Report: Tax-relief plans a boon for Worcester

WORCESTER -- Seventeen active tax-relief plans that were approved for commercial development projects in the city have generated about $16.5 million in total real estate taxes and triggered more than $306 million in total private investment, according to a report prepared by the city administration.

In addition, those tax increment financing plans have expanded the city's tax base by generating more than $200 million in new taxable value, while also creating 1,777 full-time, permanent jobs, and retaining another 979 full-time jobs.

They have also led to eight businesses staying and expanding in Worcester, attracted three new businesses to the city and made possible 17 real estate development projects, the report said.

Meanwhile, six tax-relief plans for the development of housing -- known as tax increment exemption -- will represent new housing production of 246 market-rate units with a total investment of more than $80 million, according to the report.

"These programs continue to be a critical tool in the toolbox to stimulate economic development, catalyze private investment, expand the local tax base, create and retain jobs for Worcester residents, support new housing production, and benefit the long-term economic goals of Worcester," said City Manager Edward M. Augustus Jr.

Tax increment financing is used for commercial projects under the state's Economic Development Incentive Program. With a TIF, the city can provide local tax relief to developers, with the approval of the City Council, on a portion of the new real estate taxes generated as a result of the investment made in a property.

The developer still pays full taxes on the old assessment for the property, but then can receive an exemption on a negotiated percentage of the increased value of the property over a set period of time.

Meanwhile, tax increment exemption is used for residential projects under the state's Housing Development Incentive Program and its concept is the same as that for TIFs.

Both also allow developers to access state investment tax credits, though City Council is a prerequisite for the applicant to seek the state benefit.

Currently, there is one completed TIE project – The Edge at Union Station, which involved the redevelopment of the 190,000-square-foot underused former Osgood Bradley Building, turning it into a transit-oriented 82-unit, 250-bedroom market-rate housing building.

Meanwhile, there are five TIE projects under development: 154-156 Main St. (former Elmwood Adams building), 6 Chatham St. (former YWCA building), 220 Harding St./152 Green St. (Harding/Green development), 100 Wall St. (former El Morocco Restaurant property), and 205 Summer St. (Mission Chapel building).

The city's use of such tax-relief deals for economic development purposes has drawn criticism in some quarters over the years from those who see it as financially benefiting private developers, while they contend the city does not get as much in return for the property taxes that are lost.

But the semiannual Tax Increment Financing/Tax Increment Exemption report prepared by the city administration for the fiscal year that ended June 30 highlighted how the city has benefited from both programs in a number of ways and the impact they have had on the city.

"The TIF/TIE mechanism is a popular tool nationwide for local communities to stimulate and support economic development," Augustus wrote in a report that goes before the City Council Tuesday night.

Michael E. Traynor, the city's chief development officer, said the 17 active TIF plans in Worcester are supporting three health/medical related companies, four biotechnology organizations, three financial companies, six manufacturing companies, one distribution company, two social service support agencies and a cancer center.

He said two active TIF projects -- Imperial Distributors at 150 Blackstone River Road and Table Talks Pies at 25 Southgate St. in the South Worcester Industrial Park -- were recognized with Economic Impact Awards in 2018 from MassEcon.

He added that the Table Talk project has also been spotlighted as a national success story by the U.S. Environmental Protection Agency through its Brownfields Program.

Traynor said the Economic Development Incentive Program has also supported the development of three new hotels -- Hilton Garden Inn, Hampton Inn & Suites, and AC Hotel by Marriott.

"The new hotels help support events and conferences at the DCU Center and generate revenue for the small business community as hotel guests shop and do business in the area," he said.

Augustus said significant improvements have been implemented by the city regarding compliance and monitoring TIF/TIE projects.

He said there is a newly established Program and Compliance Manager position in the city's Office of Economic Development is responsible for monitoring the TIF/TIE plans and making sure that the applicants are meeting the various goals of those plans.

In addition, the city's TIF/TIE policy has also been updated to reflect new workforce diversity goals as a result of a 2019 Worcester Construction Workforce Disparity Study.

During construction activity of TIF/TIE projects, Augustus said, developers and contractors must strive to achieve participation of 38% people of color and 10% women on the project.

He said the administration will also be establishing a provision whereby companies failing to meet a certain level of job creation commitments will be required to contribute to the Worcester Jobs Funds, thus ensuring support for skill development of Worcester residents.

Traynor said records for each project will be collected by the city on a monthly basis and site visits by the program and compliance manager will be conducted to ensure the data being provided is accurate.

"As we look at the success of these projects, we recognize the need to ensure the mechanisms we have in place for compliance and reporting are appropriate, effective, measurable and consistent with local policy requirements over the life of the projects," Traynor said.

Contact Nick Kotsopoulos at [email protected].

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