The Daily Times had a front page piece last week reviewing the status of the TIF or Tax Incentive Finance agreement that Sun Microsystems and the town had signed back six or seven years ago. The town has two of these arrangements and neither of them is in compliance with the terms of the original deal.
Let's state the obvious outcome to date of the Sun TIF deal. Yes we are glad to have them, yes there are 2100 new jobs on the site and yes they have put up some beautiful buildings and yes they contributed 6 million dollars to the town's school system for technology upgrades and yes the traffic improvements at Network Drive and route 62 have resulted in enormous improvements over the old situation.
In addition, they are wonderful neighbors and they do a lot in the community as an organization. All of that is true including the fact that they also were diligent in working to clean up the contamination that existed on the site as a result of manufacturing activities by previous owners of the site.
All of this is undeniably true. What is also true is that they were to have created roughly 4000 jobs in town and substantially more build out of the campus was to be completed by now. In exchange for that they were given tax reduction from the town as well as substantial investment tax credits from the state.
The current situation is that they have not met the terms of deal they signed. It is a difficult business environment but it is just as difficult a municipal tax environment if not more so. This is going to become even more difficult over the next several months when residents receive their new tax bill. The number has not been fixed as of yet but it is certain that the residential tax bill in town will be going up by double digits. Not because of over spending by town meeting but simply because of the shift in residential values.
To put it simply, the same amount of money has to be raised for this fiscal year, however where it comes from is determined by values. The residential value has increased substantially and the commercial values have declined. Therefore, more of the tax levy will come from the residential side of the ledger. Barring any unforeseen relief from the state, the news is not going to be good. There could not be a more obvious illustration of this than the Four Points hotel on Wheeler Road that changed hands last year. It had previously sold in 2000 for 14 million dollars but last year it was sold again but this time for for 6.48 million dollars. That resulted in a loss of about 200 thousand in tax revenue. Who do you think is going to make that up?
This situation is likely to be transitory as the residential values seem to have peaked and will likely moderate or decline during the next business cycle. Recent activity seems to indicate commercial and office space is beginning to recover according to some of the bigger players in town. How long it takes to return to a much higher commercial value remains to be seen but it certainly is not going to be immediate.
While this is going on the town is facing a number of financial challenges, fore most of which is the school building issue. The town will be faced with 2 problems. What to build or renovate and while construction goes on where to put students?
Perhaps a solution is one of those public private partnerships we often hear about. From what I understand, Sun has substantial vacant space in their buildings on Network Drive. How difficult would it be for the town to enter into negotiations to lease some of that space to house a number of classrooms? There would be a number of hurdles to overcome such as insurance indemnification and segregating access to a building from the rest of the campus but nothing that appears to rule out the potential at first glance.
The applicant is not in compliance with the TIF agreement and does not appear to be any where near compliance in the future. If that is the case why is the town still extending annual tax reduction? If the town had not met its obligations what would Sun's attitude be? Everything's fine and we are happy to be here? Somehow I think not.
Why not a creative solution that takes into consideration some of the challenges the town currently faces? It would be a complex negotiation however two facts remain. The town needs space and Sun is not making good on their own promises. It is not unreasonable to ask them to do so. If they can't meet the original terms of the deal then perhaps it can be amended to meet the needs of the community in other ways.
