Mayor Recommends 8.0% Budget Increase
Increased spending driven by Schools, Planning Department, and Fixed Costs
Budget season in the City of Boston has officially begun with the release of Mayor Michelle Wu’s FY25 recommended budget. The $4.64B operating budget represents a $344.0M increase from FY24, or an increase of 8.0%, driven by increased spending on Boston Public Schools, debt service, pension payments, and the creation of a new Planning Department. The Mayor’s recent proposal for a temporary classification change is projected to have no impact on the budget; it is revenue-neutral. There are no cuts to programs or services to ameliorate the impact of the increase in commercial property taxes included in the Mayor’s home rule petition regarding classification. The City’s workforce will increase by nearly 500 full-time equivalents (FTEs), with 209 coming from the transfer of BPDA employees to the City. Alongside the operating budget, the Mayor also released a $4.70B 5-year capital plan, an increase of 11.9% over the previous capital plan.
Property Tax – The property tax, the City’s most important source of revenue, is budgeted to make up 71.1% of the City’s revenue in FY25. Net property tax is expected to grow $158.7M, or 5.1% from FY24. The overlay reserve, a portion of the property tax set aside to cover the costs of abatements and noncompliance of taxes, decreased from $52.0M to $33.0M, allowing the City to use more of its tax collections. New growth, which has driven the City’s increase in the property tax base over much of the last two decades and allowed the tax levy to rise well above the base 2.5% each year, is budgeted at $60.0M for FY25. While this is in line with the City’s previous conservative budgeting practices, it is well below the record $121.8M in new growth in FY24.
The budget comes at a time when the Wu administration is concerned about potential declines in business property values. While overall property tax revenue is expected to grow to keep pace with spending, Mayor Wu recently filed a home rule petition that would temporarily allow Boston to reduce the residential share of the tax levy and increase the business share. This would shift more of the burden of Boston tax bills to business properties in an attempt to mitigate tax increases for residents. Business property, which constitutes 33.3% of assessed value in the City, generates 58.3% of the property tax revenue that the City takes in.
