The Mystic View Task Force has sent a letter to BOA Finance Committee Chair Maryann Heuston and to OSPCD Executive Director Monica Lamboy, cc’d to other members of the BOA, urging delay in voting on the proposed Assembly Row DIF (a District Increment Financing proposal to help pay for critically needed infrastructure, including gap funding for the Orange Line T stop). While we believe that a DIF may be the best available mechanism for moving forward on Assembly Square development, we are concerned that the proposed DIF puts a disproportionate share of risk on the City and fails to adequately hold the developer accountable. We believe that the artificially imposed December deadline needlessly deprives the BOA of the time needed to craft a more beneficial DIF proposal.
We encourage concerned Somerville residents to join us at Tuesday’s Finance Committee meeting (Nov. 30 at 7pm at City Hall) to support our call for a delay in the decision on the DIF to allow time for adequate analysis and the opportunity to negotiate a better proposal.
The following text from the MVTF letter lays out the our specific concerns:
On behalf of the Mystic View Task Force, I am writing to request that you delay any decision on the proposed Assembly Row DIF, pending completion in the next 30-60 days of (a) an objective and comprehensive analysis of the costs and risks of that investment, and (b) an expert assessment of options for amending the proposal to reduce the City’s financial exposure. Any such analyses and assessments, any amendments to the proposed DIF pursuant to such studies, and/or the rationale for going forward with the current proposed DIF in light of said studies should be made available for public review and comment prior to a vote by the Board of Aldermen.
While we share the Mayor’s sense of urgency about identifying resources that can fill the gap in funding for the Orange Line T stop and other essential infrastructure, and while we agree that a DIF could be a reasonable tool for generating those resources, we are concerned that the proposed DIF saddles the City with too much risk and requires too little in the way of assurances from the developer. We believe that the artificially imposed December deadline for BOA action needlessly precludes negotiating a more considered alternative that would reduce the City’s financial exposure and hold the developer more accountable.
The proposed DIF is a $25 million gamble on the increased property taxes generated by development of a small portion of Assembly Square… which comes on top of the $50 million I-Cubed gamble on the value of payroll and sales taxes generated by yet-to-be-identified businesses that locate in the yet-to-be-developed buildings in the rest of Assembly Square. The City would collateralize both loans: if development is significantly delayed or falls short of expectations, the City would have to tap other municipal revenues to meet its repayment obligations, and could even face bankruptcy. (What will these arrangements do to the City’s bond rating?)
Although legal documents codifying the DIF are not attached to the application which the BOA is being asked to support, it is clear that the proposed DIF entails more than just a $2 million per year repayment obligation. For some uncertain portion of the 30 year DIF repayment period, until development in the rest of Assembly Square generates sufficient additional property taxes, Somerville taxpayers will also be paying up to $4 million per year to subsidize the development covered by the DIF:
- Once development covered by the DIF is completed, Somerville taxpayers will be paying as much as $2 million per year to subsidize municipal services for the residents of the 400 units of housing, the hotel, and retail tenants (since property taxes generated by that development are obligated to bond repayment).
- The DIF application indicates that the City plans to purchase — at market value — the infrastructure it will have just paid to develop. (In the absence of a Figure 4.5.5 in the DIF application, Mystic View estimates a buy-back cost equal to the cost of developing the infrastructure, that is, $2 million per year). City residents deserve to know why the City is committing to pay market value to purchase infrastructure that will have been developed at the taxpayers’ expense. Other developers might simply deed the infrastructure over to the City, or establish permanent easements to allow ongoing maintenance.
In the absence of attachments containing the actual DIF language:
- There is no indication that the developer — especially the parent company, which is the only entity without artificially limited liability — is responsible for any costs associated with failure to fulfill development expectations. Worst case – are there provisions preventing the developer from selling the improved property — and reaping the benefit of the infrastructure funded by the I-Cubed and DIF monies — before it completes the development we’re all counting on to generate the payroll, sales, and property taxes needed to pay off those infrastructure loans/bonds?
- There is no indication that the developer / parent company (and not just the corporate shells created to hold and develop the property) is being required to guarantee — i.e., collateralize — the quality of the infrastructure funded by the DIF. In the absence of such a provision, it would devolve to the City — as the new owner — to fix any problems with the roads, intersections, or stormwater management infrastructure constructed or improved by the developer. (For an example of why such provisions are essential, consider the original Patriot Stadium (a.k.a. Schaefer Stadium), which opened with defective plumbing that required repairs whose cost exceeded the initial cost of constructing the whole stadium.)
The Mystic View Task Force remains strongly supportive of the proposed long-term vision for Assembly Square, with its prescribed mix of office/R&D, residential, and retail development. We are, however, deeply concerned that the City has assumed a sharply disproportionate share of the financial risks in its partnership with the developer, and has asked for too little in the way of assurances about the pace and type of development, which are crucial to its ability to re-pay the I-Cubed and DIF loans for infrastructure, and which will determine whether Assembly Square fulfills expectations about jobs for Somerville residents and generates property tax revenues desperately needed to cover the increasing costs of City services.
The MVTF believes that the DIF should memorialize an agreement between the City and the developer to expedite the process of bringing office and, especially, R&D businesses to the Assembly Square development, to maximize the likelihood that I-Cubed obligations are met and that the development generates the hoped-for tax revenues at the earliest possible date.
Of course, in the current economy, Somerville residents would welcome any job creation. The City’s DIF application makes it clear, however, that the initial development will not result in creation of the kinds of jobs that pay wages adequate to sustain a Somerville tenancy: ”Build out of the [parcels included in the DIF] will create 500 permanent full- and part-time retail jobs with an average compensation of $24,000 and 25 permanent full- and part-time cinema jobs with an average compensation of $20,000.” A Somerville resident paying what HUD calls a “Fair Market Rent (FMR)” of $1,149 for a 1BR apartment (the FMR includes all utilities) would spend nearly $14,000 (57%) of her/his $24,000 annual salary on housing. If that employee had a family and rented a 2BR apartment at the FMR, they would have to spend about $16,000 (67%) of their $24,000 salary on housing. That’s not sustainable.
With the exception of the agreement with Ikea to give Somerville residents a head start on job application, there is no promise that any of the Assembly Square jobs will go to Somerville residents, and there is no provision, at this point, for any worker education/training to enhance the employability of Somerville residents competing for those jobs. According to the DIF application, “No workforce program has been developed as of this date. However, the City reserves the option to develop appropriate programs and incentives necessary to attract and retain businesses to Assembly Square.”
On behalf of the Mystic View Task Force, I urge you to delay your vote on the DIF, to obtain an independent financial analysis, and to ensure that the City has tapped the best available expertise to structure a better agreement.