The Globe‘s Shirley Leung gets it right in her piece this afternoon on General Electric’s decision to relocate its headquarters to Boston:
This is better than hosting the Olympics.
No controversy over potential cost overruns, or whether taxpayers will be on the hook for billions of dollars. No worries about traffic on Southeast Expressway, or whether an aging T can handle throngs of visitors. No collective handwringing over whether the pain of throwing what amounts to a three-week party would be worth it all.
General Electric moving its headquarters to Boston is all glory, giving us a chance to step onto a global stage on our own terms. The world can now mention Boston in the same sentence as Silicon Valley when talking about where the future is being built.
This is big.
It is big and it’s welcome, and, GE, welcome to Boston. So what does this mean for Boston? Why did GE come to Boston? And what about that tax incentive package — is it too much? Let’s take the questions in order:
What does it mean for Boston?
What GE’s move means for Boston is the reverse of what it means for New Canaan. Part of this move is a straight trade-off for Boston and New Canaan, which will see hundreds of homes go up for sale, restaurants and retailers closing, the potential loss of other companies, and a lessening of philanthropy in the area. For Boston, put plus signs on all of those impacts. A hot housing market will heat up further, expect more high-end restaurants, and, as Leung notes, the branding on this move is incredible for Boston.
Why did GE decide to come to Boston?
Again, start with what GE is leaving in its rearview mirror. All decisions are made in a context, and that context was that Connecticut Governor Malloy and the legislature created a lot of tax unpredictability, a lousy business climate for companies, and reasonable reason to think that the state’s budget situation would make a long-term course correction unlikely. That is, Nutmeg State officials might cut a short-term deal to settle the stomachs of GE CEO Jeffrey Immelt and his team for a period of time, but the fundamentals of the area made long-term tax stability less likely.
So what about those city and state incentives? I’ve never been a big fan of incentive packages to attract companies. Full stop. The world of reality is that some base level of participation in such incentive races is the only way to demonstrate genuine interest in a relocation (file that under: “Not an excuse, but an observation”). But make no mistake about it, the tax incentives are not what closed the deal for Massachusetts and GE.
More details will come out in the days and weeks ahead, but what we know at the moment is that the city incentives amount to around $25 million, the state incentives (which include capital improvements) $120 million. To put this level of incentives in context, a major insurer a couple of years back offered to create 600 jobs over 20 years and received from the city alone an incentive package of over $40 million. So one important point to make is that if GE came for the incentives, it got a bad deal.
That’s especially so given that there were many suitors in this dance, from Connecticut, which was scrambling to make up for past sins, Providence, New York and Atlanta–all of which were putting on offer significant incentive packages.
What won the day for Boston were: a high-quality workforce (and a great pipeline of smart future employees), the highest quality educational system in the country, our standing as a global hub for innovation, GE’s interest in bringing together with its headquarters a greater digital/tech presence, a governor who has made clear that he wants a predictable tax and regulatory environment, and a mayor who is bullish on building the city and ensuring as he does it that it remains livable. Boston and Massachusetts answer key questions for GE–again, we won on the fundamentals not the incentive package.
Lest we think all the news on this deal is clarity and light, it’s worth pointing to a rain cloud in Jon Chesto’s summary piece:
GE is also closing down a valve factory in Avon — eliminating roughly 300 local, largely blue-collar jobs — and shifting the work that’s done there to a new plant in Florida.
What that tells you is that the tale of two cities that our state economy has become only continues with this deal; that is, Boston, with its C-level and knowledge-based economy, is hot and getting hotter, while the fight to retain manufacturing will take more work on the fundamentals. On that front Governor Baker has a lot of work ahead, whether it is focusing resources on vocational-technical schools and strengthening our community colleges, or on the cost of doing business and the regulatory environment for manufacturers.
Oh, yeah, and that picture up top is GE’s new EPA Tier 4 compliant locomotive. We could use a few new ones for our transit system, Mr. Immelt. That’s not philanthropy, now it’s in your self-interest.