Boston housing market rescuing poor excise tax numbers

Boston budget officials claim the city’s still-strong housing market is going to be able to bail out the even-more-brutal-than-expected excise tax shortfalls to avoid layoffs this fiscal year.

The city also plans to continue cost-saving measures through the spring. Boston has had in place cuts to nonessential purchases, a hiring freeze and continued looks at reorganizing debt and other fixed costs.

Those are “likely” to continue, said budget director Justin Sterritt.

“It won’t result in any service reductions or layoffs — but we will have to continue to tighten our belt a bit,” Sterritt said. He insists that the budget will end up balanced, as it’s required to be.

The city projected excise taxes — meals, hotel rooms, vehicle registrations and airline fuel — to nosedive, and indeed the money that’s come in from them has been even lower than the city expected in its current budget.

“Those are areas when we’ve seen continued trouble,” Sterritt said, adding that “it’s a little bit of an unknown” how much the city will undershoot those collections by, as the state has delayed remittance of those taxes.

City councilors in a meeting this week put that number in the tens of millions. Boston’s fiscal year 2021 budget — which went into effect July 1, and runs through the end of June — is $3.61 billion.

But he said other areas are beating projections — mainly new growth, which comes from development every year in the city.

“The real estate market and property taxes remain strong,” he said. “We have seen a high percentage of people paying their property taxes.”

He said these “new growth” numbers come from the previous year’s development — and 2019’s was “very strong.” He also said that buildings continue to be sold high, suggesting that in Boston, at least, the coronavirus-era demise of the desire to live in cities has been greatly exaggerated.

“We’ve been — knock on wood — very fortunate to see homes sell for record prices,” Sterritt said.

Sterritt said the city will have a better idea of quite what the state of property-tax collection will be when the city recertifies its budget next month, as it’s required to do when it submits property tax rates for the coming year. In Massachusetts, cities figure out what they have to set their rates at at that time to balance the budget.

Sterritt said Boston is on track to use all of its $121 million in CARES Act relief funding by the end of the year. He said in City Hall they “hope for and encourage additional federal funding” as Democrats and Republicans wrangle over a follow-up relief package.

Boston Chief Financial Officer Emme Handy said going into next fiscal year — a first shot at the fiscal 2022 budget is due in April, and then a final version has to be passed by the end of June — “The greatest areas of uncertainty and impact are state and federal funding.”

Handy, speaking on the phone earlier this week, said just that day she’d been on the phone with credit rating agencies as Boston, which were in strong financial shape before the pandemic, and heard they are preparing to keep moving ahead.

“We are confident that we will get through this,” Handy said.

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