Town Manager explanation of special Summer 2012 town meeting

Written by Webmaster
Wednesday, 01 August 2012 21:49

[Press release submitted by Town Manager Jim Malloy -- webmaster]

The Board of Selectmen has scheduled a Special Town Meeting for consideration of granting two Tax Increment Financing Agreements (TIF) to two companies. These are the only two items that will appear on the Town Meeting warrant. The Town wants to make sure that accurate information is being provided regarding the reason for setting a Special Town Meeting and what the agreements entail.

The reason the Town Meeting is scheduled on Aug. 7, 2012 (at 7 p.m. at the High School) is that it provides the time necessary to get on the agenda for the Economic Assistance Coordinating Council (EACC) agenda for September. The EACC reviews each TIF and approves of the TIF and the State’s Investment Tax Credit at their meetings. If the Town waited until the October Fall Town Meeting, the next EACC meeting would either be at the end of December or early January which would put any incentive off for six months. In order to compete with other states and other communities in MA, especially cities that can grant TIF approvals every other week when their city council meets, the Town scheduled the Special Town Meeting at the earliest date possible.

The most important part of these types of TIF agreements is for taxpayers to understand that the “tax break” that is being offered is only on the increased or incremental value from the company’s investment in their property and that the Town will collect more tax revenues after the TIF than before. For example, if a company buys a building that has a current base value of $5,000,000 and expands the business and after the expansion the property is valued at $7,500,000 the TIF is applied to the difference (or $2,500,000). There is never any break on the base value, so the Town always collects at least the amount it was collecting before the TIF.

In this case, both TIFs are very similar and offer a 15 year incentive on any increase in property value that reduces the taxes on that increased property value by the following percentages:

Year 1 50% (on the incremental increase in value)

Year 2 40%

Year 3 30%

Year 4 20%

Year 5 10%

Years 6 – 15 continue the 10% incentive.

Of the two companies that the Town has offered a TIF, the following is a breakdown of the benefits to the company, expected job growth and benefits to the Town:

The first company is Danafilms, which is presently located at 5 Otis St. and manufactures plastic and plastic sheeting. They are looking to expand their line and add an agricultural plastic sheeting product used in baling hay. The parent company owns the business here in Westborough and another plant in Kentucky and is trying to make a decision on where to locate this new line. The company is planning on adding 20 jobs to the existing 62 jobs here in Westborough. The estimated tax benefit to the company under the TIF is between $13,500 and $34,500 over the 15 year life of the TIF (we use a range because it’s difficult to determine how much of their investment will be reflected in increased assessed value for tax purposes). The additional taxes the Town is estimated to collect should the company expand in Westborough is between $77,226 and $193,066. The State Investment Tax Credit is estimated to be approximately $300,000.

The second company is MicroChem, which is presently located in Newton, MA and manufactures specialty chemicals for the electronics industry. They have outgrown their current location and do not have the ability to expand. They are looking to relocate in Massachusetts and are looking at purchasing the property at 200 Flanders Road in an industrial area. The company currently employs 47 people in Newton and would add another 23 jobs if they relocate to Westborough for a total of 70 new jobs in Westborough. The estimated tax benefit to the company under the TIF is between $232,000 and $264,000 over the 15 year life of the TIF. The additional taxes the Town is estimated to collect if the company relocates to Westborough is between $1,329,103 and $1,510,000. The State Investment Tax Credit is estimated to be approximately $500,000.

Description

Dana Films Microchem Total

Estimated additional
taxes for town 

135,258 1,419,724 1,554,982

Estimated tax break
on increased value 

23,921 247.636 271,556

Estimated state
investment tax credit
 

300,000 460,000 760,000

Estimated total
investment 

  5,000,000   13,000,000   18,000,000

# of jobs retained

62
n/a (new 
company) 
62

# new jobs

20 70 90


In summary, the two companies would create 90 new jobs and retain 62 existing jobs, generate over $1.5 million in estimated new taxes over the next 15 years in exchange for providing an incentive valued at approximately $272,000 during the same 15 year period and a state investment tax credit (does not involve the Town) of $760,000. If at any time, either company did not meet their employment goals, at the Town’s discretion, the tax incentive could be terminated.


Last Updated on Thursday, 02 August 2012 22:10