Worcester Business Journal

16 Worcester Business Journal | October 2, 2023 | wbjournal.com F O C U S BANKING & FINANCE Enforcing the e City of Worcester has begun to be more assertive with developers, although that's less likely to impact new projects than overall economic forces BY TIMOTHY DOYLE WBJ Staff Writer W hen the City of Worcester in April was voting on its new inclusionary zoning policy, housing ad- vocates lined the corridors of City Hall, people made impassioned speeches in the public comments portion of the City Council meeting, and city councilors dis- cussed the need for additional affordable housing versus the fear of cooling the city's momentum of building thousands of units of new market-rate housing. en, when the City Council voted in September to decertify Tennessee-based insurer Unum's property tax break aer the company did not meet the require- ments of its agreement with the City, that meeting was much quieter. e council members were in unanimous agreement saying, while the decertifica- tion was regretta- ble, the company was not holding up its part of the bargain. Over the past year, the City of Worcester has moved assertive- ly to ensure it is getting a fair deal with developers: the decertification of Unum's tax break, the adoption of inclusionary zoning, and the call for increased enforcement of local and diverse workforce goals. e hope is to strike a balance where cer- tain public goals can be met by placing demands on businesses without scaring them or reversing Worcester's develop- ment-friendly reputation resulting in the construction of high-profile develop- ments like the 368-unit 145 Front at City Square, the 228-unit e Revington, and the 370-unit Alta on the Row. "I would guess that most developers that have completed projects in the past five or so years or are contemplating projects would agree that the City is pro-development," said Michael Jacobs, principal at Worcester commercial real estate firm NAI Glickman Kovago & Ja- cobs. "Fortunately, our city government has some very skilled and dedicated employees in the right positions needed by our industry." Enforcing tax break requirements To encourage development, create jobs, and increase property value, the City offers tax-increment financing for commercial projects under the state's Economic Development Incentive Pro- gram. For residential projects, it offers a tax-increment exemption under the state's Housing Development Incentive Program. Businesses are offered a tax break on the increased property value that a development creates. For example, if a vacant lot is valued at $1 million and a developer builds a project on that lot that will raise that value to $10 mil- lion, the business gets a tax break for a limited time on a portion owed on the $9 million in value that the project is adding. e City does not lose the taxes on the original value. It's a very selective policy, said David Sullivan, director of economic devel- opment and business recruitment at the Worcester Regional Chamber of Commerce. Around 7,000 businesses operate in Worcester, and the City has 16 active TIF projects including the Unum TIF and five active TIE projects. e public will not necessarily be aware when businesses ask for but don't receive a tax break, said City Manager Eric Batista. Many requests are shut down before they make it to the City Council for a public hearing. "Usually what happens when a developer comes in, is that they'll ask for a tax break," said Batista. "We'll tell them what our priorities are, and they'll say 'No, we're not going to be able to do that for this particular project.' "When we do present something to the council, it's because at that point we feel it is something that we're commit- ted to, something that has a beneficial impact for the community," he said. Unum violated its deal with the City when the company decided, inde- pendently of the COVID-19 pandemic, to move its employees out of the office building it leases at 1 Mercantile St. in Worcester, which is formerly known as the Unum Building and still bears the company's sign. e more than 600 full-time employees it had promised Worcester turned into 331 work remotely throughout Massachusetts. e City Council on Sept. 12 unan- imously voted to decertify Unum's tax break, although the state government still must approve the decertification before it becomes official. In a statement emailed to WBJ prior to the council vote, Unum claimed to still be in compli- ance with the orig- inal agreement and said the company was working with the City to resolve the problem. Although the decertification was unusual for the City, which has typically le property tax breaks in place even if companies don't meet hiring goals, that one decision is unlikely to impact Worcester's developer-friendly reputation, said Jacobs from the com- mercial real estate firm. "e Unum decertification was some- what of a surprise as I don't believe the City historically has decertified too many properties in similar circumstances," said Jacobs. "I also don't believe it's a concern Eric Batista, Worcester city manager Michael Jacobs, principal, NAI Glickman Kovago & Jacobs David Sullivan, director of economic development, Worcester Regional Chamber of Commerce The Worcester multi-family develop- ment Alta on the Row is scheduled to receive a TIE from the city government, which is monitoring diversity hiring goals on the construction project. PHOTO | MATT WRIGHT

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