Boston could see permanent downturn in revenue and services
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The City of Boston is facing an irreversible decline in revenue that could lead to permanent decreases in funding for education, safety and quality of life, according to a new report on the floundering commercial real estate market.
What's happening: Working with the Center for State Policy Analysis, the Boston Policy Institute, Inc. found that Boston could face a budget gap of up to $1.5 billion over the next five years as highly-taxed office buildings remain empty in the new remote era.
Why it matters: Report author Evan Horowitz describes an economic "doom loop" for the city, in which decreased spending makes Boston less appealing, and then leads to lower property values and even more service cuts.
Zoom in: Boston has the highest proportion of revenue coming in from commercial property taxes of all major cities in the U.S. and is especially vulnerable to plummeting office space values.
What they're saying: Simply raising taxes on commercial properties or transactions to make up for losses isn't wise, according to Horowitz.
- "Introducing a tax on high-value real estate transactions would be largely self-defeating, as it would put further pressure on commercial real estate prices and heighten the challenges in that industry," he said.
One solution, or at least deterrent, to the doom loop could be increased aid for Boston from the state.
- Suburbs that are seeing higher tax collections as remote workers spend more money where they live could help keep Boston from sinking.
- "Taxing the beneficiaries of our new economic landscape to compensate the victims is a classic rationale for redistribution," Horowitz said.