It's 2015. Foreclosures have left Boston's outer neighborhoods gutted, and homes virtually worthless. Downtown, property values have also dropped, triggering sharp declines in commercial activity. The budget has been gutted, and reductions in essential city services are noticeable. Teacher, fire, and police contracts that were negotiated in 2011 and 2012 continue to bleed resources, as baby-boomer pension costs increase at exceedingly higher rates than the city's available finances.
>> CHART: Beantown counters: Boston's addiction to property taxes <<
It's a doomsday scenario, sure. But it's one that becomes more and more likely as Boston's residential values continue to tumble, as they have since the 2008 housing-market meltdown. Experts have been saying for years that the economy will rebound, but so far they've been wrong. And there's more at stake here than real estate — the Hub's budget hinges on how much your home is worth.
More than any other major East Coast city, Boston relies on business and residential owners to pay for things like jakes and teachers. One critical observer says the budget is "like an animal that we have to keep feeding" with property-tax levies; in 2012, collections on homes, buildings, and private infrastructure will feed more than 65 percent of Boston's $2.4 billion budget.
That's feasible right now. But in the next five years, Boston could hit the ceiling for how much property tax it can extract under state law. In the uncertain interim, some say that prospect should raise concern on several fronts:
* Though Boston businesses still pay the lion's share of property taxes, city assessors, out of necessity, have gradually shifted more tax burden onto homeowners for nearly a decade. That affects everyone from downtown millionaires to low-income renters.
* Operating costs increase every year, no matter what. That's on top of hardships including, but not limited to, five straight years (and counting) of reductions in state aid (Boston's third largest source of revenue after property taxes, and fees and fines). As a result, the city has already cut more than 1000 jobs since 2009 to compensate for shortfalls.
* Despite common worries that the Hub relies too heavily on property taxes, stubborn state statutes prevent municipalities from effectively diversifying revenue. Boston desperately needs "more tools in [its] toolbox,"says Meredith Weenick, the city's chief financial officer and collector-treasurer. "It's a fixed pool of resources," she says. The administration has prepared for downturns, she adds, but it's not enough. "Our powers are really limited, and we have growing obligations."
The conservative anti-tax zeal that took root in the late 1970s registered loudly in Massachusetts. Among the loudest were the Citizens for Limited Taxation (CLT), who led a three-year, door-to-door campaign for a ballot measure to cap property taxes. Mass voters approved the measure on the same November 1980 night that Ronald Reagan won the White House.
The resulting Proposition 2 1/2 places constraints on how much towns and cities can levy in property taxes. First it sets a levy ceiling —2.5 percent of the "total full and fair cash value of all taxable real and personal property." It also sets a limit on how much a community can increase its total property-tax income from one year to the next — 2.5 percent more than the last year, plus a percentage allowable for new growth. Prior to the proposition, municipalities could virtually charge however much they wanted, and many did just that.