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Gov Charlie Baker

TOWNIE: WHAT GOES AROUND COMES AROUND

former GM Framingham plant

 

Or how tax breaks for fat cats relate to a defeat for Harvard management rats

 

“Opportunity” for the few

Gov. Charlie Baker submitted paperwork to the US Department of Treasury last week, according to the Republican, asking the federal government to consider 138 tracts in dozens of Massachusetts communities for inclusion in the new “Opportunity Zones” program—passed in December as part of the Trump administration’s sweeping tax reform legislation.

 

As the name implies, each opportunity zone is a low-income area of an American city or town. According to Next City, acceptance to the program makes such areas eligible to receive investment from “Opportunity Funds”—which are to be certified by the treasury department. The funds “will be required to invest at least 90 percent of their investment dollars into businesses or properties located in designated Opportunity Zones,” and the initiative “allows investors to defer some of their taxes on capital gains in exchange for investing some of their accumulated wealth into the opportunity zones.”

 

This week, MetroWest Daily News looked at tracts chosen for the program in Framingham and Marlborough. In Framingham, “City officials nominated a pair of contiguous neighborhoods on the southeast side of the city, which has struggled to rebound from the decline of manufacturing and the legacy of environmental contamination in the area.”

 

One of those tracts is particularly interesting because it contains “a significant amount of industrial land, including the state prison and the former General Motors plant, which is now the site of Adesa, the vehicle auction house.” And thus encapsulates everything that’s wrong with neoliberalism—the return to 19th-century dog-eat-dog capitalism in which private interest must always outweigh any possible public good.

 

Which is germane to this discussion because the opportunity zone scheme was cooked up by a “bipartisan” (read “neoliberal”) think tank called the Economic Innovation Group—led by a who’s who of Silicon Valley movers and shakers, according to the Los Angeles Times. Napster founder Sean Parker, former Facebook general counsel Ted Ullyot, and a rogue’s gallery of major West Coast venture capital investment house leaders are all part of the organization’s “founders circle.”

 

So it’s absolutely no surprise that the program is essentially yet another tax break for the rich. In a federal tax regime that’s now replete with them—especially after Trump’s ungentle ministrations. More problematic, however, is the fact that the so-called opportunity zones give the rich and powerful even more control over economic development in areas already impoverished by the rich and powerful.

 

Which brings us back to the Framingham tract in question. It houses MCI-Framingham, a medium-security women’s prison with a population that includes a majority of nonviolent offenders. Most of whom are from working-class families, and most of whom would not be there if the state and federal government put less money into the “prison-industrial complex” and more money into guaranteeing economic opportunity for those families.

 

It is also home to the former General Motors plant. Which once employed as many as 5,000 workers in high-paying jobs unionized with the United Auto Workers. Just the kind of jobs that increasingly downwardly mobile working-class families need, if they want to avoid turning to crime to make ends meet.

 

According to the New York Times, the last 2,100 workers were laid off from the GM plant in 1989. And the working families of Framingham and environs have never really recovered since then. Because pols and CEOs and policy wonks can talk all they want about Massachusetts having recovered from the Great Recession of 10 years back. They can claim we’ve achieved “full employment.” But the jobs that working people have been able to get since the destruction of the Bay State’s largely unionized industrial base between the 1950s and the 1990s are not nearly as good as the ones that were lost.

 

Gone also is the social—and therefore political—solidarity that once enabled the local working class to defend and maintain the improvements they won on the job for decades.

 

In its place, we have programs like the “opportunity zones” that help the rich find new and exciting ways to get richer. But that don’t mandate the creation of good jobs for working families, or provide for the democratic control of new enterprises that are created by the people that work in them.

 

Furthermore, as Next City points out, “Opportunity funds could end up raising too much capital without enough deals in the designated census tracts, blunting the impact per tax dollar lost, or they could end up without enough capital raised to make a discernible difference.”

 

Seems likely that the new program will go the way of a similar neoliberal program from the Clinton era: “Empowerment Zones.” Which never produced gains for poor communities that could be tied to the program. Instead lining the pockets of legions of contractors and investors along the way.

 

Harvard University grad union victory

In light of the loss of 5,000 good jobs unionized with the UAW at GM Framingham decades back, it’s extremely ironic that 5,000 graduate assistants at Harvard University just successfully unionized with—you guessed it—the UAW. Big congrats to all concerned.

 

The labor campaign was absolutely necessary because the same neoliberal system that purposely depresses working-class wages and benefits worldwide to increase corporate profits also hurts grad assistants. Harvard is a large employer, and—nonprofit or not—like most large employers it always strives to save money on staffing costs. So it makes perfect sense that a union that was decimated by decades of assaults from auto industry tycoons should get vengeance of a sort by unionizing grad assistants at a ruling-class university that continues to help spearhead the corporate drive to crush global labor power. Grad assistants that—together with various kinds of adjunct faculty—get overused by fully corporatized university management to avoid increasing the ranks of more expensive (and far more powerful) tenured faculty.

 

Naturally, being a teaching or research assistant for a few years is not the same kind of job as the ones lost at GM Framingham. And the fortunes of people with advanced degrees from an elite school are typically much different than those of auto workers that often only had high school degrees. But beyond the improvements that grad assistants will see in their working lives during their short time at Harvard, and the bump that the labor movement will get from their very public victory, here’s hoping that the students will learn to feel genuine solidarity with working families the world over. And move into their professional lives with the determination to help undo the grievous damage that too many of their predecessors did, and continue to do, to the billions of people who don’t control the commanding heights of politics and the economy.

 

 

Townie (a worm’s eye view of the Mass power structure) is syndicated by the Boston Institute for Nonprofit Journalism. Jason Pramas is BINJ’s network director, and executive editor and associate publisher of DigBoston. Copyright 2018 Jason Pramas. Licensed for use by the Boston Institute for Nonprofit Journalism and media outlets in its network.

GENERAL ELECTRIC FAIL

 

Conglomerate’s woes throw Boston HQ deal contradictions into bold relief

 

November 15, 2017

BY JASON PRAMAS @JASONPRAMAS

 

What a surprise. General Electric is tanking, and the scheme to bring the multinational’s headquarters to Boston is looking worse by the day. And whom shall the public blame if that once-secret deal cut by Gov. Charlie Baker and Mayor Marty Walsh in January 2016 goes south? Potentially tossing away millions in tax breaks and direct aid to a company that has already done massive damage to the Bay State over the past few decades? Readers of the dozen columns I’ve written criticizing the boondoggle will already know the answer to that question. But for those of you who have made the mistake of believing all the massive amounts of PR bullshit that the Boston Globe and other area press have been tossing around about the affair since that time, here’s a bit of a recap.

 

Where to begin? So, the governments of Boston and Massachusetts agreed to shovel tens of millions of dollars at GE in “exchange” for “800 jobs” in a new corporate headquarters campus in the Fort Point district of the Hub. Many of which would simply be transferred from the old headquarters, and most of which would be executive level jobs that will not help Boston’s struggling, underemployed working class.

 

Now there’s a problem. GE’s been losing money all year. According to the New York Times, its stock price had already dropped by 35 percent since January. Then, according to CNBC, the company’s share value dropped another 13 percent this week as of this writing after new CEO John Flannery announced a restructuring initiative—including the one thing investors hate most of all: dividend cuts. Only the second for GE since the Great Depression. So the knives are coming out around the beleaguered behemoth, and it remains to be seen whether some internal reorganization (doubtless costing legions of employees their jobs) and some belt-tightening by its execs will be enough to stop investors from moving to carve the conglomerate up like a Thanksgiving turkey. But let’s not assume the worst just yet.

 

Funny thing about that belt-tightening, though. According to the Boston Herald, cuts are now in store for GE’s still-small local workforce, and construction of the new Fort Point headquarters building was already pushed back two years from 2019 to 2021 in August. The plan is to make do with the two old Necco buildings already being refurbished on the site at first. The PILOT (payment in lieu of taxes) agreement signed by the Boston Planning and Development Agency (formerly the Boston Redevelopment Authority) and the city of Boston guarantees up to $25 million in tax breaks to GE if it provides the much-ballyhooed 800 full-time jobs. But by what date?

 

The discussion around GE moving its HQ to Boston has focused on the corporation creating those jobs by 2024. Herein, then, lies the rub about the PILOT deal: The agreement is framed around GE hiring “approximately 800 employees at the Headquarters Building and the Necco Buildings within eight years of the Occupancy Date.” But that occupancy date is explicitly defined as “the date upon which the Company initially occupies the Headquarters Building.” Which has now been pushed back from 2019 to 2021, according to the Boston Business Journal. So 2024 cannot be the year that GE will need to have 800 employees on its new campus. 2027 would have been the earliest it had to meet that target. And now that’s been pushed back to 2029, given the delay with the headquarters building.

 

Yet it turns out that the PILOT agreement doesn’t actually require 800 jobs to be created. Remember, it starts by stating GE will employ “approximately” 800 people on the Fort Point campus. But further down in the document, in a table explaining the specific tax break the city will actually give the company during each year of the deal, it allows for the creation of as few as 400 jobs in a chart with five tax break tiers between “Job Figure is between 400 and 499” and “Job Figure meets or exceeds 800.” Keeping in mind that the agreement also specifies a “stabilization” period of seven years between 2018 and 2024, during which GE gets $5.5 million in tax breaks no matter what and isn’t required to provide any jobs at all for the first six years. GE is then only required to provide between 400 and 800 jobs from 2024 until the agreement ends in 2037.

 

Job figure table from the GE Boston PILOT agreement
Job figure table from the GE Boston PILOT agreement

 

What’s super puzzling is that agreement first requires the company to start providing annual job figures “from and after” the aforementioned occupancy date. But the agreement already established that it only really has to start meeting any job targets as far out as eight years from the date it occupies its headquarters building. Making the job target requirement trigger as late as 2029, according to current plans. Despite the tax break table in the PILOT agreement using job targets to calculate tax breaks beginning in 2025 based on the 2024 job count.

 

The state, for its part, committed a total of about $120 million to the project. Late last year, GE spent $25.6 million to buy 2.5 acres on the Fort Point Channel that includes the land the existing buildings sit on and the land the new headquarters building will (perhaps) one day occupy from Procter & Gamble. MassDevelopment, part of the Commonwealth’s economic development apparatus, took out a $90 million loan from Citizens Bank—an interesting maneuver worth looking into—using $57.4 million to purchase the two old Necco buildings on the site from P&G, and the rest to refurbish the buildings. The remainder of the state’s “investment” is slated to go to fixing up the area around the site.

 

So, GE is getting basically free rent on the Necco buildings plus free upgrades on abutting public land courtesy of the state. And a big chunk of the taxes it would normally pay over the next 20 years is coming free from the city. Without any real requirement that it actually provide any jobs in Boston for many years, and then only (maybe) 400 jobs by 2029—assuming the headquarters building is built in 2021.

 

Which is the problem with all such erstwhile “economic development” deals in the Bay State. From their origin as a way to help encourage investment in areas of the state that were down on their luck precisely because GE and companies like it moved their manufacturing operations away from cities like Pittsfield, Lynn, and Fitchburg to places without the decent labor and environmental regulation that was in place by the 1970s, they have become yet another way for rich and powerful corporations to get richer and more powerful. Worst of all, such corporations hold all the cards in the deals. If they don’t get lavished with free public money, they can refuse to move their operations here or can leave if they’re already operating in the area. Once they get the cash they’re looking for, they can basically pull out at any time. Or as is the case with GE, they can “alter” the deal Darth Vader-style, leaving our local “Lando Calrissians” like Baker and Walsh to “pray” the deal is not altered “any further.”

 

The Boston Business Journal was correct to point out that GE will get $2.1 million in tax breaks on the Fort Point Complex by 2021—the year that the company now claims it’ll be completing its new 12-story headquarters building on the site. But what if it doesn’t build the new structure at all? It’s not clear. Because the PILOT agreement is pegged to job creation starting as far out as eight years after the headquarters building is built, and then allows for the company providing as few as 400 jobs between 2024 and 2037 rather than the 800 everyone’s been assuming. While not actually demanding any job creation until as late as 2029, making it unclear how the tax break will be calculated between 2025 and 2029 should GE drag its feet for the full eight years. The conditions for the company defaulting on the agreement are also pegged to job creation. Not to the construction of the headquarters building. Oh, and by the way, the PILOT deal only covers the headquarters building and the land the company purchased under and just around it (which the agreement calls the “Headquarters Project”). Not the Necco buildings, now owned by the state. Also, there’s no word about what happens if the company has less than 400 workers in Boston at any point from 2024 to 2037. Do these curious contradictions amount to loopholes for GE to bag the whole deal? It certainly looks that way.

 

The minimum GE will get in tax breaks from the city of Boston over 20 years is $5.5 million by 2024 plus whatever breaks it qualifies for between 2025 and 2037. However, the amount the company actually puts out in annual PILOT payments after 2024 is calculated by a complicated formula based on the taxes that would have been assessed without the PILOT agreement. And the assessed value of the relevant property could change from current projections. So it’s hard to know what the total value of the PILOT deal will ultimately be to GE, other than that it will be a bunch of money… however many jobs it actually creates.

 

But why exactly are Boston and Massachusetts giving a huge company that’s still profitable any money at all? And what happens if GE bails on the scheme by hook (simply running and fighting its PILOT default in court with its vast legal department) or by crook (not building the headquarters building at Fort Point and possibly getting away with delaying the job creation target trigger until the deal ends in 2037)? And what happens if worse comes to worst for GE, and the company actually does collapse?

 

These remain my central questions. And I continue to encourage all of you to ask those and related questions to every Boston and Massachusetts politician you can find. And ask the Globe while you’re at it. They’ve got a loooot of ’splaining to do about their cheap boosterism… which they’ve become awfully quiet about of late. Preferring, it seems, to focus on the next giant company that’s demanding public bribes to come to town, Amazon.

 

A shorter version of this column appears in this week’s DigBoston print edition.

 

Apparent Horizon is syndicated by the Boston Institute for Nonprofit Journalism. Jason Pramas is BINJ’s network director, and executive editor and associate publisher of DigBoston. Copyright 2017 Jason Pramas. Licensed for use by the Boston Institute for Nonprofit Journalism and media outlets in its network.