The proposal that the council approved Wednesday, with Councilor Ed Flynn votes alone “no”is the result of a agreement Wu reached with various business and tax watchdog groups last week. These organizations had opposed her initial legislation for monthsarguing that it would be harmful to Boston real estate and small business communities and jeopardize the city’s future financial stability. Their fierce opposition delayed passage of billand finally came to this languishing in the State Senate for months.

Time is running out for the city to get its proposal across the finish line. With the approval of the council, he now heads to the State House where lawmakers and the governor must approve the legislation and return it to the City Council before the end of November, so that the City can finalize the residential exemption and tax rates in time to prepare and send property tax bills in early January.

More than 70 percent of the city’s $4.6 billion budget is funded by property taxes., of which two thirds come from commercial real estate. But like the the value of downtown office buildings has fallen due to post-pandemic remote work policiesresidential property owners faced the prospect of large increases in property taxes in order to maintain a balanced budget, as required by law.

Another option would be to The city has had to cut hundreds of millions of dollars from its budget, officials said, and it also has not collected the full amount of property taxes it is entitled to each year under state law , which is limited to an annual increase of 2.5 percent. Administration officials argued that this alternative was “fiscally irresponsible” and “unfeasible,” saying the cap did not keep up with inflation and that the city never chose not to collect the full amount.

THE compromise version of the proposal limits the scope and timing of Wu’s initial measure, which proposed a three-year opt-in period to increase commercial tax rates, currently capped at 175 percent of the residential rate, to 200 percent, lowered over a period of five years. The agreement limits the city to implementing the measure in 2025, increasing commercial tax rates to 181.5 percent of residential rates, before dropping to 180 percent in fiscal year 2026, 178 percent in in fiscal year 2027, then again to 175 percent in fiscal year 2028. The proposal also includes additional support for small businesses.

Several councilors acknowledged Wednesday, however, that the measure does not address the fundamental problem of the possibility that commercial property values ​​could continue to decline in coming years, hurting residential property tax rates or the city’s bottom line. .

Marty Walz, interim president of the Boston Municipal Research Bureau, a business-backed budget watchdog, which was one of the groups that negotiated the deal with Wu and his administration.made that point in his testimony at a council hearing on the proposal Tuesday.

“The home rule petition is not a solution to Boston’s complex public finance and economic development challenges,” said Walz, who nevertheless recommended that the council vote to adopt the petition. the measure. “The new dynamics of the commercial real estate market are not a temporary or cyclical change, which means that the city, all of us, must address the long-term budgetary implications through responsible budgeting approaches.

Before Wednesday’s vote, Councilman John FitzGerald stressed that the proposal only delays the inevitable and that property taxes will likely continue to rise when the law expires in three years. Residents who cannot pay these higher bills could still find themselves evicted from their homes.

“It is so important to highlight that the 28 per cent increase that residents fear will see this year is still coming, but spread over three years,” said Councilor John FitzGerald, before voting in favor of the proposal . “People’s fears persist, and we are allowing them to play out, while potentially causing irreparable harm to our business community. »

“After this vote, let’s not act like we’ve cleared a major hurdle, because there will certainly still be hurdles in the future. . . and so we need to start preparing for it now,” he said.

Niki Griswold can be contacted at [email protected]. Follow her @nikigriswold.