The Mayor says that the city must get involved to keep a financial services company from “picking up stakes” and moving out of the city.
Fighting to keep a global financial services firm inside city limits, Mayor Thomas Menino is unveiling a multi-faceted incentive program and calling on the Boston Redevelopment Authority and city council to back his initiative. Menino estimates that the effort could ultimately lead to more than 1,100 jobs for the city.
“Financial services companies represent a $24-billion industry in Boston,” Menino says in a prepared statement. “…and I have made it a priority that we focus on ways to strengthen and grow this sector of our economy.” The mayor plans to use tax increment financing and other relief that will assist JP Morgan as the firm’s lease at 73 Tremont St. comes to an end …
… Under the plan, JP Morgan and the city would apply jointly to the Massachusetts Economic Assistance Coordinating Council for designation as a certified project, a process that would make the company eligible for tax and financing benefits from the state and property tax incentives from the city.
The question is, is there any need for a public subsidy? In this case specifically, there seems to be no reason to offer “incentives”. It was reported prior to the announcement that the building in question, at 451 D Street, was 70% occupied, prior to the JP Morgan relocation. The downtown office vacancy rate, meanwhile, is in single digits, for the first-time, this millennium. Meanwhile, John Hynes and Gale International are proposing over 1 million square feet of office space practically next door.
The entire situation is a result of the free-market at work.
Why is JP Morgan saying it needs to move to the suburbs? Because renting space downtown has become cost-prohibitive. And why has it become so expensive? 1) No buildings with lots of space coming on the market to rent; and, 2) because the Blackstone Group bought up so many buildings over the past couple of years, and hiked up the rent.
Again: The reason that JP Morgan is moving is because it’s too expensive, and it’s too expensive because a private company is trying to make money.
So, having the city step in to offer paying a company to stay is basically just moving corporate revenues from one company to another.
Corporate Suburban Flight Gets Resistance – By Joe Clements, GlobeSt.com
Boston Mayor Steps Up JP Morgan Assistance – By Joe Clements, GlobeSt.com
City offers bank $4m tax break to relocate; From downtown, a move to waterfront – By Ross Kerber and Thomas C. Palmer Jr., The Boston Globe