The relocation deal cut for Starwood Hotels & Resorts Worldwide Inc. was by far the most lucrative for a company in Connecticut history, but one that state officials still expect to result in a significant boost to tax revenue over the life of the deal.
Long after Gov. M. Jodi Rell announced last November that Starwood had accepted more than $90 million in incentives to move its headquarters in January 2012 to Stamford from White Plains, N.Y., real estate brokers said a lease had yet to be inked as of late March.
Assuming the deal will be consummated as planned, it amounts to $92,000 in state incentives for each of the 800-plus jobs the company brings to Stamford, according to an analysis last month by the Connecticut Office of Legislative Research ”“ easily the richest incentive package Connecticut has ever extended, with the next closest the one cut for Blue Sky Studios Inc., which took the equivalent of $60,000 a job in relocating from White Plains to Greenwich in 2008.
Some have criticized the Starwood agreement on grounds that the investment does nothing to build a cluster of economic activity in a target industry sector, in the manner of the Blue Sky deal, which provides an anchor animation company for Fairfield County”™s growing digital media sector; or Royal Bank of Scotland”™s 2009 move to Stamford, cementing the city”™s status as a major finance center.
The state Department of Economic and Community Development told the Connecticut Office of Legislative Research that as a guide, the department works within a range of $5,000 and $20,000 per job for the incentives it extends to lure or retain companies.
“Every project is unique, and each project is evaluated on its own particular merits,” said Judith Lohman, assistant director at OLR.
In exchange for relocating its headquarters and 800 jobs to Stamford”™s South End, within the city”™s enterprise zone, Starwood is receiving $75 million in urban and industrial site tax credits, which it is spending on a refit of the building at 333 Ludlow St.
Starwood is also receiving a $9.5 million loan at 1 percent interest, with the state scheduled to forgive $7 million in repayments if the company maintains its work force levels for 15 years. And Starwood gets an 80 percent abatement of property taxes for five years, in line with the state”™s enterprise zone statute, and a sales tax abatement of up to $850,000.
OLR estimates the incentives for Starwood will cost the state nearly $87 million over 15 years, excluding the value of the property tax abatement. DECD projects the state to record a net gain in revenue from the project of nearly $70 million after 10 years, and $258 million after 20 years.
Since Starwood is leasing the office, the direct benefit of the tax abatement goes to the landlord, Building & Land Technology, but Starwood”™s lease rate will be adjusted to reflect the abatement.
DECD did not provide an estimate of the cost of the property tax abatement, which is to be based on Stamford”™s mill rate and the assessed value of the improved property. The state will reimburse Stamford for part of the revenue the city is forgoing as a result of the property tax abatement ”“ OLR estimates that cost at nearly $4 million.
The urban and industrial site tax credits are on a variable schedule, averaging $7.5 million between the 2013 and 2016 fiscal years, then jumping up to an average of $15 million annually.
