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From the Desk of Jack Healy

New Massachusetts TIF Values Training as an Asset

By Jack Healy, Director, MassMEP

With issuance of 429 CMR 2.00 on June 1, 2008, Massachusetts has established a set of Manufacturing Workforce Training Tax Increment Financing (TIF) procedures that in the words of the General Counsel of the Executive Office of Labor and Workforce Development, is an "innovative, creative, and unique piece of legislation, and the first of its kind in the nation." 

These new TIF procedures allow for recognition by the Commonwealth that expenses incurred while training and educating a workforce can be valued and the investment can be treated as an asset, instead of an expense that directly impacts the manufacturer's bottom line.

TIF's have been used by local municipalities for many years as an economic development tool to encourage expansion and investment where it would not otherwise occur.  Such TIF's were primarily granted to manufacturers for investments in physical assets, such as the plant and equipment. The benefit of such TIF's to the cities and towns that granted them is that they resulted in deterring the migration of business  firms to other localities and ensured the continuing growth of the overall municipal tax base through the provision of some stipulated number of additional jobs. This promised a continuation of the business entity at a location in the municipality, thereby helping to keep everyone's taxes lower than they otherwise would have been.

The new Massachusetts Workforce Training Tax Increment Financing (WFT-TIF) now allows cities and towns to use such legislation as an economic retention tool to encourage continued increased commercial growth only for manufacturing enterprises that have been located in a city or town, for a period of not less than two (2) years. This restriction of the MWF-TIF to manufacturers is in recognition of the unique challenges facing the Commonwealth's  manufacturing community.

In this new era of global competition, Massachusetts' manufacturers are now facing the replacement of one third of their workforce who will retire over the next 10 years.  The effect of the replacement process will be compounded by the need to address training and retraining of workers in engineering and science based positions that are critical to the continued development of the Massachusetts' knowledge based economy. Coupled to all of this, we have the challenge that technology is changing so rapidly that our technical professionals in manufacturing often face outmoded skills after four to five years.

For manufacturing enterprises, especially those operating in mature industries where the plant and equipment asset base is already in place, the MWT-TIF is a unique retention benefit as it allows for the provision of an asset (TIF) on the firm's balance sheet to offset the expenses incurred for the investment of training. This is the same financial treatment that would have occurred if the investment were made for a capital investment in plant or equipment.

The MWF-TIF process contains the added benefit that the training investment is being made directly in the workers, those who in this era of life-long learning are real beneficiaries. This training knowledge is retained by the employee, no matter what employer they end up working at.  This way the benefit of the WFT-TIF, unlike past TIF's  issued for plant and equipment, will not be lost if the employer should close.

Here are the details of the new Massachusetts Workforce Training TIF.

Manufacturing Workforce Training: Tax Increment Financing
In the 2006 Economic Stimulus Bill, specifically M.G.L. c. 40, § 60A, the Massachusetts Legislature created a new tool to permit local communities to offer tax incentives to manufacturers – the Manufacturing Workforce Training Tax Increment Financing (MWT-TIF) incentive.  The purpose of this first-of-its-kind legislation is to encourage increased commercial growth of manufacturing facilities by enhancing workforce development. In June 2008, the Executive Department of Labor and Workforce Development issued regulations to implement the MWT-TIF incentive program.

The MWT-TIF incentive is similar to the tax increment financing available through the Economic Development Incentive Program.  Manufacturers that enter into a MWT-TIF agreement with a city or town receive a reduction in the increase of their property taxes to offset the costs of workforce training investment.

The manufacturer must be located in an area designated as an Economic Target Area by the Economic Assistance Coordinating Council (EACC), and must have been located there for at least two years.

In order to take advantage of this program, a manufacturer must first enter into a MWT-TIF Plan with the municipality.  The MWT-TIF Plan must describe in detail all training, retraining, and workforce repositioning contemplated by the manufacturer under the Plan, including the following:

  • A provision requiring that the project shall be evaluated by the Department of Workforce Development in the same manner as other workforce and job-training programs;

  • A provision certifying that the manufacturer has sought the advice and recommendations of the local applicable Workforce Investment Board; and

  • Information concerning the following factors:

    • Whether the Project will increase the skills of low-wage, low-skilled workers;

    • Whether the Project will create or preserve jobs at wages sufficient to support a family;

    • Whether the Project will have a positive economic impact on a region with high levels of unemployment or a high concentration of low-skilled workers;

    • Whether the Project will supplement, rather than replace, private investments in training;

    • Whether the employer is a small business that lacks the capacity to provide adequate training without such assistance;

    • Whether the application was developed with employee participation.

The municipality, by vote of its town meeting, town council, or city council, and with the approval of the mayor where required by law, or as otherwise required by local law, must officially approve the Plan. The municipality then must submit the MWT-TIF Plan to the EACC for approval.

How to Apply
Parties interested in learning more of the opportunities offered by the MWF-TIF can do so by contacting the Industry Director of Manufacturing, Rich Pellagrini, at the Mass Office of Business Development, rich.pellagrini@state.ma.us.

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