Issue Date: 7/12/2007, Posted On: 7/11/2007
Columbus Center seeks more public funding
by Linda Rodriguez
Developers of the Columbus Center project have applied for up to $35 million in a tax-exempt bond loan from Boston Industrial Development Financing Authority (BIDFA), an agency of the Boston Redevelopment Authority (BRA). A public hearing on the request was held July 11 in the lobby area of BIDFA?s Drydock Avenue office on Wednesday morning.
The request comes on the heels of the controversy kicked up by Gov. Deval Patrick?s decision to award the project developers a $10 million grant. The grant was announced June 28 and was one of 21, totaling $76 million. House Speaker Sal DiMasi and state Rep. Byron Rushing, who both represent the South End, oppose the grant because they said developers promised they would construct the project with private funds. State Sen. Dianne Wilkerson, who represents the South End, championed the grant.
Conducted by Frank Tocci, deputy director for financial services for the BRA, the meeting lasted less than an hour and was attended by only two members of the public, Irena Burns of Arlington Street and Ned Flaherty of the South End, who has been a vocal critic of the project. It addressed an application by Arthur Winn and Roger Cassin, the developers of the air-rights project, for the tax-exempt bonds to go toward building a hotel and restaurant. The Columbus Center, which has been in development for more than a decade, would be built over the Massachusetts Turnpike, parcels 16, 17, 18, and 19, between Clarendon and Tremont streets; the bonds would only be applicable to building the hotel on Parcel 16.
The project is currently expected to cost more than $700 million, according to Alan Eisner, a spokesman for the developers, nearly double the initial cost estimates. The $35 million bond would offset rising construction costs, which Eisner said is behind the Columbus Center?s inflating price tag. However, the savings to the developer as a result of the bond being tax exempt would only be around $5 to $7 million, he said.
Much of the controversy around the Columbus Center and the recent $10 million grant awarded by the state to offset the cost of building a $140 million deck over the Turnpike has had to do with the recollection of residents, activists and politicians that the developers initially claimed that they would build the project without public funds. But Eisner said that the developers never promised to build the project without public assistance. ?What they said was that, this was way back when the price of the project was much, much lower, that they didn?t anticipate seeking any funds at that time, but that they did not rule it out for the future,? Eisner said.
Eisner also said that the developers have received a $2 million community development action grant from the state department of Housing and Community Development, a $20 million MassHousing loan, and the $10 million grant from the state ? in all, ?a very small percentage of a $700 million-plus project.?
The Columbus Center project is eligible for the tax-exempt bonds because of a recent Empowerment Zone designation covering the air rights parcels through the Massachusetts Turnpike. The designation is administered by the U.S. Department of Housing and Urban Development (HUD) and was created to stimulate business growth and economy in ?distressed communities,? according to HUD?s Web site, by making low-interest loans and tax credits available to businesses within the zones in return for job creation and growth.
The Empowerment Zone in Boston was expanded to include air rights parcels over the Turnpike from Brookline to the Southeast Expressway ? an expanse covering already-developed parcels like the Prudential Center. In addition to being eligible for the low-interest bond, the Columbus Center could also receive tax credits for employees on the company payroll living within the Empowerment Zone and reduced capital gains taxes.
According to Tocci, the hotel and restaurant will create 234 jobs for the community, after the project is built.
Around $130 million was set aside in tax-exempt bonds for Boston-area Empowerment Zone initiatives; the funds must be designated for developers by Dec. 31, 2009, when the $130 million allocation expires. Other projects that have benefited from the Empowerment Zone designation and the tax-exempt bonds include the Crosstown Center in Roxbury and the Fenway Community Health Center. Should the Columbus Center loan be approved, $32 million will remain in the Empowerment Zone allocation.
The bond has already been approved by Boston Connects, Inc., the city nonprofit charged with locally administering the Empowerment Zones. Wednesday?s hearing was mandated by the federal government as part of the bond approval process and represented the public?s opportunity to comment directly to BIDFA about the loan.
The members of the community who attended the meeting raised a few questions about the loan and if BIDFA was aware of the whole financial picture surrounding the Columbus Center?s other applications for public funds or loans. Tocci was unable to answer that question at the time. Most of the other questions raised at the hearing came from members of the media, who outnumbered the area residents.
Following this hearing, the bond will now have to go before the City Council for a hearing before returning to BIDFA for approval, and then to the state?s Development Finance Agency for ultimate approval. The whole process should take 60 to 90 days, said Tocci, and no date has been set for a City Council hearing. Tocci also said that though no interest rate has been established for the bond, it would likely be a half to one percent lower than market rate.
Though there is no timeline yet for the project, Eisner said that, should all the financing come through, the developers hope to begin construction by the end of the summer. Eisner said that as of this point, the developers have already contributed more than $40 million of their own funds to the project and that no investors have pulled funding from the project.
?The developers is working diligently with the city and state and their own investors to try to put a package together that will allow it to begin by the end of the summer,? said Eisner.
