Average single-family home: 10.4% increase.
    • Including other property types: 14.9% increase.
• Budget Cuts:
  • City departments have been asked to reduce their budgets by 2% below current year appropriations for the upcoming fiscal year.
  • This is in response to economic uncertainty and cooling revenue growth post-pandemic.
  • Such requests were not common in previous years due to robust revenue growth and ARPA funds.

• Annual Classification: Confirmed that this is a normal, annual classification process to avoid a single flat tax rate.
• Taxation Structure:
  • Boston is heavily reliant on property taxes (approx. 75% of revenue).
  • Massachusetts municipalities are bound by state rules, limiting options like sales or income taxes.
  • Progressive property tax rates or means-testing are not allowed under the Massachusetts Constitution.
  • The residential exemption acts as a form of progressive taxation, benefiting lower-valued properties more.
  • Other means-tested programs (e.g., senior exemptions) are also state-controlled.
• Commercial Property Values:
  • The commercial market is diverse; not all commercial spaces are experiencing consistent declines.
  • Issues with vacancy in Class B and C office space are lowering values.
  • "Flight to quality" sees tenants moving to Class A spaces.
• Home Rule Petition Timeline:
  • The current home rule petition, as drafted, covers FY25, FY26, and FY27.
  • It would revert to current maximum levels in FY28.
• Watertown Precedent: A similar home rule petition was passed for Watertown several years ago, and another is pending.

• Support for 35% Residential Exemption: Expressed clear support for maximizing the residential exemption.
• DOR Data Certification:
  • The Department of Revenue (DOR) has certified values and new growth.
  • Other items (overlay, levy limit, tax rates) come after Council action on this order.
• Average Residential Percent Increase (last fiscal year):
  • Average single-family home with residential exemption: 10.4% increase.
  • Including other residential properties (condos, large apartments): 14.9% increase.
• East Boston Housing Market: Councilor Coletta Zapata inquired about higher increases in East Boston; Commissioner Garanello offered to provide specific data.
• Factors for Residential Increase:
  • Market activity is the primary driver.
  • Valuations are based on fair market value as of January 1st, 2025, reflecting market activity in the preceding 12 months.
  • Residential prices are still increasing, but the slope is more stable than in previous years.

• Prop 2 1/2 and Levy Limit:
  • It is possible to not collect the full 2.5% levy increase in a given year.
  • Not collecting the full levy in one year means that revenue is lost for that year, but it does not prevent collecting up to the higher levy amount in future years by increasing tax rates.
  • Holding the levy flat for several years and then collecting it all at once would result in a dramatic increase in tax rates.
• Property Valuation Appeals:
  • Residents who believe their homes are overvalued can file an abatement application in January.
  • The deadline for filing is February 1st (or the next business day if it falls on a weekend).
  • Information on sales in neighborhoods is available on the Assessing Department's website: boston.gov/assessing.

• Tax-Exempt Property: Approximately 53% of property in Boston is tax-exempt (non-profits, government-owned).
• Assessment Frequency: Properties are assessed every year.
  • Recertification years (e.g., FY25) involve more reports and model reviews.
  • Interim years still involve trending values and assessing properties.
• Flagging Under-assessed Properties: The main mechanism for review is through abatement applications.
• Assessing Department Staff: The valuation staff consists of 15-20 people.
• "Gaming the System" (Landlords):
  • Councilor Breadon described landlords converting properties (e.g., duplexes to 16-bedroom units) to maximize rental income without appropriate assessment.
  • Commissioner Garanello advised residents to report such instances to the Assessing Department for investigation.
• PILOT Agreements:
  • Progress on Payments in Lieu of Taxes (PILOT) agreements is slow but steady.
  • The system is voluntary, and relationships need to be maintained.
  • Conversations with institutions are ongoing, acknowledging current challenging times for them.

• Fiscal Responsibility: Advocated for fiscal responsibility, including a hiring freeze, spending reductions, and exploring alternative revenue options.
• Blue Ribbon Commission: Recalled calling for a blue ribbon commission to address downtown vacancies and revenue concerns, which was unanimously passed by the Council.
• PILOT Program Review: Suggested reviewing the PILOT program and exploring alternative revenue sources like the MCCA state surcharge.
• Remote Work Impact: Emphasized the need to rethink the balance of remote and in-person work to support downtown vitality and commercial property values.
• Prop 2 1/2 Reforms:
  • Commissioner Garanello stated no recent conversations about Prop 2 1/2 reforms.
  • CFO Grafenberger mentioned the Mass Municipal Association (MMA) is working on recommendations, but the city is not actively involved in those discussions.
  • Mayor Wu has made general comments about the need to re-evaluate the 43-year-old Prop 2 1/2 law.

• 2% Budget Decrease: Confirmed that departments are asked to propose budgets 2% less than last year, as an initial request.
• Correlation to Tax Relief: The budget reduction is primarily in response to overall economic conditions and uncertainty, not directly for homeowner tax relief.
• Displacement Tracking: The administration does not track displacement specifically due to tax increases but acknowledges the impact of double-digit property tax increases on residents.
• Impact of Not Passing Docket #2045:
  • Tax bills would default to a single tax rate of $15.40.
  • This would be a significant increase for residents (FY25 residential rate was $11.58) and a dramatic decrease for commercial properties (FY25 commercial rate was $25.96).
• Small Business Input on Home Rule Petition:
  • The pending home rule petition includes provisions to help small businesses, such as increasing the personal property tax exemption limit from $10,000 to $30,000.
  • This directly benefits businesses that may not own real estate but pay taxes on equipment.

• Residential Exemption Application Process:
  • New homeowners receive an application automatically.
  • Existing homeowners should check their third-quarter bill (January) for the exemption deduction.
  • If not present, residents should call the Assessing Department or download an application from the website in January.
  • The deadline for application is April 1st.
  • Generally, residents do not need to reapply every year unless there's a property transfer or a random audit.
• Outreach for Exemptions:
  • Outreach is primarily through tax bill inserts and community meetings.
  • Partnerships exist with Neighborhood Development, first-time homebuyer programs, and Age Strong to disseminate information.
• Larger Exemptions for Lower-Income Owners:
  • Other exemption programs exist for seniors and veterans.
  • Deferral programs (senior, hardship) allow taxes to be deferred at a low interest rate.
• Residential vs. Senior Exemption Application:
  • Residential exemption: Generally, no annual reapplication required (unless property transfer).
  • Senior exemption: Annual reapplication required due to state law.
• Exemption Portability: The residential exemption does not follow a person; a new application is required for a new property.

• Frustration with State Senate: Expressed anger at the State Senate for not passing the home rule petition, which the City Council has passed three times.
• City Budget Reduction: Acknowledged the 2% reduction request for city departments and concerns about its impact on city workers.
• Prop 2 1/2 Override: Confirmed Boston cannot do a temporary override of Prop 2 1/2 without voter approval, and the city has never sought one.
• Home Rule Petition as Only Lever: The home rule petition is seen as the only available lever to prevent extreme residential tax hikes.
• Conversations with State Senate: The city remains open to conversations with the state, but the current process is under a time clock.
• Levy Ceiling vs. Levy Limit: Confirmed the city is not exceeding the levy ceiling but is at the yearly levy limit.
• Home Rule Petition Shift: The pending home rule petition proposes a 180% shift for FY26 and 178% for FY27.
• Impact on Homeowners: Emphasized that homeowners, especially young families and seniors, cannot absorb year-over-year tax increases.
• "Eighth Year in a Row": CFO Grafenberger clarified that it's the eighth year in a row where residential property taxes for the average single-family home have grown by more than 5%.
• Tax Rebates: The legislation allowed for rebates in the past fiscal year, but the economic situation has changed. Rebates would require an appropriation and Council discussion.
• New Growth and Tax Rolls:
  • Properties coming off tax rolls (e.g., commercial to residential conversions) do not impact new growth but lower the overall taxable value.
  • Fewer taxable properties mean a smaller group splits the levy, potentially increasing tax rates for remaining properties.
  • New growth is projected to dip in the next few years due to increased costs and decreased construction.
• Apartment Building Valuations:
  • Councilor Worrell highlighted an example of a 500-unit apartment building appreciating 8.6% (2021-present) compared to 27% for average residential parcels.
  • Requested data on total valuation of residential apartment buildings (30+ units) and single-family homes since 2018.
• Estimated Homeowner Exemption: The estimated value exempt for FY26 with a 35% exemption is $351,108, resulting in a savings of $4,353.74 (based on a projected $12.40 tax rate).

• Support for Residents: Publicly acknowledged support for alleviating financial burden on residents.
• Alternative Revenue Sources (PILOTs):
  • Questioned when the city would explore other options beyond residential/commercial property taxes, specifically targeting higher education and hospital institutions (PILOTs).
  • Commissioner Garanello stated that the home rule petition aims for stability within the current system. Exploring new revenue options (like PILOTs) would require state law changes and further discussion after achieving stability.
  • CFO Grafenberger noted ongoing productive conversations with university and medical institution partners regarding PILOTs.
• Scenario: Two-Family Home ($800,000):
  • Without Classification: $8,152 in taxes.
  • With Classification: $5,279 in taxes (35% savings).
  • With Residential Exemption (owner-occupied): $5,279 in taxes (43% savings from $9,264 without exemption).
  • The maximum projected residential exemption for FY26 is $4,353.74.
  • Councilor Mejia expressed concern about landlords passing on increased costs to renters.
• Urgency: Reiterated the urgency of passing the docket by Wednesday, the last day of the legislative cycle.
• Dollar Amount of Loss (if no action): If no action is taken, the city would default to a flat tax rate of $15.40. This would be a significant increase for residents (FY25 residential rate was $11.58) and a significant decrease for commercial properties (FY25 commercial rate was $25.96).

• Split Tax Rates: Used to keep housing affordable.
• Shift from Commercial to Residential (without HRP): Estimated a shift of over $50 million from commercial to residential property owners without the home rule petition.
• Budget Cuts vs. Levy Shift:
  • Cutting the budget by the equivalent of the shift (e.g., $116 million to achieve a $11.99 residential rate) would disproportionately benefit commercial property owners (approx. 2:1 ratio) because savings cannot be legally directed to one class.
• Historical Tax Rates:
  • Projected FY26 residential rate ($12.40) is similar to 2014 ($12.58).
  • Projected FY26 commercial rate ($26.96) is similar to 2016 ($26.81).
  • This demonstrates how classification reallocates the tax burden without increasing overall revenue.
• Pensions:
  • Pension obligations are a major cost growth item.
  • The city is projected to meet its unfunded liability in FY28.
  • Maximizing the tax levy and commitment to long-term liabilities underpins the city's AAA bond rating. Not doing so would jeopardize the rating.

• Jerry McEachern (Seaport Resident):
  • Expressed concern about escalating property values and high condo fees in Seaport.
  • Questioned the lack of city services (e.g., potholes) despite high taxes.
  • Note: Public testimony is for remarks, not direct questions to panelists during this segment.
• Michael Caine (Director, Mass Alliance of HUD Tenants):
  • Supported efforts to minimize taxes for homeowners, condo owners, and seniors.
  • Highlighted a potential issue with new housing assessments: new production is assessed at construction cost, not sale value, leading to a loss of new revenue outside the Prop 2 1/2 limit.
  • Stated that 13,000 apartments/condo units built recently are assessed at construction cost, not sale value, which shifts money within the levy limit rather than generating new revenue.
• D.B. Reif (Brighton Resident):
  • Argued that land for condominiums is effectively exempt from taxation, unlike single-family homes where land and building are separately valued.
  • Provided an example of a condo unit with a $352,000 valuation receiving a $317,000 residential exemption, resulting in a taxable valuation of only $35,000.
  • Calculated that 36,000 owner-occupied condos receiving the full residential exemption could amount to $11.4 billion in exemptions.
  • Suggested that reducing the residential exemption for condos could lead to a healthier fiscal picture and more equitable taxation.

• Veteran/Senior Tax Exemptions: The number of applicants for veteran and senior tax exemptions tends to drop year over year.
• Final Action: The committee will vote on Wednesday, December 10, 2025, on whether to grant the full 35% residential homeowners exemption and the tax shift.
• Adjournment: The hearing on Docket #2045 was adjourned.