Boston should offer developers hundreds of millions of dollars in property tax breaks — probably the largest deal of its kind in the city’s history — to entice the construction of a new neighborhood at the heart of Boston 2024’s Olympics proposal, bid organizers said Monday.
Under the new Boston 2024 plan, the city would seek a single master developer to lay the groundwork for an entirely new neighborhood to be known as Midtown on the site of Widett Circle, sandwiched between South Boston and the Southeast Expressway. The site would serve as the home of the main Olympic stadium during the Games, to be transformed into a nearly 8-million-square-foot mixed-use development after they end.
But to attract a developer willing to spend the $1.2 billion needed for site preparation costs that include erecting a massive deck over the existing train tracks on the site, 2024 organizers are asking the city to sweeten the pot with an unusual tax break stretching over the next four decades.
“Without incentives, maybe this area wouldn’t be built out for 20, 30, 40, 50 years,” said Steve Pagliuca, Boston 2024’s chairman. “The public policy question is, how do you want to use these tax deals to incentivize development in areas that are generating very little tax revenue right now?”
Property tax breaks are a common tool to spur development in the city, and there are more than 100 in place today, city officials said. Boston 2024 floated a particularly aggressive tax-break plan Monday, aimed at providing a master developer with a 12 percent return.
The Widett Circle developer would get property tax breaks starting at an 85 percent discount and phased out over the course of 40 years, far longer and more generous than has been typical in Boston in recent years.
As a point of comparison, Liberty Mutual received tax breaks about five years ago to expand its headquarters complex. The deal lasted 20 years and didn’t include a discount of more than 50 percent in any one year, according to the Boston Municipal Research Bureau, a watchdog group.
Boston 2024 offered only hypothetical examples of how such a deal might work. The particulars of any tax breaks would need to be negotiated between the city and whichever developer wins the anticipated bid for the project.
But critics are skeptical that the benefits of such a grandiose proposal would be worth this much of a significant taxpayer investment.
“This is a very optimistic illustration and not consistent with the city’s practice over the past several years,” said Sam Tyler, president of the Boston Municipal Research Bureau. “It seems overly ambitious or optimistic from a developer’s perspective of what the city would agree to, given their past experience.”
For now, though, Mayor Martin J. Walsh is saying he’s open to the proposal.
Currently, the land at Widett generates about $850,000 a year in property taxes, primarily from the food wholesalers at the New Boston Food Market. Even if the proposed tax breaks are enacted, the large number of new buildings would increase the tax base so much, organizers said, the city could expect to reap $7 million in annual taxes from the site by 2030, and $27 million in annual taxes by the time the development is projected to be done in 2040.
Walsh said future generations would see the benefits from the tax breaks. Building a massive deck over the area, the mayor said, would allow existing operations on the site — a public works yard, the city’s tow lot, and MBTA and Amtrak facilities — to continue to operate while a new neighborhood is built above.
“Put the Olympics aside for a second,” Walsh said. “If we can put a deck on it and develop it and make hundreds of millions in tax revenue over the course of the next 50 years, as compared to $800,000 a year? And keep the services in place? I think that’s irresponsible for me as mayor not to explore that.”
Boston 2024 officials said that with sea levels rising, the low-lying property is also vulnerable to flooding during storms, and therefore would be more expensive to develop and insure without the elevated platform in place.
Matthew A. Cahill, executive director of the Boston Finance Commission, a fiscal watchdog, countered that development is booming in Boston and that a tax incentive is unnecessary to spur construction on a large, attractive swath of land close to downtown.
“They keep talking about not giving any taxpayer money to these developments,” Cahill said. “This is taxpayer money. A tax incentive is taxpayer money.”
But David Begelfer, chief executive of the real estate trade group NAIOP Massachusetts, said he doubts that a developer would invest the $1 billion-plus needed for site work at Widett Circle without assurances in the form of tax breaks, zoning, and permitting.
“Would there be developers that are interested? Absolutely,” Begelfer said. “[But] no one is going to come down tomorrow and slam one billion dollars down for infrastructure and say, ‘I will roll the dice.’ They need to know a lot more about what can be done there.”
Matthew Kiefer, a land-use lawyer at Goulston & Storrs, said the Prudential Center was built over train tracks during the 1960s in the Back Bay with a similar incentive.
“A big tax break was necessary to get the Prudential Insurance company and others to invest in transforming that rail yard into what we have today,” Kiefer said.
The Widett project “would be transformational, and maybe that justifies a larger degree of public attention and support. It certainly stands to reason that you need some kind of incentive to make it work. The question is, ‘Are the long-term benefits to the city sufficient to warrant that?’ ”
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