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Mayor Daniel Bianchi addressing the Committee on Economic and Community Development on Tuesday.

Councilors Nicholas Caccamo and Melissa Mazzeo sit on the subcommittee.

The subcommittee is chaired by Councilor Churchill Cotton.

Pittsfield Sets Conditions On Rail Car Incentive

By Andy McKeever
iBerkshires Staff
03:14AM / Wednesday, February 05, 2014
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The city's Community Development Director Douglas Clark prepared a memorandum to the incentive that outlines conditions that must be met for the company to receive the benefit.

PITTSFIELD, Mass. — The city is telling potential rail-car manufacturers that if they come here and provide 100 jobs paying at least $35,000 a year, there is more than $2 million waiting for them.

Community Development Director Douglas Clark crafted conditions, per the City Council's request, for the $1 million incentive the city is looking to offer companies seeking the contract to build new Massachusetts Bay Transit Authority train cars and received approval from a council subcommittee on Tuesday.

The incentive will be coupled with another $1 million from the Pittsfield Economic Development Authority to help reel in the contractor seeking the massive state contract.

Clark's guidelines say the company would not be awarded the funds until at least 100 jobs, paying an average of $35,000 in salaries a year are created. The $1 million would be disbursed in three steps — when the construction begins, when the certificate of occupancy is received and when the job benchmark is reached.

The city will hold a promissory note until all of the conditions are met, Clark said.

"If they do default, we have fall back terms," Clark told the council's Committee on Economic and Community Development on Tuesday.

If the contract is awarded to company locating in Pittsfield, Clark expects the firm to far exceed those conditions. A total of nine companies are seeking the contract, which has been estimated to be worth at least $850 million. Proposals have to be submitted by May 1 with a site identified; the state will award the work at the end of the year. The contract lays out certain timelines of when the MBTA cars need to be built.

"Once this company is awarded this contract, they'll be all in," Clark said. "It's a lot more certainty than any other agreement because it is a lucrative contract."

The city has identified a location at 81 Kellogg St. as a suitable site and PEDA officials have already toured some of the prospective businesses there. However, the issue for the city is that there isn't a building in place, just a foundation, which could add to the costs of operating here.

Mayor Daniel Bianchi proposed sweetening the pot by matching PEDA's $1 million with $1 million of the city's dollars. Those funds will offset the cost to build on that foundation.

"I'm very proud of what's been done and I'm confident we'll be in the game," Bianchi said of the city's chances to attract a company.

In May, the city will know if any of the companies have chosen the site — or any other in the city — when they submit their bids. While the City Council was supportive of offering the incentive without knowing the company, it wanted to build in conditions to ensure the money achieves its intended purpose. It is still uncertain the extent the winning bidder would need to use city property.

"Citizens expect us, if we're using their money, to create living wage jobs," Ward 5 Councilor Jonathan Lothrop said of a condition that the salaries be at least $35,000 a year.

Jonathan Lothrop raised many questions about the incentive but was ultimately happy with only a few minor changes.

Somewhere around 250 jobs are expected to be created by the contract but not all of them need to pay that much — only 100 will be counted toward achieving the incentive. The numbers work out to show the city will be subsidizing 100 jobs at a cost of $10,000 each.

Ward 3 Councilor Nicholas Caccamo asked that language be added that specifically state that if this particular contract is not awarded to a site in Pittsfield, that the earmark is voided. Even with a City Council approval, a future contract with the city will be needed, giving the council another chance to review it, Clark said.

Councilors also wanted to ensure that the incentive not be used some other way. Nor did they want the incentive to go to a company, who opened operations outside of the city. Both of those concerns, Clark said, are covered with the memorandum he filed.

"We don't want to have an open liability out there," Lothrop said.

And it isn't just an incentive the city is willing to provide. PEDA, an untaxed organization, would lease the land to the potential rail-car manufacturer which would be responsible for taxes on the building it would own. Clark said estimated about $73,700 a year in taxes — meaning in 10 years 75 percent of the incentive would come back to the city.

The city is prepared to lower that liability as well by providing tax incentives. Lothrop said the benefits the city reaps without any property taxes at all makes up for any lost revenue from a tax increment financing agreement.

"It is suggested that a TIF would be appropriate," Clark said.

City officials say the benefits not only include increased job growth but inroads with manufacturers of related parts and that utilizing the William Stanley Business Park will help attract other companies to the other sites.

"I like that we are saying we want this," said Councilor at Large Melissa Mazzeo. "I think my issues with this has been brought forward and satisfied."

The incentive will now again return to the City Council for full approval. If approved, Clark and Bianchi will have an earmark of $1 million and tax incentive tools to attract interest in tandem with PEDA.

"Right now, as much as anything, this is a marketing tool," Bianchi said.


Tags: PEDA,   rail,   tax incentive,   

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