After months of consideration, the city of Worcester has approved a controversial plan to give a new apartment project a local property tax break.
Labor activists and other opponents have repeatedly raised concerns about the proposal. They argue the developer of the project, the Washington-based Menkiti Group, doesn’t deserve the tax exemption because it previously violated local development regulations by using a subcontractor the state found had committed wage theft.
But during a meeting Tuesday night, a majority of Worcester city councilors voted in favor of the plan, arguing the Menkiti Group has already paid a fine for the violation and shouldn’t continue to be punished. Pointing to local housing market dynamics, Councilor Morris Bergman added he’s concerned the project won’t come to fruition without the tax exemption.
“The cost to develop in Worcester is pretty much the same as the cost to develop in Boston. But the return on investment in Worcester is different than what it is in Boston. Any developer will tell you that,” Bergman said. “The numbers are much harder in Worcester.”
The city often gives developers tax exemptions as a way to incentivize housing construction and revitalize old buildings amid a shortage of affordable apartments that’s caused rents to spike. The Menkiti Group has said that without the tax exemption, it would have to shelve the $27 million project on Main Street in downtown.
The project involves converting underutilized office space into 48 apartments. According to city estimates, the tax exemption would save the Menkiti Group $613,211 and also unlock additional tax credits as part of the state’s Housing Development Incentive Program.
The crux of opponents’ argument against the tax break has been that the Menkiti Group failed to comply with the city’s responsible development ordinance. The law stipulates that in order for a local developer to receive a tax exemption, it must adhere to labor regulations and meet the city’s goals for hiring local contractors and minority- and women-owned businesses.
The Menkiti Group violated the ordinance for another Worcester project when it used a drywall company that the state attorney general’s office previously cited for wage theft. Worcester fined the Menkiti Group $5,000 for the violation. More recently, the developer has faced accusations that another of its subcontractors has violated labor laws by not submitting payroll records.
The Menkiti Group has responded that it takes the responsible development ordinance seriously. But during the City Council meeting Tuesday, Councilor Gary Rosen argued Worcester needs to demonstrate the consequences of violating the ordinance.
“If you’re not gonna enforce it tonight, we shouldn’t have it,” Rosen said. “There’s a huge difference between supporting it, and telling people during a campaign you support it, signing a pledge you support it, and then really showing your true colors and saying, ‘Yeah I support it. But no, let’s not enforce it.’”
As usual, Mayor Joseph Petty, who chairs the City Council, cast the deciding vote. Petty echoed concerns that the housing project may not happen without the tax exemption. He suggested that if the Menkiti Group violates the responsible development ordinance in the future, the city can revoke the tax break.
“I am in support of this now,” Petty said. “We can claw this back if we have to.”
