Fairhaven loses both taxes and jobs to ATT

INTRO TEXT

an at&t call center in Fairhaven will soon close its doors after a contentious nine-year relationship with the town, leaving many people feeling like they’ve been hung up on. Workers at the facility and municipal leaders have been crying foul over the company’s failure to live up to the job-creating promises of a tax-incentive agreement between AT&T and the town, while the struggling telecom giant says the planned shutdown is the result of declining call volume and a restructuring of their call center operations. Caught between the two sides are officials in different state agencies, who have been in a row of their own over whether the state has been vigilant enough in making sure companies receiving tax breaks live up to their end of the bargain.

It all began in April 1997, when AT&T approached Fairhaven with an offer to turn a vacant building the company owned there into a service center for online account representatives, pledging to hire 1,200 employees. “AT&T promised us a bed of roses,” says Linda Teoli, president of the Communication Workers of America Local 1051, the union that represents AT&T employees.

In exchange, the company sought a Tax Increment Financing plan, or TIF. TIFs were created under the Economic Development Incentive Program (EDIP) the state launched in 1993 as a way to encourage business development in economically depressed areas. Under a TIF, the company makes improvements to an existing facility in exchange for a property-tax break on the value of the improvements for a period of five to 20 years.

With an unemployment rate at the time of 6.4 percent in surrounding Bristol County, compared with the state average of 4.1 percent, the town of 16,000 jumped at the deal. Fairhaven’s board of selectmen voted unanimously for a five-year TIF granting AT&T a 40 percent reduction on the property tax due for the value added to the building. The plan took effect January 1, 1998, with AT&T spending about $5 million to update the $20 million facility.

At its peak, between 1998 and 1999, the call center employed about 1,100 people, according to Teoli. But in 2000, she says, AT&T stopped hiring new employees and began to lose nearly 20 people a month through attrition. Furthermore, AT&T failed to file annual reports required under the state tax-credit program detailing, among other things, a head count of call center employees. When Fairhaven pressed for such figures, town officials found the company’s method of counting questionable, with non-AT&T employees such as painters and cleaners included in the workforce count, according to Jeffery Osuch, executive secretary to the board of selectmen. And union leaders began to have misgivings about the TIF agreement.

But by then the town had little recourse. Under Massachusetts law, a municipality may revoke its designation of a TIF zone at any time, and in February 2002 Fairhaven’s board of selectmen voted unanimously to do just that. However, AT&T had already been sent its fifth and final discounted tax bill, so it was too late for the town to cut off any of the tax benefits. All told, the town gave up $127,949 in property tax revenue over the five-year agreement with AT&T, according to Fairhaven’s tax assessor.

Since then, AT&T’s employment numbers in Fairhaven have continued to decline. A round of layoffs in November 2004 left the call center with just 185 employees, all of whom were served notice in February of this year that the center would be closed on April 21. In early April, the company notified workers that it would postpone the shutdown for two months, and the state came through with $100,000 in worker retraining funding.

The town gave up $127,949 in taxes, and AT&T cut 1,100 jobs.

Though the workers and town officials feel burned by the tax deal, such agreements are usually beneficial all around, says Renee Fry, director of the state’s Department of Business and Technology. “The [EDIP program] has been an unqualified success,” she says. Since 1993, EDIP has created more than 60,000 jobs, retained nearly 100,000 jobs, and leveraged over $10 billion in private investment, according to Joe Donovan, spokesman for the Executive Office of Economic Development.

Yet EDIP is not without its critics. In January 2004, Inspector General Gregory Sullivan wrote to Alan LeBovidge, commissioner of the Department of Revenue, citing a chronic lack of oversight of the EDIP program, in which companies can also receive a 5 percent credit against state taxes for capital investments. “The EDIP…is an example of a tax credit program in need of reform,” wrote Sullivan.

At the time of Sullivan’s review, Massachusetts law did not give DOR authority to act when businesses failed to deliver on promises made under the program. That changed in 2004, when the Legislature gave DOR the power to decertify a company from EDIP if it was providing no economic benefits to their host communities.

Whether this additional authority will prove effective remains to be seen. The inspector general wrote another letter to LeBovidge in February, citing 55 businesses that failed to hire the agreed-upon number of employees in 2004, yet still received tax breaks. “In effect,” wrote Sullivan, “the businesses received 100 percent of the available tax credits, or $7,958 for each new job, while only meeting 34 percent of their job creation goals.”

LeBovidge responded by letter, stating that of those 55 businesses, 42 had not filed state tax returns claiming the credit since the DOR was granted the new oversight authority in August 2004. He said DOR was reviewing the other 13 businesses, and he assured Sullivan that his office would revoke the TIF certification for any that were deemed to be “not in compliance” with the job commitment standards set forth in the new 2004 enforcement statute. LeBovidge added, however, that the standard does not require that a company reach 100 percent of the job projection contained in its original proposal.

Despite the inspector general’s criticisms, Sullivan’s office favors the program as a whole. “We don’t think it’s a bad idea to incent businesses to do business in Massachusetts,” says Jack McCarthy, senior assistant inspector general. “It’s the lack of oversight that hurts the program.”

Unfortunately for Fairhaven, no such oversight was in place when AT&T failed to meet employment projections, and the fate of displaced Fairhaven AT&T employees today remains unknown. Under the three-year contract that went into effect in December 2005, AT&T’s only obligation was to offer employment at another call center. The location AT&T ponied up: El Paso, Texas.

“This is ludicrous, because they have centers right in Connecticut,” says Teoli. “Instead of letting [displaced employees] move and relocate to Connecticut, they choose Texas, 2,000 miles away, because they knew people wouldn’t go, in my opinion.”

AT&T has little to say about the ordeal. Walt Sharp, a spokesman for the company, says simply that AT&T decided to close the Fairhaven operation “because of declining call volume coming into that center.” As for why Fairhaven workers were only offered transfers to Texas, Sharp says call center consolidations are based on a variety of factors, including physical plant and workforce availability.

Meet the Author
Despite Fairhaven’s bad experience with AT&T over the past nine years, town officials are reluctant to bite the tax-credit hand that also feeds them: It was a TIF agreement that encouraged Titleist, one of the world’s largest golf ball makers, to relocate its corporate headquarters and worldwide distribution center to Fairhaven.

“I can’t say they are a bad idea,” says Osuch, the board of selectmen’s executive secretary. “Unfortunately it didn’t work out with AT&T.”