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Filene’s project may get tax break from Boston

City shifts stance after saying no to earlier developer

The former Filene's building in 2011.

Pat Greenhouse/Globe Staff

The former Filene's building in 2011.

Mayor Thomas M. Menino’s administration is considering a tax break for a towering redevelopment on the former Filene’s property downtown — an abrupt shift after the mayor steadfastly refused similar treatment for a prior developer who halted work on the site during the recession.

The Boston Redevelopment Authority confirmed Tuesday the possibility of a tax deal with Millennium Partners, the developer now building a $630 million complex at the Filene’s site that will contain luxury residences, offices, and retail stores. A spokeswoman for the authority declined to disclose the amount of money under discussion.

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But the very consideration of tax relief represents a reversal in Menino’s stance on incentives for the Filene’s project. It also creates a potentially awkward contrast for a mayor well known for favoring a handful of successful developers.

Just three years ago, Menino angrily refused to provide tax incentives to former Filene’s developer Vornado Realty Trust of New York. Vornado’s chief executive, Steven Roth, had suggested publicly that allowing a property to become blighted could help extract tax concessions from the city. At the time, work on the Filene’s property was stalled due to financial problems in the slumping economy, leaving a giant construction crater at the city’s core.

“This development is too important to Downtown Crossing and to the entire City of Boston to be used as a bargaining chip to improve your bottom line,” Menino wrote in a letter to Vornado in 2010.

Now, with Millennium already building on the site, the administration is entertaining a tax break to help with a project that includes the renovation of the original 1912 Filene’s store and construction of a 625-foot residential and retail tower. On Tuesday, the Boston Redevelopment Authority put an item on its meeting agenda for Thursday proposing to grant tax relief to Millennium.

However, the BRA took the item off the agenda after a Globe inquiry. Authority spokeswoman Melina Schuler said the item was put on the agenda prematurely and that the details of the arrangement still need to be worked out. She said the consideration of tax incentives is warranted to support a development of such significance to the city.

“This is a different time, a different developer, and a different project,” Schuler said. “The goal here is to get this done. This project is in the heart of the city, and it’s a critical piece of the revitalization work that’s happening.”

In addition to the tax incentives under consideration by the city, Schuler added, federal officials are providing $19 million in historic tax credits for the development. That financing was secured by Millennium and was specific to its development proposal. “The city wants to do its part to ensure this development gets done in the right way,” she said.

But one critic of tax incentives questioned whether such treatment is necessary at a time when construction of new retail stores and hundreds of luxury residences is already happening downtown.

“Frankly, I’m surprised you’d need an incentive for any developer to build down there,” said David Terkla, an economics professor and associate dean at the University of Massachusetts Boston. “There is a lot of development going on. It’s a profitable retail and commercial area.”

Anthony Pangaro, a principal for Millennium in Boston, said the firm is seeking reduced tax payments for a short period to help provide “predictable” costs for prospective retailers and office tenants. He said the downtown area is still up and coming, and that his firm is trying to attract more upscale retailers to the area.

“You’re asking people to make a very long-term commitment in these leases, and they will be pioneers to some extent,” Pangaro said. “A retailer doesn’t know what he is going to make down here, so we’re trying to take the experimental nature out of it.”

Pangaro has become one of the city’s most prolific developers under the Menino administration, winning approvals to rebuild large portions of the downtown area, including the massive Ritz-Carlton complex.

He said the tax incentives at Filene’s would not be tied to the 600 luxury residences to be constructed on the property. He also noted that — even with those incentives — the project would generate millions of dollars in annual tax revenue for the city upon completion. Pangaro declined to discuss how much tax relief he is seeking.

On the BRA’s agenda, the deal was referred to as a payment in lieu of taxes agreement, which allows a property owner to pay a preset amount instead of a normal tax bill that can fluctuate from year to year. The amount of such payments typically increases over time as the property generates more income.

In justifying the potential tax break, the BRA cited a section of state law that allows city redevelopment agencies to offer incentives “for the prevention and elimination of slums and urban blight.”

Millennium recently resumed construction on the Filene’s site after a lengthy work stoppage by Vornado left the property looking like a war zone, with half-demolished buildings surrounding a massive construction hole.

The firm, which is also building a 256-unit luxury condominium project a few blocks away, has signed a major lease with the advertising firm Arnold Worldwide, which will be the primary office tenant in the restored Filene’s building. Several new retailers will also be located at street level.

In all, the project will result in about 1.2 million square feet of new development on the property, including the residences; up to 218,000 square feet of office space; 230,000 square feet of retail stores; and hundreds of parking spaces.

Casey Ross can be reached at cross@globe.com.
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