Special Meeting Called To Consider Subway Car Factory Tax Break

Sep 23, 2015

CRRC USA Rail Corp. plans to build a $95 million factory on this site in Springfield, Ma and build subway cars for the MBTA
Credit WAMC

The city council in Springfield, Massachusetts has scheduled a special meeting to vote on a sizable tax break for a subway car manufacturer after a vote at a regular meeting was unexpectedly delayed. 

The Springfield City Council will meet Tuesday to vote on a tax incentive agreement with CRRC USA Rail Corp, which is planning to build a $95 million factory in east Springfield to build subway cars. The agreement,  if approved, would save the Chinese company $10 million over a 10-year period in exchange for a promise to create at least 150 jobs.

At the council’s September 14th meeting, Councilor Orlando Ramos invoked a procedural rule that halted debate until the city comptroller prepares a financial analysis.  The report from the comptroller’s office was sent to councilors on September 21st.

Springfield Mayor Domenic Sarno had asked the council to approve the tax agreement and is angry about the delay.

" Everybody talks about bringing back manufacturing and keeping business in Massachusetts, and why do we always loose to Southern states and other areas of the country. Well, they offer tax incentives. They offer other initiatives," said Sarno.

CRRC, previously known as CNR-MA, was awarded a $566 million contract late last year to build new subway cars for the MBTA.  The contract requires the final assembly to occur in Massachusetts.  The company purchased the 40-acre former Westinghouse property on Page Blvd. last April for $12 million and announced plans to build a 220,000-square foot factory.

The company and the Sarno administration began negotiations on a possible tax deal at least six months before the MBTA contract was awarded.

" This ( the factory) could have gone elsewhere," said Sarno.  " It could have gone to Pittsfield, or Westfield.  We rolled out the red carpet and that is what we are supposed to do."

Even with the proposed tax exemption, the city would collect more than $32 million in property taxes on the factory during the next 12 fiscal years, according to the comptroller’s report to the council.

The proposed agreement with the rail car company is known as tax increment financing (TIF). It is an economic development tool that Springfield, and other Massachusetts cities and towns, have used for decades to encourage business expansion and job creation.

City Councilor Ken Shea, who chairs the finance committee, said the economic benefits to the city from the new factory far exceed the amount of the tax exemption.

" We've used it a number of times, and this to me would be the most critical time we've ever used it," said Shea about the use of TIFs in Springfield.

At the same meeting where the vote on the agreement with the subway car manufacturer was unexpectedly delayed, the council approved a TIF with a Rhode Island - based commercial laundry company, Falvey Linen Supply, for a new $7 million plant and the creation of 100 jobs.

Falvey purchased a 239,000-square foot former postal service warehouse on Brookdale Drive for $3 million and plans to spend another $4 million to convert it to a commercial laundry.

Falvey will get a tax break of $100,000 over a five-year period.

The project was announced in July by Falvey President James O’Hara, who said the decision to build a second plant in Springfield is a major expansion for the 86-year-old company.

"It opens up the New York market for us. There are many opportunities from this area for us," said O'Hara in July.

Falvey has a plant in Cranston, Rhode Island, and distribution warehouses in the Boston area and in Hartford.

Hiring at the new Springfield plant is expected to begin next summer.