City Council Holds Hearing on Corporate Tax-Break Transparency

December 7, 2018
By

The City Council Committee on Ways and Means held a hearing on Nov. 29 regarding corporate tax-break transparency in the city of Boston.

With recent conversations around the location of Amazon second headquarters, tax break transparency is on the minds of the Council and the public. Councilor Michael Flaherty said that there have been issues in the past with the previous administration regarding tax break transparency.

“We’ve seen too many instances of an agreement that was made and then 10, 12, 15 years later there’s a changed condition or someone forgot to collect or another deal was negotiated in lieu of that deal,” said Flaherty. “That’s never good for our city when that happens and it quite frankly is something that I think that we have a shared responsibility to make sure that doesn’t happen.”

Flaherty said that moving forward, he would like to see information regarding tax breaks be “iron clad” and “black and white.” He would also like to see it be clearly accessible to the public so as to make sure agreements are being honored appropriately. He added that if there does need to be a renegotiation, that process should be transparent as well.

Commissioner of the Assessing Department Gayle Willet said that Boston was recently named the number one city in the world for job opportunities and growth. “This combination of universities, culture, medical advances, and tech talent makes Boston a place that businesses want to invest,” Willet said.

Willet added that 70 percent of the city’s revenue comes from property tax collections, and “growth to the property tax base is essential in covering the increases in municipal costs and funding of new initiatives,” she said.

“Tax incentives are considered on an exceptional basis when they are required to advance Boston’s economic development priorities where the market does not support full taxes,” Willet continued. “This may include stimulating economic development at a strategic location, assisting a project with unique economic or construction challenges, or attracting a key industry or company that will yield significant gains and employment.”

Willet said that the agreements are listed on the assessing department’s website, and over 80 percent of the 121A agreements are subsidized housing projects, including recent agreements with Old Colony in South Boston and Orient Heights in East Boston.

She said that when the use of a tax incentive is feasible, it is structured in such a way that the city only provides the level of assistance required to make a development project attainable.

John Barros, Chief of Economic Development, said that “as an economic development strategy,” they make sure to not erode the tax base. “And so growing the tax base and growing jobs and increasing economic activity is in fact at the heart of our incentive strategy,” he said.

Boston is growing—“we’re growing, and we’re growing in a smart way,” Barros said. He said that Boston maintains four key principles in planning for its growth: driving inclusive economic growth, increasing the quality of life for residents in all neighborhoods, promoting a healthy environment and resilient city, and investing in infrastructure, open space, and arts and culture.

“Obviously the use of tax incentives and these types of packages to attract economic growth, corporate investment to cities across the country has been under immense debate given the Amazon deal,” he said. He said that each deal in Boston is approached uniquely, and Mayor Walsh said that Boston would not be getting into a bidding war with other cities for Amazon’s second headquarters.

“And in fact, when we released our bid to Amazon’s HQ RFP, you would find that Boston said very clearly that we were not offering any incentives to Amazon to come, but we invited a conversation because in Boston we believe every deal needs to be looked at closely and we need to stay true to our principles around what it brings to the residents of Boston,” Barros said.

He said that the growth of property taxes is “essential for covering escalating municipal costs and funding new initiatives,” and that their approach to incentive packages has been successful. Agreements have been updated and modified as needed, and many companies have come top Boston because of different investments or incentives the city has offered,” Barros said.

Councilor Matt O’Malley asked if the city is using fewer tax incentives now than it has in previous years.

“I believe so, yes,” said Renee, LeFevre, General Counsel for the BPDA. “I’ve been here a long time and they’re far fewer now than they were in years before.”

Greg LeRoy, executive director of Good Jobs First, a nonprofit, nonpartisan research group, made some suggestions to the Council via Skype. He said that online reporting of each deal, along with the name of the country, source of incentive, value and duration of the incentive, the project site address, and “whatever the company is supposed to do in return for the incentive” should be made public.

“At least once a year, [there should be] disclosure of the outcome of each of those awards for the duration of the deal—snapshot every year of the progress of the deal interns of actual jobs created, actual wages paid, or actual dollars invested so that everybody can see the deal played out over time,” he said. He added that this data should be user-friendly and downloadable.

Good Jobs First gave Boston a “goose egg” rating in 2017 because its tax increment financing program is not disclosed online. “Your state actually has not been a great state in terms of disclosure,” LeRoy said. “It now has a very modest form of disclosure for a few programs but compared to many other states, Massachusetts was a late state to start disclosing and still doesn’t do an especially robust job of it.”

He said that if the city wants more civic engagement in economic development, then the data must be available to the public so they can see where the deals are in their neighborhoods. Good Jobs First also gave Boston a zero on the Tiffs transparency rating because follow-up reports tracking whether or not payments have been made are not posted online.

Martyn Roetter provided public testimony, saying that “transparency itself is not an end. It’s a means to an end and the end presumably is to be able to negotiate deals with corporations that benefit both the corporations or perceived by the corporation to be beneficial to it and also benefit Boston and perhaps beyond Boston, even Massachusetts.” Roetter is the Chair of the Neighborhood Association of the Back Bay, but was speaking from the perspective of a resident and private citizen at this hearing.

“I don’t believe like some people that every negotiation inevitably leads to a winner and a loser,” Roetter said. “I think the best negotiations lead to situations in which all parties get something, maybe not all that they want.”

He added that in his experience, while tax incentives or breaks can have an impact on a company’s choice of location, “in the majority of cases, they’re not decisive.” He said that other factors, such as the “quality and relevance of the available labor force” and infrastructure help drive corporate decisions.

Councilor Michelle Wu sponsored this hearing, and said that transparency and having these kinds of conversations is vital to having an open conversation as an entire city. “At the baseline, we do need transparency to be able to evaluate forward looking and looking back about whether the commitments were upheld and were worth it for the taxpayers and the residents of the city,” she said.

Newsletter

Full Print Edition