State government’s increased attention to and investment in Gateway Cities is both encouraging and needed. In recent years, there
Larry Curtis
has been a tremendous surge in development in these 26 municipalities, but it has generally been on the residential side.
Creating new affordable and market-rate housing will continue to remain a significant state initiative, but to truly lift a local economy and generate more employment opportunities, there needs to be a commercial investment component. And to generate that, there needs to be some financial assistance.
Because development does not occur in a vacuum, you’re subject to certain unavoidable market dynamics. The unfortunate reality is that the economic rent in Gateway Cities often does not support the capital costs of rehabilitation or new construction. Subsidies are needed to offset the costs to make the project viable for the private sector.
There are existing programs in place, such as the federal New Market Tax Credit (NMTC), to encourage commercial development in Gateway Cities, but most programs are more geared toward housing. Bringing jobs and dollars to the community is a priority for the leaders of these cities, but more needs to be done to spark interest.
According to the advocacy group New Markets Tax Credit Coalition, $8 billion was spent by the federal government in NMTC between 2003 and 2012. The returns on that investment were substantial: $63 billion in investments to local businesses, $120 million new square feet of commercial space and 750,000 jobs were generated.
Too often, programs like NMTC get abolished because of a focus on the cost paid out by the government via taxpayers. That viewpoint unfortunately fails to take into account the principles summed up by the old adage “you’ve got to spend money to make money.” The credits are an investment and will require funds. Their value – and what should be the point of emphasis – is the output. The New Markets Tax Credit Coalition offers another anecdote telling of the NMTC’s success; businesses benefitting from the NMTC generated $984 million in tax revenue in 2012, far exceeding the $800 million in lost revenue due to the credit. Some NMTC development has occurred in Gateway Cities, but most has not.
Given the tangible benefits offered by the NMTC, the logical next step to advance commercial investment in Gateway Cities would be to increase them and for Massachusetts to create a parallel program at the state level. We’ve seen the state do this with great success with the historic tax credit.
Transformative Change
Investment in Gateway Cities also represents capitalizing on opportunity. Though these cities have yet to fully reclaim their former glory, they are rich with character. They contain unused buildings that are ripe for rehabilitation. A converted mill makes for a far more unique workspace than the traditional commercial offerings.
Businesses should also consider and appreciate Gateway Cities as an alternative to the Boston/Cambridge area with reduced costs. This is especially key for younger companies. Thanks to the many fine academic institutions in Massachusetts, there is significant intellectual capital. It would be a shame if the next Facebook were to leave the state because it could not afford to operate here at $70 per square foot. Workers also benefit from working closer to home with conveniences like parking – 25 percent of the commonwealth resides in Gateway Cities.
To get these businesses to Gateway Cities, further action is needed. For example, New York state’s START-UP NY program offers businesses 10 years tax-free to relocate (or in the case of existing New York businesses, expand and relocate) to designated zones provided that they are aligned with the educational mission of nearby academic institutions. This program brings quality jobs to areas that would otherwise mostly be ignored, along with money and further economic stimulation via this new workforce.
Along with housing, commercial investment is vital to the reinvigoration of Gateway Cities. While new housing will remain very important to Massachusetts’ growth in the coming years, we must be mindful that bringing jobs to these cities will bring the most benefit to their economies. Transformative change is possible, but it will take time. We need to allocate resources to help expedite the process.
Larry Curtis is president and managing partner of Boston-based Winn Development, which has performed residential and commercial development in 15 Gateway Cities in Massachusetts.
