Liberty had previously assured the Boston City Council at a public hearing that the company has absolutely no intention of pulling its headquarters operation out of Boston, so that loss was never a risk. As to “job creation: I testified, as I had written, that, in return for about $40 million in City and state tax waivers, Liberty is promising to create, at its 2500-employee Boston headquarters campus, an average of 30 jobs annually for the 20-year term of the tax break — barely 1% hiring growth that will be invisible in a company this size, and indeed, under one-fourth the number of jobs Liberty has created annually (125) since 2004 WITHOUT any tax break. Yes: with the tax break, Liberty will hire 75% FEWER employees than it hired without the tax break.
And of those, only 20% will likely go to Boston residents, per the current pattern. So, the City of Boston is giving Liberty a 20-year tax break totaling an estimated $16-$20 million to hire six Boston residents a year. SIX JOBS A YEAR: INVISIBLE! At a million dollars a year, that’s about $165,000 per job per year (I wonder if any of the jobs will even pay that much). Mr. Bialecki wrote in an internal memo that subsidies should not exceed $30,000 a job, which is a federal standard.
I pointed out in my testimony that when he was running for office, candidate Deval Patrick said to me personally, and admitted in the Boston Globe, that tax breaks don’t influence significant business decisions, and that a business relying on tax breaks is a business going out of business. Yet the state corporate gravy train continues and indeed accelerates.
Of course, Liberty Mutual, #86 on the Forbes 100, is far from needy, so flush with cash that it will fund the $340 million tower to be subsidized out of its current assets without even needing a loan. It takes in $30 billion a year, with a net annual profit of about $1 billion. And two of its buildings, in the “blighted” Back Bay, already have tax exemptions under Chapter 121A here and here, for an annual tax saving of some $7 million. This TIF is just a little more icing on the Liberty cake, a golden handshake for its $27-million-a-year CEO.
But it is significant money in terms of the city and state public services it could fund. (I ask again: where are the library advocates? the parks advocates? the schools advocates? None were at this EACC meeting.) The Governor closed the Ferguson Industries for the Blind to save $867,000 a year, eliminating 25 jobs. At any time, but especially at a time when public services are being slashed to the bone, a subsidy like this one should not even be considered.
Patrick, who evidently arranged for this approval in a closed door deal along with Boston Mayor Tom Menino, will now have to defend his record on corporate welfare. We will not be fooled again.
I invite the Governor, the Mayor and the Boston City Councilors who voted for this TIF (only Turner and Yancey voted against it), to explain their decision here.
And I invite all the other gubernatorial candidates to state their positions on this and similar tax breaks here.
they are also getting some kind of investment tax credit with this thing?
The state portion is an investment tax credit; it’s a percent of the construction cost. The city portion is a property tax exemption of varying percentages each of the 20 years of the TIF term, starting at 50% and tapering over the years.
the soundproof bubble that some of our electeds live in. What do they think, that no-one is going to hear about it. Yet, no support heading out to the middle class taxpayer.
Governor Patrick allowed the National Grid rate increase, and wants to tax car insurance premiums. Getting really tired of corporate welfare, while the workers who drive the economy keep getting nickeled and dimed to support that corporate welfare. I like Governor Patrick as a person. But he just doesn’t get it. I cannot support him in the upcoming primary election.
I guess this must be the property tax relief that Deval promised last election. He just never let on that it is only for the mega rich corporations of Boston.
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p>This deal, orchestrated by Patrick and Menino, is what happens when special interests collide with politicians who feel little accountability back to their constituencies. Menino was just re-elected again in a veritable walk and Deval looks to have sewn up the Democrat nomination for Governor (will Grace Ross even make it on the primary ballot?). With no real challengers and visions of contributions dancing in their eyes they sold off a substantial amount of the Commonwealth’s and Boston’s tax revenues in return for what amounts to 30 jobs a year.
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p>Will anyone put the pressure on these two to explain how they sold out their constituents to a company that doesn’t seem to need these tax breaks? As a good first start, I would argue for Grace Ross receiving enough convention votes to appear on the primary ballot. She has shown that she is not afraid to confront Patrick on the issues and she would make him accountable for this decision.
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p>Without something to hold them accountable, they will keep doing what they want, constituents be damned.
Are we talking about a $1 million per year property tax break to develop a parcel that currently only earns $40,000/year in property taxes anyway?
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p>I honestly don’t know the details, here, so answer me this:
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p>In developing this parcel, would Liberty Mutual be the sole tenant in the new building? Or would other offices and retail be built in, thus bringing in far more than the $1 million in question?
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p>And is there a chance, as the economy rebounds, that the current residence for Liberty Mutual might bring in a new corporate client, once LM moves, thus bringing back most or all of those taxes to the current property?
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p>And though nobody thinks the Back Bay is blighted (thanks, no doubt, to the community battles to prohibit development of any project that might cast 20 minutes per year of a shadow on a park 3 blocks away), is it possible that there are times during this economic recession when a long-term, relatively small property tax break might bring immediate jobs and construction from the development of a parcel that many people feel needs a boost? So a relatively small tax break might bring more than that in short-term tax relief through construction?
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p>This is far different than, say, a corporation moving into a building that already exists, no? This is actually developing a project now, at a time when we need development, we need new (i.e., outside of prop-2-1/2) tax revenues, we need jobs.
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p>And the $900K or so for the Fernald is a red herring here, no, as none of this money is state taxes, just city?
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p>Like I said, I don’t claim to be an expert, but it would help to clarify this. And it would also help to explain that this isn’t a $20 million giveaway. $1 million per year is not as catastrophic as you seem to claim.
… is if they intend to move out of the buildings they already occupy. They have space in 2 or three buildings near Park Plaza currently. This could be a problem where they move out of the spaces they are renting into the new building and occupying most of it, leaving a bunch of empty commercial real estate behind that may or may not fill up again. The result could depress commercial real estate prices and hit taxes negatively that way.
Excellent question. They could be planning to move all their staff into the three tax-advantaged buildings (the TIF tower and the two in Park Plaza which have “blight” tax exemptions under Chapter 121A). Then they could point to their old building as vacant and blighted — and get a tax break to tear it down and build a new tower that is tax-advantaged too! This one, they could lease out for revenue stream, or just flip the property at a huge profit.
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p>Either way, this proposed tower will be adding to a glut of office space and further depress rents and commercial taxes, with a consequent shift of some of the commercial tax burden to the residential owners, as happened in 2004. Building towers does not create jobs; that’s why we have so many vacancies. Jobs are created when there is demand for goods and services.
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p>The point is that this tax break is not necessary for the development to happen. As Deval Patrick said when he was campaigning, a business relying on tax breaks is a business going out of business; he said he wouldn’t be giving away subsidies to lure businesses because this is not what influences business decisions — or shouldn’t be. This is just a little gravy for Liberty, and pols (including the governor, now that he’s in office) like it because it serves their purposes. As one of them explained to me the way most pols think about this, “I can brag at election time that I created 600 jobs, and who’s going to notice a few million dollars more wasted in these huge budgets?” Most people don’t have the information to analyze what happened, so this ploy works for them.
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p>Of course it will bring in more than the tax break; it’s a waiver of a certain percentage of taxes every year for 20 years. But we could collect ALL of the taxes; we don’t have to forfeit any and we’d still get this amount of hiring.
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p>Liberty will not fill this building. The application says it will lease out 30% of the space for the first few years, and then gradually occupy more, up to about 90%. (There is no mention of retail.) So it will be cannibalizing other struggling office buildings (and possibly its own — see reply to next post), aggravating the city’s high vacancy rate and further driving down commercial rents on buildings whose value is already in the tax levy, so the burden will shift to residents as happened in 2004.
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p>I don’t understand your question. LM is not moving. The current property is (was) mostly occupied by a tax-exempt organization, that’s why its taxes were so low, not because it was vacant. It doesn’t matter, for property tax purposes, which corporate clients occupy it; the income is the income and that’s what the tax is based on. LM’s newly built leasable space will be competing with the many office buildings already available, lowering rents.
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p>Are you saying the community advocates should be blamed for preventing blight?
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p>Didn’t you read what I wrote? This tax break is not going to create jobs. Tax breaks don’t sway business decisions. Liberty will simply hire the workers it normally hires — fewer, actually. Building an office tower does not create jobs; people are hired when a company has increased demand for its services. That’s why all those other towers are standing empty, their incomes, and thus their tax obligations, way down and much of the tax burden of their boom-time taxable value shifted to residents. This parcel doesn’t need a boost, and Liberty Mutual certainly doesn’t need a boost, of you look at their income. They don’t even need to take a loan to build a $340million tower, they can just write a check. The only jobs that will be created are construction jobs; and we should not be planning our city’s development as merely a way to keep builders busy. Anyway, there are plenty of things that we actually need, like moderately priced housing all over the city, good neighborhood schools, public transit, etc, that would employ construction workers and also make the city more attractive for workers so that employers would want to move here. If we had a real planning department, instead of being run by an urban-renewal authority, this might be happening.
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p>Yes, it’s different: it’s much worse. If LM moved its new employees into an existing building, that would be good; it would support the commercial rents, thus commercial tax payments. We don’t need development; we have a decade of office absorption just to catch up with our glut. We need jobs, but those jobs should be doing stuff we need, not adding to the problem (as Mel King said to the “job-creation” brigade at a bioterror lab meeting: you’d probably be willing to build concentration camps just to create construction jobs) And if we are short on tax revenues — why are we giving them away to corporations who don’t need them? Why build stuff that will harm our real estate market, to create new growth that will depress the tax value elsewhere?
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p>Fernald? You mean Ferguson Industries for the Blind? Yes, it is state taxes; the state is giving Liberty Mutual $22.5 million. By the way, the Globe found internal documents (which had been wrested out of Deval Patrick’s offices by the above-mentioned community advocates) showing that Greg Bialecki needed to cap the per-job subsidy to $30,000 (state standard), so the EACC inflated the number of jobs Liberty promised to “create” from the 600 in the application to 750, in order to give the company more money. The EACC decided to say that Liberty has created the extra 150 jobs since the negotiations began, which the Liberty spokesperson had the integrity to deny. More evidence that the whole “job creation” thing is just an excuse for pols and corps to exchange money and favors.
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p>I hope I clarified this. And yes, it is a giveaway, differing in the amount every year, totalling at least $38.5 million in state and city money (the state part wasn’t known until yesterday; I thought it would be 10% of the $340 million construction cost as the program allows; limiting it by the number of jobs “created” was a new approach). It’s a give-away because it isn’t necessary; it doesn’t accomplish anything.
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p>Well, how much would the government have to give away for you to find it catastrophic? It’s pretty catastrophic to the people whose services are being eliminated due to money shortages. And this is only one of many tax give-aways the state is doling out every year. Pretty soon, you’re talking about real money. Check out the state’s tax expenditures budget for 2009 online.
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p>And again, one more time: the point is that these subsidies are not really accomplishing anything. They are not “incentives.” They don’t influence business decisions. They either line the pockets of non-needy (to put it charitably) corpo
rations, or temporarily prop up businesses that are not viable or not planning to stay here anyway. If we spent those millions improving public services, we’d get a lot more benefit for businesses and for residents.
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p>Go read “The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation” by Greg LeRoy. There is a summary online but the whole book is incredible, and everyone who wants to talk about corporate subsidies should read it.
Grace wrote:
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p>As governor I will implement strategies proven to rebuild the economic engine of the purchasing power of regular people. Baker, Cahill and the present governor instead continue to focus their economic recovery plans on the large corporate players and taking funds from the rest of our economy to do it.
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p>I have supported and will continue to prioritize the small businesses that create the most new jobs and in an economic downtown retain jobs more. Governor Patrick, instead, is leading an effort to give Liberty Mutual $50 million in tax breaks to create 600 jobs over the next 20 years. This amounts to $83 thousand per job created and it is a revenue cut for our state budget at a time when all we hear is how there is no money for the most basic of jobs and services. The economic downturn is happening now and spending money when we are in trouble for the promise of a few jobs ten, fifteen, twenty years from now is ill-timed, ill-conceived economic policy.
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p>In the 1990s, a series of sector focused tax cuts were made to theoretically save jobs – they had no requirements for job creation or retention tied to the tax breaks. What happened? Those of us paying attention watched the so-called Raytheon-tax break save companies money while they still outsourced jobs beyond our state borders; the financial industry with the so-called Fidelity tax break did the same. Apparently unable to learn from our state’s history, Governor Patrick put a $58 million package together for Evergreen Solar which is now moving the best paying jobs out of Massachusetts – he apparently does not even learn from his own history.
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p>This is spending tax dollars on a company minting money at a time when many Massachusetts residents are trying to simply put food on the table and keep a roof over their heads – Liberty Mutual is making a reported 84 million per month and is already benefiting from previous tax breaks.
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p>The Governor is proposing as much money for Liberty Mutual alone as he has put aside for all the small businesses in the state even though that is where jobs are created and local businesses create a much greater multiplier effect in our communities.
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p>That same money used to save government services and thus jobs brings an estimated $1.60 or more multiplier effect for each government dollar spent. This is one of the highest multiplier effects per government dollar; it is an effect now; and it addresses the basic needs of residents across the state.
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p>$5 million spend on food stamp intake workers is very conservatively estimated to bring in $340 million in federal stimulus in the form of food stamps – providing $600 million or more in economic activity and $7-10 million in state revenue in one year! And would address our rapidly spreading hunger crisis which among other things is driving bad student test scores and underperforming schools which the governor claims is a priority!
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p>Let me make it clear that Liberty Mutual is a company I like; I have, in fact, enjoyed having them as my insurer for years. However, using tax dollars for bail-outs makes people justifiably angry because they clearly do not rebuild our economy and that must be the priority now!
It is so refreshing to hear this. I am so tired of the constant “trickle up” of middle class taxpayer dollars to the million/billion dollar profiteers. I was beginning to think that corporate welfare was the new way of the world, and that no-one dare speak against it or they would be called a socialist, anti-capitalist, free-market basher.
Honestly, can we please have Grace Ross be our next Governor of Massachusetts?