A Chinese company is expected to get a sizable tax break for building a new factory to manufacture subway cars in Springfield, Massachusetts.
The Springfield City Council is being asked to approve an agreement with the company that is planning to build a $95 million factory that would reduce the property tax owed by $10 million over a 10-year period.
Mayor Domenic Sarno has asked the council to approve the agreement. It is on the agenda for Monday night’s meeting.
City Councilor Ken Shea, who chairs the council’s finance committee, said the council will consider a 10-year abatement known as a tax increment financing (TIF) agreement. It is an economic development tool that cities and towns in Massachusetts have used for decades to encourage business expansion and job creation.
" It allows a developer some breathing space and we've used it a number of times. To me this would be the most critical time we've every used it," said Shea.
Shea said the economic benefits to the city from the new factory far exceed the amount of the tax break.
" This is a serious number of jobs. When you figure you are going to have 200- 300 employees averaging $66,000 a year that is a huge amount of money poured into the economy," said Shea.
CRRC USA Rail Corp, previously known as CNR-MA, purchased the 40-acre former Westinghouse property on Page Blvd. last April for $12 million after the company was awarded a $566 million contract to build new subway cars for the MBTA.
A groundbreaking ceremony was held September 3 with Gov. Charlie Baker
Springfield Chief Development Officer Kevin Kennedy said negotiations on the tax agreement began about 18 months ago. Between then and now the size and estimated cost of the project grew. What was originally planned as a 125,000-square foot assembly plant is now a 220,000-square foot facility.
The project cost has gone from $50 million to $95 million.
" The tax agreement is on the added value they are putting into the site. The city will be doing quite well from any perspective" said Kennedy.
If the TIF is approved, the tax bill for the property will be almost $27.5 million over 10 years, according to city officials.
A project of this size with the potential for hundreds of well-paying manufacturing jobs has not been seen in western Massachusetts in decades. It will cause a ripple effect for jobs at other area precision manufacturers, according to David Cruise, the president of the Hampden County Regional Employment Board.
" We have a supply chain that will be able to respond to their needs. No doubt about it," he said.
CRRC’s contract with the MBTA calls for the production of 284 subway cars to replace vehicles that have been in use on the system’s Red Line and Orange Line since the 1960s.
Production is to begin in 2018
Company officials say they are pursuing other business in the United States. The Springfield factory, which will include space for engineering, research and development, and administrative offices, will be the company’s North American base.