Is your head spinning just trying to understand the Tax Incremenent Financing (TIF) agreement proposal for special town meeting?  The following explanations have been kindly offered by town officials who personally attempted to answer your questions.  This information is meant to help inform residents and is not meant to represent the official position of any board.

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In short, a TIF exempts a portion of the property tax of a commercial/industrial property. It only exempts the increased value that the business creates - the increment.

An example with nice round numbers may be more helpful than jargon: say you have an office building with a current assessment of $10M (the base valuation). Chelmsford's current tax rate is $12.53 per $10,000,000 of valuation. Hence, the tax is $12.53 X $10,000 = $125,300. The owner of the office building proposes an addition that will invest $1M in the property and he requests a TIF.

Let's say the TIF was for a 50% exemption. The TIF tax exemption only applies to the increased value that is created (the $1M investment in the addition). So the tax on the addition is the tax rate times the increased value (the increment) times the exemption, or $12.53 X 1,000 X 0.50 which equals $6265. The original $125,300 tax on the base valuation is unchanged. The TIF only applies to the $1M addition. So the total tax is $125,300 + $6265 = 131,565.

In the case of Circles, they are requesting a TIF on a portion of the building at 300 Apollo Drive. They are proposing to lease about 13% of the building and the rest of the building will not be part of the TIF. So we will collect the full revenues on the other 87% of the building. So the Town is not giving money back when it agrees to a TIF, it is exempting future tax revenues. Our feeling is that it is better to get this vacant building back on the tax rolls now, albeit with reduced revenue, rather than wait for the market to catch up. As far as opening the floodgates to other companies, we have approved 2 TIFs previously (2001 and 2004 I think) and businesses are not storming into town to take advantage. I did all this without a caluclator so the numbers may be off but I hope the example is clear. Let me know if it is helpful and if you have any other questions.

- Andy Sheehan, Community Development Coordinator

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In order for a TIF to be put into effect, the location must qualify for TIF
status as defined by the relevant statutes (MGL Chapts. 23A, 40, and 59,
Secs. 3E, 59, and 5 respectively).  The area under consideration is located
within the boundaries of the Lowell-Chelmsford Economic Target area and
meets the criteria, and any businesses within that area are eligible,
including existing businesses.

Circles is a concierge/services company based in Boston.  They want to
expand their current operations by locating a call/service and
administrative center outside of Boston, but within the 495 belt area.  We
became aware of Circles' desire to expand through our contacts at the state economic development office

Paul Cohen, Andy Sheehan, and the Board worked together cooperatively to
get Circles to consider expanding their operations in Chelmsford.  We had
several phone conversations with Circles executives, and it was made clear
to us that a TIF agreement would be the baseline for consideration. Marborough was also under active consideration, and would have had to agree to a TIF in order to get Circles to locate there.  Marlborough is a classified city with a tax rate roughly double ours.

Circles' CEO and CFO told us that the difference in tax rates was a "significant factor"
contributing to their decision to locate in Chelmsford.   Not the overriding factor, but significant nonetheless.   Although Circles will realize a local tax benefit as a result of the TIF, the primary economic benefit for Circles is the effect it will have in helping Circles to access and leverage additional significant economic concessions from the state.

How does the Town benefit?  Circles will bring up to 330 office/service/administrative jobs into town, with all the immediate and multiplier-type benefits that such activity normally creates.  It is estimated that this project will result in an approximate $5,000,000 investment in the facility over the term of the agreement, thereby
increasing the value of the property, which will result in additional real estate taxes for the town.  Additional high-quality commercial presence in the town has a tendency to generate increased economic development (the "anchor tenant" effect), thereby further enhancing the value of all commercial properties within the town.

A successful TIF will increase gross tax receipts.  Let's assume that we
are considering a TIF for Company A that will occupy leased space within a
building that currently generates $250,000 in annual property tax revenue.
Let's further assume that the company will occupy 10% of the building
space, and that space's current pro rata share of the tax bill is $25,000 per
year. Remember, vacant commercial space is still taxed because its value is
based on current area market lease rates and what the area should rent for, not
on what someone currently pays to rent the space.  So whether or not Circles
or any other company occupies that space, the town will continue to collect
at least $25,000 annually.  The tax increment exemption applies only to any
additional taxes that may be generated over the base amount already being
collected.  Additional taxes may result if the value of the property increases because of additional investment by the Landlord or tenants (Circles will invest $5,000,000), or a general area increase in lease rates.

Let's assume, using the above numbers, that Company A occupies the space
under a TIF with conditions similar to those proposed for Circles, and as
a result of their initial investment and general market conditions, the value of their leased space increases by 10% in the first year of TIF applicability, and their pro rata share of the taxes increases by $2,500.
The proposed TIF agreement will run 13 years, as follows:

                 Year                    Exemption
                 2009                    90% of the increment
                 2010                    85% of the increment
                 2011                    80% of the increment, etc.
                 to 2021                 5% of the increment

Under the above example, Company A will pay in 2009:
        Base year tax:                    $25,000

        Plus $2,500 - .9($2,500)           250

Total Tax:    $25,250, vs. $27,500 that might have been paid without the TIF.

Under this example, the town would forgo $2,250 in tax revenue that we
might have collected if no TIF were in place and the valuation of the real
estate had increased year over year.   If no one moves in, or if another less
desirable company moves in and does nothing to enhance the value of the
company or the facility, and/or general commercial market lease rates do
not increase, then it is likely that no additional value would accrue, and no
additional tax revenue would be generated.

In consideration of the TIF, Circles will agree to submit annual reposts
on job creation and new investment to the State, and the town will receive
copies.  If Circles does not meet its obligations under the Agreement or
terminates its lease or ceases to exist, then the Board of Selectmen may
discontinue the Agreement.  Both the state and the Town Manager's office
will act as monitoring and enforcing agents.

It is important to remember that the increment exemption only applies to
additional taxes that result from any incremental value of the facility.
Circles or any other company that occupies the facility will continue to
pay taxes at least at the minimum amount of the base year (2008), unless the
overall value of the building decreases as a result of general market conditions.

Hopefully this helps.  If you would like to discuss this further, please let me know.

Regards,
Sam Chase