The news this week that General Electric has decided to relocate its headquarters to Boston raises the inevitable questions: What’s in it for GE? And what do the city and state get out of it?
When Boston Mayor Marty Walshgleefully announcedthat one of the world’s most recognized companies was moving to his city, he explained what kind of money the city offered up in an effort to woo them.
"We agreed that we could potentially go as high as $25 million because the economic benefit on the return outweighs that short term tax incentive,” he said.
A city analysis showed Boston would get back more than 10 times its investment over 20 years, including from jobs at other companies that would be attracted to the area.
On top of that investment from the city, the state offered GE an incentive of $120 million. State Secretary of Housing and Economic Development Jay Ash says it's worth it.
“We’re talking about high-value jobs that will contribute significantly to our income tax here in Massachusetts,” Ash said.
Jim Stergios, the executive director of the Pioneer Institute, says it's a good deal for GE, too.
“I firmly believe that GE needs Boston as much as Boston needs GE.” According to Stergios, there’s no better place for GE to push their brand of innovation.
“They’re moving to the Innovation District," he said. "They’re moving very close to MIT and Harvard—two brands that are incredibly strong. They’re moving to one of the centers of bio-scientific research. These are all really great things for them.”
And they’re moving to a state where taxes have been going down, unlike their current home of Connecticut, where things have been going in the other direction. Stergios says despite the price tag of incentives, it’s a good deal for the city and state.
“Yes, this is a significant amount of money, but if you do a comparative analysis it’s really not an outsized amount of money to get what they got,” he said.
Cornelius Hurley, director of the Center for Finance, Law and Policy at Boston University, is more skeptical about the whole thing.
“There are short-term press releases and announcements and everybody feels good," Hurley said. "But the tax breaks go on for years and years, if not decades.”
Hurley said the city and state will have to keep a close eye on GE to make sure they hire as many people as they say they will.
“At the same time that they were announcing this step, this historic step, they were also announcing the movement of 300 jobs from Avon, Mass., to Florida," Hurley said. "It takes a lot of monitoring.”
Billy Soo, chair of the accounting department at Boston College, says the devil is in the details. Soo points to examples of states giving away too much to woo big companies.
“They give them a lot of tax breaks on extremely rosy projections, and the company backtracks," he said. "They end up not hiring as many people as they initially promised, the growth isn’t there. And so the question when that happens is, OK, do you get some of the money back, or have you effectively just sort of subsidized this company?”
Ash says they haven’t negotiated details like that yet. There are still a lot of questions about GE’s move—exactly how many people do they expect to bring? Will they build a new headquarters or move into an existing building? And anyway, he says most of the incentives won’t just be tax breaks for GE—it will go to "public assets.”
“Public assets would be things like bringing utility lines to a site if they’re going to build their own building, or helping to build a public parking garage where their employees might get reduced parking charges in,” Ash said.
That way, he said, even if GE were to pack up and leave at some point, the infrastructure the state and city invested in would still be here in Boston.