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HomeMy WebLinkAbout2007-10-10 Patriot Partners Q&A on TIFThe Lexington -Shire TIF Frequently Asked Questions Q: What is Tax Increment Financing (TIF)? A: Tax Increment Financing (TIF) is an economic development tool regulated by state law enabling cities towns and the state to compete nationally for corporate investment and jobs by abating part of the increased tax revenues associated with a company's re- location. Q: Why is a TIF important for the town and Shire? A: Shire is a well - established, credit worthy international company that would be a stable tenant at Lexington Technology Park for many years into the future. Lexington's local TIF agreement is necessary for Shire to access state incentives as well. Combined, these state and local incentives will make Lexington an attractive location for Shire to expand its operations and to locate manufacturing facilities. Q: Why would a large, financially strong company like Shire need a tax abatement in order to locate in Lexington? A: While the tax abatement that has been negotiated under the TIF agreement is relatively small compared to overall project costs, the TIF is a key element to Shire's committing to the current Massachusetts expansion proposal. The TIF is essential to access state incentives. Shire has to operate in the best interests of its shareholders, and when other states and localities are offering substantially better deals, there has to be some offset to justify locating in Lexington. Q: Could the town achieve the same result with a minimal TIF? A: Lowering the level of the local TIF could jeopardize its approval at the state level, which discourages minimum local contributions especially in cases of significant employment retention and growth and capital investment like that in the Shire proposal. Any reduction would likely reduce Shire's level of investment here and increase the risk that Shire would move its manufacturing and technical operations component elsewhere. Shire has explored other locations that have attractive incentives that do not require similar, local approval but are instead available through established state plans. Q: How will the TIF benefit the Town of Lexington? A: The TIF will help to generate $67.7 million in tax revenue from Lexington Technology Park over the next 20 years. This revenue is $20 million more than the town anticipated when Town Meeting approved rezoning the park in 2004. Q: What other benefits will this development bring? A: Shire's development plans will generate $890,000 in permitting fees paid to the town, and the state and /or Shire will provide $2.6 million to the town for infrastructure improvements. Shire will also contribute $400,000 to the town over 10 years for community support and developer Patriot Partners will contribute $100,000. The development will create more than 600 new jobs, averaging in the $100,000 salary range. (Over) The Lexington -Shire TIF Frequently Asked Questions (cont.) Q: What are the proposed terms of the Lexington TIF? A: The maximum tax abatement allowable for a TIF is 100% of the incremental taxes, up to 20 years. The TIF negotiated between Shire and the Town of Lexington has a 20 -year term, and the percentage vanes from year to year, with an estimated net total of 13 %. It is expected that the TIF will provide a net benefit to Shire of $5 million over 20 years. Q: Why are the percentages higher in the early years of the TIF? A: Shire will be making a tremendous capital investment in the property in the first few years. The TIF provides an offset to the overall cash and capital costs, much of which is spent in the first few years. Shire's Lexington Technology Park facility will not produce revenue for approximately five years because of long construction timelines and lengthy governmental approval processes before start -up Q: How do we know Shire will not abandon the facility and fail to perform on its obligations under the TIF? A: Shire's commitment is reflected in the magnitude of Shire's investment and the long lead times to bring a facility like this on line. While it is most unlikely that Shire would decide to vacate, if this remote event were to take place the town could terminate the TIE. Q: What happens if Shire is bought by another company? A: If Shire is acquired by another company it would have to continue to meet the TIF requirements to receive the benefits. Q: What happens if the TIF is not approved? A: If Special Town Meeting on October 10 votes to reject the TIF agreement negotiated by the Board of Selectmen and Shire, the town may miss the opportunity to substantially improve its economic development and expand its commercial tax base. In addition, Lexington Technology Park would not realize the growth and benefit that this new tenant would bring. Q: Why not wait for another company that won't want a tax break? A: Over the past four years Lexington Technology Park has leased only 114,781 square feet out of the 293,000 square feet available. And, of the amount leased, 33,647 square feet are back on the market. There are no guarantees that a replacement for Shire could be found in the near future. Also, TIF's are not a secret and any qualifying prospective occupant could be expected to pursue one of their own. Q: What is Lexington Technology Park? A: Lexington Technology Park is a 96.5 -acre campus at the northeast corner of the intersection of Route 2 and Route 128. The park is comprised of three buildings of 293,000 square feet with expansion of up to 631,600 square feet. The site was the former corporate headquarters for Raytheon and was redeveloped by Patriot Partners. Flexible zoning is in place to accommodated office and laboratory uses. For more information, visit www .lexingtontechnologypark.com. Q: Who is Shire? A: Shire is a rapidly growing global specialty biopharmaceutical company with offices in the United States, Canada, United Kingdom, Republic of Ireland, France, Germany, Italy and Spain. Shire is looking to establish Lexington as the global center for its Human Genetics Therapies business which is focused on helping people around the world with rare genetic diseases. New medicines to help people will require expansion of operations and are central to Shire's overall success. A unified and centralized operation of office /lab space with manufacturing space offers a more efficient and effective approach and allows for structured growth strategy. For more information about Shire, visit www.shire.com.