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To land big corporate fish, some use tax baits

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Siemens Healthcare Diagnostics is considering building a $300 million addition to its factory in Walpole. (Siemens Healthcare)Siemens Healthcare

When state and Boston officials dangled corporate tax breaks, infrastructure improvements, and other goodies designed to entice General Electric to move its global headquarters to the city, the proverbial carrot included extended and extensive relief from local taxes.

It's an approach that Massachusetts municipalities increasingly have been using in their efforts to convince businesses to locate or expand in their locales. Case in point: Walpole officials recently authorized a substantial tax break for Siemens Healthcare Diagnostics, if the international company agrees to invest some $300 million to expand its factory in the town and add at least 400 jobs.


The offer includes a reduction in new property taxes by an average of 75 percent over 20 years. Officially known as a tax increment financing agreement, or TIF, the carrot for Siemens still needs approval from Walpole Town Meeting in March, as well as from a state economic council — a body that has never used its veto power to overrule a municipality.

In the past four years, cities and towns in Massachusetts have given 158 tax breaks totaling $241.8 million — about $160 million in 2015 alone — in TIFs, with values ranging from tens of thousands to millions of dollars.

"Companies are shopping around to see where they can get the best deal; it's a dollar-and-cents reason they might choose one community over another," said Paul Halkiotis, planning and economic development director in Norwood, which has 11 TIFs on the books.

The trick is to determine whether landing the business is worth the loss of potential tax revenue, he said.

"There has to be something in it for the town," Halkiotis said. Ultimately, "it has to add value to the tax base and add jobs" for the local workforce.


Stoughton used a 10-year TIF worth an estimated $2.9 million to lure in 2014, filling a vacant 330,000-square-foot warehouse and getting bragging rights for snagging a high-profile business.

"The community was very excited about Amazon moving here," said Stoughton's economic development director, Pamela McCarthy. "It attracts attention and lets other businesses know that Stoughton is a business-friendly community and will work with them to help them succeed."

McCarthy is a fan of TIFs. She used to work in Norwood, where she helped negotiate a TIF with Steel Art Co. in 2012 to move into a property that had been vacant for about a decade. For a tax break of about $71,000 over 10 years, the town brought in a business that has added more jobs than it promised, she said.

The agreements can range from five to 20 years and reduce taxes on new development from 5 to 100 percent, according to state rules. TIFs need city or town council or town meeting approval and then are reviewed by the state council, said Kristen J. Sabella, spokeswoman for the state Department of Housing and Economic Development.

TIFs started in the 1950s in California — which phased them out about five years ago — and were adopted in Massachusetts in 1993 as a tool to stimulate economic growth.

"The definition of an incentive is [encouraging] something that should happen, but isn't happening, and won't happen until public dollars reduce private risk," said Greg LeRoy, executive director of Good Jobs First, a research group in Washington, D.C., that tracks economic development subsidies of all sorts around the country. A good example, he said, might be bringing a food store into an area without any healthy food outlets.


That's what Brockton did when it negotiated a 13-year TIF worth $1.2 million with Vicente's Liquor and Tropical Grocery in 2014. The locally owned grocery store opened last summer on Pleasant Street, replacing a long-abandoned warehouse that Mayor Bill Carpenter described as a "black hole" in the downtown.

But often, LeRoy said, the rationale behind a tax break is questionable. He points to a Missouri city that gave tax relief to a mall to build a Nordstrom as a poor use of a TIF.

Other times, he said, businesses engage in "job blackmail" — pitting municipalities against each other and pushing them to pile on tax breaks in order to win the competition for a business location.

"Are they overused? Absolutely," said Adam Langley, senior research analyst at the Lincoln Institute of Land Policy in Cambridge. "And overuse of tax incentives can really erode a municipality's fiscal health."

Noah Berger, president of the nonprofit Massachusetts Budget and Policy Center, said another problem with TIFs is that it's hard to determine their effectiveness.

"The big question is what would have happened if [a company] didn't get the TIF," Berger said. "Would they come there anyway, or would some other company have located in the space? Basically, it's unknowable."


Berger argues that the money spent subsidizing specific companies would be better spent on things like education and transportation that improve the economic climate and therefore attract businesses.

That's the argument made by Walpole Selectman David Salvatore, the only board member who voted against the TIF agreement with Siemens.

But the chairman of the Board of Selectmen, Clifton Snuffer, said the long-term benefits of enticing the company to expand in Walpole, where it already employs more than 600 people in a highly automated plant that produces more than a billion diagnostic tests annually, outweighed any short-term tax loss.

"We are giving up something, [but] in the end we will get more," he said, adding that the town is competing with other states and risks alienating Siemens if Town Meeting rejects the TIF.

The company has said it is considering locations other than Walpole.

"The TIF certainly will factor into the economic viability of the project," said senior director Michael Canary.

Johanna Seltz can be reached at