The Select Board on Tuesday provided feedback on a draft tax increment financing (TIF) agreement between the town and the owner of a new pickleball/padel club. Members suggested negotiating a shorter-term agreement than proposed while noting that the applicant entered into this process late in the game.
Tax increment financing (TIF) agreements allow new businesses to pay lower tax rates when they initially open if they provide a community benefit. The amount gradually increases as the business becomes more established.
The TIF agreement must receive approval at the May 2 Annual Town Meeting. The terms would go into effect on the date of occupancy, Town Manager Elaine Lazarus said.
The Select Board at its Oct. 7 meeting authorized Lazarus to enter into negotiations with Yev Galper, the founder of Open Play Pickleball & Padel Club. Galper at that time noted that the club, located at 124 East Main Street, represents a $5.5 million investment in the town. It also provides a “state-of-the-art” facility for padel, which he said is rapidly becoming popular in the United States. The facility intends to operate 19 indoor and outdoor courts.
TIF terms outlined
Lazarus said that a team has been negotiating the TIF’s terms with Galper. Members include Lazarus, Assistant Town Manager Lance DelPriore, chief financial officer Kyla LaPierre, principal assessor John Neas and Julia Chun, the town’s sustainability, economic development and equity project manager. The 24,000-square-foot facility is under construction.
“Open Play initially requested a 14-year agreement,” Lazarus explained. “We in general prefer as a town shorter agreements to minimize the lost revenue.”
She added that business circumstances may change over the TIF’s term that would negate it. Possibilities include growth, new ownership, merger or closure.
The draft TIF agreement she presented was for a seven-year real estate tax exemption and a five-year personal property tax exemption. The real estate tax exemption, Lazarus said, “would start at 90% and goes down to 30% in the final year.” The personal property tax exemption would be 100% for all five years.
Lazarus clarified that the exemption is on the improvements made to the property, not the property’s full value. Because this property has been vacant, the improvements would be substantial.
If the property value is assessed at $4.5 million, Lazarus said that the projected lost real estate tax revenue for the town would be $57,024 in the first year. This amount would decrease to $19,008 in the final year. Personal property tax loss was estimated at $14,000 for each of the five years.
For community benefits, Lazarus said Galper proposed offering “up to 50” discounted memberships to residents under 16 years of age and over 65. He also pledged to host an annual fundraising tournament for a local charity and reserve a minimum of 200 memberships for Hopkinton residents. Also discussed was initiating a partnership with the Hopkinton Public Schools for varsity and club programming.
Open Play Pickleball & Padel Club is under construction on East Main Street. PHOTO/JERRY SPAR
Members: Draft lacks town benefits
While members expressed enthusiasm about the business, they were lukewarm to the draft agreement as proposed.
“At this point, I don’t see the benefits to the town for this TIF agreement,” said chair Joe Clark. “At this stage in the project, I think this is something that seems like it was almost done towards the finish line as a way to potentially save some tax money.”
He noted that this proposal comes when “tax revenue is critical” to balancing the town budget.
Member Matthew Kizner shared Clark’s concerns. While he indicated he is supportive of Open Play and believes it will succeed, he said he didn’t think the venture “is something that we should be subsidizing.”
Member Amy Ritterbusch said she had “mixed feelings” about the TIF. She noted that the property had been vacant for a long time. The town also is trying to be more business friendly.
She added that she would be more receptive to a shorter-term agreement. Also, Ritterbusch said she has not heard much public feedback about Open Play.
Vice chair Shahidul Mannan said the negotiators should “go back a little bit to the financial drawing board.” He suggested reducing the term to three years and capping the amount of lost revenue at “$150K max.” Additionally, he proposed a “clawback” mechanism if the business is successful financially.
Member Brian Herr suggested putting any proposed benefits in writing, as well as an annual review to ensure that they are provided.
Clark added that the business already is being built. Usually, TIFs are incentives for businesses that are considering investing in a community.
“We are not opposed to a TIF,” explained Kizner. “We are not opposed to working with you. But we want to work up front, and we want it to be because you want to be here.”
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