Don’t let growth stop at Route 128

In July, the House and Senate passed their respective versions of the economic development bond bill, which started out as Gov. Healey’s Mass Wins Act. Reconciling the two packages now lies with the six-member conference committee, which includes the joint economic development committee co-chairs Rep. Carole Fiola and Sen. Barry Finegold. As a result of new legislative rules, the conference committee could complete its work as late as the beginning of January. 

Each version of the bill includes significant policy changes and investment tools. We lay out our recommendations for a final version below. But taking a step back, our overriding message is that the legislature and administration must ensure that job growth and private investment reach Gateway Cities, the engines of regional economies in every corner of the state. 

That won’t happen without intention. 

For example, the economic packages include a $25 million grant program for private businesses to expand commercial, industrial, and manufacturing operations; $75 million to support strategic AI deployment; and $100 million for the defense sector; just three among numerous capital funds. There is no language guiding where these funds will land, and the likeliest outcome is that the bulk of these investments will support the growth of existing firms in technology-dense locations. The state must make a concerted effort to drive at least a portion of these capital grant programs to job growth in Gateway Cities and extend the footprint of these competitive sectors. 

The conference committee could consider inserting language “directing EOED and other agencies to expend these capital funds in ways that balance the state’s overall goals with job growth and investment in Gateway Cities and other strategic locations where job creation and sector strategies would have an outsized positive impact.” 

Gateway City priorities: 

• Downtown fund (7002-8085): Recommend the Senate’s $27.5 million funding level. 
• Placemaking fund (7002-8086): Recommend the Senate’s $30 million funding level.
• HDIP cap increase: Include House language raising annual cap from $30 to $40 million (Section 77B). 
• ENOUGH Act: Include Senate language creating a fund to support place-based efforts to build mixed-income neighborhoods and public schools. 

Urge to include: 

• Language improving the state’s business improvement district (BID) statute: Neither branch adopted this commonsense language, which enjoys unanimous support from existing and prospective BIDs in the state. 

Strongly oppose: 

• Changes to the definition of Gateway municipalities: We urge the conference committee not to include the Senate’s language. While it is well-intentioned, it would create a new category of “Gateway-like” municipalities that would encompass over half of the communities in the state and therefore render the designation meaningless.  
• A new tax incentive for video game developers: While the provision creating this new incentive in the House bill does encourage location in Gateway Cities, we believe this is not an efficient or effective strategy to build Gateway Cities economies, as detailed in the last edition of the Journal.  

We commend the Healey-Driscoll administration, the House, and the Senate for advancing a strong economic development package. We respectfully urge the conference committee to adopt these recommendations to ensure that the Commonwealth’s investments strengthen economic opportunity not only where growth is already occurring, but also in the communities that have the greatest potential to serve as new engines of regional innovation and growth. 

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 homes. 

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 provides $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 with 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 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.