There's more to business growth than tax breaks
When business growth clashes with municipal policy, the issues of property taxes and tax breaks tend to dominate the focus, especially when those issues are reported in the media. Tax-related data are easy to gather and, since issues in the public interest — as opposed to business interests — can dominate the printed page, airwaves and the web, they're easy fodder for debate.
But when it comes to driving economic growth, how much do municipal taxes really matter?
Some, but not as much as one might think, according to Barry Bluestone of the Dukakis Center for Urban and Regional Policy at Northeastern University in Boston. At the top of his list is how well a community or region promotes itself and how quickly it can approve and expedite permits so construction or renovation can start as quickly as possible.
In his recent keynote address to 200-plus attendees at the WBJ/Worcester Regional Chamber of Commerce 2014 Economic Forecast forum, Bluestone's data, culled from a survey of businesses, indicated that how a community supports and fosters the growth of its commercial base is more important than how much of a financial break it can offer on the tax bill.
"Anything that slows you down is going to harm you," Bluestone said.
Taxes can slow down business growth, for sure, but many communities — Auburn and Worcester especially — have bought into the belief that taxing business properties at the same level as residential properties makes good fiscal sense and sends a clear “let's grow” message to the business community. Over the last three years, Auburn and Worcester have narrowed the property tax rates between the two groups, nudged by a lobbying effort from the business community. Bluestone's top four factors, in order of influence on a business or developer's decision to go forward with a commercial expansion project, were economic development marketing, timeliness of approvals, parking and public transit.
Yes, municipal taxes are a necessary evil, but what's also necessary is the fiscal discipline at the local level to keep those taxes low and manageable for the taxpayer. Taxes that are far out of line with regional averages will no doubt hurt the community. While we support efforts to reduce the commercial rate where that disparity is great (such as Worcester and Framingham) we also believe that successful business recruitment will rely on a more balanced scorecard and a focused effort to market those strengths to the business community.
We also agree with Bluestone that marketing and quicker permitting are important for business growth, along with parking, access to public transit and minimal traffic congestion. That's why public investments in infrastructure and transportation are also important to the business community. And while some communities use tax breaks — such as tax increment financing, or TIFs — to help generate jobs, Bluestone warned that too much reliance on them can do a community more harm than good.
Worcester officials have made significant progress in areas that matter most in growing its business base, especially six-month permitting for priority development sites. The Worcester chamber's recent efforts to spearhead a new initiative around recruiting, retaining and incubating business development shows great promise in making a difference for the city and the region. Working with municipal partners, the chamber should be able to succeed where past efforts have fallen short. Two other communities, Leominster and Marlborough, have recently made strides in drawing new business in the last two years.
More of that kind of progress is needed from all cities and towns as the region continues to look at an increasing pipeline of growth opportunities following the Great Recession. As Bluestone noted, companies move to municipalities rather than states. With fiscal restraint at the federal level limiting aid to states and communities, municipal officials have to market their communities more effectively to woo the kind of business development that suits them best.
Becoming more competitive and customer centric at the municipal level is not a “nice to have,” but is becoming a “must have” if a community is going to thrive in the long run. The fact that Central Massachusetts has more communities buying into that effort is an encouraging sign.
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