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

Thank you.

Thank you.

For the record, my name is Brian Worrell, District 4 City Councilor, and I'm the Chair of the Boston City Council Committee on Ways and Means. Today is December 8, 2025. The exact time is 1014 a.m. This hearing is being recorded. It is also being live streamed at boston.gov backslash city-council-tv and broadcast on Xfinity Channel 8, RCN Channel 82, and Fios Channel 964. Bring comments may be sent to the committee email at ccc.wm at boston.gov and will be made part of the record and available to all councillors. Public testimony will be taken at the end of this hearing. Individuals will be called on In the order in which they signed up, we'll have two minutes to testify. If you are interested in testifying in person, please add your name to the sign-up sheet near the entrance of the chamber. If you are looking to testify virtually, please email

Our Central Staff Liaison Megan at meagancorredo at m e a g a n dot c o r u g e d o at boston.gov for the link and your name will be added to the list. Today's hearing is on docket number 2045, order relative to the adoption of tax classification in the city of Boston in FY2026. This matter was sponsored by Councilor Brian Worrell and was referred to the committee on December 3rd, 2025. Today, I'm joined by my Councilor colleagues in order of arrival. Murphy, Council President Louijeune, Councilor Coletta Zapata, Councilor Fitzgerald, and Councilor Breadon. We have received a letter of absence from Councilor Weber. I want to thank everyone for coming. As we talk about taxes once again, I want to remind everyone of the action that will ultimately be taken with this docket.

We as a council will vote on whether or not we will grant the full 35% residential homeowners exemption. and we as a council will vote on whether we want to set the residential rate at the lowest possible rate allowed by state law in comparison to the commercial rate. We take this action every year. I want to now pass it over to today's panelists if they want to introduce themselves. I'm going to wave open remarks to my colleagues so we can just dive into the conversation. The floor is now yours.

Ashley Grafenberger Good morning, Chair Worrell and Councillors. I'm Ashley Grafenberger. I'm the Chief Financial Officer for the City. Thank you for having us here today to talk about this very important annual topic. As the chair mentioned, this is a routine annual exercise for the mayor and the city council to adopt the residential exemption and classification for the city. Historically the city has chosen to maximize both under current state limits and that's a similar ask of what we're asking of you all today to maximize both under current state law. As you are all very familiar with, we have passed and sent up, with your help, a home rule petition to make further adjustments to those maximums, but that legislation is still pending a committee assignment at the State House So the action today is to adopt both of those under the current limits under the law.

So I think with that, I'll turn it over to our Commissioner of Assessing, Nick Garanello.

NICK GARANELLO. Good morning, Councillors. Good morning, Chair. For the record, my name is Nicholas Aranello. I'm the commissioner of assessing for the city of Boston. I'm here today on behalf of the administration to support docket 2045, which would allow for a split tax rate through classification. That's what makes it so residential and commercial tax rates are different. And it would allow for a residential exemption. So without passage of these dockets, We would revert to a system where we have one flat tax rate for everybody. It's a really important action that the council and mayor I think since both these things have existed, have always voted to maximize to provide the most relief possible to our residents. By way of...

Example, these are estimated rates because the final rates are still dependent upon action, the council, and then also final approval of the state. But I can tell you that if we had a flat tax rate, The residential tax rate would be estimated to be $15.40 and the commercial tax rate would be estimated to be $15.40. So that's across the board for everybody. If we had a residential exemption of 35% and we chose not to adopt classification, then we would have a residential rate of $18.62. and a commercial rate of $15.40. So that demonstrates how the residential exemption gets built into the residential tax rate itself. Shifting to what I believe to be kind of the likely scenario of the laws as they stand today.

I can give you examples of what it would look like if we had a 175% shift and we had a residential exemption of 35%. So in that instance, the residential rate is going to be estimated to be $12.40 for fiscal year 2026, and the commercial rate is going to be estimated to be $26.96 for fiscal year 2026. If it's interesting, I have another couple of examples. One are related to the legislation that we filed last year and also the legislation that is pending now. If we look at one of the figures in legislation that's pending now is 180% shift. So if we look at that, the residential tax rate is estimated to be $11.99. So still an increase over last year, but a decrease from $12.40. And the commercial rate would be estimated to be $27.73.

Another number that's in the legislation that's currently up at the State House is 181.5%. That would have a residential exemption estimated to be $11.86 and a commercial tax rate that is estimated to be $27.96. and then finally the example I will give would be kind of what could have been the maximum under last year's legislation which is a 200% shift and that would have a residential rate going down to $10.33 and a commercial rate of $30.81. The legislation and system is designed as kind of the scale where you can pick anything in a whole range. So if the council is interested, I'm happy to share every possible number from no shift to 20% shift. I have that available and can either talk through it or share it afterwards.

As I said, historically, the Council has always chosen the maximum shift available to benefit our residents to the greatest extent possible.

Thank you. I want to acknowledge that Councilor Flynn and Councilor Santana has joined us, and also Councilor Pepén. I will now turn it over to my council colleagues in order of arrival for questions starting with Councilor Murphy. Councilor, you have the floor.

As we know we're in the last hours of this term we're meeting today if you could just talk through the timeline are you expecting this To just begin the conversation for hearings next year, I'm hoping that this is something that we bring forward on Wednesday to vote on.

The docket that is scheduled today. We're hopeful to have it for Wednesday so that we can proceed with the printing of our tax bills that go out on January 1st. Without it, I think we default to that flat tax rate, as Commissioner mentioned, which would mean everyone would get a tax rate of $15.40.

And we were here doing the same thing last year. Could you talk through what's different? If anything?

I think the process every year is fundamentally the same. So there's an order that is put forward seeking to have the maximum classification shift and to have the maximum residential exemption that's allowed at that point in time. So it's a very similar process to last year and I would say at least the last 20 years as far back as I'm familiar.

And as we all know, last year it didn't pass at the State House. So if you could talk through. What impact that did have on our residents?

Yes. So the home rule petition that we had introduced last year was not successful at the State House ultimately. And so we had to adopt a shift at the maximum level allowed under state law, which is 175%. And as a result, as we predicted, residential property taxes increased significantly. I think for the average single family home, that increase was about 10.4%. And then when you expanded that to include other property types in the city beyond just single family home, that increase was closer to 15%. That was again with the state law limits that currently exist.

And looking ahead to the budget season next year, and I know conversations start July 1st, like we don't wait. Are we making any cuts that would also help support not needing to raise taxes on our residents?

So we have issued guidance to our city departments for this upcoming fiscal year to reduce their budgets by 2% below their current year appropriation. As we've talked about many times, that is very helpful and necessary for fiscal stability of the city. And whether or not it impacts the taxes is based on whether or not we make a different choice about our tax levy. Given the economic uncertainty and things that we're forecasting for the next year, we are asking departments to make reductions in their budget.

And that's not common, say, three years ago, four years ago? Did you ask departments to do that also?

We didn't in the last couple of years because we had a robust revenue growth that was supporting the budget.

and COVID money.

Yeah, there was the ARPA funds, but kind of focusing generally just on our regular operating revenues. They were strong and recovering post-pandemic. And so we were able to support a healthy growth in our budget. But as I think we're all aware, economy is cooling, things are slowing down, and so we're making adjustments accordingly.

Thank you. I'll wait till the next round for more questions. Thank you, Chair.

Thank you. The Chair recognizes Council President Louijeune. Councilor, you have the floor.

Thank you, Mr. Chair, and thank you to everyone for being here. So just to clarify so that folks are aware, this is the normal tax classification that we do every year so that we don't go revert to A single rate. The single rate, exactly. Correct, yes. And so while it's related to the conversation, this is the work of the council that we have to do every year. I'm curious with respect to what taxation looks like for both based on property and income. We don't have an income tax here, but what does it look like compared to what other cities are doing?

Great question. So we are Not unique in Massachusetts in that we are all sort of bound by the same rules and structures. So we are heavily property tax reliant here in the city of Boston. About 3 quarters of our revenue is generated by property tax. and there's great variability across cities. You have other cities that have sales tax, income taxes as you mentioned. So we are very limited in the structure that we have to be property tax reliant.

Right, and we can't have a progressive property tax rate because, I believe I've asked you this question, Commissioner Arellano, if we could do it, if we could means test

Yeah.

Not separately. I think people have an income tax for that reason. But if there was a way to means test property taxes so that One of the reasons why we're here, Mass Senior Action Council was here, so many of our residents are house rich but cash poor. And, you know, if there was a way to sort of understand who could actually bear the burden of increased taxes based on income, that could be another maneuver that this body could look at. But my understanding is that Pursuant to the Massachusetts Constitution that we're not able to do that.

MR. I appreciate the question, Madam President. That's correct. The property tax law is very much tied into our state constitution and there are a lot of restrictions around kind of ways to modify it and not modify it. The closest thing that we have to that is the the residential exemption that kind of does an element of turning what would otherwise be a flat tax into a progressive tax. So the lower your property value is, the higher percentage of your tax is the residential exemption. Accommodates for. And then other than that, the other means tested products that we have are exemption related. So senior exemptions that are also Very much controlled by state law and that the council has also put forward along with the city some adjustments to those programs that we're still waiting for action on.

Okay. Two additional questions. When we talk about the decrease in commercial property values, Can you talk about, is that consistent throughout the city, through all commercial spaces? Are there areas where the commercial industry in the city is doing fine and is thriving, where they didn't experience a significant decrease Do you have that data to share with us?

Yeah, that's also an excellent question. It's something that It'd be nice if there was a really straightforward answer. I think one of the good things about Boston is that we are large enough and diverse enough that there's a bunch of different property types and so it is not that the commercial market is consistently going There's definitely has been has been widely publicized an issue on Vacancy and kind of Class B and Class C office space. That's been lowering those values. There's also been an issue with basically a The concept is a flight to quality, where when tenants are renewing space, they end up moving towards the higher and Class A space.

and many more. Relatively normal economic concepts that have been kind of brought on as the economy globally, but in Boston in particular, kind of adapts to what the future looks like post COVID.

Thank you. Two or three additional questions. One, but I can't find the other one in my head. But this Homo petition that we've put forward now twice before to our colleagues on Beacon Hill, There's a time period on it, right? So at what point would it revert back to what we're voting on today, essentially?

Yes. So the legislation as currently drafted was a three-year window covering FY25. this current year, FY26, and then FY27 next year, and then we'll revert back to the current maximum levels in FY28.

Okay, thank you. And then it's my understanding that earlier this year, or was it last year, that the legislature passed a similar home rule petition for Watertown and is considering passing a similar homeowner petition again while action for the city of Boston has stalled. Is that correct?

And are the HRPs, homeowner petitions, are they similar? Yes, I believe there was one for Watertown that was passed several years ago, and I think there was another one that was recently submitted to the legislature and referred to committee for Watertown again for this year and going forward. Thank you.

So, I mean, historically, these have been pretty, you know, the city, especially with the AAA bond rating determining what makes the most sense for its finances and hoping that the legislature will do what it has done normally. Yes, thank you so much. I have further questions, but I'll wait for another round.

Thank you. The chair recognizes Councilor Coletta Zapata. Councilor, the floor is yours.

Thank you, Chair. Thank you for being here, CFO and assessor. This council has historically approved this residential exemption up to the maximum for 35% for maximum savings, and that's something that I definitely plan to vote yes on so that we can give and others. As it relates to this proposal, I think that's clear. Obviously this is existing in the broader landscape the economic landscape of the city of Boston with what's happening up at the Statehouse We do have to receive certain approvals from the state which means that we need to gather data from the DOR and that's a point that I want to just dig in Right now, while I have the time, can you just walk us through exactly what data the DOR has certified for the fiscal year, if they have, including the final levy limit, class by class, valuation totals, and the average single family tax bill? and explain how those numbers translate into the projected 13% year-over-year increase for residential taxpayers.

Sure. So the stage we're at in the process now is that the DOR has certified values and they've certified new growth. out of the items that you've talked about. That's normal for this time of year and normal for where we would be in terms of having this hearing. Honestly, we're having the hearing A little late relatively. We normally have it before values or growth are certified for this particular item. The other items that you mentioned overlay, levy limit, tax rates, those all come after the council takes action on this order as this order is Thank you. Thank you.

Thank you. And the average residential percent increased last fiscal year. It was in between 10% and 15%. Can you just clarify that point for me? I was trying to take notes.

Yeah, so the average single family home receiving the residential exemption, I believe the increase last year was 10.4%. But when you expanded that to include other types of residential properties like condos or large apartment buildings, the increase was more like 14.9%. So that was, yeah, last year.

I've heard anecdotally that because East Boston's housing market is so hot and everybody wants to move there, it increased more than other neighborhoods. Is that a fact? Can you speak to that as specific about East Boston and the percentage there? I know it's complicated, but if you can try.

I don't have the data with me to be able to give you a concrete answer on that. I'm happy to get that for you and share it with you after the After the hearing, if you want to just let me know what years you're looking for and what kinds of properties, we could make you some maps that kind of show you different increases for different parts of the district.

Okay, thank you. And my last question, can you just explain why the residential increase is higher this year than last year? You know, what are the factors? Is it specifically because of the magnitude of the commercial valuation decline or other factors?

Why the residential values are increasing more than last year?

In general, values increase because of market activity, right? So every year, the city and every city in Massachusetts is obligated to value all property at fair market value as of a particular point in time. So for fiscal year 26, the valuation date we're looking at is January 1st, 2025. And then we're looking at market activity that occurred kind of in the 12 months before that valuation date to figure out What's going on and to set those values and build models off of them. So I think the quick answer is market activity. And depending on the property type, if we're looking at residential property, some properties during calendar year 25 values are relatively stable with things going up a little bit and maybe not as much as they were historically for a long time residential prices were kind of on this very steep upward trajectory. They're still going up.

It's just the slope has kind of shifted to be more stable.

Thank you. Thank you, Chair.

Thank you.

The Chair recognizes Councillor Fitzgerald. Councillor, you have the floor.

Thank you, Chair, and thank you both for being here today. So I'll start off just the 35% residential exemption is a positive thing. I think that many of us can agree on that. A couple of questions I have just to clarify for myself, but also for anyone out there listening. If prop two and a half, if every year we go up two and a half percent on the total overall value of our properties in the city is from how I understand it. Some folks have reached out and say, what if you don't go up to that two and a half and to not collect as much? I understand that if we do that in one year, each subsequent year is A little bit less because you've kind of lowered the value of that first year so the two and a half percent next year is not as much as it would be because you didn't collect as much the prior year. Could you tell us is there a way or what the process would be to if we chose to go less than the two and a half for any reason.

What the process is to make up for that over the next, I don't know, however many years it takes, I guess, what is that process to sort of make up? Any lost collections from if we don't go the full two and a half?

Sure. Thanks so much for the question, Councillor. The way that that levy limit works is it's possible in any given year to not collect up to the full levy. The amount of levy is set based on the about the budget that's set earlier in the year and the other revenue sources that we have. And so in general, it's pretty formulaic. It's basically like seeing how much money we have already approved that we are going to spend when we set the budget. And then it's making sure that we have revenue sources set to meet that. So if it turned out that we didn't need to collect the full levy in order to meet those revenue sources, It does not preclude us. So we would lose the money for that year. Definitely, and not get that back, which is fine. It wouldn't mean in the future that we wouldn't be able to collect up to that higher levy amount.

We would. The way that you would do that is by increasing tax rates. So let's say, for example, we held the levy flat for five years and didn't collect any sort of additional amount from that 2.5% potential gain. and then we collected it all at once in year five, that would be a dramatic increase in residential and commercial tax rates to kind of get up to that new threshold.

Thank you very much. And also, last year, a lot of people were on the valuations of homes, right? The tax rate that has to get set, but the value of everyone's individual homes. was also a big deal. Some were grossly overvalued and people coming in wondering why did my house increase $300,000, $400,000, $500,000, $600,000 when I haven't touched it in years or anything. If that happens again this year, could you just please explain how folks can go about reaching out if they feel their home was grossly overvalued and thus raising their taxes along with the tax rate? What is the process for them to go and say, I would like to have another look?

Yeah, no, of course. It's a really good question, honestly. So the assessing department does not. 180,000 real estate parcels roughly in the city, right? Taxable and exempt. And we are obligated to value all those properties. but it's not a process where we're individually appraising properties. We're doing it all for the best information we have and sometimes that information is bad and so it leads to bad results, right? We have no interest in having anyone's property be overvalued. And I very much would love it for everyone to look at their tax bills every year, look at the value, Look at the stuff in their neighborhood. We put out all kinds of information on our website about sales in every neighborhood in the city for different kinds of properties so people can go and they can look and they can see We tie it to a map so you can pull up your address. You can see what properties sold in your neighborhood, what they sold for, see if you think they're like your house or not.

And if your value's too high, the month of January, you can file what's called an abatement application. It's a pretty simple process. You basically fill out your name, tell us your address, and ideally tell us why you think your property is overvalued. The more information you can give us, the easier it is for us to And then the deadline for that is February 1st. Unless February 1st falls on a weekend and then it's whatever the next business day is, right? and so really the first step is just to get that form to us so then we know that you want us to come look at your property and you're preserving your legal rights. It's all a process that's set up in state statute. We have to respond to you within three months. There's a whole process of what happens if we don't respond to you. If we respond, you don't like the answer, but the goal By and far is for us to value everyone appropriately.

No one too high, no one too low, and so that way the burden is shared fairly.

Great. Thank you, Commissioner. And what is the website just for folks if they want to pull up that map that shows everything?

Yeah. So all that information is on the assessing department main page. We put it up after, like in the beginning of January, kind of right after values are set and people get their bills. So you go to boston.gov backslash assessing. It's A-S-S-E-S-S-I-N-G.

Thank you very much.

And thank you for your time, Chair, that's all. Appreciate it. Thank you. The Chair recognizes Councillor Breadon. Councillor, you have the floor.

Thank you. Good morning. Morning. How much of our city I don't have a

I want to say it's around 18,000 parcels. I'm not sure that number is particularly helpful.

Am I right in thinking that about 53% of the property in the city of Boston is tax-exempt? Including all of our non-profits. Non-profits and our government, state... State, city owned and federally owned property. So there's a huge chunk of our property that we don't actually tax.

I haven't looked recently, but I have no reason to disagree with you.

Okay. And that, you know, the knock on effect of that is it puts a huge I'm just wondering in terms of, we have 180,000 real estate parcels. You said that the assessing department, how often are they assessed and what's the mechanism for flagging up and properties that are not being assessed appropriately.

So we're obligated to assess properties every single year. The review process with the state varies depending on whether it's something called a recertification year or not. We most recently had a recertification year last year in fiscal year 25, which involves us generating a lot more reports and reviewing our models. But in interim years, we still trend values. We still assess properties. We don't hold values at a particular level until the next recertification year or anything like that. We have various. maintenance cycles that we go through in different areas so that we try and kind of Take this enormous amount of work and break it down and improve different areas over time so we can kind of get the whole city. And then one of the main ways that we review properties is by people filing treatment applications. And how many assessors do you have?

I want to say, in valuation, I have staff around 15 to 20 people.

So one phenomenon we see in our neighborhood, and I'm sure ours is not the only district in the city to experience that, but we have landlords that build What looks like a duplex, and it's supposed to have four bedrooms in each unit, but in fact they have eight bedrooms in each unit, so they have a total of 16 bedrooms. and the building brings in a rental of about 18,000 a month and yet the neighbors next door are ordinary family homeowners who are who are doing the right thing. They pay their regular property taxes. But these operators are gaming the system to make a hell of a lot of money out of their real estate in a residential neighborhood.

decreasing the quality of life for their neighbours but they're also they're just making a huge amount of money and we need to be able to hold those people accountable and make them pay their fair share so and I think there's some sort of a mismatch between How we do that? It makes people feel very annoyed and feel mistreated by the city if we can't address this issue of

Thank you very much. Thank you. The best suggestion that I would have is that if people feel that's occurring in a neighborhood or in a location, then let us know and we're happy to take a look at the data and see if there's something that needs to be corrected.

The non-profit sector, the eds and meds obviously are having a really rough time at the minute and we're working on trying to get to pilot agreements. Are we making any progress? I think we're making slow, steady progress, but we haven't actually delivered any modification in the pilot agreements, because it's a voluntary system, it's a voluntary agreement. Are we making any progress on that?

You know, I like to think that every year that we continue to have an existing pilot program, we're in essence making progress because these are relationships that we need to maintain, and as you mentioned, it's voluntary. and I think that we have decent participation now, Things could always be better and there's always ways to improve. I think we have been having a number of conversations, the administration's been having a number of conversations with the institutions around here. As you rightly noted, it's a challenging time for them. So those conversations are maybe not as easy as they used to be but people still want to be good partners and they want to participate and they want the city to succeed because they recognize that Their success and the city's success are tied together. So I think that there is good progress and as I said, every year we have a continuing program is a successful year.

I appreciate it's a challenging time for Edison Meds, but it's also a really challenging time for our residents in the city with increased costs across the board. So we'll continue to push them to see what we can do. Thank you.

Thank you, Councillor. The chair recognizes Councillor Flynn. Councillor, you have the floor.

Thank you, Mr. Chair. Throughout my time at the City Council, I have called for and held hearings on providing property tax relief for long-time residents and our seniors, veterans, as well as increasing the residential exemption and other measures that would provide tax relief to address high cost of living, support working families that are having a difficult time making ends meet in our city. These longtime residents helped build this city. With the continued uncertainty in our economy due to the effects of post-pandemic inflation and higher interest rates, it is my continued belief that the city should show our commitment to fiscal responsibility, discipline, accountability, transparency, and examine areas to tighten our own belt after an 8% increase.

including implement a hiring freeze, reduce spending, and explore all alternative options. But following commercial property values, the city, over 70% reliant on property taxes, and as we mentioned here, 53% of our land is absorbed by large nonprofit partners. We have long-term fiscal issues to deal with in Boston. This formula is unsustainable. In my opinion, an 8% increase was significant. I also recommended a hiring freeze. Look at tapping our budget reserve surplus in interest We should have discussed our reliance on property taxes in the face of a commercial property value crisis due to remote work. For the last two years, three years,

I have called for the establishment of a blue ribbon commission made up of business leaders, labor leaders, government officials, relevant experts, neighborhood organizations to address the issue of downtown vacancies and our revenue concern, which was unanimously passed by a resolution by the Boston City Council. I also called for a review of the pilot program. I also suggested exploring other alternative ways to help with revenue and avoid an increase in residential property taxes like using MCCA state surcharge to help with revenue. We also need to rethink our balance when it comes to remote and in-person work. I continue to say that while it may not be politically popular, our city and the economy can no longer afford all sectors to work from home indefinitely. and continue to contribute towards following commercial property values.

Maybe a compromise that I recommended, including a four-day work week in exchange for more in-person work. The City of Boston, our private sector, non-profit partners need to work closely together to encourage workers to come back and bring foot traffic back to downtown Boston. The ZBA should be in downtown Boston at the City Hall in person. That is still remote. So it continues to be a valuable and desirable place to do business and remain a key driver of our city, state, regional, In my opinion, it's not the time for finger-pointing between Boston and the State House. What is needed is to lower the political temperature in the room, have coffee and work together, find common ground,

Move forward in a respectful manner and listen to each other, even if you disagree with them, and try to come up with solutions that work for everybody. That's what I believe. Commissioner, it's good to be with you. Let me ask you, we have heard some discussions from city officials talking about possible reforms to prop two and a half. What are some of the reforms you're looking at in terms of Potential Reforms to Proposition 2 1⁄2.

Thank you so much for the question, Councillor. It's good to see you.

Good to see you.

I haven't had a conversation about reforms to Proposition 2 1⁄2 recently, so I don't really have a good ability to answer your question.

Does CFO have an opinion on that?

The Mass Municipal Association has been doing some work in this area and are due, I believe, to put out some recommendations for Prop 2 1⁄2 reform, but we've been... Not really even part of those conversations, but aware that they're doing that work and are awaiting to see what comes out of that set of recommendations.

Oh, so the city is not looking to make changes to Prop 2.5 then?

Well, it would require state approval to make any changes, and I think there's just been some kind of preliminary discussions that have been happening over at the MMA that we, again, have been... in receipt of and aware of, but there's nothing that we are working on ourselves.

Has the city administration expressed an opinion about Proposition 2 1⁄2 of making reforms?

Yes, I believe the mayor has made comments.

What are some of those opinions?

I don't want to necessarily totally speak for her, but I just believe there's been general comments about the need to re-look at Prop 2 1⁄2 It's a 43-year-old law, and so I think there's just been general comments about the need to look at if it still works for municipalities today.

Thank you. Thank you to the administration team for being here. I'm out of time. I want to be respectful to my city council colleagues. I'll wait to the next round. Thank you.

Thank you, Councillor. I just want to acknowledge that Councillor Durkan has joined us. The chair recognizes Councillor Santana. Councillor, the floor is yours.

Thank you Mr. Chair and thank you CFO and Commissioner for being here this morning with us. CFO, I think you mentioned in the previous councilor's questions about the 2% decrease that you're sending to all departments. Are we expecting that for this upcoming fiscal year for that to be the case?

Yes, we've asked departments to propose budgets to us that are 2% less than last year. It's obviously a process, it's not automatic, and we'll evaluate sort of what comes in and also identify if there are opportunities to go further, but that is the initial request that's been made to departments.

Is there a direct correlation to tax relief for homeowners in doing so?

Yeah, so I think it's more in response to overall economic conditions and uncertainty. As I mentioned previously, we've seen really robust years of revenue growth in the last couple of years. And just as the larger economy starts to cool, we're sort of reacting to that and anticipation for further uncertainty.

Thank you CFO. To the Commissioner or to her I guess, does the administration track how many families would face the displacement without the residential tax relief?

I'm not sure if we have information at that exact level, but we recognize that this would be I think the eighth year in a row of double digit property tax increases and so we're mindful of the impact that that has on all types of residents in the city in this high cost environment.

And do we have any data on like what neighborhoods are impacted more?

I don't think so. No.

Okay. Great. And then in terms of like So I heard you're looking for this to be brought up this upcoming Wednesday. The urgency is real. You mentioned the January 1st deadline there. Can you talk about the impact of that I'm not passing this on Wednesday. What does that mean?

Yes. So if there's no adoption of a residential exemption and classification, our tax bills will default to a single tax rate, and so everyone Commercial property taxpayers, residential taxpayers will pay a single tax rate, which I believe the commissioner said was $15.40. As a point of comparison, the residential rate for FY25 was $11.58 and the commercial rate was $25.96. So that would be a significant increase for residents and a dramatic decrease for commercial properties. It's important to pass both the residential exemption and classification so that we can maintain that balance.

And then my final question here, this proposal was made up of You know, residents, obviously the administration, small business owners were at the table at this. Can you just speak to, you know, I think there's this narrative, I think it was more to last year, I've heard it less this year, but I think it's still out there. I get this question of, you know, what does this mean for our business community? Are we going against them? I mean, I want you to talk about the seat at the table that small business owners had in this proposal.

In the home rule petition? Correct. Yeah. So we heard, as you mentioned, a lot of feedback from small business owners. And so in the iteration of the home rule that is currently pending at the Statehouse, there's a couple of provisions in there. that are designed to help small business. The first being an increase to the personal property tax exemption or personal property tax limit, which is currently set at $10,000 would allow us to increase it up to 30,000. So that would be direct relief to small businesses because not every small business is directly paying real estate taxes, right? They're leasing a space and it's getting passed on, but they're not paying directly. Whereas whether or not you own or lease space, you're possibly paying personal property taxes on your business equipment. And so by increasing that exemption amount, we would be helping them directly.

Awesome. No further questions. Thank you both for being here. Thank you, Mr. Chair, for sharing. Thank you.

Thank you, Councilor. The chair recognizes Councilor Pepén. Councilor, you have the floor.

Thank you, Mr. Chair. Thank you, Chief and Commissioner Breaux for being here. This is probably the number one topic that I'm now hearing about in my district. We have a lot of proud homeowners that make a good majority of my district, representing Ross and Ohio Park and Mattapan. And, you know, as I get these questions, I can't help but ask them. In terms of if I were a homeowner, how do I find out about the application for the residential exception? Am I automatically looped in or do I have to apply every single year? So I just want to know about just the overall process. Can you share that with us?

Yeah, no, happily. Thank you so much for the question, Councilor. So the residential exemption, it's something that In order to qualify, in the year that you buy your property, on July 1st, you need to O'Neill. So that's what we have the applications to try and figure out. Any year there's a transfer, we automatically send an application out to the new homeowner in order to try and get that process started before the bill shows up. In general, I advise everyone that asks me to always check their third quarter bill which is the one that comes out in January, end of December, beginning of January.

because that's the bill that tells you the final exemption amount and whether you're getting it or not. So if you get that bill and you don't see a residential exemption deduction on the right side near where it says I want you up to pay, Then you're not getting it, and you should call us if you think that you qualify. The qualification date, if you didn't buy the property, is January 1st. It's a little weird. There are two different qualification dates, but it's the January 1st. Before the fiscal year starts. So right now, let's say you own a property for like last five years. This coming January of 26, you get your property tax bill. It says you don't have an exemption. Then you give us a call. We'll send you an application. Also, we usually have a link on our website in January where you can download an application so you don't have to call us. And you have until April 1st to get that paperwork to us. Okay. That happens every year? And to preserve your rights. And so that's every year.

We try not to make people apply for the residential exemption every single year. In general, if you're and Occupant. We don't have reason to think that you've left. We don't send out a renewal. We do do random audits throughout the city, but the goal is not to make everyone just needlessly give us paperwork for something that tends to be pretty Thank you for joining us.

The people that didn't apply for residential exemption but may qualify for it, and if so, is there any outreach to those individuals?

So in general, our outreach, most of our outreach is done through tax bills. So we have an insert that goes to the third quarter tax bill to tell people about the programs that they may qualify for and encourage them to call us. and you know when we go out into the community for various community meetings and events we talk about the programs a lot and talk about Fitzgerald. Other than Our main outreach is kind of prodding people when there's a transfer and when they first acquire a property to say hey this might be something you're eligible for here's an application fill it out and send it back to us.

Okay and is that something that your department Assist with, especially I'm thinking about like a first time home buyer that maybe is going through this process for the first time. Is that a partnership that you do with the homeowners?

Yeah, so we do a lot of work with other areas of the city. and so forth. So, we've been working with neighborhood development and with first time home buyers program and with Age Strong to make sure that they have kind of information and pamphlets from us that they can provide for when they encounter residents. where there might be some ability to collaborate. So those are things that we do try and get information in the hands of anyone who may be talking to our residents.

Okay, okay. The reason why I'm really paying in on these specific areas because I think the more awareness we create for homeowners, the better chance they have of paying lower taxes, especially in these conversations that we're having here today. I also wanted to I wanted to ask you a little bit about those residents who may be considered lower income owner occupants obviously could potentially be going through displacement risk. More consideration were an opportunity for larger exceptions for folks who may fall into this category. We had these conversations.

So we have, depending on the category and the criteria, we have a few other exemption programs, then we have some deferral programs. to tell people so we have a couple of exemption programs that are aimed towards seniors and then we have programs that are aimed towards veterans and then we have deferral programs that are aimed towards seniors and then also a hardship deferral program. The hardship deferral program is meant to be more of maybe a short-term kind of struggle. Situation, similar to the one that I think you're talking about. And so there's an opportunity to apply and for a relatively low interest rate, have your taxes deferred until you're able to pay for them.

Thank you. I know my time is up, but thank you so much for just breaking that down. I think it's always helpful for context in this conversation. So I appreciate you.

Thank you.

Thank you. Thank you, Councilor. The residential tax exemption, you have to apply for every year. The senior one, that's just a one time.

It's switched. So the senior exemptions, you actually have to apply for every year. That's tied into a state requirement. The residential exemptions, you are not required to apply Every year, but it's good to check every year to make sure that you're still getting it. The population that qualifies for the residential exemption is much, much larger.

And does it follow you property to property or do you have to apply for it if you were to buy a new home?

That's a great question. So anytime you go to a new property, you would need to apply again. It doesn't follow a person.

Awesome. Thank you. The chair recognizes Councilor Durkan. Councilor, the floor is yours.

Thank you so much, Chair Worrell. So today we're doing something cursory that we do every year, but we're doing it with the background of a home rule petition that the city council has passed three times. I truly believe if you represent Boston, you should represent Bostonians. And it's with a lot of honestly anger at the Senate that I'm here today. have another commitment in the community today, but I decided to be here to share my thoughts. I understand that the city is engaging in a 2% reduction in city departments. Obviously in terms of city workers, I have concerns about where that is happening. Obviously, I think we all know Boston can't do a temporary override of our Prop 2 1⁄2.

I think the mayor's proposal is the only, and the city council's proposal that we've passed, makes it the only available lever to present extreme residential tax hikes. I would like to put on the record that Boston is receiving less state funding than we have in previous decades and the idea that we can fund our entire Thank you. Thank you. The Levy. So I guess my questions are today, what have the conversations been with the Senate? Are we communicating with the Senate, with the media, or do we actually have a good rapport? Are we trying to have that conversation?

and obviously we know that homeowners are feeling this. I represent, I mean, A lot of folks have called my district the Ritz to Roxbury district. I think that it's really important that I represent the most vulnerable in my district. I also think it's important that there have been other tax proposals that have been at the City Council that do not benefit my district in terms of taxing apartments more. So I have to have a very nuanced thought process in terms of making sure that I'm representing my constituents well. But I know that this is going to hit young families and seniors in my district. And I think that anyone who's not upset about this and upset about the Senate completely, honestly, They are not representing Boston.

And Boston is the moneymaker for the entire state. We are the economic driver. My district is an economic driver in the city of Boston. The idea, I've heard from commercial real estate owners that they do not care what happens here. This is a media fight. I've heard from commercial owners, this is the cost of doing business, this change. This temporary shift. They would be able to absorb this. The seniors and the young families I'm talking to in my district cannot absorb this. and they can't absorb it year to year. And so anyone who tries to downplay the moment that we're in right now is not representing our constituents. I'm not a homeowner, but I think it's incredibly important that I represent those who have built this city and those who continue to build this city. So I'll get off my soapbox and just ask

What have the conversations been? We know that we don't really have much available to us other than the temporary shift that this city council has passed three times. So where do we go from here?

Thank you, Councilor. I just want to put a point on what you were just saying, where I think the point of the home rule petition is really about creating stability for both residents and also commercial taxpayers. It's not meant to Thank you for raising that. In terms of conversations with the state, we remain open to have conversations with anyone who wants to talk to us about this. But we're here today because we are sort of under a time clock and need to proceed Thank you. Thank you.

Yeah, and I struggled, honestly, to figure out what to ask you because I know that you are doing everything you can. I wish I was sitting in front of the Senate right now and I could have that conversation with them. So in terms of the prop two and a half, I just wanted to ask, so we are not exceeding the levy ceiling, but we are exceeding the yearly, or we are at, The yearly levy limit, is that correct? Yes.

Yes, that's correct.

Okay, so if we were to make changes? I mean, I know that Boston cannot do a temporary override. So if we were to override Prop 2 and 1 half, are we able to override Prop 2 and 1 half?

We would need to get approval from the voters, but Boston has never in the 43-year history of Prop 2 1⁄2 sought a Prop 2 1⁄2 override. And nor are we proposing two.

Yeah, that was my understanding. So without that, this is the one... I mean, the home rule petitions are the one... Thank you. Thank you. But it's one proposal that can alleviate homeowners.

Right. And we're not trying to get more revenue than we're entitled to. We're living within our 2.5% levy limit. We're simply trying to reallocate the balance of that levy limit through our home rule petition.

Thank you. No, this is really helpful. And I just want to say again, homeowners cannot absorb this year to year over and over again. They're feeling it, and as a representative of Boston, and I think we all should be together and united in saying, how can we make this happen? and I think it's really our hands are tied. So I'm going to support this on Wednesday if the chair brings it forward and I think we need to bring it forward. Um, but it's just, I'm, I feel a little bit deflated that, um, this body has been so disrespected, um, given the situation that we're in. So thank you, chair.

Thank you. Thank you, counselor. Um, CFO, you mentioned the eighth year in a row, a double digit, what was it, an increase in homeowners property tax bills?

Yes, I believe it's the, when you're looking at the measure of an average single family home, The tax increase for the average single family home has increased in double digits over the last eight years. That's the right data point. Please hold. Okay. We'll correct that.

All right. Just want to acknowledge that Councilor Mejia has also joined us as well. And after we get this answer to the question, go to you for questions.

maybe it might take us a minute to make it take a minute all right councilman here you have the floor good morning everyone um thank you chair I

I'm wondering, just out of curiosity, and I just want to go on the record that I will support anything that will help alleviate the financial burden on our residents, so I just want to start. with that public acknowledgement. So just know where I'm at with this. I guess what I'd like to learn a little bit more about for those folks who are tuning in, you know, everyone keeps talking about the higher ed institutions and our hospitals because they don't you know they payment in lieu of taxes and I know that there's some legislative work that needs to happen for us to even be able to do anything in regards to that. And I'm just curious, at what point, if any, will there be an appetite for us to explore other options that do not solely just rely on residential or commercial

because at some point, something will have to give. And when I look at Harvard, and I look at BU, and I look at Northeastern, these institutions that are buying up blocks and making it very difficult for families to be able to even stay here in the city of Boston, I'm curious at what point will we start considering them as viable targets for taxes as well?

Good morning, councillor. Thank you so much for the question. It's really interesting to think about. It's always interesting to kind of talk about other potential sources of revenue and how that might kind of play into the mix and what can offset what. Right now, the proposal that we put forward with the home rule in the shift is not, as Steve was mentioning, it's not one that's designed to get us more revenue. It's one design for us to continue to work within the constraints of the system that we have and to try and prevent dramatic swings. So that was the objective, and that's kind of the continuing objective, I think, If we could get across that hurdle, then it would create room and space for us to have conversations about the overall revenue mix and who pays taxes and who we think should pay taxes

and kind of start to explore the topics that you're raising, but all of them are tied into state law, right? So none of them are things that we have individual discretion in. like the council and the administration combined. It isn't something that we control ourselves. It's something that no matter what we would need to go to the state for approval for. But we've very much been focused in the past few years about trying to just have some sense of stability within the system that we have now before we kind of explore new options for revenue.

So I'm just going to, for the record, again, just since the day I stepped foot into this chamber, I've been talking about the role that pilot payments can play in helping us as a city. And I think that while it may not be the appetite right now in this moment because we're dealing with this urgent matter, I think it's still worth advocating that we can have it all. And we should be looking at all different pathways to stabilizing our financial crunch. And I'm also curious now, and I only have two and a half minutes If you could just talk to me a little bit about paint the scenario. I mean, I know that you laid it out here, but for those folks who don't have access to these documents, If you own a two-family and your home is assessed at $800,000, what would the price point be?

and what would potentially be the landlord's hypothetically game plan? Basically, what I'm going to get at is that they're going to pass on the burden to their rental. So we're going to see a ripple effect on folks who are going to have a hard time paying their rents. So if you can just kind of walk us through that scenario so that folks who are tuning in can understand the gravity of what we're discussing here today.

Sure, no, I'm happy to. So on the briefing that the council was provided for, these are examples using last year's Thank you. and so the first one is classification and so in $800,000 home if classification were not to go into effect would have to pay $8,152 a year in taxes, but due to the benefits of classification, Their tax responsibility would drop to $5,279, so it's a 35% savings, and that's kind of what the value of the shift is to a specific property that's worth $800,000, right? The other benefit that we're talking about today is the residential exemption and what would happen if that were to go into effect.

So that same $800,000 home, if it is owner occupied and they qualify for the exemption, then Without the exemption, they would be paying $9,264, and then with the exemption, they'd be paying that $5,279.79 amount. So that is last year's savings of just under $4,000, which is a 43% savings, which is pretty dramatic. I calculated this morning what I think the residential exemption might be if we were to put into effect this year with the potential tax rate this year of classification and the residential exemption. And so the maximum amount this year is projected to be $4,353.74 if this order were to pass.

Thank you. And Wednesday is the last day of our legislative cycle. So I'm going to assume that whatever we pass has a time ticking clock on it, right? So let's just underscore, again, the urgency around what we're trying to do and the moment we're trying to meet. And so my time is up clearly, so I'm not going to hold you up. Thank you, Chair, for the grace.

Thank you.

Thank you, Councilor.

I can answer your question from earlier. Okay, I apologize. I misspoke. This will be the eighth year in a row where residential property taxes for the average single family home have grown by more than 5%. I apologize.

Thank you. I know in our Home Rule petition that we sent up to the State House, it included tax rebates, knowing that we are asking departments to decrease 2%, you mentioned economic uncertainty. Where are we now? What's the stance on rebates?

Yeah, so I think as written in the legislation, the rebates were allowed for the fiscal year that has passed. Of course, it could be amended. As we sent the home rule petition up as amendable. But you make a good point. The kind of economic situation has changed a bit since last year. And so it always gave us just the option to do it. I don't think it ever required us to do it. So it would just have to be, again, a discussion that we would need to have, I think, also with this council because it would require an appropriation if we were to do it.

And then how would new growth be affected when buildings temporarily come off the tax rolls? So I know we have a pilot program, commercial to residential. Is it a negative on our tax rolls?

That's a really good question, Chair. So if a property comes off the tax rules, It doesn't impact new growth. What it does do is it lowers the overall value of property in the city that's taxable. And so the way that tax rates are calculated is you basically take the amount of money that you're allowed to collect which is the levy and you divide it up amongst the properties that are taxable in the city so fewer taxable properties we have the smaller group of properties that is splitting up that amount of money for the levy so depending on you know One property doesn't really have an impact to the scope of our city, but the more properties you have, the higher value of the properties that are going off the tax rolls, then that would end up increasing the tax rates.

And then new growth. Thank you. Thank you. Oh, no, still over 60 million. How do we see new growth evolving over the next few years based on what we're seeing in construction?

That's a great question and one that the CFO is very interested in the answer to and is constantly asking me. So my abilities to see the future are limited. They're okay, but they're not definitely 100%. I think there's a clear reality out there that costs have increased and that construction has dipped. is in essence the major driver of of new growth and so our source revenue outside from the two and a half percent increase over the base and so we are projecting that Those numbers are going to continue to dip next year and potentially the following year. We'll see how things go. I tend to be very conservative in how I forecast since the city is obligated to have a balanced budget.

And so I personally view it as very bad to tell the city that they're going to have more money to spend than they are.

And I've taken a very keen interest in property taxes, and we've been doing some research. One of the case studies that I dove into was a 500 apartment unit building that's located atop a commuter rail station, two subway lines. And the apartment building has appreciated in value 8.6% from 2021 to now. At the same time, the average residential parcel in the city has appreciated 27%. So 8.6% for a 500 apartment unit, 27%. for a single family parcel. I know you're valuing these buildings properly, so I'm not suggesting otherwise, but one is through a commercial lens and the other one is not.

And I want to use this time to point out that not only are large apartment buildings are paying less on a per unit basis than, say, a condo in a large residential building, but on top of that, their valuations are not appreciated as quickly. Despite, and I think Councilor Breadon brought this up, despite the fact that their raking in rent increases year after year. So when we say the system doesn't benefit our homeowners and instead benefits corporate landlords, this is just one example of the inequities inside of our tax code. Saying all that, are you able to provide a total valuation of all residential apartment buildings of 30 units or more going back to 2018?

So I don't have that data with me, but it's something my office could put together.

And then can we do the same thing for single family homes?

Sure.

Awesome. And then can you provide the baseline valuation number What is the estimated amount of homeowners exemptions this year? I think it's something that you provided in the past, saying if you were to pass what we have in front of us now, what would be that homeowner exemption number for this year?

So the estimated value that would be exempt for 26, if we have a 35% exemption, is $351,108. So that's the value deduction. And then to translate that into tax dollars with the Projected tax rate of $12.40 means that that would be a savings of $4,353.74. Thank you.

I'm gonna do second rounds of questions, but before I go to second rounds, I'm gonna see if we have anybody signed up for public testimony. We hear your name called. Please come down to one of the two mics, state your name, any affiliation, and you'll have two minutes to testify. Michael Caine. I don't see him. I think he left. We have a, I can't read this, Giselle? Geraldine. Geraldine, sorry, Ken. The floor is yours, Geraldine.

My name is Jerry McEachern, and I'm an owner down in Seaport. And the values in the Seaport area Escalated more than, you know, say a district West End or some other place, obviously Mattapan or someplace like that. We've not only been hit with high condo fees but taxes as well. A lot of people are renting it out to make up for, you know, they can't always pay for it. and I don't think that a lot of folks down there have made a lot of money reselling. They've actually taken some hits. Some of the three bedrooms way up in the penthouses have made money. Basically, for me, it's a working building. It's not like you live in the rich life, even though there's a lot of amenities and all that. But Seaport seems to be more expensive than other districts. Is that correct?

Oh, you have to direct all questions to the chair. Nothing can be directed to the panelists.

Not sure I understand that.

Yeah, you can't. So who would have the answers? You're just giving public testimony. Oh. Right.

So there's no answer.

Right.

Oh, okay. And the other thing is, you know, as far as I'm concerned, I walk all over Boston, but where are the services? Some of the services have been decreased. There's potholes everywhere in the streets. You know, either... A friend of mine took a trip the other day off one of the potholes. The cars are getting hit, you know, all the time. There used to be a truck that used to go around and fill those potholes. Is that just a simple service that's been eliminated? Because you can call 311 and you send pictures and a lot of things aren't taken care of. So, anyway.

Thank you.

Yep.

And I also want to acknowledge that we've been joined in the chambers by Councilor Baker. Now, oh, and we also have Councilor Weber who also joined us. So before we go to second rounds of questions, we will go to first round of questions for Councilor Weber. Councilor, the floor is yours.

Thank you, Chair. Sorry, I had a surveillance oversight advisory board meeting scheduled at the exact same time. Have we talked about... You know, what impact we think the Mayor's sort of instructions to reduce the budget by 2% to departments and hiring freezes we'll have on next year's budget.

Yes. Touch on that a little bit. So it's really in response to the larger economic climate out there, and things are slowing down, things are cooling off. And so we are instructing departments to propose budgets that are 2% less than last year. that will require departments to absorb some of their known cost increases and possibly make reductions beyond that. You know, it's just the beginning of a process. It's just a proposal. We'll see sort of what departments provide us. Some 2% reductions might not be Possible, you know, others perhaps could go further. So it's really just a starting point in the process.

Okay. And so, I mean, I think it was two years ago the budget went up by 8%. Last year the budget was 4.4. Are we expecting lower than that?

A little too soon to tell. I think a big reason why we're needing to ask departments for reductions is we're seeing enormous cost growth and a lot of our non-discretionary costs like our long-term liabilities, our health insurance costs are growing significantly. and so I wouldn't expect that the budget would shrink. I think we would expect next year's budget would still grow, but again, too soon to tell by how much.

Okay. Let's see, and again, if this has already been covered, Chair, just feel free to cut me off. Chair, four minutes. Okay. In terms of, you know, People talk about diversifying our revenue base. We have a transfer fee that we've tried unsuccessfully. Have you talked about anything else that we're looking at that We would be able to obtain revenue through other than the property taxes.

Yes. No, we haven't really got into that a little bit. I think there's a couple of things that are out there. Number one being the Governor's Municipal Empowerment Act. include some adjustments to existing excise tax revenues that would generate additional revenue for the city beyond what we're able to collect. We talked a little bit about the Mass Municipal Association is looking into different types of recommendations around municipal revenue, given the pressures that other municipalities in the city are facing or in the Commonwealth are facing. And then the mayor has expressed interest in convening a revenue diversification task force in the new year that would look to different types of options that could provide more diverse revenue for the city.

In terms of, I guess, the, let me see. Well, I know, sorry, I'll scratch that, but when we are... So I'm sorry, the home rule petition that we have in the State House, I know we initially started 200%. We were trying to shift that to commercial landlords. shifted it to 181.5 is that, but that was for FY25. So if we passed it, what would the shift be?

Yes. So as drafted for FY26, the shift percentage is set at 180%.

Okay, so if that passes, it's 180 for this year and then 178 for FY27, again, as presently drafted. Okay. Procedurally, Not that you're the expert on this, but that's what's pending at the State House, and we couldn't file another. and so forth.

So it's pending. It has yet to receive a committee assignment. And the way we sent it up last year was as amendable. Oftentimes home rules are and so forth. So that is what's currently pending. So hopefully because there has that amendability We would be able to work with the legislature to make whatever changes are necessary to update it and therefore not need to file a new home rule.

Okay, just last question is about pensions. Sure. How are we doing on satisfying? Because my sense is over time we haven't had enough money to satisfy all the liabilities for pensions and pay our workers their pensions. And we've done a great job sort of filling in that gap. Where are we? If we didn't set the levy limit at the highest level, how would that impact our ability to pay pensions?

Yes, so our pension obligations are one of our largest cost growth items in the budget and projected to be. We are projected to meet our unfunded liability in FY28, so we're Thank you. Thank you. Thank you. Thank you. Thank you. It's both the maximization of our tax levy and our commitment to our long-term liabilities is what really underpins the city's AAA bond rating. If you look at any of our rating opinions over time, they cite those specifically. So I feel that that would really jeopardize the rating if we were to make any of those changes.

Okay. Thank you, Chair.

Thank you. And I see Michael Caine has come came back into the chamber. So Michael I called your name for public testimony, but you weren't here. So I want to give you that opportunity now to testify. And then we'll go to Councilor colleagues for second rounds of questions.

Thank you, Councilor, for inviting us to testify. I'm Michael Caine. I'm the director of the Mass Alliance of HUD Tenants. And we obviously support any effort to minimize taxes paid by homeowners and condo owners, of which I am one, as well as in particular seniors, who are paying excessive house rich, cash poor. They're paying excessive taxes. So we obviously support the home rule petition. I had understood today's hearing was also on your proposal.

No.

That's a different one. OK. Well, I'm just going to support, obviously, the city's efforts to get a just allocation. One thing I would want to bring up, When we were fighting for the city rent subsidy program some years ago, we learned that the city, when this is relating to new revenue that is exempt from the two and a half limit, when the city When a city builds new housing, the cost of the new production and the cost of the The cost of construction, not on the cost of sales in the case of condos. So what that means is that the city is missing out on new revenue outside of the two and a half limit. Because if you then, if you build a building like Millennium Towers,

and you only are assessing the value of it at the cost of production. And then they sell the units for two or three times that in the next few years. That new revenue from the sale of units just comes at the expense of shifting the money around within the two and a half limit. It's not outside of the two and a half limit. And I'm not clear why that is the case, but perhaps the assessing commissioner could indicate. But there's been 13,000 apartments and condo units built in the last several years. and they're being assessed for the two and a half exemption purpose. at the cost of production, the cost of construction, rather than the sale value of the condos. That's something that I think you all may want to look at.

Thank you. I will now go back to council colleagues for second round of questions. I'm going to assume if you're here, you have more questions. So starting with Council President Louijeune.

Thank you, Mr. Chair, and thank you to Michael and to everyone who provided public testimony. Again, I think it's just important to just state again that this is something that we do. I've now been on the council. It's my second term. We do this whether or not there's a home rule petition before the state house. This is part of our obligation so that we can set the tax rate every year at 175% for commercial properties and so that we can provide the residential exemption. And so I just want. that to be ever clear like just I think that the two conversations are related but this is pretty rote and routine for this body to and probably I don't know if there's always even been a hearing on There's always been a hearing on that. There's always a hearing, OK, on the tax classification. Then we vote on it. But I think there's, of course, heightened Thank you. Thank you.

Thank you. It's also worth reminding that these homeowner petitions were not thought up in a vacuum or by homeowners themselves. It was done at the table. with business leaders who agreed that these were changes, temporary changes, that commercial property owners could assume and could internalize for a limited period of time as we do the work of seeing what's happening nationally in the commercial real estate market in doing some of the looking at the budget and doing some see where there can be some cost-changing mechanisms. You spoke to it. I mean, if our home rule petitions aren't seeing movement, we are a home rule authority state.

And as you answer Councilor Weber's questions, the issue of further diversifying our revenue is also as difficult because it requires authorization from the state. And I just think it's really because I mean, my questions to you want to be in part like, what else are we doing to diversify or to look at how we can diversify our revenue? with the understanding that even those conversations with the Trans Review or with whatever else are just as difficult, if not more difficult. Because again, these tax shifts have historically been something that the State House has done. for both the City of Boston and for other municipalities pretty routinely. But I have a question, I think, more for you, Commissioner, with respect to who gets these tax bills. It's a question that I'm dealing with, it is the property owners who are billed even under a triple net lease? Yes, that's correct.

There's no way for the city to bill the renter or the commercial renter.

Yeah, no, the process of who bills get sent to is also set by state law. And so in order to make sure that our taxes are valid and represent a valid lien if someone doesn't end up paying them. Right. It is built to the owner as of the record date, which is the January 1st before the fiscal year begins.

Awesome. And so the lien then would therefore be placed on the property owner and not on the commercial tenant? That's correct. And if there's any sort of liability, it is then the commercial owner who is then potentially filing some sort of claim or a lawsuit against the commercial renter.

Yeah, that would be correct. Not knowing what the relationship is in terms of what's set out in the lease with that private matter between those two private parties, as far as the city is concerned, it's an issue that has to do with the real estate and it has to do with the owner of the real estate.

And so, this is not directly related to this issue, but does that change at all if it's a property where, let's say, there was some sort of deal struck or it's a community space pursuant to a BPDA project.

Does that change at all? There are different laws that govern. So the community benefit aspect, no. If you're talking about Leases where people are leasing from government entities. There's a different law that allows for the taxation of that lease as if the tenant is the owner. It applies very specifically and it changes depending on What the organization is. There's a whole bunch of different laws that kind of govern leases of government space. but the general rule is that bills are always taxed to the owner. And so even if you have a, let's say you have Thank you. Thank you.

The only instance where we bill tenants is pursuant directly to statute when it's a lessee of government property.

Okay. Understood. Okay, thank you for that. I don't have any additional questions with respect to what is before this body because, like I've done every year, I will be voting in favor of this routine death classification and also I hope to continue the advocacy that this body has done in passing home rule petitions to provide relief to our homeowners, relief that was at one point agreed to as compromise legislation with our business community and policy leaders here in our city. I think it's the right move. I think it's the right move for our residents. I think it is fair as we continue to do the work of trying to be a city like any other city that is dealing with changes and fluctuations in the commercial real estate. Commercial Real Estate Industry, and maintain the power of our AAA bond rating while making sure that we are doing what's needed for our residents who are house rich and cash poor.

Thank you. Thank you, Mr. Chair. The chair recognises Councillor Coletta Zapata. Councillor, you have the floor.

Thank you again, Sharon. Again, thank you for all of your answers to our questions. So just hearing public testimony from the individual, I forget her name, from Seaport. I think Jerry was her name she was talking about. you know we're seeing an increase but what about all these potholes that I'm seeing in my street and that is exactly what I am getting from the from my residents and I would love to Read an email that I received from a veteran in Charlestown who will go unnamed but he took time out of his day yesterday to send me this email if you would just give me the Good morning, Councilor, Gabriella, Coletta, Zapata. With all the discussion of who should be paying the higher taxes, I hear no mention of the obvious alternative, cut the budget. 13% tax increase for homeowners. How about a 20% cut in the city budget? It works for me. Sincerely yours. I'm not going to read his name, but he also put up comma, fed up in Charlestown. So can you just speak to, can you just answer his question?

I mean, if we are going to ask our homeowners to, obviously we want to make sure we pass this first, that's the obvious. Docket in front of us here, and then we're talking about the home rule petition. What does that mean in city services? Because that is the core function of, at least for me, I'm not going to speak for my other colleagues, but the core function of my job as a district city councilor. is ensuring the delivery of essential city services showcasing that we are listening to residents, that we are providing changes that better their lives. What they see at their front door, I think this was former city councilor Tim McCarthy's main thing that he used to say, but what people see at their front door matters, and it impacts their quality of life. And so if we are thinking about You know, a 2% decrease. What does that mean? But also, what would it mean for FedUp and Charlestown's proposal as well to cut the budget 13% specifically on city services?

Thank you for the question. I just did quick math. So if we were to cut 20% from our roughly $4.8 billion budget, that's nearly a billion dollars that we would need to cut from the city budget. Thank you. Thank you. Thank you. Thank you. have the same impact as our home rule petition is significant. So sort of in anticipation of this, we did some quick math. If you were to attempt to keep the residential tax rate the same Thank you. Thank you.

Thank you, Mr. Chair. Thank you. Thank you. When you really don't have discretion over making those payments, the thing you have to do is go to city services. And hundreds of millions of dollars of reductions to city services in a time when we're hearing that they're already stretched really thin, would be devastating and I think would do irreparable harm to the services that we provide to residents and businesses.

Thank you. Thank you for clarifying that. And I do appreciate my council colleagues' questions about our pensions and liabilities. Obviously, that is worst case scenario, and that's not something we ever want to entertain where we are. Dugan, Dugan, Dugan, Dugan, Dugan, Dugan, Dugan, Dugan, Dugan,

This is another question from a constituent. In the neighborhood, there's a three unit condo in a residential neighborhood that's not charged for the land that it sits on. It's just a regular Three Family Home that's been condoized. And then there's another neighbor within spitting distance that's a two family, and they are charged for their land. There is a land assessment on the land value. Why is there this discrepancy between a condo on a plot of land and a two-family that's on a plot of land? Why is the condo not charged for the land?

Thank you so much for the question, Councillor. Condo assessments are unique in that they are the only parcels that are specifically defined in statute. Not that they are not being charged for the land. I would argue that is not true. But the way that their value is established is that each unit is charged for The space of the unit that has to be on like a filed plan with registry of deeds and then its percentage interest in the common area as controlled by the condominium master deed. and so the condo unit itself could not exist if there were not land that was sitting upon and so the assessment is based on sales of comparable condo units that's the way that we determine market value for Condominiums. It's called a sales approach. Similar approach we use for two family homes.

But the way that the value of the space is determined is what that condo would sell for. And that presumes that the land Exist. So it is not something where we are separately valuing the land and they're getting a discount. Both of those properties are being valued in a sales approach that said, if someone's going to come and buy the thing that you own, what would they pay for it? And so that includes the building and the lands for both of those things. Just the way it shows up on a tax bill is different because of state law.

Yeah, so the backyard is valued. The value of the backyard is split between the three condo units?

Yes, so it's included in all of those units' value if they all have access to the yard. If it's set up where only one of them has access to the yard, then only that one pays for the yard.

Okay, excellent. and the other question I have about health insurance premiums and all this conversation at the national level about tax rebates for condo in the in the Affordable Care Act, being able to get tax relief on your condo, on your, I'm talking to the last question, on your health insurance premiums. Is there ever any conversation about pooling for health insurance across the board? There's sort of economies of scale that you can negotiate a better price.

Is there ever any conversation about having all the municipalities in Massachusetts negotiate across the board price for health insurance, like almost increase the size of the bucket and get a better deal?

So this exists in the form of the group insurance commission at the state. And many municipalities opt to join that for cost reasons. We in the City of Boston have the Public Employee Committee or the PEC in which we work with our union partners to design plans and and go out to bid for our health insurance costs, but it is common for municipalities to join the GIC for exactly the reason you talked about.

but we choose to do something different.

We choose to do something different because I think the history is previously all kind of health benefits were individually negotiated in all of the different union contracts and that was pretty and so we have this new model or you know new the last couple of you know several years where we work directly with the unions and provide benefits for all of our employees regard you know kind of regardless of the union you're in But it's a negotiation that we enter into every couple of years, and we do a comparison Okay, what if we go out on our own versus if we decide to join the GIC? So that is a conversation that we have regularly. Yeah, so you keep tabs on whether or not it's still working for us to do it the way we do it.

Yes. Excellent.

Thank you. Thank you. The Chair recognises Councillor Flynn. Councillor, you have the floor.

Thank you, Mr Chair. I still believe it's not the time for finger-pointing between Boston and the State Senate. I do believe the state senate care about the city and what happens in the city, so I do want to acknowledge them. It's about working together, in my opinion. We need to lower the temperature. Thank you. Thank you. Thank you. but to call out the State Senate as if they're not concerned about the residents of Boston is false. Let me go back to Commissioner,

Can you explain to me the tax support system you have, tax relief I should say, for veterans and disabled veterans? Can you just give us a little bit of background? A lot of veterans do watch the program, and I want to give them a little bit of background information, please.

Yeah. No, of course. Thank you so much for the question, Councillor. So our veteran exemption programs, they are created by statute. These sub-clauses of Chapter 59, Section 5, the clauses are 22 through 22F, and they provide relief to... in various circumstances. Most of them are related to service-connected disabilities, and they are something that Thank you very much. mid-August to early September and try and get those back as quickly as possible so we can make sure that exemption then shows up at the first available opportunity, which is the third quarter bill.

But the actual final deadline for anyone that isn't receiving it is April 1st. So for example, this year will be April 1st of 2026. So if it's anything that anyone thinks that they might be eligible for, I highly recommend they go into our website, look at the materials there, call our Taxpayer Referral Assistance Center, that phone number 617-635-4287 so that my staff can kind of talk them through the programs and figure out whether it makes sense for them to apply. Whenever there's a doubt, we always encourage people to apply because the worst that happens is that we say no. I don't want to ever prevent anyone from applying for something that they might potentially qualify for. that is also a program that relatively recently, but fiscal year 26 will be the first year that the amounts of those exemptions are tied to a cost of living adjustment.

So before they had baseline amounts of $400 up to $1,500 and the city was already in a program that potentially doubled those. And so it would be $800 to potentially $3,000. but now in addition to that doubling we also This council and the administration passed an option to allow for a cost of living adjustment to have those amounts increase because they've been static at those levels for quite some time now.

Well, thank you, Commissioner, for that answer. One thing I wanted to do, Commissioner, maybe next year, obviously, February, March, I'd like to have a city council hearing just on... How Veterans Could Apply, What the Process Would Be for Applying, basically a public awareness campaign, but maybe I'd love to have you as a guest, as an administration official to testify. I do want to try to get the information out to as many disabled veterans as I can throughout the city. And just for the record and being transparent, I do receive some... Some assistance, tax relief because I'm a service-connected veteran, but I want to help other veterans participate in the program as well. Thank you, Mr. Chair. Thank you. The chair recognizes Councilor Mejia. Councilor, you have the floor.

Thank you. I'm curious if you have, since you've been running numbers, Chief, if you could, if you happen to know what the number would be total that we would be... either saving or losing if we don't pass this home rule petition.

So I want to make sure I understand your question. I want to make sure I even understand my question.

Here's what I'm trying to understand. Just for the sake of the exercises, for folks who are just tuning in so that they understand the gravity of what we're trying to do here. Can you give me a ballpark figure in terms of the dollar amount of what we would be losing if we don't take action?

Yes, so OK, so the docket in front of you today is about adopting the residential exemption and classification It has no impact on the amount of money we collect, but it will impact individual people and how they They're tax bills. Right. So what's that dollar amount for those folks? I see. So if we did not adopt anything today, we would have a flat tax rate of $15.40. For comparison, the residential rate for FY25 was $11.58 and the commercial rate was $25.96. So, you know, Pick your property value and add $4 to that, and that would be your new tax bill. It would be a significant increase for a resident, and it would be a very significant tax decrease for a commercial property.

Thank you. Thank you for that. And while I understand that this may not be the appropriate hearing to ask the question, I still would like to know whether or not I keep going back to pilot. I'm always looking at other options. I'm always trying to figure out another path forward. There has to be another way for us to not find ourselves in these situations where we're pitting People against each other, which is kind of what this always feels like. And then the burden falls on us as city councilors to make these really difficult decisions. But at the end of the day, that's what we get elected to do, right? Is to make decisions on behalf of our constituents. And so what are you all thinking of moving forward considering all of the back and forth that we've had

This past year regarding the commercial versus the property, what is your path forward? How are we going to set ourselves up for success after this?

Yeah, I think we continue to make the case at the The home rule petition that we've put forward and that's pending at the state is the right answer. It provides the right level of stability for We're not trying to pit people against one another. We're really just trying to create stability in a moment of transition. So we continue to make the case and believe that that is the right solution here. in order to provide stability and not create an enormous impact on city services.

But I do have something that I just want to throw out there for consideration is that Harvard and BU and Northeastern always have students, like that's stable. We already know that they're always gonna get their $50,000 or however much they charge per year. So I'm curious if we know that that is, Thank you. Thank you.

thinking about pilot right we've we the administration started those conversations before the latest federal administration I think things got a little Dicey in the early part of this year but we're continuing to have really productive conversations with our university and medical institution partners to see where There's opportunity there to have them be more folded in. Because like we've said, I think our success and their success is so linked. And so we try and find ways where we can reasonably you know, modify those agreements if possible to help with the city. Right, because even, and I, Chair.

One more question. Thank you. Even, I'm gonna talk about Brigham and Women's Hospital, right? There's other employers who are doing business here. They may not be commercial in the sense of the traditional way that we see them, but they are providing a service. They are technically I just want us to continue to push us to really look at everyone who is occupying space here and how we can tap into those dollars as a part of the solution as well.

Thank you.

Thank you. The chair recognizes Council Weber. Council, you have the floor. Thank you, Chair. Just a couple things. So I feel like I understand what's going on. So with the split tax rates, what I read was that generally you use that to keep housing affordable for people. I assume you agree with that? Yes. Okay. And in terms of You know, we're trying to take the maximum split, you know, 175% for commercial and maybe with the home rule slightly more. I guess, so I had our budget, Karishma ran some numbers. My question was like how much without the home rule petition passing would shift from commercial, you know, property owners to residential? and the number I got was about 53 million dollars. That's like maybe last year and this year. Do you have a number?

Is that in the ballpark?

I just want to make sure Understand the question.

I'm not sure that I have an answer right now.

I might have to get it to you later, but sorry, go ahead.

The difference between the 175% split tax rate for commercial properties and 181.5 and the 180. The estimate I got was about $53 million between those in terms of the total part of the tax levy that was being, because it's really, we've got two sides of the seesaw here. I don't know if you, you know, I was trying to figure out, the average was 780 for single families and trying to figure out how much that was, but do you have a dollar figure for the total amount?

Yeah, so I think the, It's an interesting question. It's not the kind of thing that we normally look at. We're not normally weighing what percentage of the levy would be paid by somebody if we had a different ship than the ship we're proposing. We took a look at, do you remember if it was 180 or 181? We had a number that was like 75 million or something.

Well, you can get back to me on that. So we calculated in the low 50s, but $50-plus million as we're We're just, and it's either somebody's paying it. It's either the commercial properties or the residential property owners. and I think that's what we're talking about in terms of these shifts.

So there is something that I would love to clarify on that because One of the, the reason I can't quite remember the number is that when we were kind of having this conversation internally and talking about what the value of that number was, we realized that it makes it sound like It's solvable by cutting our budget by that difference. So if you take last year's commercial percentage of the levy and you apply it to this year's levy, How much money is that? And is that something you can solve with the budget? And the reality is we can't because if we cut our levy, it is not something we can direct. City Council, City Council, City Council, City Council, to like the lowest amounts that is proposed in the legislation, which is the 180% shift.

If we were going to try and achieve that rate, basically what that would do is shifting to 180% would take our potential $12.40 residential tax rate this year and it would move it to $11.99. If we were going to try and adjust this year's tax rate just by cutting the levy instead, we would have to cut $116 million from the levy. And so that would make the residential tax rate $11.99. It would also then cut the commercial tax rate from $26.96 to $26.07. So in essence, the Commercial property owners get a benefit of around two to one over residential property owners for any levy cut that we make because we're not allowed to legally direct the savings towards one class of property.

Yeah, that's a good point. I had one follow-up question. I appreciate it, Chair. Just in terms of the rates we're talking about, around 12, for residential, 25 for commercial. Do you talk about the historical, where that is in terms of You know, we, and you have a chart. Did you hand that out? I'm sorry.

Yeah, no, I can tell you whatever. I didn't hand it out, but I'm happy to get it to you.

What's the one sentence on each one, you know, where we stand now compared to historically on those rates?

Sure. So for 26, the residential rate is projected to be around $12.40. So it's assuming that classification that In essence, assuming this order passes. And so we have classification at 175%, and we have a 35% residential exemption. You play out that math with the values that we have, and the residential rate should be around $12.40. For a historical comparison, the last time the residential rate was at that level, was 2014 when it was $12.58, so a little bit above. And then 2015, it went down to $12.11, and then it dropped for quite some time. The commercial tax rate right now is projected to go out for fiscal year 26 at $26.96. And for a comparison, historically,

The last time we were close to that was fiscal year 2016. The commercial rate was $26.81. In fiscal year 2015, it was $29.52. So that is also climbing to a higher level than it's been in the past handful of years. And so this is another thing that is just kind of It a little bit demonstrates how classification works. This is never about the city getting more revenue. It's really about who is paying and how that breaks out in tax rates.

Okay. Thank you. Thank you, Chair.

Thank you, Councilor. We'll now go online for public testimony. When you hear your name called, please state your name, any affiliations. You will have two minutes to testify. D.B. Reif. The floor is now yours. Can you hear us? You're on mute. We can't hear you.

All right, third time's the charm. Thank you, Chair, and thank you, all city councilors and to the panelists. I'm a longtime city resident. I live in Brighton. And I have been sort of mulling over this problem of the city taxation for a long time. And I'm just going to walk through an analysis I've done that I think will be very important. So I know the assessor says that the land that condominiums sit on is included in the valuation of a condo. And if you look at the assessing documents, you can see for a single family home, the land has a value, the building has a value, and they're both taxable.

When the two-family, for example, becomes a condo, the land says exempt. And it is a loss of tax revenue, even though there are two taxable units. But the taxable units each receive the full residential exemption. So for example, I just looked at a large condominium complex near where I lived. And on the assessor's page, there's a range from, I don't know, 350 Invit 75, excuse me, to $450,000 assessments. And if I go ahead and click on one of them and I look at the tax bill, The total full valuation is $352,000. The residential exemption for that unit is $317,000.

which leaves that unit with a total taxable valuation of $35,000. And that's, it's not unique. you know look for it i didn't pull it out i can look at any of the hundreds of condos around here uh and that's distressing And so then through the data portal, I just looked up how many residential condos are in the city, 183,445, 36,000 of which are owner-occupied. If those 36,000 owner-occupied residential condos all get the residential exemption from the example, which was $316,530, and I do the math, It's a number that is mind-boggling. So it's 36,212 times 316,530.

It's 11 billion, 4.6 million. That's the amount of money that goes to residential exemptions for owner-occupied condominiums. So if you just think about, well, what if they got half of the residential exemptions so that we don't have people whose valuations are $37,000? You know, that alone is $5.7 billion. I think there are other things that I've looked at that I think would lead to, for one, a healthier fiscal picture for the city and more equitable taxation. and, yeah. Thank you. That's part of, yeah.

Thank you for your testimony.

Thank you, thank you.

Looking at my colleagues to see if they have any additional questions. No? OK. I'm seeing people shake their heads. All right. I have one last question. Year over year, have we seen an increase in our veteran senior tax exemptions?

The number of applicants actually tends to drop year over year.

Okay. Thank you. All right. All right. Well, seeing no other questions, no one else signed up for public testimony. I want to thank my colleagues. I want to thank you for being here. I want to thank everyone who came to testify. I want to thank central staff. And again, I want to remind everyone The action that we're taking and will be voting on on Wednesday is will we grant the full 35% residential homeowners exemption. So that is something that we'll be bringing forward on Wednesday to the council. Yeah, and the tax shift. Yeah, absolutely. Again, with that said, thank you to everyone. And the heron on this docket number 2045 is adjourned.

Thank you