The Boston City Council passed a resolution calling for the creation of a special commission to address office vacancies and declining values four months ago, but one councilor says the Wu administration has not acted on the recommendation.
Councilor Ed Flynn said he’s been trying to “sound the alarm” on the issue “for some time” while pointing to a February report that cites the negative impact falling office values and vacancies will have on the city’s commercial tax base, in a letter urging Chief of Planning Arthur Jemison to create a blue ribbon commission.
The commission would “study and make recommendations on the issue of downtown office vacancies,” Flynn said. He envisions it as being composed of business leaders, city and state officials, neighborhood organizations and industry groups. The Council approved Flynn’s non-binding resolution to support creation of such a commission in March.
“Vacancies and falling downtown commercial property values from this struggling industry can pose serious concerns for our city’s tax base and budget,” Flynn wrote. “It is critical that we be proactive in working to address any potential revenue shortfalls.”
He pointed to unspecified reports of office buildings “being sold at a portion of their original purchase price,” such as 201-207 South St. in the Leather District that sold at $13 million recently compared to its 2016 purchase price of $27.5 million and the nearby building at 186 Lincoln St. that sold for $11 million last November when it was bought in 2015 at $20.7 million.
Flynn also cited a February report issued by the Boston Policy Institute and Tufts University’s Center for State Policy Analysis, which projected that falling office values could lead to a more than $1 billion revenue shortfall in five years, and a $500 million annual drop in city revenue after that time.
“This is an alarming possibility, and our city must take steps now to address this,” Flynn wrote, adding that he was urging the city’s planning department and mayoral administration to “take this issue seriously” by creating a blue ribbon commission.
A Planning Department spokesperson said Wednesday, “We are reviewing the letter and look forward to working with the City Council in any way that will help to address office vacancies.”
Given that more than 70% of the city’s annual budgetary revenue is derived from property taxes, a third of which comes from the commercial sector, city officials have said a decrease in commercial property values would shift more of the tax burden onto residents, with the potential for a double-digit tax increase next year.
Mayor Michelle Wu put forward a plan that would allow the city to raise commercial tax rates beyond the state limit for four years to stave off part of that high tax increase for homeowners. Business leaders and industry groups have criticized the proposal for further hampering a struggling commercial sector.
The plan was approved by the City Council last month, but needs final approval from lawmakers on Beacon Hill, where it has faced pushback and stalled thus far.
Flynn and others from the business sector have cited the potential for a so-called urban “doom loop” that could result from falling office values and downtown vacancies, but Wu said that she did not envision such a scenario occurring in Boston, during an appearance Wednesday on the “Java with Jimmy” podcast.
Boston’s economy is recovering from the pandemic, Wu said, citing data from a report released by the planning department in June that show its vacancy rates are fourth-lowest among comparable cities, foot traffic is “steadily growing,” and public transit ridership in Massachusetts is recovering at one of the fastest rates in the country.
“Even though it feels like we still see vacant spaces, we’re actually doing a lot better than other places,” Wu said. “I don’t think we’re in an imminent crash or doom loop, but because we can’t be sure exactly the scale of what’s going to happen, we have to make sure we’re being cautious now.”
