Economic Report
June 2002, by the Alliance of Boston Neighborhoods
Fact sheet prepared for ABN Town Meetings, Spring 2002


What has been the city's vision for "growth"?

For 50 years, urban renewal visions of the "New Boston" have driven the development of our city, responding to post-war suburbanization. Despite two decades of spectacular "booms" in the region, urban renewal strategies, based on elimination of "blight," continue to shape Boston.

  • The economic goal has been to attract capital investment to revalue real estate that was devalued by decades of suburban flight. Public support -- land, tax subsidies and zoning -- have been used to foster "economic development": large-scale commercial projects, institutional expansion, entertainment arenas, visitor facilities, and high-end housing. Tax relief for large corporations and developers was seen as the only way to "create jobs" and "expand the tax base." This "trickle-down" approach assumes that public subsidies to private corporations and developments will have a "multiplier effect" -- stimulating new development investment, and encouraging new businesses to open, to supply the needs of these projects and their users.

  • The social goal has been to "bring back the middle class," to live, work, shop, or tour. Highways and garages have proliferated to accommodate commuters, tourists and affluent new residents in the city, while public transit has become more financially constrained.

While the city is again a fashionable destination and wealth has been created for some, economic, environmental and social indicators tell different stories about prosperity and success. Who has benefited form the booms of recent decades?

121A Urban Renewal tax relief:

Fifteen of Boston's biggest commercial projects get an estimated $15-$30 million annually in 121A tax reductions as "blighted" sites (including the FleetCenter, One Beacon St., the Massport/Fidelity Seaport towers, Post Office Square Garage).

Boston is the only city in the state still granting 121As.

PILOT:

Tax exempt private institutions pay negotiated Payments in Lieu of Taxes (PILOT). Institutions have expanded, building millions of square feet of facilities -- but PILOTs have barely increased, and do not cover the cost of their city services.

Nine of the biggest colleges, with over $21 billion in endowments, pay $2.5 million annually in PILOT.

Big developers can often negotiate their own tax assessments. Studies show that big commercial projects often don't pay their share for city services.

Tax Relief for Jobs:

  • Raytheon benefited from a $100 million state tax law in 1995, promising to create jobs; however, its jobs have fallen, from 19,500 to 13,800. Total manufacturers' tax breaks statewide were $550 million; however, instead of job gains, 10,000 jobs have been lost.
  • Fidelity Investments subsequently requested, and received, $40 million in tax relief for job creation for mutual funds companies.
  • The Red Sox sale was structured to avoid $342,000 in state excise tax and $15 million in state income tax. City/state subsidies promised to the team for building a new stadium total $325 million -- though it is well documented that ballparks do not create economic benefits.
  • Crosstown: multi-million dollar subsidy for hotel and institutional parking garage; of jobs anticipated, many are part-time and most are low-wage.

Raise taxes, cut services -- or find private funding and lose accountability?

How much has your property tax increased in the last 10 years?
Instead of "expanding the tax base," big developers often force homeowners and small businesses to make up the difference -- or move out of Boston.

Development subsidies cut funds available for public services.
Example: Boston's Parks Department budget has been cut 40% during the 90s. The city is forcing citizens to find corporate sponsors -- or to negotiate with developers who want to overbuild -- for parks, public schools, and street works.

What is the "job creation" record?

Boston has developed far more jobs than housing, fueling regional sprawl and pricing residents out.

Commercial vs. Residential Growth '95-'97
1980s -- 100,000 jobs: 10,000 homes
1990s -- 123,500 jobs: 3,500 homes

Job vs. Housing Growth
Boston -- 95% vs 5%
Mass. -- 47% vs 53%

  • Boston has 10% of the state's population, but provides 17% of its jobs.
  • Commuters hold over 60% of Boston jobs -- and 80% of the high-salary downtown jobs -- though 68% of Bostonians work in Boston.
  • The largest employers (including institutions) hire, on average, about 28% Boston residents.
  • About 85% of their employees have some college education; 52% of Bostonians have such education.
  • 20% of their jobs are part-time; more Bostonians than non-residents hold these.
  • Boston lost 41,000 manufacturing jobs since 1969, with a 17% drop from 1988 to 1998.

Boston median income rose 4% in the 90s, less than most towns in the metro area.

Median family income, 2000 census:

Boston: $39,600

Brookline: $67,000
Winchester: $94,000
Wellesley: $114,000

Newton: $86,000
Lexington: $97,000
Needham: $88,000

Boston's poverty rate remains static at about 20%.

The state and city will spend nearly $1 billion on the news South Boston Convention Center, whose viability is in dispute. Several buildings and dozens of jobs were displaced to clear the 60-acre site. The key hotel, which was bid to be privately financed, is expected to request 121A tax relief.

Economic Growth Strategies for Communities

  • Locally-owned businesses return 4 times as much to the community as do corporate chain stores in "multiplier effects," recirculating money in the neighborhoods.
  • A diverse job base keeps the economy resilient. Boston's Back Streets program has recently begun, to support small industrial and commercial businesses; city financial commitment to date: $1 million in loan funds.
  • Boston has 21 "Main Streets" districts, created to revitalize neighborhood commercial centers. Over 6 years, they have received $585,200 in city grants; private investment totals $1,738,200.

Redevelopment Authorities -- how much impact do they have on cities?

A 10-year California study* (1979-89) found that cities without redevelopment agencies had greater gains in per-capita income growth than those with redevelopment agencies (130% vs 92%). "Redevelopment is subsidized by taxes drained form public services."

*Redevelopment: The Unknown Government: What it is. What can be done. -- A Report to the People of California, August, 1998, Second Edition, published by Municipal Officials for Redevelopment Reform (MORR), through a grant from the Fieldstead Institute, Irvine, CA.