City officials dangled $25 million in tax breaks to lure General Electric Co. to relocate its headquarters to Boston but expect to get back more than double that amount in property taxes over 20 years.
A recently negotiated tax agreement between the city and GE projects the net property tax payments for the three-building complex would total $67 million over two decades.
The city tax break would apply only to the new 12-story office building that would be the centerpiece of GE’s headquarters complex on Fort Point Channel. After accounting for the tax break, GE would still pay the city nearly $50 million over the period for that building alone.
The company is also renovating two brick buildings at the site that would generate an additional $17 million in tax payments over the period, according to city projections.
“This offers us a unique opportunity to recruit what is now the largest headquartered company in Boston and generate more than $60 million in revenue over the period of the tax agreement,” said David Sweeney, the city’s chief financial officer.
GE spokeswoman Susan Bishop said both the city and company will benefit.
“It’s an agreement that allows GE to build a world-class headquarters while improving the city’s infrastructure,” Bishop said. “We’ll be paying property taxes on an area that today is generating minimal taxes.”
City and GE officials expect to sign the tax deal later this fall. It would take effect in 2017.
The property is currently owned by Procter & Gamble Co., which operates the massive Gillette plant next door. City officials estimate the 2.4-acre site, which is part of a larger property, currently generates a few hundred thousand dollars a year in property taxes.
GE will need to employ at least 800 people at the three-building campus by 2024 or risk losing a piece of the tax discount, which will be $1.5 million a year when fully phased in. For example, if GE employs only 400 people in a given year, the tax break would shrink proportionally, to $725,000.
GE officials said it won’t be a problem to hit the 800-person target. The company is working out of temporary offices nearby for now, with a goal of moving into the two renovated warehouses by early 2018 and occupying the third, bigger building by the end of 2018.
“We fully expect we will hit that 800 number very quickly,” Bishop said. “We’re not planning on building a big building and have it be empty.”
The size of GE’s tax break would climb steadily over the first seven years before reaching $1.5 million annually. GE wouldn’t be subject to any employment requirement during that transition period.
The tax agreement “seems like a pretty responsible use of tax incentives, when compared to the huge giveaways you see in other cities,” said Adam Langley, a senior research analyst at the Lincoln Institute of Land Policy in Cambridge. “But at the same time, it seems unnecessary to attract GE to Boston. GE has said many times that they chose Boston because of the workforce, the labor force here.”
GE’s plan for its approximately $200 million campus is expected to be approved by the Boston Planning & Development Agency on Nov. 1. GE would then buy the portion where the new building will stand from P&G, while a state agency, MassDevelopment, would acquire the two older buildings and lease them to the company.
The GE deal, one of the city’s largest tax breaks, is similar in scope to one approved for Liberty Mutual’s headquarters expansion in 2010. At the time, the insurer agreed to add 600 jobs to its headquarters in return for a 20-year tax break of nearly $24 million.
GE will also benefit from up to $125 million in state grants to help assemble the land and prepare it for the headquarters, and up to $5 million for a life sciences innovation center. None of the state money in the incentive package to draw GE here from Connecticut will be jeopardized if GE doesn’t meet its local hiring goals.