Boston officials more than doubled the size of their offer to GE during negotiations
Boston officials initially considered a much smaller tax break for General Electric last fall to lure the company here from Connecticut before raising the offer to an unprecedented $25 million, according to newly released public documents.
City Hall initially developed a property tax abatement valued at $8 million to $12 million in mid-November, according to documents the Walsh administration released Wednesday in response to a public records request from the Boston Globe. Over the next several weeks Boston officials increased the upper limit of the abatement to $15 million, and then again to a $20 million offer that was included in a memo addressed to a GE official dated Nov. 30.
The amount was subsequently increased to as much as $25 million over 20 years.
Daniel Koh, Mayor Martin J. Walsh’s chief of staff, said in an interview there were two reasons for the large increase in the offer to GE. First, the amount of aid was linked to the size of the complex GE wanted to build. Later in the process GE indicated it wanted a much larger complex, so any tax abatement would increase accordingly.
Second, Koh said, Boston was in a tough competition with New York City, Providence, and other cities to land the industrial giant.
“We didn’t want them to walk away,” Koh said. “At the end of the day, we wanted to make sure we closed the deal.”
As of mid-November, city officials were under the assumption GE wanted a headquarters of around 140,000 to 170,000 square feet. But GE has since decided to open a roughly 300,000-square-foot campus near A Street in Fort Point that includes a new building and two renovated warehouses, each about 55,000 square feet in size.
GE expects to employ 800 people at the new headquarters when it opens in 2018, and will start moving executives here this summer to temporary space nearby. In November, city officials expected the company to employ 400 to 600.
“When it became clear that [GE was considering] the opportunity to build a campus, we received indications that the square footage might go up,” Koh said.
Officials in Governor Charlie Baker’s administration also agreed to sweeten their offer, according to the documents, increasing the state incentive package’s size from the $60 million to $80 million range last fall to as much as $120 million in January, when GE announced it had picked Boston for its new headquarters.
Much of that money could be used to pay for the two old brick buildings, which under one scenario under discussion would be owned by the Boston Redevelopment Authority. The grant money would come from a state program that can only be used for publicly owned properties.
GE would buy the buildings, transfer them to the BRA, and lease them rent-free for 20 years. It would be responsible for operating expenses and any property taxes still owed after the abatement. GE may also end up paying rent after the 20-year deal expires.
Baker on Wednesday defended the use of state funds for the GE buildings, saying the investment will significantly increase the taxes Boston will get from the property even after the abatement, and will leave a valuable asset — two renovated buildings near downtown Boston — under BRA ownership.
“I actually think, compared to the way most of these deals typically get done, which is straight checks or straight cash or straight credits for a certain number of jobs you create, I think this is a much better deal,” Baker said. “It’s a much better deal for us — the Commonwealth and the city — and it’s also the right kind of deal for what GE is looking for.”
Asked about documents showing the Baker administration increasing the state incentives offered to GE, spokeswoman Lizzy Guyton said, “These e-mails represent a snapshot in time during which the state worked closely with the city and other agencies to convey the Commonwealth’s strong economic environment.”
A spokesman for GE declined to comment Wednesday, other than to say the company is pleased with the public aid it will receive.
The Walsh administration’s decision to increase the property tax abatement to $20 million drew some words of concern from Boston’s assessing commissioner, Ronald Rakow.
“Its [sic] the number I’m choking on,” Rakow wrote in a Nov. 30 e-mail to John Barros, the city’s economic development chief.
“To warrant that level of investment,” Rakow wrote, Boston should require GE to create more than 600 jobs at the new headquarters. He also wrote that he was concerned about offering such a big tax deal, the largest in recent memory in the city, based on “just” 170,000 square feet of office space.
Koh said Rakow’s concerns have been assuaged because GE has since increased the size of its complex and its head count to 800.
In November, state officials also offered $5 million to GE for an “innovation center” and $1 million for workforce training. Those offers were also in the final deal that GE accepted to come to Boston.
But some ideas didn’t make it into the final package, such as a proposal to build a garage for GE with state funds, with the potential for free parking for GE workers.
GE officials were treated to a tour of local sites in September. By late November, city and state officials were floating a range of properties for GE. Many of those were publicly owned. But GE eventually did not pick any of them.
The company instead will buy a 2.5-acre portion of the Gillette campus from Procter & Gamble.
“We didn’t show them specifically those buildings, but we definitely showed them the Seaport,” Koh said. “I think when they saw what was going on there, they really fell in love with it. I think they saw the energy there, but [also] there was more room to have more of an impact.”