As the mayor’s race heads for the elimination round on September 24, many observers have been struck by the robust and thoughtful civic debate this crowded field has generated. Those not already committed to a candidate are now paying closer attention as they decide which one merits their vote.
While many factors weigh in this decision, we believe a critical one is which candidate can best manage growth and harness it to the city’s benefit. Of course growth is good generally — it produces jobs, improves neighborhoods, and is the sign of a thriving city. For Boston, it’s also good for a very specific reason: It’s the only way city government can provide essential services to its residents while balancing its budget.
Boston relies on property taxes for two-thirds of its operating budget — an unusually high portion, which has increased as net state aid and federal aid have diminished. Under Proposition 2½, new growth — principally new construction or major rehabilitation — is exempt from the cap on increases to the annual tax levy. This exemption has allowed the city to increase its levy by almost twice the 2.5 percent limit over the last several years.
More important, commercial development in the downtown core, the Back Bay and the Seaport alone generates over half of the city’s total annual tax levy and cross-subsidizes basic services to homeowners across Boston’s neighborhoods.
In addition to generally having higher absolute values, commercial property is taxed at nearly three times the residential rate under what is known as classification. Large commercial projects also generate housing and jobs Linkage payments to the City. With their private building services, they impose a much lower cost burden on city services such as trash collection, schools, parks and public safety and often generate exactions to help pay for them.
In contrast, owner-occupied residences benefit from classification and also qualify for a 30 percent tax exemption. The combined effect is to cut a typical homeowner’s tax bill in half, and due to classification, shift almost $440 million of tax liability from residents to businesses in fiscal year 2013. This cross-subsidy gives all residents of the city a very direct stake in growth and especially in commercial growth in the high-value urban core. Whether they realize it or not — and we suspect many do not — it keeps their taxes low and pays for the city services they rely on every day.
Mayor Menino’s 20 years of careful stewardship has left Boston — and the next mayor — with a great gift: a fiscally healthy city with an excellent bond rating. This provides a solid platform to continue to improve the city. The candidates should be judged on how well they acknowledge the benefits of growth and recognize the need to manage it to pay for basic services and for the new programs we’ve heard them talk about in the mayoral debates.
This is not as easy as it sounds. No candidate has run on a platform opposing growth, but new development has impacts on its immediate surroundings and is often locally unpopular, at least initially. It requires active political management to prevent a minority of abutters, after sufficient time for review, from depriving the rest of the city of its benefits.
New development also involves risky private investment in the face of changing markets, so it requires city government to calibrate development exactions and to make development incentives available when required for project feasibility. Do candidates view this as mere spending, or do they recognize that development incentives are investments in the city’s future that should be evaluated from the perspective of the public’s return on its investment?
A rigorous development approval process is necessary to ensure that impacts are addressed and the ambitions of developers are balanced with the interests of the public, but our current process is needlessly cumbersome. It could be streamlined in practical ways without reducing substantive protections, and the entire city would benefit. Which candidate will have the determination to tackle this tedious imperative?
New development, especially commercial development in the urban core, benefits every neighborhood. The city relies on it for its fiscal stability. With only 1 percent of the metro area’s land mass, Boston has almost a quarter of metro jobs, so the entire region relies on it too.
Because of its importance, the job of the mayor is to effectively manage growth for the whole city’s benefit.
Samuel R. Tyler is president of the Boston Municipal Research Bureau. Matthew J. Kiefer is a Boston land use attorney and director at Goulston & Storrs.