Columbus Center: RIP | Back Bay

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While the $10 MM subsidy is certainly open to question on grounds that Ron has articulated well (i.e., other neighborhoods and cities more deserving of scarce resources), the whole notion that Columbus Center is being further subsidized by "below market" cost of the air rights to the developer is a complete figment of Ned Flaherty's and Marty Walz's imagination, and sadly echoed in the Herald editorial this morning.

The lack of sophistication in the economic thinking in this city is sometimes amazing.

To state the obvious, for something to be "below market" implies that there is a market to compare. But there are so few air rights projects (and in such different locations) it is difficult to establish their value. And because it will clearly cost tens of millions to build the deck (a poster above suggested $100 MM, which is plausible), the value of air rights parcels is a tiny fraction of the value of parcels on solid ground of similar size. Indeed, it isn't clear to me that there is a ton of value in these air rights parcels themselves - the costs other developers incur to acquire land is in the case of air rights largely required to build the required decks, even if the leases are free. Certainly if developers had been held to the zoning standards of the surrounding neighborhoods (i.e., permitting only modest height), it is clear that the value of this air rights lease would be zero.

Walz and Flaherty, who have opposed this project from the start, continue to throw around numbers that suggest that if we just snapped our fingers the decks would magically appear - and to imply that if the parcels were handed over to another developer, a lower density project would appear on the site in a jiffy. Flaherty is a garden variety NIMBY who lives in 75 Clarendon and would just as soon the Pike be left untouched, so his intellectual dishonesty isn't hard to understand. (The most rabid opposition to CC has always been from residents of 75 Clarendon and the Pope building whose views would be compromised - they LIKE the trench). Walz, however, is an elected representative and a lawyer of some academic distinction. Is she being disingenuous, or is she really this dumb?
 
A host of editorials from the sensationalist globe today.


Public subsidy, public disapproval

July 21, 2007

WHEN HOUSING and Economic Development Secretary Daniel O'Connell says that the proposed Columbus Center will "reconnect two important neighborhoods in Boston," whom is he kidding? There's no disconnect between our neighborhoods. Anyone on Clarendon Street who wants access to the South End just ambles across Columbus Avenue ("DiMasi rips $10m grant for project," Page A1, July 19).

Now picture the disruption resulting from a behemoth condo, hotel, and retail center hovering over this residential area. If "public support" means neighborhood reaction, we've already testified that this enormous development will divide our communities. It doesn't take an urban planner to visualize the ensuing chaos and alienation.

It's reassuring that Representatives Byron Rushing and Marty Walz and House Speaker Salvatore DiMasi are listening to the folks who elected them.

JEAN GIBRAN
Boston

WE AGREE with the Globe's assessment regarding the discussion of public subsidies for the proposed Columbus Center: "If this is the future of building on air rights in Boston, then developers should stay on the ground" ("Development: Enough with the subsidies," Editorial, July 16).

Many of us feel the sting of bait and switch. The approved project exceeds the community design guidelines set forth in the 2000 Boston Redevelopment Authority publication "A Civic Vision for Turnpike Air Rights in Boston." It will result in a 35-story tower looming over the westernmost parcel. As the project has evolved, it has ballooned in square feet, and the affordable housing component has not been fully incorporated. Although the public record seems incomplete and the participants in the process were prevented from electronically recording the meetings, those who live in the affected neighborhoods were repeatedly told that height and mass were required to make the project economically viable and that the developers were using their own funds. Now we find that they want a huge public bailout. It is time to stop any consideration of public financing for this project. If it is too expensive for the developer, it should be scaled down to a project that fits "A Civic Vision."

JACKIE YESSIAN
Chairwoman
Neighborhood Association of the Back Bay Boston

RECENT REPORTING on the public subsidies given to Boston's proposed Columbus Center project have failed to mention what makes this project different from others in Massachusetts and uniquely ill-suited to public subsidy: The Turnpike Authority chose this developer without an open competition. Other than the developer, no one knows what the economics of this project are or whether this project is the best use of this real estate. The market never had the chance to operate, as it does through the bidding procedures otherwise required for the sale of public land in Massachusetts.

We do know that this developer has had an extraordinarily long time to try to make the proposal work. The market has determined that it does not.

MARK MERANTE
Boston
The writer is a member of the Columbus Center Citizens Advisory Committee.

REGARDING THE Columbus Center and similar proposals, does it really make sense in this age of security concerns to be building over open highways ?

ALLAN DUTTON
Jamaica Plain
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With that said, is the columbus center actually 100% approved? Is there still a chance the Nimby's can win, besides the $10m?
 
Well, it is approved, it just isn't being constructed. The problem is the long we wait the more expensive it gets, which is why there are all these subsidies.
 
But basically they could start construction anytime they want providing the funds are in order? I am sure they are looking into other funding options such as bonds and loans etc. Each day this project seems to get worse and worse support. I fear that it is going to be axed.
 
Towering hypocrisy over project

July 26, 2007

YOUR JULY 16 editorial ("Development: Enough with the subsidies") and chorus of July 21 letters ("Public subsidy, public disapproval") against state subsidy of the proposed Columbus Center project all ignore the fact that the project as approved requires public benefits such as parks, subsidized housing, and subsidized day care.

In most places it's the public and not private developers that must pay for those benefits.

Ironically, the same activists who complain about the lack of affordable housing don't want to see any housing built at all. Kudos to Governor Patrick for saying no to not-in-my-backyard types.

JOHN A. SHOPE
Boston

The writer is past president of the Bay Village Neighborhood Association.
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Finally, someone who can actually see reality.
 
Winn's folly
By Steve Bailey, Globe Columnist | July 25, 2007


House Speaker Sal DiMasi got it exactly right last week when he asked: How many times are taxpayers going to pay for Arthur Winn's deck?

Boston is in the midst of the kind of building boom we haven't seen in more than a decade, and Winn is desperate to finally get a shovel in the ground on Columbus Center, his long-proposed mini-city across the Massachusetts Turnpike. The reluctant developer has a reported $40 million of his own money in the deal. Now, he says, it's our turn to give.

Winn's story -- if not his numbers -- is always the same: Blame the deck.

The man has sold the same story everywhere he has gone. He told the city and the community that he had to build far bigger than the zoning allowed to pay for the high cost of building over the turnpike. Then he used the same story with the Massachusetts Turnpike Authority to justify a below-market rent in negotiating a lease for the air rights. Now he is back for more, making a case for large, direct public subsidies after suggesting (at the least) that he had no plans to go that route. As DiMasi put it: How many times do we have to pay for one deck?

Winn, a Republican moneybags, spent four years making his case for subsidies in every corner of the Republican Romney administration. Here is what he heard -- repeatedly -- from the pro-business Romney people: Apply like any developer for the various housing and transportation programs, but there is going to be no special deal for Arthur Winn. Now Democrat Deval Patrick, champion of property tax relief for the little guy, is willing to write the kind of large check that Mitt Romney, our CEO governor, would not to build million-dollar condos and a luxury hotel.

Patrick has signed off on $10 million for infrastructure costs from a fund the Legislature authorized for economic development. This is on top of approximately $60 million in a variety of public financing sources, including loans, grants, and city bonds. DiMasi, an architect of that economic stimulus fund, is appropriately unhappy. The persistent Mr. Winn, as always, wants more still. (It was just two years ago Winn's pal, state Senator Dianne Wilkerson, slipped $4.3 million into the stimulus bill for the deck, which DiMasi killed. Now Winn wants $20 million.)

It's the deck, he says. The price of the deck, Winn says, has gone from $60 million to $160 million in six years. But an analysis completed for the Turnpike Authority in March 2006 as part of the lease negotiation put the premium of building over the turnpike far lower, $34 million. Another study in 2002 put the premium at about $21 million.

"Only $12 million of the $800 million project is direct grants," says Alan Eisner, a Winn spokesman. "The rest is low-interest loans that will have to be paid back. In return, the city is getting over $50 million in direct public benefits that were worked out with the community in 100 community meetings." (Public benefits, by the way, the public is now expected to fund.)

In the end, Winn made a bad bet. He lost valuable time trying to squeeze tens of millions out of the public sector. The real cost, however, was in time: While he hesitated, the cost of the project exploded from $300 million to $800 million, or so he says. Condo prices softened, and other developers leaped ahead of him in the market. This is what risk is all about.

Columbus Center would be a good project for the city, helping to knit together the South End and the Back Bay. But not if it does not make economic sense. It is not like there aren't plenty of others things that need doing. How much, just for starters, is replacing the crumbling Storrow Drive tunnel going to cost?

Steve Bailey is a Globe columnist. He can be reached at bailey@globe.com or at 617-929-2902.


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Did the nearly $20 billion Big Dig make economic sense?

If it did, it did so in the same ways Columbus Center would:
-it helped bury a highway and created parkland, improving real estate values
-it spurred development that can be taxed by the city, some of which will be housing that will relieve the dearth of supply that drives up housing costs
-it created many construction jobs

Additionally, no one seemed to mind how often construction costs have seesawed over the two decade period the Big Dig has been under construction.

So why can Boston build the gargantuan, $20 billion project and not the much smaller one for a tiny fraction of the cost?
 
It's the deck, he says. The price of the deck, Winn says, has gone from $60 million to $160 million in six years. But an analysis completed for the Turnpike Authority in March 2006 as part of the lease negotiation put the premium of building over the turnpike far lower, $34 million. Another study in 2002 put the premium at about $21 million.
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How can you say that the price is one thing 5 years ago when you just said the price went up over 6 years?!?!
 
The Globe said:
"Only $12 million of the $800 million project is direct grants," says Alan Eisner, a Winn spokesman. "The rest is low-interest loans that will have to be paid back. In return, the city is getting over $50 million in direct public benefits that were worked out with the community in 100 community meetings." (Public benefits, by the way, the public is now expected to fund.)
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Is he saying that as if it were a bad thing? :?:
 
In the end, Winn made a bad bet. He lost valuable time trying to squeeze tens of millions out of the public sector. The real cost, however, was in time: While he hesitated, the cost of the project exploded from $300 million to $800 million, or so he says. Condo prices softened, and other developers leaped ahead of him in the market. This is what risk is all about.
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O please. If it wasn't the NIMBYs whining about every aspect of this tower and the FAA making up the most ridiculous excuse of it being in the way of flight paths, this project would have benn done. The blame goes to those NIMBYs, not just Winn.
 
make the project viable

If the developer no longer has to include the 45 affordable housing units on site then the project might be viable.

My dollar figures are estimates
800,000 market rate
300,000 less the affordable rate
---------
500,000 times the number of units 45 = $22,500,000

and 45 fewer $800,000+ buyers looking in the neighbor hood.

Add to the the subsidized day care and the affordable units built in other areas.

this is not mitigation is greed on the mayors part and the neighborhood
 
Bailey shades his numbers as much as he accuses Winn of doing. Maybe Bailey is trying to show he can out-scam Winn.

It's the deck, he says. The price of the deck, Winn says, has gone from $60 million to $160 million in six years. But an analysis completed for the Turnpike Authority in March 2006 as part of the lease negotiation put the premium of building over the turnpike far lower, $34 million. Another study in 2002 put the premium at about $21 million.
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The 'premium' as I understand it is the additional cost of having to build a deck as your foundation, when compared to what would have been your cost for excavating and building up from traditional terra firma. Bailey's numbers therefore are apples and oranges, and he should know better.

And as the Globe itself noted just two days ago, the cost of filling in a badly deteriorated Storrow Drive tunnel and replacing it with a surface road is now $80 million. So a big deck over the turnpike seems relatively cheap by comparison.
 
The state should pay for the deck, it's a no brainer for all the deck parcels. If Winn can't make CC work on the paid for deck then reopen the bidding.
 
The Globe said:
State agency ignores own guidelines in condo loans
Awards $20m set aside for apartments

By Andrea Estes, Globe Staff | August 22, 2007

A state agency created to help foster affordable housing ignored its own guidelines by awarding more than $20 million in housing loans to the controversial Columbus Center development.

A spokesman for MassHousing, a quasi-public agency, acknowledged that the money for the low-interest loans will come out of funds specifically set aside for affordable rental apartments, not condos in a high-end complex such as those planned above the Massachusetts Turnpike between Back Bay and the South End.

"Columbus Center at this point is the one exception of a project that isn't rental and doesn't meet the guidelines," said Eric Gedstad, MassHousing's communication manager. "But it is still a worthy project, so we made a commitment to it."

The $700 million megadevelopment, which will span three city blocks, is one of 36 projects to get money from the $100 million "priority development fund" created by Governor Mitt Romney in 2004. MassHousing approved the Columbus Center loans last year, although they have not yet been paid out.

Governor Deval Patrick's administration came under fire recently when it awarded developers Arthur Winn and Roger Cassin a $10 million grant to construct a deck over the turnpike. Lawmakers and community activists said the developers had repeatedly said they would not seek public subsidies for the project, an assertion that Winn and Cassin deny. A request for an additional $10 million grant is still pending.

House Speaker Salvatore F. DiMasi, who urged Patrick to rescind the $10 million grant, said the project should not receive MassHousing loans that were designated for another purpose.

"Funds set aside to encourage affordable rental housing should not be used to help subsidize multimillion-dollar condos," DiMasi said last week.

"If MassHousing cannot provide an adequate explanation for whether these funds were appropriately used, I would hope the auditor or inspector general investigates."

Representative Martha M. Walz of the Back Bay called the agency's decision to funnel rental housing money to Columbus Center "utterly bizarre."

"It's one more bizarre example of people trying to save what appears to be an unviable project," she said. "If it isn't viable, it shouldn't be built. Why are we throwing money at something the private market won't support?"

Not only was the fund designated for rental housing, but the agency had developed guidelines limiting loans to no more than $75,000 per unit.

In their initial loan application, the Columbus Center developers said that 44 units would be affordable, which would mean that they are receiving more than $450,000 per affordable unit, about six times the limit.

They have now increased the pledge to 75 units, which would translate into nearly $275,000 per unit. The complex is slated to have a total of 443 units.

MassHousing guidelines said exceptions to the $75,000 rule could be made in two situations: If the loans were to be repaid by developers quickly or there was a need to loan more money to meet "high priority public policy objectives."

But neither of the two loans approved by MassHousing in 2006 -- one for $15 million and another for $5.6 million -- is scheduled to be repaid quickly.

The larger one, which carries an interest rate of only 4 percent, does not have to be repaid for at least 30 years. The smaller loan has a 6 percent interest rate and must be paid back within 35 years.

The project also does not comply with MassHousing affordability guidelines, which require that at least 25 percent of all units in a project be affordable to households who earn no more than 80 percent of the Boston area's median income.

In its application, the Columbus developers said 22 of the 44 affordable units would qualify, or about 5 percent of the 443 units in the complex, while the other 22 would be affordable to those earning no more than 120 percent of the median income.

Alan Eisner, a spokesman for Winn Development, said the developers did not specifically request money from this fund, but said public assistance is critical if the project is to be built.

"We feel the low-interest loans are justified and necessary in light of the unprecedented public benefits of this project, which now total in excess of $50 million including transportation improvements, three new parks, and a new ground-water system," Eisner said. "With the housing market in turmoil nationwide, this project will provide a timely boost to the city of Boston."

Gedstad said that while the developers did not apply for money specifically from the priority development fund, the fund was the only one available to provide the gap financing the developers said they would need to pull together enough money to pay for the project.

The agency tapped the fund despite the guidelines, Gedstad said, because Columbus Center represents "a rare opportunity to transform the landscape of downtown Boston and most importantly because our mission is to provide some affordable condominiums in a neighborhood where there really is no such thing."

The $20.6 million in loans is not the only money Winn Development is in line to receive from the fund.

MassHousing also approved an additional $6 million in loans for two other Winn projects -- both apartment complexes.

Between the three developments, Winn Development will receive nearly a third of the $97 million that has already been committed to projects.
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