Lawsuit that alleges Boston is inflating commercial property taxes goes to court this week

A lawsuit that alleges the City of Boston is inflating the assessed value, and taxes, for commercial properties that file abatements will be taken up by Suffolk Superior Court on Wednesday.

The alleged practice has been slammed as retaliatory and unlawful by the Pioneer New England Legal Foundation, a watchdog group that filed the class-action lawsuit on behalf of a commercial property owner last December. The property is 148 State St., a Seaport office building.

The city filed a motion to dismiss the lawsuit in February, arguing that the case does not qualify as one that should be considered by Superior Court, given that the plaintiff “has an adequate legal remedy at the (state) Appellate Tax Board.”

City Hall attorneys will be asking the court to grant the motion at Wednesday’s 2 p.m. hearing.

“Plaintiff failed to exhaust its mandatory administrative remedies; indeed, plaintiff and the city are involved in a pending administrative action that will address some of the excessive valuation claims raised in its complaint,” the city’s motion states. “Plaintiff chose not to appeal the remaining excessive valuation claims raised in its complaint.

“Contrary to its argument, plaintiff’s claims do not fit into the exceedingly narrow exception that would permit the Superior Court to hear its claims for declaratory and injunctive relief under extraordinary circumstances,” the city’s motion states. “As a result, the court is without jurisdiction to entertain the complaint, and it must be dismissed as a matter of law.”

The Pioneer New England Legal Foundation filed an opposition to the city’s motion to dismiss last month that argues against what it sees as the “essence” of the the motion, which is that “the court must decline to hear the case because the statutory abatement and Appellate Tax Board process is mandatory and exclusive.”

“Defendant’s framing baldly misstates what the complaint actually pleads and what this action seeks to remedy,” the Pioneer filing states. “Contrary to the premise of the city’s motion, this action is not a routine dispute over the valuation of a single parcel.

“Plaintiff alleges a deliberate, systemwide retaliatory practice: when a taxpayer exercised the right to petition by pursuing an ATB appeal, the city used an add-back or override methodology to inflate the property assessment at issue artificially, and ostensibly to ‘stabilize’ the taxpayer’s value at prior-year levels.

“Similarly-situated taxpayers without ATB appeals did not receive the same treatment. Plaintiff further alleges that this practice is reflected in the city’s own property record cards and operated as a hidden penalty on protected petitioning activity,” the Pioneer filing states.

Pioneer’s attorneys added, “At the pleading stage, those well-plead allegations must be credited as true, and the city cannot obtain dismissal by trying to recast the complaint as nothing more than an ordinary overvaluation claim.”

The lawsuit is seeking restitution, for the city to repay the plaintiff commercial taxpayer, along with others who may join the filing, the amount they were overcharged in property taxes, due to the city’s alleged overvaluation.

Despite reportedly agreeing privately to stop the alleged overassessment practice as part of settlement negotiations, the city has publicly dismissed Pioneer’s allegations as “baseless and full of misinformation,” per a prior statement from Mayor Michelle Wu’s office.

Frank Bailey, Pioneer’s president and a retired judge of the U.S. Bankruptcy Court in Massachusetts, has said Pioneer estimates as many as 200 commercial properties have been overtaxed by the city practice.

If the suit is successful, those properties could be owed restitution at a time when the city’s finances are hampered by declining commercial property values tied to vacant office space that one City Hall watchdog has projected may lead to a $1-2 billion budget shortfall over the next five years.

The city is scrambling to close a $48.4 million budget shortfall by June 30, the end of this fiscal year 2026. The mayor has pitched a $4.9 billion budget for FY27 with a 2.1% increase, the lowest rate of growth since the Great Recession in FY10.

Bailey said the lawsuit was filed “only after serious consideration and after literally months of efforts to engage the city and the Department of Revenue to ensure basic questions about the transparency and fairness of the Boston commercial real estate tax system” and that it “is operating in compliance with the law.”

He said the alleged overassessment practice went on for fiscal years 2024 and 2025.

City Hall disagrees.

“The city assesses 180,000 properties annually, and less than one out of every 200 end up in dispute,” a city spokesperson said in a prior statement. “There is a well established and clear legal process for any property owner to appeal who believes their valuation is too high, including this plaintiff.

“Ultimately, Pioneer chose to sue and the city will defend Boston taxpayers and our authority to fairly tax our largest commercial properties.”