Two wrongs don’t make a right.
That’s the adage that keeps turning over in my mind as I continue to ruminate about the Sullivan Courthouse-First Street Garage Disposition debacle.
The first wrong — the original sin, if you will — was the state’s own disposition process for the Sullivan Courthouse and Middlesex County Jail, which put a public asset deeded in perpetuity for public use, into the hands of a commercial developer whose proposal was not the most popular, but which satisfied the state’s desire to squeeze the greatest windfall profit out of a sick building that was an eyesore when it was newly constructed in 1970 and has become even more of an eyesore since the state walked away from its responsibility to properly maintain it.
The second wrong could take place this Wednesday (Sept. 18) if six members of the City Council succumb to the developer’s full-court PR press and other persuasive techniques (it’s an election year) and vote to approve the disposition of 420 parking spaces in the First Street Garage, a municipal garage constructed with federal funds to serve as serve the public’s parking needs, affordably. This second disposition process was set in motion by the first, and the city’s Request for Proposals to lease the bulk of the unassigned garage spaces was designed to elicit a single bid, that of the prospective Courthouse developer, which was in the enviable position of bidding against itself to “win” a “competitive” disposition process with a predetermined outcome.
So we are working with two botched and outrageously opaque dispositions of public property. Approving the second one will compound the error and could set a risky precedent that every other real estate developer that would like to avoid paying the market rate to lease or construct parking will be watching closely.
And the saddest part of this story is that the Council is getting poor advice from our own city administration. In orchestrating a disposition process specifically designed to help the developer meet the parking requirements in the 2014 special permit granted by the Planning Board, which unwisely believed the developer’s unsubstantiated assurances that 420 parking spaces (80% of the developer’s parking requirement) could be secured in one nearby garage or another, the city administration are deep in “CYA” mode. Did anyone honestly expect the Planning Board to produce anything other than a favorable recommendation on the garage disposition? They literally had no choice, and now the Council is being strong-armed into believing that we have no choice either. And, I would add, it would be hard for the Council to negotiate more favorable terms when the city administration has put all its weight behind this bargain.
When Cambridge residents citywide are receiving large-format four-color postcards touting “over $200 million in benefits to the city,” are the city staff helping the Council to deconstruct these purported public benefits and compare them to other scenarios as well as to weigh the opportunity costs? No siree. In fact, the postcard boldly states, “Already supported by the City Manager and the Planning Board, the Council just needs to approve a parking lease in the First Street Garage….” (my bolding). Ladies and gentleman of the Council, get your rubber-stamps out.
The manager’s recommendation to the Council that we support the disposition never acknowledges that any other lease terms or alternatives exist and, worse, it suggests that if the parking disposition is not approved the building will continue to blight the area for the indefinite future. Further, allowing the developer and its allies to gin up fears that the asbestos long known to be inside the building has suddenly migrated outside and is poisoning its neighbors appears self-serving on the part of the state anxious to unload its asbestos-ridden albatross, and a city addicted to the private development growth model. How ironic that the fate of the former jailhouse is holding us all prisoner to low expectations and fear mongering, with the state and city acting as our jail keepers.
So let’s unpack the “$200 million” figure that’s being used to persuade us this is a deal we can’t pass up. The $200 million includes $120-150 million in new tax revenue over 30 years and $50 million in asbestos remediation, so the community benefits imputed to the parking disposition total about $77.4 million. The estimate for the cost of the asbestos remediation comes from the developer, and it serves their interest for it to be as high as possible to make other development scenarios look unaffordable. Demolishing the building might cost less but we have not been provided independent estimates for either way of cleaning up the site for redevelopment. I am sympathetic to the concerns of residents about the asbestos inside the building, and feel they deserve to be confident there is no health risk to living nearby, so I am glad that the State’s DCAMM agency has responded favorably to our request for air quality testing and will take additional measures to secure the site and to pump the water out of the basement. Any party that eventually remediates the site will be under the close supervision of MA DEP, but accountability and transparency could be greater concerns with a private developer in control of the site.
The community benefits include 30 years of below-market lease payments to lock up 80% of the remaining publicly available spaces in a city’s garage and to tenant a retail space that the city has left empty and neglected since 2006. The parking study showed that the garage is operating comfortably in the black, the unassigned parking is not going begging and would leave non-resident visitors in the lurch, and any extra space in the garage is intermittently used by the city for storage and municipal vehicles; so would the city have to find and pay for this flex space elsewhere if the developer ties up most of the unassigned space? The market for retail space along First Street could support a rent higher than what the developer is offering to take it off our hands for, so let’s subtract these $52.7 million in lease payments from the $77.4 million. Note that the lease payments compromise more than two-thirds of the purported financial benefits of the disposition. Lease payments are not a benefit that only a disposition to this developer can supply, and do not come without an opportunity cost. That cost in unaccounted for in the information provided to the Council.
Also left unsaid is how much a long term leasehold in the municipal garage is saving the developer — and what precedent it may set when other developers seek to permits that require large amounts of parking. The cost to construct underground parking is about $100,000 per space or about $42 million for 420 spaces. That money invested in another project or simply banked and compounded over 30 years would yield far more than what the developer will pay to lease the spaces. I would note that the lease payments are annualized, not a single upfront payment, so the present value of the money attributed as a benefit is free to generate income for the developer even as its being counted as a benefit to the city.
Then there’s a $2.5 million commitment to make some overdue capital improvements to the garage and $1.5 million to fit-out the 9,000 sf ground floor retail space — don’t retail tenants normally pay for their own fit-out? It’s a cost of doing business, not a community benefit.
A lump sum payment of $500,000 plus $26,000/year for 30 years ($780,000) would go toward capital maintenance of the garage. Again, commercial tenants are often assessed “CAM” (common area maintenance) fees on top of their triple net rents (which include taxes, insurance and maintenance). Have we been charging the other commercial garage tenants CAM fees, and if not, why not? And can anyone explain why the city has been willing to forgo 13 years of rent on the retail space if all that’s required to get it in shape for a new tenant is $2.5 million in capital improvements? In any case this $1.28 million commitment (60% of which is spread over 30 years) is trivial on a per square foot basis and, again, this is not a benefit that the city couldn’t have realized on its own with a modest capital investment.
Unquestionably the greatest benefit to come out of any redevelopment of the Courthouse site is the addition of affordable housing. This developer’s plan capitalizes on the outrageously outsized density afforded by the state’s having been exempt from zoning when the Courthouse tower was built, and leverages it to maximize commercial development on the site, allocating only about 5.5% of the floor area to housing. The 24 affordable units are counted as a community benefit and valued at $5-6 million, but if the site were to be redeveloped as housing at the same density the inclusionary requirement would be the full 20% of gross floor area. And if the state had done what the neighborhood originally wanted and accepted a housing developer’s bid, the entire site would be housing. So affordable housing is not a benefit that can only be realized through this development and we may even be short-changing ourselves through this deal.
A payment of $4.5 million to the Affordable Housing Trust is welcome and would fund the creation of about nine affordable units elsewhere. The incentive zoning payment of an estimated $7 million (another 14 units elsewhere in the city) is assessed on a per square foot basis and would be due from any developer of the site at this density. But how many low, moderate and middle income households will be displaced as a result of the increased demand for housing generated by about 420,000 sf of new commercial development? Is it more than the approximately 47 units that could be created through this developer’s plan?
There is a package of “Green Initiatives” and “PTDM Strategies” valued at about $5.7 million over the next 20-25 years. It includes the installation of solar panels on the garage for “up to” $1.5M and a $10K annual contribution toward their maintenance for 25 years. Why hasn’t the city already installed solar on the garage? Is that the full cost of an array and how much electricity does it generate? The community benefits tally sheet also assigns an annual cost savings of $140,000 over 25 years to the solar array — again, what has kept the city from making this modest investment to install solar and reaping this savings before now? As one of the richest cities in the Commonwealth and with our much-touted AAA bond rating, do we really need to wait for a developer to help us afford to save on energy costs?
The developer would install 20 EV charging stations (valued at $400,000) and would put $50,000 toward a Bluebikes dock as the only PTDM (parking and traffic demand management) strategy listed among the benefits to offset the estimated 2,000-plus new daily car trips. The EV chargers and a bike share station are appreciated, but hardly exceptional in the context of what would be expected of any major private redevelopment on the Courthouse site.
The other benefits are smaller payments totaling just over $200,000 per year for 10-30 years to support local community groups for workforce development and programs benefiting seniors and residents of affordable housing. Again, these are appreciated but customary for any major commercial redevelopment.
And finally just to state the obvious: this $200 million is largely money that is paid out over 20-30 years, not a check that’s written to the city upon disposition of the garage. So when residents email the City Council to say: “I want the $200 million” or come to City Hall wearing “Why Wait?” stickers printed by the developer, it’s tempting to reply, “Why not wait?”
Rejecting the disposition is an option, and it’s what I will do if it comes to a vote on Wednesday.
Please read my prior post First Street Garage Disposition: A Test of Vision and Will for a further explanation of what has shaped and informed my perspective.
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Jan Devereux City Councillor Cambridge, MA