Developer Wants $2.4 Million TIF For Washington Square Hotel

WORCESTER, MA — A developer planning to build a new hotel in the Washington Square area downtown is seeking a multi-million dollar tax-increment finance (TIF) agreement with the city. If granted, the TIF would be the latest allowed for a number of new developments in that neighborhood.

Developer Washington Square Hotel LLC wants to build a 105-room Home2 Suites hotel at 36 Washington Square at a cost of about $22 million. The project could break ground in 2020, but first the developer is asking for a TIF tax break worth about $2.4 million over 10 years.

Under a TIF agreement, developers get to pay less in property taxes over a set period of time — in this case 10 years — in exchange for rehabilitating an underused property. The city does give up some property tax revenue while the TIF agreement is in place.

The site where the Home2 Suites would go is vacant land valued at $400,000 today. When the TIF expires in 10 years, the property will have an assessed value of about $20.8 million, according to the city's Business and Community Development department. Once the TIF expires, the property owner would pay the full property tax amount on the higher-value property.

In the case of the Home2 Suites TIF, the owner would pay taxes on the base assessed value, and then 70 percent of the new assessed value when the building is complete.

The economic development department also this week sent the City Council a semi-annual report on the city's 17 TIF agreements. Many have achieved job-creation and investment goals as-advertised, although some have fallen short in some areas, the report shows.

For example, the Hilton Garden Inn along Major Taylor Boulevard was granted a 20-year TIF in 2004. The agreement allows the owner to pay about half the amount of property taxes on average each year. The project has so far created 71 of the 100 jobs estimated at the beginning of the project. But the total investment in the project ended up above $24 million, about $4 million more than originally projected.

The city has granted TIFs for a wide range of other projects, like the Saint Vincent Hospital cancer center near Washington Square, and the Unum office building at 1 Mercantile Square.

Washington Square Hotel LLC also built the $21 million Homewood Suites Hotel by Hilton, located just east across the Washington Square Rotary from the proposed Home2 Suites site. The new hotel would create about 35 full-time jobs by 2023, according to projections.