A new data forecast is warning Boston could face a significant downturn in tax revenue from office buildings over the next five years.
Axios reports the forecast from the Tufts University Center for State Policy Analysis and the Boston Policy Institute offered three possible outcomes:
- A best-case scenario with office values declining 20% to 30%, which would result in a $1.4 billion budget shortfall over that period – including a $415 million gap in 2029;
- A middle of the road scenario with office values dropping 35% to 45% over five years, resulting in a $550 million shortfall in 2029 and a $1.7 billion budget shortfall overall; and
- A worst-case scenario with office values plummeting even further, creating a $660 million shortfall in 2029 and a $2.1 billion budget hole overall.
The forecast predicted the city government will need to enact a residential property tax rate hike between 1.27% and 1.38% to fill the revenue gap over the coming five years, depending on which scenario plays out. The current residential tax rate for Boston is $11.58 per $1,000 of a property’s assessed value.
The city’s budget plumbs 70% of its revenue from property taxes, with two-thirds of that figure coming from commercial real estate. Mayor Michelle Wu tried to raise commercial property taxes last year, but the state legislature blocked that effort – she has refiled the request earlier this year.
“Shrinking demand for office space is not a short-term problem that the city can hope to simply wait out,” the report cautioned. “It requires a durable, transparent rethinking of budgetary priorities in order to sustain and support Boston’s economic future.”
