Worcester Looks to Lure Developers With Tax Breaks
Monday, November 26, 2012
The SWIP project involves the environmental remediation and demolition of blighted buildings and structures to create development sites for private businesses. Currently, the City owns about eight of the 11 acres at SWIP. Buildings on several of the City's parcels have already been demolished and remediation activities are ongoing.
Once the final demolition and remediation work is completed, up to six new development parcels will be available for development, with the combined potential for roughly 180,000 square feet of new industrial or commercial space, as well as the new jobs and tax revenues that go along with it.
In order to make those parcels more attractive, Chief Development Officer Timothy McGourthy and City Manager Michael O'Brien are recommending the City Council designate the SWIP properties as Site Specific Economic Opportunity Areas and institute a Tax Increment Financing (TIF) plan, which would provide real estate tax exemptions based on the size of the building constructed and the number of jobs created for a set duration.
"It is my hope that by offering a creative, flexible incentive as a tool for redevelopment, the City will be able to realize the maximum redevelopment potential at SWIP," O'Brien wrote in a letter to the Council.
The program is part of the state's Economic Development Incentive Program (EDIP) designed to foster job creation and stimulate business growth throughout the Commonwealth. Companies can receive both state and local tax incentives for job creation and retention, as well as private investment, and the EDIP may be utilized by manufacturers, retailers, commercial office users or industrial businesses.
The proposed TIF plan would offer tax breaks ranging from 40 percent to 100 percent over a period of 10 to 20 years and would be based on the specifics of the proposed project. Any tax break plan would also require the recommendation of the City Manager and approval of City Council prior to being submitted to the Massachusetts Economic Assistance Coordinating Council (EACC) for its approval and designation.
Under the proposed TIF schedule, buildings of 5,000 to 9,999 square feet would receive a 40 percent tax break, which would last for a minimum of 10 years, but could be longer based on the number of jobs created and retained within the first five years of construction. The real estate tax exemptions would increase by 10 percent for every additional 5,000 square feet of space.
Buildings of 35,000 square feet or more would be eligible for a 100 percent real estate tax exemption for ten years. That term could be extended all the way to 20 years if the business located their can create and retain 46 or more jobs within the first five years.
The TIF exemption schedule scenarios will be included in the Requests for Proposals to be issued for the sale and development of the City-owned parcels at the SWIP pending the City Council's approval.
McGourthy has requested that the plan be sent to the City Council's Standing Committee on Economic Development for review before being sent to the full Council for a final vote.
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