Phillips & Angley

Local government tax incentives for redevelopment

Although Massachusetts land owners and developers often complain that local land use and zoning regulations can make new developments difficult, local governments do sometimes work with private industry to promote new ideas for land use, sometimes with great results. One tool local government uses is known as Tax Increment Financing.

The city of Worcester used a Tax Increment Financing program for a massive redevelopment project that involved relocating and expanding an entire hospital. Partnering with the historic St. Vincent's Hospital, the city guided the development of the new Worcester Medical Center in its downtown. The Tax Increment Financing program worked by giving the Worcester Medical Center tax exemptions for 18 years in exchange for promises from the hospital, including a $250 million investment in new facilities.

The city claims the project created hundreds of jobs, revitalized its downtown and expanded its tax base.

In an area that is more rural than Worcester, the city of Leominster used a Tax Increment Financing agreement to promote the expansion of Star Container Corporation's packaging facility. Star Container invested more than $6 million in the expansion and agreed to create 25 new full-time jobs at the site, as well as keeping 150 existing jobs at the facility. In exchange, the city gave Star Container tax exemptions on a scale that gradually decreased over eight years. The city claims the deal will lead to greater tax revenue for the city over time, as the increase in jobs will lead to more economic activity in the area.

While land use and zoning issues can be difficult for land owners and developers, they aren't impossible. A real estate attorney can help clients review all their options, develop a strategy and argue for their ideas at public hearings and in court.

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