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On the plus side, the tax break is still less than the CEO's yearly compensation
By adamg on Tue, 06/12/2012 - 7:23am
The Globe reports the BRA wants to give State Street an $11.5-million tax break to move into the Innovation District (so there must be innovative new ways to service the financial needs of the bank's rich clients, no?). It would be spread out over several years, the city would make a boatload of taxes on the building and, besides, the CEO made $16 million in salary and other compensation last year.
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Comments
Lame
All this does is give the blue shirts a shorter walk to the beer garden and whiskey priest. Getting "creative" with the quarterly reports doesn't qualify as innovation.
shorter WALK?
Thats' not enough money then. Throw in some more money for Limos from Boston Coach!
Great idea.....
And why don't we give them multi-million loan guarantees too? I mean, just look at how well that worked out for Curt Schilling... I mean, Rhode Island!
And while we're in such a generous mood, how about closing down a high school and using the money that we save for rewarding Libety Mutual execs with a one-time only bonus....
Stand and be recognized
This has to go through 2-3 layers of approvals
The BRA (scheduled for July)
The city council (they'll probably do it under the cover of summer in August)
The state (maybe, if they are offering some matching funds which is usually the case - the EDIC has to approve those funds)
I am going to be speaking with the heads of neighborhood associations citywide and asking them to COLLECTIVELY oppose this tax break. We are all hearing about how the city has so much unfunded retirement liability and every neighborhood has suffered from budget cuts and now they want to give away another $11 million!?
The BRA as a tool of the mayor will just pass this - but if your local neighborhood groups write in opposition to the city council the time may be right for them to finally put a stop to these ridiculous behavior. This amounts to a discount of about $1.50 per sf in rent. Why should we the taxpayers be on the hook for this - let the landord (Commonwealth Ventures) eat it.
Ya know..
I do a lot of volunteer activities to make my little piece of Boston a better place to live. I know many people who do the same (although it seems to be the same people who do everything). However, the vast majority of people just go about their daily business with no knowledge of how our deeds improve their lives.
I propose that anyone who devotes 10 hours or more per month to clean-ups, beautification projects, youth mentoring and other volunteer activities be property taxed at a lower rate than everyone else!
so, you'd like to be paid for
so, you'd like to be paid for your volunteer work.
not really..
I enjoy what I do. I was attempting an analogy at a different scale.
But many of the suburbs do offer seniors property tax reductions if they do town based volunteer work.
And Deval has his employee SERV program, which pays state employees to volunteer.
Taxes
The City isn't giving away any money this is a tax break. Instead of paying for instance 31 million over 5 years they pay 20 million over 5 years the alternative is they leave for RI and or NH and the city gets ZERO 0000000000000 so why is it a problem we don't get the 11.5M now and we could get nothing!!!
Probably because State St.
Probably because State St. wouldn't actually leave for RI or NH.
Why not?
Fidelity is closing up most of their Marlborough offices for Manchester for the simple fact that they wanted newer facilities around the same rate.
StateStreet has a global reach, and a big, big, big footprint in Kansas City. There's not much the state can do to keep them here if they decide to chase the lowest dollar, and cheapest worker.
The only thing we can do to keep them here is to keep a large, educated, highly productive workforce that they need.
We've not really fostered that the past 10-15 years though. There's been a lot of young educated professional flight.
Fifteen years.
11.5mil over 15 years works out to be a 760k tax break per year. I don't know how much State Street pays in taxes a year, but I would guess that it's a lot more than that's going to make a dent in.
4 teachers, 2 rookie cops and a librarian, give or take.
If it's a drop in the bucket for State Street, as you say, then why not just skip the tax break? As it is, the optics of this are terrible. There's an nauseating odor of corruption and favoritism to these tax deals, and I think we should stop allowing them.
What he said!
What he said!
A reduced tax liability means
A reduced tax liability means that money is available for other things... like capital investment. Note: I am not expressing an opinion either way. Just saying that it's not a drop in the bucket to them.
Cripes
Say that to the 2 trillion
in cash major corporations are currently sitting on rather then investing or spending.
The problem is these breaks are not used for expansion. They're used to inflate a quarterly dividend and pay out a CEO. Thats not investment, it's robbery through questionable legal means.
Suddenly you're not talking
Suddenly you're not talking about State Street, but painting all corporations with the same brush.
Cripes
Corps have no choice
They do what other corps do, less they fall behind and go out of business or get bought out. It's game theory in action.
It's why we have business cycles and recessions are self sustaining. And it effects people's choices all the same.
If you can't predict the future, and you can't predict your industry and competition, you tend to follow each others lead.
But to bring the discussion back around, we KNOW where these tax breaks go. They're not going to help StateStreet to create jobs and they won't change it's decisions one iota. They're going to go to a money fund, to shareholders, or to the CEO and BOD.
If we're worried about jobs, make it a conditional loan with heavy penalties for not meeting new job levels.
Otherwise that's not taxpayer money well spend. It be better spend, getting more bang for the buck, and spreading out risk more by giving small businesses tax breaks to main street shops in DTX, Chinatown, The north End, ect.
If mikes decided afterward it wants to move to providence RI cause his buddy mayor hands over a trillion dollars, well no skin off our back since he got a very small business break here. If Menino wants to attract businesses to his legacy district, fine, but he better spread out the risk associated with doing so. Luring companies from the financial district with tax incentives is not good for anyone, but Menino saving face on a project thats been lagging.
After all, if StateStreet decides to move their operations to dirt cheap Kansas City, it's going to be on Boston taxpayers backs now.
Tax Break
Dan:
If your a tax payer in the City of Boston and a home owner you get a tax break it's called a RESIDENTIAL EXEMPTION. This is to keep Millions in taxes here in Boston. If they don't get tax breaks then they leave for RI or NH and the City loses taxes. Where is the corruption??? Everyone gets tax breaks. Homw owners, elderly, etc.
Categorical vs. Company-specific
These deals are like the Mayor and City Council approving a specially tailored tax break for Mr. Frank Johnson, your Menino-supporting neighbor who wants to put an addition on his house, as opposed to creating a statutory break, with clear criteria, for everybody who's planning on doing renovations.
As we speak I bet that State Street lobbyists and employees are making contributions to city councilor's campaigns in an effort to grease the wheels. Thus the stench.
Not only that, it's risky
There's nothing tying down these companies once they get their breaks. Many times they'll take them and use the money to move their operations in a year or two. That's the problem with large, firm specific gifts on the taxpayer back.
We've seen the economic loan shenanigans in RI.
If the government is going to be in the job of incentives and industry loans; it needs to do so blindly on a set of risk averse criteria and at levels where if one company fails or moves shop; it doesn't leave taxpayers in the line of fire.
Giving (relatively small) tax breaks and incentives to small and ultra small technology start-ups that require an initial independent and public audits and audit on a regular basis therefrom is smart. It minimizes risk and spreads out a investment basket.
Giving StateStreet or Liberty Mutual a huge tax break to do things they're already planning on doing is just handing over tax revenue to private coffers. You simply can not call it investment, or even incentive. It's a bribe.
State Street flack Sam Tyler weighs in, disguised as "watchdog"
The Globe should be ashamed of itself for refusing to disclose Tyler's conflict of interest. The chairman of the board of the "Boston Municipal Research Bureau", i.e., Sam Tyler's boss, is none other than State Street vice president Joseph McGrail Jr.
Tyler is thus hardly an objective observer, but the Globe quotes him anyway, without mentioning his connection to State Street. Such bullshit.
What's the tit-for-tat?
Ok, so we give them a break on some taxes. The city gets them to move. What's the motivation?
Well, for starters, we're giving them $12M and taking $40M in new taxes on the new real estate they are building. Of course, they were moving there anyways according to the city...so, what else does the city get? Well, that $12M might potentially speed up the construction in a down construction period rather than have it languish a few years with slow development...except that their leases all across town are running out so I doubt they'd lag on this.
It does free up the office spaces that they are leaving in Copley, the Pru, the Hancock...so older, cheaper, smaller locations can be used by other new companies looking for office space. But is that worth $12M over 15 years?
I don't know...it seems like more of a thank you note than a necessity to seal this deal. Unlike Vertex, we're not getting State St from another city...just slightly increasing their tax burden with new waterfront property.
And as for that dumbass quote from Samuel "I know who writes my paychecks" Tyler: If $11.5M for a city with a $2.4B budget is small potatoes, then why isn't it also small potatoes and not worth worrying about for a company that netted $1.95B in profits, dickhead?
NO
For the love of god no.
Statestreet already leases out most of it's own tower to other firms because they're cheap asses and figured they could make more money in renting their corp tower and move most of their operations to cheaper places.
They don't need a even bigger incentive, on the taxpayers back, to do what they already do every 2-3 years!
Actually, State Street leases
Actually, State Street leases only 30% of the tower to an outside firm, not quite most as you are claiming.
They go back and forth
Depending on the market.
Most of Lafayette was in the building, then moved above Macys. They had a big office on Federal street for a while, moved them back, and if I remember correctly heard they were moved back out again.
When rents in the area fall they bring other offices back in. When they rise they quickly sign leases and move them out, and then rent their own building for larger revenues.
I'm not knocking them, but taxpayer money shouldn't be subsidizing a practice they've been doing for years as is.
The innovation doesn't need huge financial companies in it, and have no qualms about moving around. It needs the next twitters, facebooks, google, planetary resources, ect.
This is What You Get When
The electorate supports a business tax and labor environment that is hostile to business in an absolute sense and relative to its neighbors (e.g., NH) and the other 49 states.
If the electorate put people in government with a mandate to reform corporate taxation and labor rules so as to make them competitive with neighbors and the other 49, then we would not need to cut sweet heart deals to "important" businesses in the City of Boston and the Commonwealth. If we are comfortable with the current tax and regulatory scheme, don't whine, cry or be surprised as large companies will continue to do this simply because they can (and as a result, should).
The biggest loser here are small businesses that do not hold enough sway individually to receive a tax abatement from Boston or the Commonwealth. They pay full freight because of lack of bargaining power.
Illinois is going through the same song and dance with Caterpillar and Sears, among other companies.
Lefties and other UHub grouches: you get what you vote for. Don't expect anything to change if you can't grasp that.
Uh huh...
And so if our neighbor is whack-a-doodle crazy and zeroes out his business tax rate, we've gotta get down in the mud with him and wallow in hardship? Hardly.
State St isn't leaving the state any time soon. Your particular brand of insanity has had a good 40 year run. It's time to try a different approach to society, thanks.
kaz - You might try
Reading the newspapers, particularly about California and Illinois.
I don't have a dog in this fight, just stating the obvious that businesses (including home grown ones) tend to choose to locate and grow where conditions are the most favorable to them. It's why most companies incorporate in Delaware, for example.
State Street has substantial operations in KC and India. Fidelity has substantial operations in Merrimack, NH. While it's true that neither Liberty Mutual nor State Street ever had public plans to abandon Massachusetts, the threat of them leaving Boston proper is real. Suburban office space on 495 is far cheaper than the Financial District or even the Seaport.
The Governor and the Mayor do what they can to keep companies here and, given the tax and regulatory environment relative to our neighbors and the country as a whole, tax breaks have obviously become part of the equation. There are others factors that attract businesses, like the relatively high level of education in Metro Boston.
I don't see how this is a "brand of insanity" or how any of it reflects 1970-2010. But then again I'm posting on a "news blog" populated by left of center know-it-alls, just like you Kaz. I'm betting the words "tax", "labor" and "regulation" impaired your ability to read the rest of the original post, including how unfair this scheme is to small businesses.
Kaz, I'm sure you can post like a grown up if you try.
Looking at current MA employment, growth and GSP rates
...compared to the "other 49" would indicate that, whatever the Commonwealth's failings with regards to equitable business regulation and tax schemes (ie plenty), your
argumentrant that this compels the government to cut deals with large and overstuffed corporations would seem to lack merit.Btw, for someone without a "dog in this fight" you seemed more than ready to piss all over the rest of us as a group, while having your little slap-fight with Kaz. Not exactly a "grown-up" move.
MA isn't CA or IL
Plus, just to prove a point NH taxes companies in the state based on revenue, not profit like we do in MA. That's a much harder rate on businesses, especially small and local.
Overall, the tax climate is pretty even in the NE region economy, which is part why it works so well. We're all around the same rates, we just get our tax money through different models. NH it's fees, property taxes, and business taxes; in MA is sales tax, income tax, and a substantially lower property tax.
Fidelity, as far as I know, moved because it couldn't find suitable newer office space at the right price in MA, and didn't want to move to Boston rents. Marlboro and Worcester will be eating it for that, but outside of a developer offering what they needed there's not much the state could have done there.
That all the suitable locations in central MA were filled says something as well.
Then we got news that MA unemployment rate has dropped yet again, and construction is picking up. Finance has started hiring again, and biotech, medical, and higher education was relatively insulated from the recession.
MA is sitting pretty right now. Nope, it's no CA, IL or FL.
Didn't we just post a surplus too?
Please
While some of what you say is true on the bigger issues (cost of human capital for example) - this is a political favor to the developer (imagine that in Boston). Their tax break amounts to $1.50 per sf. Why in God's name are the taxpayers eating this subsidy when the tenant would have the same net effect if the landlord just dropped the rent - I'm guessing about 3-4%? This is purely the old boys looking out for one another on the taxpayer's dime after a few drinks in the back room.
IBM's leaving for India
So, the state should bribe them to stay? What happens when they take the money and leave anyways?
So, now Americans are expected to immigrate to India and China to get work?
At some point this hedging needs to stop. Walmart economics and cost cutting is actually detrimental to a health economy. You're sapping wealth and capital creation for large payouts to very few people, which undercuts the system as a whole.
Unfortunately that's the regulatory job of government. But lately government and business are one of the same. So we eat our own future.
And I'm the one without a clue?
What you describe with the "keeping up with the Dow Joneses" approach to making local-yet-national companies happy every time they hamstring the government with threats of picking up and leaving while other governments try to entice them away with sweeter tax deals so the local government just has to play ball and the whole vicious cycle continues...it's like watching a guy play two car dealerships by constantly telling the other one he's found a better deal until one of them has to give him the car for free. That dealership would go out of business the same way the government will end up bankrupt if it keeps eroding its tax base just to accommodate companies that may or may not leave anyways.
Yet, this is exactly what governments across the country have done for the past 40 years chasing corporate tax dollars at pennies per dollar of what they're worth. Except the only way that deal works out for the government is if the company then relegates itself to stay once the sweetheart deal is over. But they just proved they can pick up and move to warmer waters whenever they want by coming to you in the first place...so the first thing they do when the deal runs out is strike a new deal with you or someone else! You never get back above water that way and the corporation keeps making out.
Remember "Hollywood East"? Yeah...look at all the new studios and jobs that generated...I bet the tax revenue is just rolling in from our new and burgeoning entertainment industry...
Any parent can tell you that if you give the kid candy to get him to do something all you do is create a monster that requires candy to do anything.
Any parent can tell you that
Exactly.
Reward comes after good work, not before. It's not the way government incentives work now.
Right now businesses have it set up to get a BJ, and take off without spending the night.