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Boston agrees to $7.8m tax deal for Filene’s project

City, developer in 13-year accord to help downtown complex draw premier tenants

Current construction at the Filene’s Downtown Crossing site is focused on the rehabilitation of the original 1912 Beaux Arts-style building.

DAVID L. RYAN/GLOBE STAFF

Current construction at the Filene’s Downtown Crossing site is focused on the rehabilitation of the original 1912 Beaux Arts-style building.

Mayor Thomas M. Menino’s administration has agreed to give a $7.8 million tax break to help redevelop the former Filene’s property into a $630 million complex of offices, stores, and luxury homes.

The tax incentives will be spread over a 13-year period and will be passed along to retail and office tenants that agree to open on the property.

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A spokeswoman for Menino said the money will not go to the developer or to subsidize the owners of luxury condominiums on the site.

“In order to attract premier office and retail tenants, this level of tax certainty is needed for the first few years of the project,” said the spokeswoman, Susan Elsbree.

“Many projects receive 30- and 40-year tax agreements, so this is very modest by comparison.”

The agreement was announced on the eve of a formal groundbreaking at Filene’s scheduled for 10:30 a.m. Tuesday.

The developer, Millennium Partners, which has already started the work, will discuss its plan to rehabilitate the original 1912 Filene’s store and build a 625-foot retail and condominium tower next to it. The 1.4-million-square-foot project is also expected to include a supermarket.

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The tax agreement is scheduled to be considered at a Sept. 26 meeting of the Boston Redevelopment Authority’s board of directors.

City officials have been negotiating the arrangement for several weeks, but did not publicly dislcose the terms until late Monday.

Executives with New York-based Millennium could not be reached for comment.

The deal represents a reversal in Menino’s stance on incentives for the Filene’s project, as he had refused to give tax help to a prior developer who halted work on the property during the economic downturn.

Some specialists have said it would have made more sense to provide government support when the project was struggling, not at a time when the economy is improving and real estate development is booming in neighborhoods across the city. 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 because of financial problems, 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.

The city’s tax assistance will help Millennium proceed with its version of the development, which is planned to be a new center of gravity in the downtown skyline and bring more than 500 luxury condominiums to the property.

Federal officials are also providing $19 million in historic tax credits for the development, which involves a detailed restoration of the Beaux Arts-style Filene’s building, the last major work of the renowned architect Daniel Burnham.

Elsbree said that even with the $7.8 million tax break, the project will generate nearly $60 million in new property taxes for the city during the agreement’s 13-year duration.

The project is also expected to create 600 construction jobs and another 2,000 permanent jobs once work on the site is completed.

In justifying the potential tax break, the BRA has 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 the massive construction hole.

The company, which is also building a 256-unit luxury condominium development 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 the street level, including the new supermarket.

In all, the project will result in about 1.4 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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