WORCESTER — After growing criticism from city officials and business representatives over Worcester Polytechnic Institute’s plan to purchase two city hotels to convert into student housing, WPI officials said in a letter to the community that the purchases are a response to a looming shortage of student housing.
In addition, according to WPI officials, the properties would remain on the city’s property tax rolls for a certain period of time after purchase.
A WPI spokesperson shared the letter with Telegram & Gazette on Monday. WPI had not previously commented on its plans.
Timothy P. Murray, president and CEO of the Worcester Regional Chamber of Commerce, said WPI’s conduct surrounding the plan should give the city and its residents ample reason to be “skeptical” of WPI administration’s claims.
WPI intends to purchase the two hotels – the Hampton Inn & Suites at 65 Prescott St. and the Courtyard by Marriott at 72 Grove St.
The purchase attracted widespread attention after Worcester’s Economic Development Coordinating Council sharply criticized WPI’s plans in a letter to WPI President Grace Wang.
Members of the Economic Development Coordinating Council, an informal partnership between city agencies and some of the city’s largest business associations, say Worcester could lose $780,000 annually in property taxes and over $850,000 in annual tax revenue from the hotel and motel sector. In addition, over 100 jobs and 25 percent of local hotel room capacity could be lost.
The hotels are part of the 55-acre Gateway Park project, which used approximately $170 million in public and private funds to clean up contaminated land and rehabilitate old industrial buildings to create a mixed-use development. The project includes WPI’s 125,000-square-foot Life Sciences and Bioengineering Center.
The criticism continued through a signed letter and public statements from the majority of the Worcester City Council. The City Council’s agenda for Tuesday includes several items related to the proposed purchase as well as the PILOT (Payments in Lieu of Taxes) agreements the city has with WPI and other colleges and universities.
A Historical Commission meeting scheduled for last week to discuss the hotel plan was postponed until Thursday. The city manager’s office had already communicated with WPI on Thursday about a possible meeting.
The letter to the WPI community is signed by Michael Horan, WPI’s executive vice president and CFO, and Philip Clay, senior vice president for Student Affairs & Enrollment Management.
The planned purchase is confirmed, with the justification that WPI has not yet been able to provide an update because they are in “confidential discussions”.
The letter states that WPI is exploring strategies to address the projected shortage of student housing and provide students with “affordable, accessible and attractive housing options.” The letter states that WPI does not have enough space for senior students and that freshmen and transfer students are guaranteed on-campus housing.
“Many of you live in the city, so you know that Worcester’s housing market is extremely tight, with ever-increasing rents and a vacancy rate of 1.7%, one of the lowest in the country,” the WPI letter said. “This situation places a significant strain on our students’ ability to find affordable housing and further exacerbates the city’s housing shortage. Our plans to increase the number of our on-campus apartments will not only help our students, but also create space in the market for families and other renters impacted by the housing shortage.”
Initially, the hotels will continue to operate at their current capacity and the management company will remain in place, the letter states.
The plan is to convert the Hampton Inn into a student residence in 2026, while the Courtyard by Marriott will continue to operate as a hotel until at least 2030.
Until that time, the buildings would remain on the city’s property tax rolls and generate hotel tax revenue.
“This approach will benefit our students by providing them with housing close to campus, encouraging their participation in our vibrant campus life,” the letter said.
If WPI purchases the Hampton Inn, it may have to pay full property taxes through at least June 30, 2029, because of a tax increment financing agreement the city signed with the Hampton Inn’s original owner, SXC Prescott Street Hotel LLC, in 2014. The deal exempted SXC from paying a portion of the property taxes for a seven-year period from July 1, 2015, to June 30, 2022.
Baked into the contract was a clause that the property, regardless of who owns it, would remain taxable for 14 years from the first day of the increase agreement or the owner would make a tax-equivalent payment. The 14-year period ends on June 30, 2029.
Courtyard by Marriott is not part of the tax increment agreement. The hotel paid a total of $4.5 million in property taxes from fiscal years 2015 through 2024.
Murray said the letter did not mention the TIF agreement obligations for the Hampton Inn, adding that WPI administration was not keeping the hotel open “out of the goodness of their hearts.”
The WPI letter cites payments the university makes to the city under its PILOT agreement, which exceed $815,000 annually.
“Our university has stood on this hill for 159 years and we have always proven ourselves to be a solid member of the community and a good neighbor.”
The letter states that nearly 450 WPI employees are based in Worcester and that WPI Technologies and its resulting local and regional companies will employ more than 400 people and have raised approximately $1 billion in investments in 2023.
Murray, who signed the Economic Development Coordinating Council’s original letter and has been a leading critic of WPI’s conduct in connection with the purchase, said he was particularly surprised by what WPI’s letter did not say: namely, how the university would offset any losses in hotel and property tax revenues or capital expenditures to ensure the continuation of the Gateway Park vision.
“City leaders, the business community and employees should be suspicious of any claims and statements given how the WPI president and her leadership team handled this matter,” Murray said. “There was no transparency. It was not collaboration, it was not partnership.”
Regarding the housing shortage anticipated by WPI, Murray reiterated a point from the Economic Development Coordinating Council’s letter: WPI made a “strategic error” by not acquiring 200 beds from buildings formerly owned by the now-closed Becker College and another 200 beds that Becker had through long-term leases.
“They made a strategic mistake by not acquiring these properties. Now they are cannibalizing 25% of the City of Worcester’s hotel capacity, taking properties off the tax rolls, reducing hotel and motel revenues, and jeopardizing the integrity of what Gateway Park should be focused on.”
Murray said WPI has chosen not to engage in dialogue with the city and company leadership about student housing or about spending from the university’s endowment to build on existing WPI sites.
