Boston facing $1.7B budgetary shortfall from empty office buildings: Report

Empty office buildings have commercial values declining at a steadier clip than initially projected as the City of Boston is hurtling toward a billion budget shortfall in the next five years a fiscal watchdog warns in a new overview The latest numbers are more daunting than the roughly billion budget shortfall that was projected in a similar account issued last year by the same local think tank the Boston Protocol Institute in conjunction with The Center for State Strategy Analysis at Tufts University and drew backlash from City Hall Empty offices continue to threaten Boston s fiscal future as once-attractive buildings sell for half their former value and property tax collections weaken faster than anticipated the watchdog overview circulated on Thursday states A lack of decisive action combined with a faster-than expected decline in tax assessments has further darkened the outlook BPI s initial projection of a billion shortfall based on a - decline in office values over the next five years now reflects a best-case scenario and appears outdated and overly optimistic according to the summary s authors The fiscal watchdogs say their analysis based in part on assessed values and the commercial real estate sphere is pointing to a steeper - decline that could lead to a billion revenue shortfall A worst-case scenario pushes that possible shortfall over billion over the next five years should a consistent hike in property taxes further depress office values the description states A post-pandemic shift to remote work has led to nowadays s empty office buildings which is leading to declining values that are eroding the city s commercial tax base the assessment states Office vacancy rates have climbed from in to nearly this day the overview states Compounding matters is the city s budgetary structure which derives about three-quarters of its revenue from property taxes Homeowners were hit with a double-digit spike in property taxes earlier this year by way of falling commercial values that pushed more of the city s tax burden onto the residential sector Should the city continue to raise property taxes rather than pivot to alternative solutions office and home values could be depressed even further in the coming years according to the overview The budgetary shortfall would thus increase This is a daunting prospect Gregory Maynard executive director of the Boston Approach Institute recounted the Herald This assessment should be eye-opening for people putting together the city s budget The summary suggests that the city consider taking in less than the maximum amount of revenue allowable under state law and cut spending in the budget rather than continue to hike property taxes Boston s leaders sometimes imply that their budget is self-healing that shortfalls cannot happen and that the city can dependably collect the maximum amount of revenue allowable under state law the review states But there s no magic here The way shortfalls get filled in the current budget process is through automatic tax rate increases And while that might be fine when the increases are small large rate hikes carry substantial economic and political jeopardy Tax rates for homeowners stand to rise over last year s level by per the analysis should the city choose not to adjust spending or reduce revenue expectations City Hall downplayed and eventually outright dismissed BPI s prior review that projected a more than billion shortfall in Boston by as a end of office vacancies Maynard is hopeful that the reaction will be different this time I hope the mayor I hope the administration takes this more seriously Maynard reported I think the pushback that we got from City Hall last year was pretty dishonest The mayor was calling the BPI document false information on the one hand and then proposing a tax shift which was explicitly aimed at solving the difficulty that we identified on the other I think what this makes clear is that the city necessities to get serious about taking the soundness of downtown Boston much more seriously he commented A scant hundred office to residential conversion units is not a downtown revitalization plan and it s really clear the city demands to do a lot more Related Articles Maura Healey delivers millions to boost downtown Boston housing revival Boston City Council passes Michelle Wu s billion budget with M in amendments Massachusetts U S Attorney Leah Foley slams Boston Mayor Wu for false narrative of ICE Family of -year-old boy run over by Boston school bus sues BPS transportation provider Pols Politics Sunlight may be latest through on Beacon Hill this legislative term Flowers are left to go dry at Atlantic Ave in the city Nancy Lane Boston Herald