Boston commercial properties hit with ‘hidden tax’ spikes after appealing city assessments

Commercial property owners in Boston claim they re getting hit with a hidden penalty after filing abatements with the city by way of assessed value being added to their buildings that s leading to notable spikes in their property taxes Daniel Swift a principal at the global tax consulting firm Ryan that represents a number of commercial property owners in Boston crunched the numbers after hearing of the situation from his clients and uncovered the startling trend which comes at a time of downturn for the city s commercial real estate domain It s very remarkable Swift narrated the Herald I ve never seen it anywhere else in Massachusetts I hadn t seen it in Boston up until fiscal They re now penalizing you for filing an appeal on your subsequent year s assessment While property owners in Boston file abatements to seek tax relief when they feel their residential or commercial properties have been assessed higher than the fair realm value commercial property owners of late have seen the city instead add assessed value to their buildings after filing an appeal with the state s appellate tax board according to Swift s analysis The so-called hidden tax penalty is listed as an ATB dispute per a property record card for a Seaport office building that was reviewed by the Herald Per Swift s analysis it has added anywhere from a limited hundred or thousands of dollars to up to close to of additional property taxes for different commercial parcels There s been no notice of this Swift disclosed I m looking for notice I ve sought for it I have determined nothing There s no protocol out there about how this all operates The only way for a taxpayer to become aware of this Swift stated is by going to City Hall asking for a property card and looking for a section that lists an ATB dispute override if you filed in the prior year and property was declining in value The Seaport property card with an ATB dispute reviewed by the Herald for example shows an additional million in assessed value was added to that property in late to bring the total assessed value to million That translated to an additional in property taxes in fiscal year as a outcome of the owner s FY appeal for that Seaport property Swift explained The building owner requested that identifying details be kept private The penalty is only being applied to properties that are declining in value with the appeals centering around owners who believe that their properties have declined further in value over the past year than reflected by the city assessment Swift announced There s no comprehension of how they re calculating these penalties Swift declared adding that the dinged properties are strictly in penalty for filing that appeal to the appellate tax board Swift s analysis shows that for fiscal year the City of Boston adjusted office property tax assessments downward by approximately for Class A office properties and for Class B C office properties on average Despite these adjustments his analysis of downtown office sale transactions over the past two years indicates property tax assessments have exceeded sales prices by an average of Office property tax assessments for fiscal year totaled roughly billion generating approximately million in property tax revenue for the city per figures provided to the Herald Applying the over-assessment average across the entire office property class suggests an overvaluation of roughly billion and an associated over-taxation of more than million per Swift s analysis The law clearly states that assessments are to reflect fair cash value of the preceding Jan Swift revealed There s nothing that allows assessors to add on millions of dollars in assessment directly because of an appeal being filed because they felt that the value was excessive in the first place There s constitutional issues with this he added There s due process issues with this There was no notice provided to any taxpayers of this I can t effectively counsel my clients on what the consequences will be in current times if they file an abatement on fiscal and what happens to them next year because it s being applied in a subsequent year Swift s analysis comes at a grim time for the city s commercial real estate realm which is grappling with empty office space and falling values due in part to changing post-pandemic work patterns The Boston Protocol Institute published a statement last Thursday that shows office values are falling at a steadier clip than it projected last year at - versus - over the next five years That decline could push the city s budgetary shortfall to billion over the next five years compared to the - billion that was projected by the watchdog group in an initial summary last year It also comes after a yearlong battle by Mayor Michelle Wu to combat the impact falling commercial values are having on the city s budget which derives roughly three-quarters of revenue from property taxes by seeking a temporary change in state law that would allow the city to shift more of its tax burden from the residential to commercial sector The tax shift measure is stalled on Beacon Hill amid steady opposition from the commercial sector and specific elected bureaucrats who felt the city should cut the billion budget which grew by this fiscal year with a proposed hike in the next year that begins July instead Related Articles Battenfeld Wu now Trump masses enemy number one posing dilemma for Kraft Boston Mayor Wu blasted by feds for comparing masked ICE agents to neo-Nazi group Boston facing B budgetary shortfall from empty office buildings Description Battenfeld Michelle Wu has her own secret police difficulty Maura Healey delivers millions to boost downtown Boston housing revival Swift noted however that the abatement dispute override mathematically blunts the tax impact on homeowners which was the intent of Wu s tax proposal I have no idea what the intent is Swift mentioned of the hidden penalty Mathematically because you re adding these artificial assessed values due purely to appeals they re tied only to appeals and you re adding that value onto the commercial you are increasing the commercial allocation and shift of taxes and decreasing the residential as a aftermath The Wu administration disputed Swift s analysis These assertions either misunderstand or ignore the specific requirements in state tax law defining how cities assess and finalize valuations city spokesperson Emma Pettit reported in a report The City of Boston follows all state law when assessing values and all values have been certified by the State Department of Revenue The mayor s office quoted a prior ruling from the Supreme Court of Massachusetts which per the city has stated The assessors must determine a fair cash value for the property as a fee simple estate which is to say they must value an ownership interest in the land and the building as if no leases were in effect Because of state law the mayor s office declared values are determined using industry rate leases territory rate expenses and sphere rate capitalization rates not sales for office buildings