Massachusetts needs to rework its tax incentive programs to create jobs, stimulate commercial development, and build market-rate housing in the state’s most economically distressed cities. That was the message from the city officials and economic development policy advocates who testified Wednesday before the Joint Committee on Revenue to back a revitalization plan designed to transform the 11 Gateway cities into vital and energetic regional hubs.
“This package is the equivalent of an economic Marshall Plan for our cities,” New Bedford Mayor Scott Lang told the committee.
The current recession has made bad situations in the Gateway Cities, like unemployment and blighted neighborhoods, worse. Without targeted new incentives for investment to reverse those trends once and for all, some believe the cities could go the way of Springfield, into receivership. Fall River Mayor Robert Correia stressed that lawmakers should choose “a recovery plan over a bailout plan” like Springfield’s. “The more independent we are, the less dependent we can be on state resources,” he said.
Almost $500 million in tax incentives are given out on an annual basis,and very few of those are targeted to Gateway cities, according to former Fall River mayor Edward Lambert, director of the Urban Initiative at the University of Massachusetts at Dartmouth. Less than 5 percent of state incentive spending goes to credits aimed at urban areas.
Moreover, Lambert suggested that there are inefficiencies in the current tax incentive program, since 138 cities and towns are all able to offer the same economic development tools. One of those tools, the economic opportunity area tax credit, was designed to benefit older cities, but wealthier suburbs and economically stable areas are also taking advantage of the credit.
“We think it’s time for the Commonwealth to decide how to better target those resources,” said Lambert after the hearing. “The program can be tightened up to do that.”
Under the new proposal, another tool, the historic tax credit, would be expanded. There would be no limit on the credit in Gateway Cities and a $100 million cap in other communities. On the housing front, the program would identify specific neighborhoods for development and provide incentives to homeowners for repairs and improvements up to 25 percent of property value and $5,000.
Employers would also gain a tax credit of $2,500 per new full-time employee. Additionally, the bill would allow investors to combine the current investment tax credit and the economic opportunity area tax credit and allow developers and property owners to use the economic opportunity area tax credit for leased buildings on a certified Gateway City project (currently, only certified project companies can use the credit.)
“We need to use these tax credits that already exist on the books, most of them, in a smart way,” Rep. Antonio Cabral, a New Bedford Democrat and a principal sponsor of the bill, told CommonWealth.
Most of the Gateways Cities are rich in period architecture such as mills and Victorian homes. “Old buildings would be turned into absolute assets under the program,” said Matthew Morrissey, executive director of the New Bedford Economic Development Council, after a post-hearing news conference.
Uncapping the historic tax credit alone, would send $170 million and 250 new construction jobs to New Bedford, according to Morrissey. “New Bedford is losing jobs to Rhode Island all the time,” he said.
However, though Rep. Jay Kaufman, co-chairman of the Revenue Committee, said later that he was sympathetic to the proposal, he also stressed that any “tax credit means forgone revenue.”
“It’s absolutely true that a certain amount of the tax credit would be associated with revenue that we don’t now have,” the Lexington Democrat said. “That is, it’s prospective development that might be stimulated by this legislation and therefore, it’s not really taking away from revenue, but generating new revenue, some part of which would be offset by a tax credit.
“What we need to do,” he continued, “is sort out how much of the tax credit/revenue impact would be for new money and how much of it would actually cut back on the already short budget that we have.”
The Gateway Cities are Brockton, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Lowell, New Bedford, Pittsfield, Springfield, and Worcester.
MassINC Executive Vice President John Schneider and Research Associate Benjamin Forman testified in support of the bill.
MassINC and the Brookings Institution also produced a comprehensive report on economic conditions in the Gateway Cities, Reconnecting Massachusetts Gateway Cities: Lessons Learned and Agenda for Renewal in 2007 and a follow-up policy brief, Going for Growth: Promoting Business Investment in Massachusetts Gateway Cities in 2008.