Keurig Talks Tax Incentive in Lead Up to Town Meeting (Poll)

Representatives from Keurig, the company behind the K-Cup coffee makers that is from Reading to Burlington, met with Town Meeting members and residents last week to talk one of the two constants of the universe: taxes.

The meeting was to bring residents and Town Meeting representatives up-to-date on a proposed Tax Increment Financing agreement with the town that would save the company an estimated $3,256,352 over 15 years. The proposal is on the May 2012 Town Meeting warrant.

Town Meeting kicked off this past Monday and the Keurig agreement is the 13th warrant article. Town Meeting will reconvene this evening at 7:30 p.m. in the auditorium and this agreement will very likely be one of tonight's decisions.

, Keurig is looking to find a larger facility for its headquarters. Currently Keurig has a base of operations in Reading and offices in other New England states. Keurig is looking to close the office locations, including the Reading office, and move to a new location.

Keurig is considering occupying the Gutierrez-owned building at 63 South Avenue, where iRobot used to be located. The company is looking to lease the property for 15 years and do extensive upgrades to the site, including building extra space for its growing business.

"The site includes an 80,180 square foot vacant building .. the proposed plan consists of constructing an estimated 445,000 square foot expansion of office and research and development space in two phases," a release from Keurig states. "The project investment is estimated at $135.5 million in construction costs and $21 million for personal property."

According to Keurig representatives, the relocation of the company headquarters to Burlington would bring benefits for the community. First, the relocation wold mean that between 400 to 500 current, well-paid employees would be in town spending money in Burlington businesses. Keurig also plans to hire 400 to 500 new employees over the next four to five years. In the presentation last week, Keurig VP of Finance John Heller said jobs will be advertised to qualified Burlington residents first if the company were to come to town.

The members of the Board of Selectmen and Town Administrator Robert Mercier have all said they are very interested in bringing Keurig to Burlington. The next step in the process is the passage of a Tax Increment Financing (TIF) agreement that will help make the deal more palatable to the board of Keurig's parent company, Green Mountain Coffee, based in Vermont. Mercier said the TIF agreement is a tool the town can use, though he said it should be used seldom and intelligently, to attract a business that would be a boon to the town.

What is a TIF agreement:

In the presentation Keurig helped residents navigate this rather complicated tax incentive.

In short, a TIF provides a company with a sliding scale property tax exemption of up to 20 years based on the increased incremental value of the project property due to new, on-site investments.

For example, if a business moves into a site with a $200,000 tax levy, it will pay the full taxes that the site has been assessed. However, if the company builds an expansion or engages in renovations and increases the assessment, a TIF agreement can allow a discount on the taxes of the added value. For instance, if the company doubles the assessed levy, it could negotiate with the town to pay half the added tax levy. In this hypothetical case, the company after renovations/expansion would have a site with an assessed levy of $400,000 but would pay $300,000.

TIF projections for Keurig:

In the proposed deal, Burlington and Keurig would enter into a 15-year deal that would give Keurig the following tax breaks on the extra value added to the property: 65-65-65-75-75-60-55-40-30-25-15-10-5-5-5.

Mercier said that over 15 years, this would equate to about a 40 percent tax break on the added property value.

By the numbers:

Keurig provided some projections on what this deal would mean for Burlington and the company: 

Current base estimated annual real estate taxes:

• Current annual taxes payed on property to Burlington: $311,094
• Current taxes paid to Burlington over 15-years: $4,666,409

Estimated new real estate tax

• Real estate tax revenue to town with proposed TIF over 15 years: $6,111,359

Estimated additional revenues:

• Revenue from permit fees, hotel and meals taxes, over 15 years: $1,657,500

Combined estimated revenue to Burlington: 

• Combined estimated revenue over 15 years: $12,435,500

Proposed estimated tax savings for Keurig

• Projected real-estate savings over 15 years: $3,256,352
• Projected annual average real estate savings: $217,090

Burlington Patch will be at tonight's session of Town Meeting to report the decision by the members. In the meantime, what do you think? Take our poll and let us know if you think the agreement should be approved.