EFFORTS by cities to recruit or retain companies can result in a barrage of tax incentives. But with an operating budget that depends heavily on property tax revenue, Boston must take care not to stumble into a tax-break arms race.
The Menino administration recently offered a $2 million tax break over 15 years to JPMorgan Chase & Co., provided the global financial services firm agrees to relocate from downtown to a D Street office building near the South Boston waterfront. The banking behemoth, which currently employs 523 workers on Tremont Street, was contemplating a shift to the suburbs. Menino intervened with an offer to forgo a significant portion of the property taxes - a tax-increment financing deal, or TIF - that otherwise would have accrued from an upgrade of the D Street property. The bank's move would also trigger a roughly $1.5 million investment tax credit from the state.
This proposal hardly seems reckless. But Boston lacks clear criteria for evaluating TIFs. Without them, approving the JPMorgan plan could open a floodgate.
The absence of local taxes on meals, goods, or services leaves the city with few revenue sources other than property taxes. The city would be hard-pressed if other companies with expiring leases squeezed the mayor or Boston Redevelopment Authority head John Palmieri for similar deals.
JPMorgan proposes to create 373 new jobs over five years at the South Boston site, and promises to hit certain benchmarks along the way. The Menino administration should track that progress carefully and withdraw the tax breaks if the company fails to meet its commitment.
But TIFs should not be judged by job counts alone. In Hartford, where Palmieri worked before taking the BRA post, the city's well-publicized policy also cites expansion of the tax base, architectural merit, and full-time jobs for city residents as among the criteria for approving a TIF.
In Boston, the process is less transparent. And inasmuch as TIFs are best suited for stimulating development in blighted areas, the JPMorgan plan is notable because it would instead help rehab an office building that sits across the street from the city's new convention center.
Menino vigorously defends the deal. By forgoing $2 million, he says, the city will pick up hundreds of new jobs and signal that an underdeveloped part of the waterfront could become an extension of the downtown Financial District. It's not a bad argument. The JPMorgan deal could attract more high-end tenants to the area.
Still, the city should not agree to a TIF without first drawing up a fair set of rules.
