Worcester Business Journal

wbjournal.com | February 4, 2019 | Worcester Business Journal 11 B A N K I N G & F I N A N C E F O C U S In general, of the 19 communities analyzed by WBJ, the ones with the higher business tax rates offered the most tax-increment financing agreements. Tax breaks on high taxes Average business tax TIF agreements Municipality rate over the last six years from 1998-2018 Framingham* $37.42 9 Hudson* $35.06 6 Worcester* $33.07 28 Milford* $30.48 11 Marlborough* $26.41 16 Fitchburg* $25.29 18 Auburn* $23.77 0 Gardner $20.04 10 Sturbridge $19.68 7 Leominster $19.25 21 Westborough $18.37 7 Hopkinton $17.25 4 Northborough $17.07 2 Oxford $16.48 4 Millbury $16.44 0 Southborough $16.21 0 Charlton $13.71 3 Natick $13.47 1 Shrewsbury $12.74 1 Note: Tax rate is per $1,000 of valuation *Community with split tax rate Sources: Massachusetts Department of Revenue, respective communities support its manufacturers and help them stay and grow, said Mark Hawke, Gardner's mayor since 2008. TIFs can be virtually the only option. "The municipal toolbox is small and shallow," said Mark Hawke, the Gardner mayor. "It really just includes a TIF. There's very little else in our toolbox. "If we can do a little something to help them make their finances work better, we do it all the time," Hawke said. Marlborough has signed TIF agree- ments with corpo- rate giants including the pharmaceutical company Sunovion, TJX, and medical technology companies Boston Scientific and Hologic. That's in large part due to fierce competition between communities to land such corporate tenants, Marlborough Mayor Arthur Vigeant said. The mayor compared communities chasing the same companies to how Target and Walmart compete for the same customers. Leominster has averaged about one tax break a year for the past two decades, nearly all going to manufactur- ers. Dean Mazzarella, the city's mayor for the last 25 years, said Leominster has helped manufacturers when the local industry was struggling. "Many of those companies are still here," Mazzarella said. Recipients include Fosta-Tek Optics, Easy Pak and Process Cooling Systems. Process Cooling began building a new facility in December with more than 60,000 square feet in the Southgate Business Park. While Sturbridge isn't exactly as active as those cities, it does have a very detailed TIF policy passed in 2017 spelling out what the town looks for. Prioritized are companies bringing tourists into town. Companies already seeking building permits for an expan- sion are out, because they've demon- strated they were ready to build even without a tax break. "We're cautious of how we use it because it's such a powerful tool," said Kevin Filchak, Sturbridge's economic development and tourism coordinator. "We're making an investment in this by saying we'll reduce the tax break for you. We want to make sure the investment is going to benefit our local economy." The big company advantage In the 148 TIF agreements reviewed by WBJ, tax breaks have represented both major investments by large com- panies and small expansions by fami- ly-run businesses. Boston Scientific said it would spend $250 million expanding its office cam- pus in Marlborough when it signed a tax deal in 2006. Hanover Insurance Group said it would spend $194 mil- lion on an expansion in Worcester, and although it fell short of that, it did spend $135 million. But companies don't always have to promise much to get a tax discount. In total, 19 companies got tax breaks while pledging to spend less than $1 million, and 31 got tax breaks while committing to add fewer than 10 jobs — or no particular number of jobs at all. Smaller firms who might promise less in a tax break are often less likely to receive a discount on their taxes in the first place, said David Merriman of the University of Illinois Chicago, who stud- ies tax policy. Larger companies are the ones with the ability to pay good negoti- ators or lawyers, or the wherewithal to seek TIFs in the first place. "The smaller companies are the ones who can't negotiate," he said. In fact, with so many companies might not knowing where to look, Lynn Tokarczyk has been providing help for companies looking to secure tax breaks for the past 15 years. Her company, Business Development Strategies Inc. of Medway, has worked recently with furniture maker AIS, laser manufacturer IPG Photonics and equipment provider Primetals Technologies to help land agreements. AIS got a tax break in 2013 in Leominster in return for a $13-million investment to move into a vacant 537,000 square-foot building on Tucker Drive. In the past year, IPG got a tax break to expand in Oxford, and Primetals moved from Worcester to Sutton to build a $28-million facility. "These programs help keep Massachusetts competitive," Tokarczyk said. "The tax incentives are beneficial when companies are in process of making their corporate real estate decisions. It has to be the right kind of company and partnership, because it's required to be voted upon by the municipality and state." The tax break recession WBJ's review found tax breaks are signed less often than two decades ago. The use of TIFs hit a peak before the Sept. 11 attacks and the Great Recession that followed, with eight deals signed in 1998 and another 14 in 1999. Two were signed in 2007 and four in 2008. In the two-decade span analyzed by the WBJ, the first decade – 1998 to 2007 – included 80 tax breaks. In the following decade, there were 64. Local governments often deal with ballooning pension and other employ- ee retirement costs, as well as keeping up with other needs at a time when state aid doesn't always keep up with costs. Skwierawski, of Fitchburg, wasn't surprised that TIFs have gotten slightly less common in recent years. "With all the financial liabilities we have, you do have to be a bit more dis- cerning in the projects you do approve," Skwierawski said, "and why it's more important for a project to be part of a larger vision and not just about getting a project done. "I'm sure it's no coincidence that it peaked before the recession," he said. Tax increment financing agreements have been used less often in the most recent decade compared to the one before it, according to a WBJ study of 19 of the largest Central Massachusetts communities. Fewer tax breaks Note: 2018 total does not cover full year. Sources: Communities Gardner Mayor Mark Hawke 0 3 6 9 12 15 '98 '18 '00 '02 '04 '06 '08 '10 '12 '14 '16 Number of agreements Georgia Pacific received a 10-year tax break in Leominster in 2011 in return for an $18-million expansion. W

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