Efforts to bring Boston-based Investors Bank & Trust into Rhode Island
are gaining steam, with the financial-services company now approved to get two
tax breaks – one of them guaranteed for 10 years – if it proceeds to set up
shop in the state.
But the move is not yet a sure thing, Townsend Goddard, spokesman for the state Economic Development Corporation, acknowledged last week. IBT is “looking at a number of sites in and around Providence,” he said, and it needs to do some “company work” first. The EDC is hoping for a resolution by early fall, he said.
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“We are two steps into what is really a three-step process to bring them in here, and ultimately the decision is IBT’s,” Goddard said. “We want to move as fast as they’re willing to move.”
IBT’s chief financial officer, John N. Spinney Jr., spoke to the EDC board at a meeting last week and expressed his continuing enthusiasm for a move. He was not available for an interview, however; IBT has been fairly quiet about the deal.
Goddard said for Rhode Island, bringing in IBT would be good because it would boost the state’s “very competitive financial-services cluster,” a priority for the EDC.
An economic-impact study by the EDC estimates that the company would also produce about $422,132 a year in new personal income-tax revenue, based on a payroll of 300 employees making an average of $53,434.
IBT has experienced “dramatic growth” since becoming a publicly traded company in 1995, the study noted. The 2003 annual report for IBT’s parent company, Investors Financial Services Corp., shows assets under its administration topped $1 trillion last year, up 35 percent from 2002. From 1998 to 2003, operating revenue grew by 30 percent, and net income grew by 44 percent, to $91.8 million. (Employment, however, dropped by 205 people from 2001 to 2003, to 2,413 company-wide.)
Goddard said IBT, which is headquartered at the John Hancock Tower in Boston, is looking at Rhode Island because it wants to spread out key operations as a safety measure in the wake of the Sept. 11 terrorist attacks. Many companies, most notably Cantor Fitzgerald, were crippled by the World Trade Center attacks, Goddard said, and now “business continuity is the buzzword.”
Rhode Island is appealing to IBT, Goddard added, because it has a good work force (“They were very impressed with the colleges and universities in the state”) and a “vibrant quality of life,” especially in “hip, urban” Providence. Boston’s financial-services industry has a high worker turnover rate, about 30 percent, Goddard said, whereas in Rhode Island, it’s a much more stable 10 percent. And rents are much lower.
Still, those assets alone wouldn’t suffice. Having just taken a $7.2 million hit in Massachusetts after a key tax break was revoked, IBT wanted to ensure that the same wouldn’t happen if it came to Rhode Island, Goddard said.
To help IBT, Gov. Don Carcieri and the EDC supported a bill in the General Assembly to extend an existing tax exemption for so-called “passive investment companies” – firms that manage and invest other people’s money – for 10 years.
The General Assembly approved the bill in the last days of its session, but only after limiting the deal to IBT and requiring that in exchange, the company commit itself to bringing in at least 250 jobs paying at least $25,000 each, plus benefits.
The tax break applies to the income IBT generates from investing its clients’ money, Goddard said; other corporate income would still be subject to taxation. The EDC’s economic-impact analysis, however, considers only the projected payroll taxes.
IBT is also expected to invest about $15 million to set up its new Rhode Island offices, including $6 million in construction labor and $8 million in materials, furniture and equipment, according to the EDC analysis. At the meeting that IBT’s chief financial officer attended last week, the EDC’s board voted to exempt all those purchases from the state sales tax, an estimated $560,000 break.
The analysis does not calculate the value of the passive-investment tax break.
Asked whether IBT is seeking additional tax breaks from Providence or any other communities it’s considering for its new offices, Goddard said he wouldn’t know, because “it’s not something that we’ve been involved in.”
Nevertheless, Goddard said all of the EDC’s deals include “a very tight linkage”
to accountability, to ensure they pay off for Rhode Island. And they reflect
the realities of the market. “We do have to be cost-competitive; there’s no
question.”
