GE could still end up paying tens of millions in property taxes
General Electric Co. may end up paying Boston tens of millions in property taxes on its new headquarters in the Fort Point neighborhood, despite $25 million in incentives the city promised the company.
The company is planning to buy a roughly 2.5-acre property near Summer Street that is at the edge of Procter & Gamble’s Gillette campus, where GE will build a new headquarters and renovate two older buildings.
Boston economic development chief John Barros said Friday that even with the tax breaks, GE will eventually pay much more in taxes than the city currently receives for the property.
“It will increase taxes almost 10 times for that site,” Barros said. “For a city like Boston that relies so much on the property tax, that’s an important contribution to our ability to continue to have a strong ecosystem.”
The GE complex will total at least 300,000 square feet, possibly more, Barros confirmed. At that size, a comparable office property in that part of the city would pay about $2.4 million a year in taxes — or $48 million over 20 years, according to figures provided by City Hall. The city’s incentive to GE, meanwhile, is a tax abatement valued at $25 million over 20 years.
It’s impossible to know how much P&G currently pays in taxes on the land and buildings, because the property is part of a larger 9-acre site along A Street that is primarily used as a parking lot. P&G’s tax bill for the full 9-acre property — much of it undeveloped —
GE spokeswoman Jennifer Erickson declined to comment, other than to reiterate the company’s explanation that its move to Boston from Connecticut is part of a broader effort to modernize for the digital age.
“Our headquarters will be the catalyst for [GE’s] digital transformation,” Erickson said. “Specific details about the space are still being worked out.”
Once the abatement expires, the city is expected to receive millions more each year for the GE property. General Electric is also eligible to receive as much as $120 million from Massachusetts for infrastructure and other property-related expenses, as part of the package Governor Charlie Baker and Mayor Martin J. Walsh offered the company.
But the GE tax deal has sparked criticism from community activists who contend the city and the state cannot afford to cut a break for a multibillion-dollar corporation while the Boston public schools and the MBTA face cutbacks.
Eli Gerzon, an organizer with Jewish Voice for Peace, said any tax payments from GE will pale in comparison with subsidies it will get from the city and state.
“They are infamous tax dodgers. There’s no reason to expect they will start paying taxes out of the goodness of their heart,” said Gerzon, whose organization is a longtime critic of GE for its military work.
Jewish Voice for Peace is among the groups organizing a demonstration Monday afternoon outside a downtown office building where GE executives are hosting an event with Walsh and local business and civic figures to herald the company’s move to Boston.
But longtime Boston budget watchdog Sam Tyler said the tax abatements represent a smart move on the city’s part. Tyler, president of the Boston Municipal Research Bureau, said the deal proves Boston will more than recoup its money. Tyler also sees a harder-to-quantify benefit: GE’s potential to draw other employers into the city.
“Any tax breaks will be criticized, but the long-term picture is this will have a much more positive effect for Boston in terms of its image and companies wanting to come to Boston,” Tyler said. “Even if [the tax deal] comes out neutral, I think Boston still comes out ahead.”
GE hasn’t disclosed what it is paying for the property, although chief executive Jeff Immelt in late March said he expects the entire project to cost $80 million to $100 million. GE expects to employ about 800 people at the complex when it opens in 2018. In the meantime, a smaller headquarters staff will work out of temporary offices on nearby Farnsworth Street.
Barros said Boston is still negotiating with General Electric over the exact size of its tax payment. The terms hinge on complex arrangements in the incentive package.
For example, under one option, GE would buy the two older buildings from P&G, and then transfer ownership to the Boston Redevelopment Authority to make it easier for the company to qualify for the state subsidies.
The BRA would lease the buildings back to GE, under that option. The incentive package allows GE to not pay rent in any BRA-owned buildings for up to two decades. But Barros noted that GE would be responsible for any property taxes, beyond the abatement amount, and operating expenses on those buildings. After 20 years, the BRA could charge rent.
Barros said he expects to have more clarity about the negotiations within two months.
Adam Langley, a senior research analyst at the Lincoln Institute of Land Policy in Cambridge, said it’s likely GE would have moved to Boston anyway, regardless of the incentive package.
“The bottom line is the amount given away is not as bad as you see in other cities,” Langley said, “but it’s a lot of money and probably unnecessary.”