Worcester revisiting Unum tax break in light of work-from-home change

Photo | Grant Welker 1 Mercantile Street in Worcester

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By Grant Welker

Worcester city officials are weighing whether to keep a tax break in place for the Unum after the insurance company said in July it would close its downtown office and instead have hundreds of employees work from home.

Unum has a 15-year tax break Worcester offered when the company moved into a new office building on Commercial and Foster streets on the site of the old Galleria mall. The deal allowed the company to pay targeted tax payments instead of the commercial property rate, in exchange for retaining 600 jobs and investing $25 million in the city. The deal ended up being decertified by the state government for failure to meet the job-creation goals, although the city kept the deal in place.

Now, city officials are reassessing the deal, after Unum said it would have employees all work remotely and would seek to sublease more of its space than it had already done so under shrinking headcounts. Tennessee-based Unum said it had roughly 400 workers in July when it made the announcement for a remote workforce. About 80,000 square feet of office space is now available at a time when the market for office space has significantly weakened because of the coronavirus pandemic.

The decision was spurred not by the pandemic but by a reduced workforce locally and a belief that a work-from-home model would help Unum continue operations in the event people aren't able to make it into the office. Unum’s lease extends until 2030, and the company plans to sublease the space until that contract expires, the company said this summer.

City Manager Edward Augustus told city councilors in a memo ahead of the City Council's meeting Tuesday night city officials expect Unum's employment to fall below a threshold for employment commitments: that at least half of the number of employees once on payroll remained with the company. A recommendation to the council regarding the tax break will come early next year, he said.

The Worcester Business Journal reported in 2017 the city administration has kept tax breaks in place despite companies not meeting job creation or investment requirements, including for Hanover Insurance Group, Saint-Gobain, Unum and the Beechwood Hotel. Unum's deal was decertified by the state because of previous job cuts by the insurer.

"We recognize the critical role that Unum played as a catalyst for the rest of the CitySquare development," Augustus said. "The construction of their new building created the necessary momentum and progress needed to attract the remaining development. We also understand that the current environment of Governor Baker's executive order relative to office space restrictions creates some uncertainty and challenge for Unum to make new commitments on the timeline for leasing and job creation at the property."

"However, at the same time," Augustus wrote, "the [Executive Office of Economic Development] and City Administration holds companies and developers accountable for their TIF agreement commitments."

At the time Unum moved in, it committed to retaining nearly 700 full-time jobs and creating an additional 50. Unum moved from an office building a few blocks away on Chestnut Street, a site that remains vacant.