State Street Corp. said it will not seek additional tax incentives from the state government to move into a new office complex on the South Boston Waterfront, beyond the $11.5 million local property tax break it won from the City of Boston.
In an interview at the Globe Monday, chief executive Jay Hooley also said State Street did not explicitly promise to create or retain any jobs to win the tax break. Several other financial companies, including Liberty Mutual, received both city and state subsidies for new office developments in exchange for promises to add hundreds of new jobs in the city.
But Hooley said the tax benefit was only one small factor in the company’s decision to commit to a new building in Boston, instead of expanding elsewhere. The $225 million, 11-story building at the Channel Center complex, Hooley argued, represents a major investment here by the Boston financial services giant and underscores its plans to remain in Boston.
“It’s really a commitment to the city,” Hooley said. “We plan to retain the jobs, but the tax benefit was not tied to job activity.”
State Street is already one of the region’s largest private employers, with more than 12,000 workers statewide, including 8,000 in Boston. Despite the relatively high cost of living in Boston, Hooley said the company decided to remain in Boston because it wanted to retain its existing employees and found Boston to be an ideal place to recruit new ones.
Boston is ‘a pretty good labor market for us.’
“There is a pretty deep reservoir of talent” here, Hooley said. “We think that it’s a pretty good labor market for us.”
The tax subsidies for State Street and other corporations have become a source of controversy as critics argue they drain tax revenue that could be used for roads and other government projects that benefit the public. Watchdogs say many of the developments probably would have been built without the tax breaks or the tax breaks went to wealthy businesses that did not need government support. State Street, for example, earned $1.9 billion in profits last year.
Liberty Mutual, the city’s sole Fortune 100 company, received $46.5 million in state and local incentives two years ago to build a new $300 million office tower near its Back Bay headquarters.
But Mayor Thomas M. Menino of Boston has supported using tax breaks in some instances to help retain key employers and encourage development in new areas, such as the South Boston Waterfront.
The Boston Redevelopment Authority formally approved the 15-year tax break for State Street last month. Other recipients of city and state tax breaks include investment bank JP Morgan and Manulife Financial Corp., the Canadian parent of Boston insurance giant John Hancock Financial Services. Outside the financial sector, biotech giant Vertex Pharmaceuticals Inc. received more than $21.8 million in city and state tax incentives for a pair of large office buildings nearby at Fan Pier.
The Channel Center complex, located off A Street in the Fort Point area, is expected to be completed in 2014. Even with the tax break, the city said the project will add $43.3 million in property taxes to the city over 15 years.
Hooley said he was sensitive to the criticism of the tax breaks.
But he thought the incentive was a fair trade for the company’s decision to commit to a major new building in the city. “We try to strike that balance,” Hooley said. “All of us know that the city, the state, and the country are going through a difficult time.”