Columnists :: City Streets
No more handouts by Shirley Kressel
contributing writerThursday Jun 5, 2008 New Boston Redevelopment Authority director, John Palmieri, hired for his "economic development" experience, has now shown us what that means. The BRA always worked for developers to get buildings built. Now, he tells us, it will also work for commercial building owners, to get their properties "tenanted."
Witness the TIF ("tax increment financing") tax-break the mayor and BRA are pushing for JM Morgan Chase. It is actually a 14-year discount on the city property tax for a building owned by Robert Beal, to cover Beal’s rent discount for JP Morgan and to help poor JP Morgan redecorate Beal’s space when they move into it from their downtown buildings.
The Beal Company, one of the region’s most successful developers, is asking the beleaguered taxpayers of Boston for a handout. The Beal building is assessed at $45 million - more than double the $19 million assessment of 2000 and up nicely from $9 million in 1993. Since commercial assessments are based on income, Beal must be doing very well with this property. But he has a vacancy. High rents and changing use plans - these are the likely reasons for the vacancy. Normally, an owner in a hurry for a tenant just lowers the rent - free market, supply and demand, etc.
No more, apparently. Director Palmieri testified to the City Council that it’s the BRA’s job to get buildings built and tenanted (at taxpayers’ expense, of course, the way the BRA always does things). And chief assessor Ron Rakow added that, while Boston relies heavily on property tax, this TIF is worthwhile because filling the building would increase the property value and therefore raise its tax bill double the amount of the TIF, so we’re just splitting the new tax - how could we afford not to give away this money? Maybe the buildings JP Morgan is vacating, whose value would therefore fall, would be next to qualify for a subsidy.
The TIF backers acknowledged that the building hasn’t been vacant for long and yes, another tenant might well have come along in the normal course of business. But why wait - and lose the opportunity for a mayoral photo-op, featuring Tom Menino congratulating himself for "landing" such a big company in the Seaport? Will he also accept blame for the resulting downtown vacancies?
JP Morgan Chase is one of the biggest companies in the world, with more than $20 trillion dollars in assets under management. This unimaginably wealthy conglomerate is actually threatening that without $2 million, spread over 14 years ($140,000 a year), from Boston’s taxpayers, and another $2 million from the state, it cannot move from downtown to the Seaport and instead, will move to Braintree. Braintree! Well, if the world’s titan of corporate capital has an opportunity to enter that suburban bastion of corporate power and still save the shareholders a few pennies, I say, go for it! JP himself would surely be proud of such a shrewd bargain.
What about paying JPM to become a "catalyst" for office space on the Seaport? Nonsense. There are already many office towers there, many of them with bogus tax breaks of their own - we’re losing a fortune on all this economic development.
And the claim of blight? It’s next door to the gigantic new Boston Convention and Exhibition Center and the spectacular new W hotel, in the booming Seaport. Yet somehow, it’s been included in the Crosstown-South Boston Empowerment Zone, a designated disinvestment area where taxpayer subsidies are meant to help poor people.
And its promise to try to hire 10 percent residents of the "Economic Target Area" (that’s Boston)? Well, it currently hires 10 percent Boston residents - but the over-all office economy hires 20 percent and the institutions hire 30 percent. JP Morgan has only about 700 employees in Boston - that’s 70 of them Boston residents. And most are high-level management; there’s nothing here for impoverished residents of the Empowerment Zone. And what about the much-touted "new jobs"? The vague possibility of 340 permanent full-time hires over five years is being dangled before us; at 10 percent, up to 34 of them might be for Boston residents: a whopping seven jobs a year, sure to buoy our economy! So much for "job retention" and "job creation." And the tax-break "decertification" provided by the applicants for failure to hire this handful of people can be delayed until it’s all over in 14 years, meaning it doesn’t really exist.
JP Morgan has been operating offices in two buildings that happen to be tax-exempt, 1 Beacon (a 121A "blight" boondoggle) and 73 Tremont (institutionally owned), so the company probably figures it’s a shame to start contributing to Boston’s tax base now. The question is: why doesn’t the Mayor get all those exempt office buildings on the tax rolls, where they belong, instead of looking to forfeit taxes from even more buildings? Because he won’t be held accountable for the harm, that’s why. He simply uses our unfair business-favoring property tax formula to force the rest of us to make up the difference. So why not make his friends and supporters happy and pretend he’s promoting "economic development"?
This is yet another abuse of a program created to help needy communities. And it’s a dangerous precedent for the city’s tax policy; if this is approved, we can expect a parade of businesses threatening to leave town if we don’t make up their mismanagement losses with our taxes. This is a "race to the bottom," a legacy of America’s urban renewal disaster, with the BRA, an urban renewal agency, as eager and able abettor.
It’s well documented by economists that tax-breaks don’t influence business decisions. But politicians like to give away our money in these so-called "incentives," so they can brag that they "lured" businesses here and, at election time, claim credit for "job creation" when companies are merely hiring employees they would hire in any case.
At the hearing, the city councilors interrogated the BRA and JP Morgan, sounding appropriately indignant and adversarial - however, the council’s typical pattern is feisty grandstanding at the hearing, and then obedient approval at the vote. But they know this TIF is wrong. Any Councilor voting for it should be held accountable next election time.
Shirley Kressel is a landscape architect and urban designer, and one of the founders of the Alliance of Boston Neighborhoods. She can be reached at Shirley.Kressel@verizon.net.
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