The City Council has been presented with a second Tax Increment Finance (TIF) proposal by Mayor Gray. (The first, you will recall, was for the new hotel going up on Elm St., by Stop and Shop, approved last summer. You can read my blog post about that proposal HERE.)
TIFs are a tool authorized under Mass. General Law that enables municipalities to offer businesses and property owners exemption in part (or full, for that matter) from municipal property taxes, for a defined period of time. NOTE: the exemption is applied to the increased value on the improved property, not on the base value, which the City will collect either way. You can learn more about TIFs HERE.
The basic idea is that Amesbury can offer exemption from property taxes to a business or property owner in exchange for some perceived economic benefit to the City.
In 2014, the City Council approved TIF guidelines for the City of Amesbury that defined where in town and under what circumstances the City would consider offering a TIF incentive to a business or property owner.
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| Steven Kille, CEO of DesignWerkes, Inc., 8/4/15 Site Visit |
It has been a very fast moving request and process. On July 24, the Council President announced a Special City Council meeting for July 28, to be held immediately before the regularly scheduled Finance Committee meeting. We met and referred the measure to the Finance Committee meeting that took place minutes later. Economic and Community Development Director Bill Scott gave us a presentation on the request; Mr. Kille also spoke to us. Both answered our questions about the proposal. We are scheduled to take a final vote on the TIF agreement this Thursday, August 6. (Tight timing is in an effort to get in the State's pipeline for their consideration and approval of the TIF, which is part of the process.)
You can read Mayor Gray and Mr. Scott's cover letters, along with the details of the TIF application HERE.
My initial reaction to this project was the same that I think should be brought to any TIF request (this is the City's second): "Why should this business/property owner get a break on their property taxes when other businesses/owners don't and won't get a break?" One of the guiding principles of Amesbury's TIF standards is: But for this support from the City, this project would never happen.
In this case, Mr. Kille is looking to move from Boston North to a vacant industrial building at 2 Industrial Way (off Monroe St. and on the same campus of Amesbury's very active medical marijuana grow site). He is hoping to expand significantly, tripling his potential production space and adding new production lines and large machines. His company focuses on manufacturing key components in the conversion drives within hybrid municipal buses. The demand for his product outstrips his current capacity and he's looking to expand rapidly.
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| Machined product in production, from 8/4/15 site visit |
All noble and good but again, why this property and why this business?
In this case, for me, the compelling argument FOR granting this TIF property tax exemption is not as much about the business story (which is an excellent story, by the way; Mr. Kille is very passionate about his business). Rather, it is about the site at 2 Industrial Way.
If you drive by 2 Industrial Way, you'll see that it has become something of an eyesore and a dump and this right at the entry way to one of Amesbury's few industrial parks. The building is literally falling apart. It has laid fallow for a good number of years (I can't speak to why or why not the current owners have not been able to lease it or why they haven't kept up with this investment).
Mr. Kille is basically proposing to invest substantially in this property to not only get it to code (again, it's literally falling apart) but to upgrade all of its energy-related systems to current state of art technology for energy efficiency.
What's the projected value of the tax exemption in this TIF? $191,368, spread out over 15 years. (75% of property tax is exempt in first 5 years, 35% in the second 5 years, and 10% in the final 5 years.) Actual value could go up or down, depending on future valuation of the property and future property tax rates.
What's in it for the City? Retaining and creating good paying and benefited jobs. As part of the TIF deal, the business must expand to 40 employees within 5 years. Also, a low-performing industrial property that has failed to attract use and investment in recent years receives significant capital investment and increases in overall value.
What about the property that DesignWerkes is leaving? Is this just robbing Peter to pay Paul? Boston North enjoys a decent occupancy rate and DesignWerkes is one of dozens of companies that do business at the Park. Their leaving should not negatively affect the value of that property (DesignWerkes leases space at Boston North).
What if DesignWerkes fails to perform or moves? The TIF agreement, like the one with the hotel, will have claw-back provisions that protect the City if the TIF's designee fails to perform in some manner.
So, the City gains at least 15 new jobs in the community and, most importantly, sees an under-utilized property revitalized and expanded. In my own assessment, the City gains more than it gives up in this deal and it is a good example of the ways in which a local government can support businesses that might otherwise leave or never choose to locate in Amesbury.
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