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All that empty downtown office space could mean tax-collection trouble for Boston
By adamg on Sat, 02/24/2024 - 5:35pm
A recent report projected more than a $1-billiion decrease in property-tax revenue from downtown office buildings seeing a continuing drop in occupancy because a lot of people are still working at home. Scott Van Voorhis reports we're now seeing the first wave of that: A growing number of requests for tax abatements from downtown building owners who claim their buildings simply aren't worth what they were in the Before Times.
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Now remember Boston is small
Compared to other urban areas in the US. Every major city is looking down the barrel of a shotgun, and no mayor has a plan.
It’s also going to crush small banks once owners default on their commercial loans.
Boston is not in the worst position compared to others, we have a much more diverse commercial office tenant base. Can’t take a lab home like you can a laptop.
Although we keep electing morons who think charging people to enter the city is a great idea considering the above forthcoming circumstances.
Although we keep electing
I haven’t seen any proposal, ever, for charging people to enter the city. What I have seen is proposals to charge people for bringing automobiles into congested areas.
Watch what will happen soon.
Watch what will happen soon. Future of Boston is bad. Are life science buildings the only ones with full tenancy? We're talking buildings and skyscrapers that require engineering maintenance. Fire safety, temperature and structural preventive maintenance worth tens of thousands to upkeep. But you know what's the biggest bullshit? The gawl for these vacant tenants to have websites that give the buildings' addresses when you click "Contact Us" .
And yet Boston keeps
And yet Boston keeps approving more offices in the Fenway, Seaport and elsewhere instead of the housing the city desperately needs because the people in charge are all landlords and homeowners who don’t want housing bc the less housing the more their properties increase in value.
The city isn't a developer
Boston can only approve what private developers propose. Perhaps if Boston made it easier (cheaper) for developers to build housing, more housing projects would be proposed.
Remote working is good for
Remote working is good for employee quality of life and the environment.
Democrats should support empty office buildings.
"Democrats"...
...is doing a lot of work here.
Perfect time to collect taxes on colleges and churches
This might get ugly.....time to cash in those decades of limited or no taxes.....maybe just tax college sports revenue to start.
Or will the residential exemption get reduced?
As a city resident for 12 years the residential exemption has been part of the reason we have stayed in the city. If taxes go up I wonder how many families will head for the suburbs?
Tax College Sports in Boston?
That will raise a whopping $4,068 per year.
City Income Tax?
Cutting the residential exemption would go straight against the policy goal of reducing housing costs. I don't know if they can means-test it so that it phases out for properties above a certain value, i.e. exemption only applies to properties under $1M assessed value.
My guess is if it starts to get bad we'll see talk of a resident/commuter tax similar to NYC.
Under $1M?
So every property in Boston. Brilliant!
Important details that's
Important details that's often left out; the $1 to $1.5 billion decrease estimate is over a 5 year period and it's from the city's $4 billion annual budget
Yep, Easily Solved
$1.5B / 5Y = $300m/yr = the annual budget of the Boston Fire Department.
If you prefer to defund the police, they account for $400M, so we only need to cut 3/4 of them.
Boston Public Schools is good for about a billion annually, so just cut their budget 30%. Maybe fire every other teacher so all the administrators and support staff can keep their jobs.
I didn't do the math but if you were to axe everything in city hall that's named "Office of ___" or "Mayor's Committee on __" you might come up with a couple tens of millions in annual spending. We can probably get by without the Office of Food Justice, but that's only $1.4M.
Public Works is $100M.
Is there 7.5% of waste and unnecessary spending in the City's budget? Almost certainly. But it's a lot, and nearly all of that will have to come from headcount cuts--so you're talking a 10% RIF probably to get there, which is going to make for one heck of a food fight. Forget about a capital "U," that would be ugly with a capital Y.
Yes and no
First the no because there's been multiple articles lately on other local news sites about Fidelity and other companies shifting back to more in-office days. Fidelity is a large tenant in various buildings in downtown crossing.
But the yes is that not everyone that is coming back to the office.
In fact, I bet for some companies who went fully remote or scaled down (and moved elsewhere for cheaper rents) their leases have all expired. If you signed a 5 year lease in 2019, it would be ending this year.
This is really just ebb and flow sorta thing. It happens often during a recession, but we're not in one (and aren't heading toward one, regardless of what the news says). This works to an advantage because yeah the building owners can't charge those premium rents. They will now have to lower the price a bit and attract tenants that wouldn't normally look in the city due to price.
This happened after the dot com bust eons ago. I sat on several companies' 'moving committee' and looked at more vacant office space than I want to admit. All at amazing low prices b/c landlords were desperate for tenants. One place got some Charles River view top floor office space in Kendall around that time for
My point: Yeah they are crying poor mouth now, but it just means they will lower rents to the point where they are breaking even and won't make much profit. Big deal.. cry me a river. It'll rebound at some point.. it always does.
A slightly more pessimistic view from
Banker&Tradesman
https://bankerandtradesman.com/goodbye-to-downtown-skyscraper-building/
Two separate but related issues:
1.) Declining tax revenue from existing CRE resulting from lower rents and occupancy.
2.) Boston has relied heavily on New revenue from projects coming on line to fund operations. This appears to be drying up.
Part of this is the results of Massachusetts tax quirks, primarily Prop 2 1/2 and state control of tax authority that is probably not going away soon.
15 years is long time economically. (See the article)
I think we are more 1980-95 than 2005-20. Unfortunately, we don't have Ted, and Tip etal blocking for us today.
And if Trump wins how much federal $ would Boston lose
It is likely all city depts will see cut$ if these tax projections are accurate.
BPS already has a reputation for poor performance and they are closing classrooms at over half their schools next school year and will close schools the following year which could result in a reduced BPS budget 3-5 years from now.
These projections don't take into account the likely cuts Trump would make to federal funding for Boston if he is elected - $700 million in 2023 and $551 million for 2024 I think?
https://www.boston.gov/departments/budget/fy23-federal-funds
https://www.boston.gov/finance/fiscal-year-2024
This isn't accurate
BPS is looking to reduce their maintenance and infrastructure costs, but they have no plans to shutter over half their schools.
That plan was basically a deferral of decision making to reassess each year and close under utilized school buildings to focus resources into more used ones.
You’re missing the point
This is about property tax revenue, not property owner revenue. If the property owner needs to lower the rent to find a tenant, the value of that property has decreased and therefore so does the property tax.
That's not how it works
If a store sees its business dramatically decline in one month, do you think its property tax assessment (and therefore bill) is also somehow magically reduced that month?
It's not magic
It's a business, so they've got the paperwork to show how much lease revenue is coming in along with the comps for nearby properties. That data gets used to protest the assessment for upcoming tax years, which is why this is an impending tax revenue problem for the City.
That is how it works
Not at a monthly resolution, but I never said that. Property tax abatement’s need justification and lowering your rent for a year to multi year lease agreement is about as solid of a justification as you can get.