Worcester Business Journal

14 Worcester Business Journal | July 24, 2017 | wbjournal.com HIT Abbvie 463 jobs created $97.1 million invested HIT Saint Vincent Hospital 425 jobs created $281 million invested HIT Hilton Garden Inn 100 jobs created $24.7 million invested HIT Home Depot 125 jobs created $10.7 million invested F O C U S L A W In the last five years, 75% of Worcester tax breaks were successful, but the city kept the benefits even for almost all missing their goals Hit & Miss MISS Beechwood Hotel 10 jobs cut $12.5 million invested MISS Hanover Insurance Group 1,237 jobs cut $135 million invested MISS Unum 97 jobs cut $32.6 million invested MISS Saint-Gobain 0 jobs created $14.2 million invested I n 1996, Worcester city officials eyed the underutilized, polluted former industrial area along Summer Street near Union Station and wanted something better. So they made a deal. If Saint Vincent Hospital agreed to move downtown from its Winthrop Street location and spend $215 million on a new 299-bed hospital, the city would waive part of the hospital's taxes over the following 18 years. The deal worked, boosting down- town at a time when the neighborhood desperately needed it. After a separate $40-million city- and state-funded cleanup, Saint Vincent moved 1,223 employees downtown, hired another 425, and spent $281 million on its new facility, which opened in 2000. In a city with high business property tax rates, such breaks have become a key economic development strategy. "We're very judicious in how it's been used over the years," Michael Traynor, Worcester's chief development officer, told the City Council's economic devel- opment committee in June. From 2012 to 2017, two dozen prop- erty tax-break agreement spurred more than $882 million in private investment in Worcester, according to a review of the agreements active over those five years. Those projects added more than $202 million in new real estate property values, yielding an additional $35.5 million in tax revenue. But they haven't always worked out. Massachusetts has revoked the state benefits – a break from their corporate income tax – for 25 percent of those Worcester deals, over failure to create enough jobs or investment. Yet, the city, with the exception of one, has kept all the local benefits in place, including for major names in the Worcester community: Hanover Insurance Group, Saint-Gobain, Unum, Beechwood Hotel. Despite the businesses not holding up their requirements, they remained successful in some aspects of the agree- ment or continued to be a vital contrib- utor to the city's economy, City Manager Edward Augustus said in a memo to the City Council. 'Looking at less of these' Massachusetts cities and towns began tax-increment financing in 1993 to entice businesses to move or expand, hoping growing jobs and property val- ues would net a tax collection increase. Eileen McAnneny, the president of the Massachusetts Taxpayers Foundation, said TIFs are one of the few tools com- munities have to draw companies, whose property-tax bills can be among their biggest expenses. "Ideally, you'd have a tax structure where you don't need tax breaks," she said. "It's simple, fair and it doesn't affect economic decisions one way or another." Worcester is one of 16 Central Massachusetts communities with a split tax rate where commercial/industrial properties pay a higher rate than resi- dential ones. For 2017, the Worcester business property tax rate is set 71 per- cent higher than the residential rate. Worcester officials don't entice busi- nesses with the promise of a tax break, but make companies demonstrate why they need the discount in order to expand or start operations, Traynor said. Anthony Economou, a city councilor who chairs the economic development committee, called the city's use of busi- ness tax breaks necessary to improve areas such as the South Worcester neigh- borhood where Polar Beverages received a 40-percent tax break to expand. "When you look at the numbers, the numbers don't lie," Economou said As the city's economy strengthens, "we'll probably be looking at less and less of these," he said. The 24 Worcester business tax deals active in the last five years resulted in 1,700 new full-time jobs, according to the city. Three new businesses were brought into and 14 kept in the city. The case of Saint Vincent was one BY GRANT WELKER Worcester Business Journal Digital Editor Michael Traynor, Worcester chief development officer

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