Commentary: New growth takes center stage as Boston sets its FY2024 tax rates

The following analysis was published last week by the Boston Municipal Research Bureau, an independent, non-partisan organization established in 1932 to provide objective and impartial research and police analysis about Boston’s city government.

Boston’s assessed property value sustained its upward trend, marking over a decade of continuous growth by increasing $8.6B or 4.1 percent from FY23, for a total value of $220.9B for FY24. Fueled by an unprecedented surge in new growth of $121.8M, Boston’s tax levy is expected to jump by $195.6M or 6.1 percent this year.

The assessment date for FY24 is January 1, 2023 and captures the market activity of 2022. This record for new growth tops the previous best of $102.7M set in FY21 by $19.1M, or 18.6 percent. New growth is a critical component of the annual tax levy increase because it permits the City to maintain its ability to deliver basic services. In every year from FY16 onward, new growth has represented more than half of the tax levy limit increase. This creates a heightened importance for new development and raises questions about how development can continue apace as the City faces economic uncertainty.

Property Values — Boston’s growth in FY24 taxable value represents an increase of $8.6B or 4.1 percent, substantially less compared to last year’s growth of $14.4B or 7.3 percent. By class, residential value increased by $5.7B or 4.0 percent, while business
(CIP) value rose by $2.9B or 4.1 percent. While growth in commercial value of 4.1 percent and personal property (mainly the equipment and machinery of utilities and office equipment) of 8.3 percent drove business assessed values up overall, industrial property valuation decreased by 1.7 percent. The City’s property base remains strong.

Levy & New Growth - Boston’s property tax levy, the total revenue the City can raise through real and personal property taxes, increased by $195.6M or 6.5 percent from FY23 to $3.19B in FY24. In FY24, property tax revenue from new growth of $121.8M accounts for 62.1 percent of the levy limit increase, enabling the levy limit to rise by 4.1 percent on top of the base increase. New growth in FY24 rose by 24.7 percent or $24.1M over new growth in FY23, resulting in a substantial expansion of the City’s levy raising capacity.

Tax Rates & Classification - In addition to the value jump, tax rates for both residential and business properties increased this year after a slight decline last year. Residential tax rates increased by $0.16 or 1.5 percent to $10.90 per thousand dollars of value, while the business tax rate of $25.27 increased by 2.3 percent or $0.59. As a result of the City’s application of full classification, which allows the City to shift the property tax burden from residential to CIP, business property holds only 33.3 percent of the taxable value in the city, yet pays 58.3 percent of the tax levy. Residential property represents 66.7 percent of total taxable value but will pay 41.7 percent of property taxes.

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