General Electric (GE) , the manufacturer that traces its roots to Thomas Edison's light bulb, is moving its headquarters to Boston as CEO Jeffrey Immelt amps up his investment in digital manufacturing.
The relocation caps a year of changes to the company's identity that included the acquisition of Alstom's power business, the largest deal in the GE's history; the collapse of a second attempt to sell its appliance division; and the wind-down of much of its sprawling lending business, with agreements to sell $157 billion of its portfolio.
GE announced this summer that it would consider moving out of Fairfield, Conn., its home of 40 years after what the company characterized as an onerous increase in state taxes. The company said Wednesday that executives had been informally reviewing the makeup and location of the headquarters for three years.
Moving to Boston, an area home to 55 colleges and universities including Harvard and the Massachusetts Institute of Technology, reflects Immelt's plan to outpace competitors by offering software products and equipment that enhance manufacturing across the industrial spectrum. The company's Predix platform, which serves as the manufacturing counterpart of systems like Apple's iOS and Alphabet's Android, allows partner companies to develop apps that can optimize equipment used in businesses from railroads to wind-turbine farms. It will invest $1 billion in digital businesses this year, adding workers and offering 100-plus apps.
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"Massachusetts spends more on research & development than any other region in the world, and Boston attracts a diverse, technologically fluent workforce focused on solving challenges for the world," CEO Jeffrey Immelt said in a statement. "We are excited to bring our headquarters to this dynamic and creative city."
The relocation will have no material financial impact on GE, the company said. Executives worked with Massachusetts Gov. Charlie Baker and Boston Mayor Marty Walsh to secure an incentive package that will curb the costs of relocation while benefiting both the state and city, GE said. Roughly 800 employees will be located in Boston, including 200 corporate staff and 600 digital industrial product managers, designers and developers.
The headquarters will be located in Boston's Seaport District, and employees will begin moving to a temporary location in the city starting this summer. The company will offset some of the expenses by selling its offices in Fairfield and at 30 Rockefeller Center in Manhattan.
GE didn't disclose the specific incentives it negotiated for the move, which was first reported by the Boston Globe. Massachusett's corporate tax rate of 8% in 2014 compared with 9% in Connecticut, according to an analysis by the Tax Foundation, an independent researcher. The overall business tax climate in Connecticut ranked 42nd among the 50 states, while Massachusetts ranked 24th, the foundation said.
The cost of living is less than $1 lower in the Massachusetts city, according to Bankrate data.
"As much as all the discussion for six months has been about taxes, this decision wasn't about taxes," said Mike Tetreau, Fairfield's first selectman, a position comparable to mayor. GE would have contributed about $1.6 million in tax revenue to Fairfield's $290 million budget, he said in a phone interview.
"We have a whole number of other major corporations in Connecticut, and we've got to make sure that we're doing what's best to create a health economic environment for them to stay in Connecticut," he said. "We need a more aggressive plan to address our corporate citizens and explain to them why Connecticut is job friendly and create a culture in Connecticut that is job friendly, because what we need are more jobs."
Local and state officials will meet with GE in coming weeks to discuss details of the transition and how its impact might be minimized, Tetreau said. While GE has said it would maintain a significant presence in Connecticut, the company hasn't discussed Fairfield specifically.
GE had moved to the area in the 1970s, after leaving its longtime offices on Lexington Avenue in Manhattan, and local government officials had speculated it would return to the Big Apple when Connecticut failed to make sufficient concessions on its taxes.
It was in early June, just a day after Connecticut's legislature approved a budget plan with a $1.9 billion tax increase, that Immelt said he would form an exploratory committee to consider relocating. Changes to the state's tax laws included a so-called unitary tax that effectively places a levy on corporations by altering how the government accounts for income earned outside the state.
Other multinational corporations in Connecticut complained, too, including insurance giants The Hartford Group, Travelers and Aetna, prompting the General Assembly to pare about $350 million in taxes from its 2016 budget during a special meeting on the state's deficit in December. The increase in the unitary tax was capped at $2.5 million above the current level.
While New York would have provided an easy commute for the 800-some employees in Fairfield, Boston was a tough competitor, with the mayor and governor working closely together, according to the Globe. The state was eager to shed the "Taxachusetts" label it had been stuck with in the '70s, the paper reported.
Still, GE has deep roots in New York. Founder Thomas Edison started New York City's first central power station in 1882, and the company was the exclusive provider of switches and switchboards for the Empire State Building.
GE reported profit of $5.6 billion, or 56 cents a share, on sales of $42 billion in 2014, according to a company statement. About $31 billion of total revenue came from manufacturing operations.
The company, which makes products from jet engines to medical equipment and railroad locomotives, already has nearly 5,000 employees in Massachusetts. GE moved its life sciences headquarters to Marlborough in 2014 and said last year that its energy services start-up, Current, would be centered in Boston.
GE climbed 1.4% to $28.24 Wednesday in New York. The shares have gained 18% in the past year.