Boston Mayor Michelle Wu and business leaders have reached a compromise that the mayor’s office says will provide a “path forward” for the city’s plan to raise commercial tax rates, by way of a lower shift of the tax burden on to businesses.

Wu announced Wednesday that an agreement had been reached with the heads of the Greater Boston Chamber of Commerce, Boston Municipal Research Bureau, NAIOP Massachusetts, and Massachusetts Taxpayers Foundation, six days after the stakeholders penned a letter to legislative leaders saying they would withdraw their objections to the plan, contingent on a lower tax shift onto businesses.

“For Boston to be a home for everyone, our residents and businesses depend on each other to thrive,” Wu said in a statement. “As we continue working together on the challenges facing our communities and economy, I’m grateful for the strong leadership and partnership from across our neighborhoods and business community to plan for our shared future and economic growth.”

The mayor filed a new home rule petition Wednesday with the Boston City Council that features the terms of the agreement, which includes the lower maximum shift of 181.5% that was recommended by the four business groups, rather than the 182% Wu had initially included in a draft petition she had been circulating over the weekend. The other two shift numbers in the remaining two years were proposed by the mayor.

“While negotiations were difficult, and no party received everything it wanted, this compromise demonstrates that when stakeholders are willing to come to the table, practical solutions emerge to navigate complex public policy problems,” James Rooney, president and CEO of the Greater Boston Chamber of Commerce, said in a statement. “We hope that this resolution mitigates property tax increases on Boston residents next year while avoiding significant new burdens on the commercial property market, and particularly small businesses.”

“That said, approval of this new home rule petition at the city and state levels is only a temporary reprieve,” Rooney added. “This does not solve the underlying structural changes to the commercial property market and the property tax burden shift between residents and businesses. Those fundamental changes may require new approaches to city revenues and expenditures.”

The plan, which allows the city to implement a higher shift of its tax burden onto businesses beyond the 175% cap allowed by state law for a three-year period, is aimed at preventing a 14% increase in property taxes for the average single-family homeowner next year. It would instead garner a roughly 9% increase, per city data.

Commercial taxes for a property with a $5 million value would decrease by 3.2% next year with the proposed change, versus 6.7% without it, per city data.

If the petition is approved by the Council, it would then be filed as state legislation that needs approval from the House, Senate and governor.

The Council did not add the mayor’s late-file petition to the Wednesday agenda, which required unanimous consent, due to an ‘nay’ vote from Councilor Ed Flynn, a critic of the plan who has proposed two alternatives, prompting cries of “shame on you” from members of the public and a warning against talking in the chamber issued by Council President Ruthzee Louijeune. It will instead be considered at the next Council meeting.

“Given how this legislation has been negotiated — behind closed doors, outside of the view of the residents, and the City Council — it’s critical that we adhere to the transparency and accountability that the taxpayers of Boston deserve,” Flynn said in a statement. “This proposed legislation should follow the proper procedures, and not bypass our Council Rules to fast track a bill to raise the tax rate on businesses beyond the state limit.”

“The city neglected to compromise in good faith for months on cuts to our 8% budget increase, implementing a hiring freeze, or considering our revenue and alternatives from fiscal watchdogs,” Flynn added. “For those who say we don’t have time for real debate and public discourse, I understand the urgency. But we cannot only believe in transparency when it’s convenient.”

Per the agreement, the city would be allowed to shift 181.5% of the tax burden from the residential to commercial sector in the first year, 180% in the second year, and 178% in the third year, before returning to the standard 175% cap in fiscal year 2028.

The deal also includes features the mayor had agreed to with House leadership in late July, such as lowering the length of the legislation from five to three years, and providing targeted tax relief to small businesses. It passed the House, but did not come to a vote in the Senate by the end of formal legislative sessions.

The mayor filed a home rule petition last March with a maximum shift of 200%, and immediately encountered resistance from the business community, industry groups and fiscal watchdogs, who urged Wu to instead look to cut a city budget that grew by 8% this fiscal year and dip into the city’s roughly $1 billion reserve fund.

Wu remained firm on what she says is the need for the legislation, pointing to falling commercial property values — with city data showing a 7% decline in commercial versus a 4% increase in residential — that are driven by changing post-pandemic work patterns and vacant office buildings.

That dynamic has eroded the city’s commercial tax base, and by way of a budgetary structure that derives more than 70% of its revenue from property taxes, is pushing more of the tax burden onto Boston homeowners — which Wu says her plan aims to stabilize over a three-year period.

A thaw in those frosty relations was seen for the first time last week, when four business stakeholders, James Rooney from the Boston Chamber, Marty Walz of the Research Bureau, Tamara Small of NAIOP and Doug Howgate of the Taxpayers Foundation, sent a letter to Senate President Karen Spilka and House Speaker Ron Mariano, indicating they were open to a compromise with a “modest” shift onto commercial properties.

“On these tough issues, I have long believed it is important to bring people together to get the best result,” Spilka said in a statement. “I’m very pleased that the stakeholders have agreed on a proposal that helps residents and balances concerns about the impact on Boston’s businesses. This was our goal when we started negotiating months ago, and I appreciate all parties for their commitment to reaching compromise.”

Announcement of the day’s tax agreement prompted immediate criticism from the Boston Policy Institute, which published a report last February that found falling commercial values and vacant office space in Boston could lead to a more than $1 billion budget shortfall in five years.

“The tax shift deal announced today comes up short of what Boston needs,” Gregory Maynard, executive director of the Boston Policy Institute, said in a statement. “That is because this year’s 7% decline in commercial property value and 28% jump in homeowners’ property taxes is not a one-time event which can be ‘smoothed out’ with a temporary, three-year tax shift.”

The data from BPI’s report and similar reporting on the commercial real estate sector “all share the same conclusion,” Maynard said. “This year’s sharp decline in commercial real estate values will continue for years to come.”

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