For officials in some communities, the calculus seems simple: Either give companies a break on their tax bill, or don’t get any tax revenue at all.
This fall has seen a flurry of towns and cities chasing new development through tax increment financing — or TIF — plans that temporarily reduce property tax bills for businesses that agree to complete projects adding local jobs. Within just the past few weeks, Lexington, Marlborough, and Needham have approved or announced plans to seek approval for TIF agreements.
Proponents of tax increment financing say it is necessary to attract or retain employers, while others say the incentive deals lead to communities undercutting each other, and giving up revenue in order to satisfy large companies.
“Some people have described it as a race to the bottom,” said Melisa Tintocalis, Lexington’s economic development director. “When you have municipalities competing against one another to keep a company, everyone’s losing out a little bit.”
Lexington Town Meeting on Monday approved a tax plan that would allow an international custom-printing company, Vistaprint, to pay a reduced tax bill on a proposed expansion of its local facility, which serves as the base for its US operations. Under the 13-year plan, the tax reduction would start at 45 percent and gradually draw down to 2 percent.
Tintocalis said the tax-incentive plan made sense for Lexington because the town will still get new tax revenue if Vistaprint expands. However, the plan might not even be aggressive enough to keep the company in town, she said, noting that Vistaprint is still considering moving elsewhere.
Marlborough’s City Council is using a more aggressive approach to lure Quest Diagnostics Inc. Its plan, recommended unanimously by the council’s Finance Committee on Nov. 14, calls for Quest to pay no taxes at all for two years on improvements it makes to the former Hewlett-Packard Co. complex on Forest Street. Over 15 years, the company’s tax discount would eventually reach 50 percent, and then expire.
In exchange for the tax savings, Quest would invest more than $64 million in the site and will bring nearly 1,200 jobs to the city over the next few years, according to local officials.
Marlborough is no stranger to tax-increment financing, after approving tax breaks in the past year for TJX Cos. and Ken’s Foods.
“I think they work well for us,’’ Mayor Arthur Vigeant said. “Every community is a little bit different. Our commercial tax rate is a little higher than some of the other communities. We’re just trying to level the playing field a little bit.”
Vigeant noted that TJX — which is moving into the former Fidelity Investments site on Puritan Way — and Quest would fill vacant office space and bring in workers who will patronize the city’s businesses.
Michael Sullivan, Maynard’s town administrator, said officials there are not interested in using tax breaks as a lure.
“They look great when they’re first rolled out of the showroom, but they get old quick,” Sullivan said.
Maynard officials have already told potential developers of a large site on Parker Street that they will have to pay their entire property tax bill. The town granted a 15-year tax break for the Clock Tower Place office park, but that will expire in July; its property tax bill will essentially double overnight.
“It’s going to make it very difficult,” Sullivan said. “They struggle mightily to pay their tax debt now.”
Jerry Wasserman, chairman of Needham’s Board of Selectmen, said he is not worried about that scenario in his community. Special Town Meeting voters will decide on Dec. 3 whether to extend a property tax break to TripAdvisor LLC, an online travel company that has outgrown its headquarters in Newton and is considering a site in Needham’s New England Business Center.
“TripAdvisor is a very rapidly growing company,” Wasserman said. “The buildings that are developed will still be there. If, for some reason, TripAdvisor couldn’t stay, somebody else would come in.”
Needham’s plans call for TripAdvisor to get a 76 percent discount on its taxes for new development for five years, and then a 1 percent discount for the next eight years.
TripAdvisor is expected to bring 450 jobs to Needham immediately, plus another 250 over the next five years, Wasserman said.
“We expect it will propel further growth,” he said. “This will be definitely a centerpiece.”
While the plan calls for TripAdvisor to save $362,000 a year in taxes for the first five years, the company would still be paying $114,000 a year.
Town Manager Kate Fitzpatrick said TripAdvisor will still pay full current taxes to Needham on the property at the New England Business Center, an office park alongside Route 128. The company would only realize savings, she said, on the tax bill for improvements — a tax bill that does not currently exist.
Without that development, she said, “We weren’t going to get the money anyway.”