New Worcester Law On Developer Tax Breaks Likely: Councilors

WORCESTER, MA — A major shift in how Worcester oversees tax breaks given to major development projects may be on the horizon.

On Tuesday, the Worcester City Council signaled support for turning a city policy governing tax breaks into an ordinance, or law. The change would solidify rules around local hiring, jobsite safety — and fireproof the tax break rules against clawbacks in the future.

"An ordinance is not so easily dismantled," District 4 Councilor Sarai Rivera said after she moved to hold a hearing on a possible new tax break law. At-Large Councilor Khrystian King and District 2 Councilor Candy Mero-Carlson — who represents parts of downtown seeing major growth — both backed Rivera's move.

Worcester offers two main tax breaks to developers: tax increment financing (TIF) plans for commercial developments, and tax increment exemption (TIE) plans for residential developments. Both types function essentially the same: incentivizing development by offering property tax breaks over a set amount of time. The city loses tax revenue over the life of the plans, but in theory benefits over the long-term by getting valuable properties taxed fully when the plans expire.

For example, this week the developer behind a planned 364-unit residential building along Franklin Street asked for a TIE plan. The developer would save about $11 million in tax payments over 15 years, but would turn a blighted property into a new development.

The city's TIF/TIE policy has also been criticized for not being tough enough on developers that flout its provisions. The developer behind SOMA, a Polar Park-adjacent residential building, failed for months to meet hiring goals under its proposed TIE plan, leading to a confrontation with the city. The insurer Unum also nearly lost its TIF after vacating its downtown office during the pandemic, violating its TIF agreement.

Last June, the council's Economic Development Committee asked city economic development officials to strengthen penalties in the city's TIF and TIE policies as part of an ongoing revision. Chief Development Officer Peter Dunn presented that update to councilors on Tuesday; the new TIF/TIE policy now includes a $5,000 fine for developers found in breach of some provisions, and strengthens language around safety training and hiring minority and women-owned businesses, among other new items.

The TIF/TIE policy was first adopted in 2016 and last updated in 2019.

"Our current TIF/TIE policy doesn't have the teeth," Worcester NAACP president and North Atlantic States Regional Council of Carpenters leader Fred Taylor told councilors Tuesday. "This is why we're interested in working with the city council and city manager to strengthen their enforcement. We also support changing the policy to an ordinance."

Rivera's motion to convert the TIF/TIE policy from a policy to an ordinance was sent to the council Economic Development Committee chaired by District 1 Councilor Sean Rose for a public hearing at a future date.

Here's a look at the new TIF/TIE policy unveiled this week: