Editorial: Seeing the whole economic development picture
No one could look at the contributions The Hanover Insurance Group, Saint-Gobain, Unum, the Beechwood Hotel and Harr Motor Group have made to the Greater Worcester economy and dub them as failures or a drag on the community.
In fact, the opposite is true. They are stunning successes in a city trying to remake itself for the better.
It would have been easy to scandalize the cover story from this issue, Grant Welker's “Hit & Miss” deep dive into the 24 tax-break deals Worcester had active in the last five years. Six of the companies failed to meet the job creation and investment requirements, resulting in the state decertifying the deals; yet Worcester held up its end of the bargain for five of them. The headline “Worcester keeps sweetheart deals after major employers fail to create enough jobs” would have attracted a lot of reader interest.
Even though such a headline technically isn't wrong, it wouldn't have been right either.
Yes, Hanover didn't create the 225 jobs required for its 5-percent tax break on the improvements to its Lincoln Street headquarters (largely due to the economic downturn), but having the company make those improvements still increases the value of its properties and the ones around it. Plus, as Worcester's only publicly traded company, fluctuations in its 2,000-ish local employee base aren't as important as the strength of the company.
Look at any of the five companies missing their tax-break requirements and keeping the local benefits – Hanover, Unum, Saint-Gobain, Beechwood, Harr – and imagine if they had endangered their long-term viability for the sake of meeting the requirements of the short-term tax break. Unum could have not cut 97 jobs and retained the 600 as required by its tax-break deal, but keeping those positions on the books would have created a sluggish and less market-responsive company. The company would be losing the war for the sake of winning a battle.
City Manager Edward Augustus is right in what he told the Worcester City Council. The companies may not have met the letter of their agreements, but their economic contributions have grown and continue to grow. That is worth running out a tax break for the length of its original term.
The larger issue here isn't a handful of tax-break deals, but the city's tax rate. Worcester still maintains the property tax rate structure it set up in 1984, where commercial/industrial property owners pay a significantly higher tax rate than residential owners. As other Central Massachusetts communities have worked to eliminate this imbalance – only 15 others remain with such a structure – Worcester has grown the disparity the last two years; creating tax rate 71 percent higher for business properties. Despite numerous studies showing how such policies hurt tax collections and proposed long-term plans to move toward a single-tax rate, Worcester remains fixated on 33-year-old tax policies.
Business property tax breaks are good for business and the community. Even if 25 percent don't meet the exact requirements, they still move the economy in the right direction. What would be better, though, is to have a tax structure where such deals aren't necessary.
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