At a time when budget stress is wreaking havoc at all levels of government, the city of Somerville is preparing a $25 million bet on a speculative, $1.2 billion real estate development that, under the rosiest of forecasts, is unlikely to be completed for another decade.
The gamble, in dollar terms, would equate to more than 14 percent of the annual revenue generated by Somerville, a densely populated city with a limited footprint and, according to local business and public officials, an antiquated commercial tax base.
That the city?s prospective bond sale would be floated at such low points in the economy and commercial real estate market highlights its thirst for new tax revenue. That the sale?s proceeds would be wagered on such a controversial project, the long-delayed Assembly Square development, speaks to Somerville?s desperation to revitalize the one ? and possibly only ? tract of land with the potential to turn the city?s finances around.
On Dec. 2, Somerville?s board of aldermen approved a plan to issue $25 million in bonds to advance construction of a new subway station at the 145-acre project site, a neglected swath bordered by the Mystic River and a no-mans-land of empty lots within view of highway overpasses. But as one local business leader recently put it, the area?s problems also represent its greatest opportunities; just 2.5 miles from downtown Boston, Assembly Square?s proximity to major highways and potential waterfront views could make it an ideal destination for shoppers, diners and anyone else seeking relief from the region?s other congested commercial districts. City officials peg the project?s eventual property taxes in excess of $18 million a year.
The Massachusetts Bay Transportation Authority?s plan to build an Assembly Square subway stop is considered a make or break component to the project?s completion. Initial plans to pay for the MBTA station, estimated at $50 million, called for a mix of public and private funding anchored by a $25 million earmark sponsored by U.S. Rep. Michael Capuano, a Somerville native who once served as the city?s mayor.
The earmark was authorized in 2005, although no money has been appropriated to date, according to project officials and a Capuano spokeswoman. People familiar with matter say the money is unlikely to materialize, given the nation?s growing disdain for federal earmarks. ?I don?t think people should be banking on that,? said Wig Zamore, a co-founder of the Mystic View Task Force, a community group that has actively shaped the Assembly Square plan.
The situation ultimately prompted the city?s $25 million bond proposal. The plan, hotly debated in public meetings last month, is widely supported by Zamore as well as local business and city officials interviewed for this story. ?We can?t lose the train station,? said Monica Lamboy, the executive director of Somerville?s community development office.
The bond plan awaits final approval by the state. The securities sale would likely occur in late 2011, according to Lamboy.
Don Briggs, an executive with the project?s owner, Federal Realty Investment Trust of Maryland, said Assembly Square?s first phase will likely break ground in late 2011 or early 2012. Briggs said Federal Realty is ?knee deep? in preliminary construction work and has committed $15 million to the MBTA stop.
City filings indicate some of the $15 million commitment is shared by IKEA, the Sweden-based furniture and homegoods retailer that has been struggling to open an Assembly Square store since 1999.
To be sure, IKEA?s travails are emblematic of Assembly Square and its inability to take form. Once home to an auto assembly plant and a failed mall, the project site was declared ?blighted? by the city in 1980. In the years since, myriad development plans and property owners have come and gone. Law suits and community backlash scuttled most of those earlier blueprints.
However, IKEA?s commitment to the area has more or less driven the current development plan, a so-called ?urban village? featuring 2,100 rental units, 1.15 million square feet of retail space and another 1.75 million square feet of office space. The six-stage development plan is slated for completion in 2019, based on current schematics. Federal Realty?s Briggs said the entire deal will cost in excess of $1.2 billion.
The project?s long-term financing is yet to be determined, he said. Likewise, IKEA spokesman Joseph Roth said the company has yet to set a timeline for its development plans. Much depends on whether Somerville can come through with its bond pledge.
Despite the uncertainty, local leaders say the city?s financial commitment to the project is imperative. They say the risks of the bond sale are outweighed by the risks of doing nothing. ?I?m not in the business of making predictions,? said Stephen Mackey, president of the local Chamber of Commerce. ?But the city had to move to ensure the whole package would stay together.?
Read more: Somerville eyes big bet on long-stalled project | Boston Business Journal
