Last week, the House passed an omnibus economic development bill that included important wins for Gateway Cities on both HDIP and downtown vitality. The legislation now moves on to the Senate, where there are opportunities to lock in these gains and make some modifications that would produce an even stronger package.
Let’s start with a look at the good stuff that we encourage the Senate to build on:
HDIP. The pipeline of Gateway City residential projects remains strong. Without HDIP, few of these projects would move forward in this economic climate. Rep. Cabral offered an amendment to increase the annual cap from $30 million to $50 million. His amendment was accepted, though at a lower level of $40 million. This increase is significant progress toward meeting actual demand, and it will give developers the certainty that they need to continue pursuing difficult to finance construction projects in Gateway Cities across the state. At a minimum, the Senate bill should mirror the House. But all indications suggest the current project pipeline could expend $50 million. And the state could certainly benefit from the construction of these additional housing units.
Downtown Vitality. The House bill authorizes $25 million to support downtown revitalization with capital funds for infrastructure, public spaces, and placemaking projects. In addition, there is a new $25 million capital authorization for creative economy investments in public spaces and historic districts, including wayfinding, improvements to performance venues, and installation of public art. On top of these capital resource streams, the FY 27 budget provided $600,000 in funding for the Massachusetts Downtown Initiative. Restoring the program to FY 25 levels after allocating no funds for downtowns in FY 26.
Altogether, this is significant progress toward supporting healthy downtowns in these challenging times. The Senate has an opportunity to build on these pieces by adopting two no-cost provisions that Gateway City economic development leaders have been advocating for: 1) strengthen the state’s business improvement districts with minor modifications to the authorizing statute; 2) include language in the downtown revitalization capital program that explicitly allows district management organizations to utilize these funds as seed capital.
A Friendly Amendment
The House’s solid backing of both HDIP and downtowns is good for Gateway Cities and the Commonwealth’s economy more broadly. However, there is one provision in the House bill that we encourage the Senate to remove: the new tax credit for video game developers. The new video game credit builds on the film tax credit model, which has been a costly failure. Massachusetts has spent over a billion dollars on film incentives. These funds haven’t created a sustainable growth industry. Year after year, Massachusetts taxpayers have been on the hook subsidizing a product with no broad public benefit.
While the video game tax credit includes a bonus for firms located in Gateway Cities, this is an extremely inefficient way to encourage growth. Gateway City economic development leaders aren’t asking for this new tool, especially while state investment in our downtowns and homegrown regional industry clusters remains anemic.
As currently drafted, there is no cap on annual spending for the new refundable video game tax credit and, to our knowledge, there has been no fiscal impact analysis, which both conflict the recommendations of the Massachusetts Tax Expenditure Commission. Just based on the number of developers who are already here, it’s likely that video game tax expenditures will quickly exceed what Massachusetts invests annually in all of our downtowns and their undercapitalized small businesses.
With nearly half of states offering video game incentives, legislators face a real predicament. But Massachusetts can’t cover the cost of 25 percent of salaries for workers in favored industries. Inefficient incentives such as these lead to reductions in essential services or higher tax burdens. To maintain our competitive edge, legislators must stand firm and refuse to participate in this race to the bottom.