The real reason the old Fallon Health HQ is going to become housing

There is much excitement over the proposal from Synergy Investments to turn One Chestnut Place and Two Chestnut Place from office buildings into housing.  Most will know the big building as the GREEN ROOF building just west of Downtown Worcester.

https://www.telegram.com/story/news/local/2024/02/08/fallon-...

Yes they are asking the City of Worcester for Tax exemptions

Yes they are going to spend a lot of money on the modifications.

Yes, Worcester needs more housing of all kinds.

Yes, it will be cool to live in a tall building.

Yes, it is good that they are going to repurpose an office building.

Yes, there is less need for office space.

But here is the sadness. 

Is it true that Worcester, a city of over 200,000 people cannot support an office building market?  We can count the office towers in Worcester on 1 hand.  100 Front, 120 Front, 1 Mercantile street (UNUM building), 446 Main street (the glass tower) all clustered in downtown, and for fun lets throw in 440 Lincoln street ( Hanover Insurance).

The GREEN ROOF building was once considered the best office building in the city.  Now it will be housing.

This is not surprising, what is surprising is WHY?

Yes, we have plenty of good reasons above, but there is one real reason.

The SPLIT TAX RATE in Worcester.

For 2024

Residential Tax Rate:  $13.75/Thousand

Commercial Tax Rate: $30.04/Thousand.

Let's look at 2 buildings owned by Synergy Investments in Downtown Worcester

446 Main street has been undergoing a major rehab and is assessed by the city at $15,014,100 for 2024. So the tax bill should be $451k

22 Elm Street (which is the address of the 2 Buildings at Chestnut Place is valued at $17,441,700 for 2024 which has a similar tax bill of $524k

They have recently filed permits for $49mm to convert from office to Residential.

Let's imagine that the building goes up in value by $49mm to $66mm,  The tax bill on a $66mm residential building will be $907,500 so it only increases by $383,500 a year.

Synergy is requesting a tax exemption valued at $3.96mm over 15 years or basically a $264k a year reduction of taxes on the new building.

So essentially they will take an old highly taxed office building where people used to work, create essentially a new Residential tower which will make them a TON MORE MONEY and the City only receives an additional $119,500 in Tax revenue a year for the first 15 years or. a total of $1.8mm

Tax exemptions aside lets see how the City taxes property owners.

If you own a $73mm residential building or a $33mm commercial building you pay essentially the same $1mm a year in taxes to the city of Worcester.

This is the same owner Synergy Investments, and they realized that their investments in Worcester need to be in Residential buildings not in Commercial buildings.  

You see this happening all over the city as all the new buildings are residential not commercial.  

We realize that with hybrid work people don't need as much office space, but the city councilors who are voting every year for the lowest residential tax rate are driving the businesses out of Worcester.  Where are your constituents going to work?  Where are they going to shop?  Do we just want Worcester to be a RESIDENTIAL CITY where people live and have to drive or take a bus to go to work and shop in the Suburbs?