“All politics is economics and all economics is religion.” ...Unknown

Hayward Place

Fri, 21 Aug 2009 16:40:26 -0400

Hayward Place is a .87-acre surface parking lot in Chinatown, next to the Midtown Cultural District. It was slated to be the site of a new public high school. In 2000, Mayor Tom Menino announced that the City would sell the land for development. The City had tried to sell it before, but the deal fell through. But this time, the Mayor gave away the land to the Boston Redevelopment Authority -- without consulting the City Council, he told the BRA to take it by eminent domain and waived the compensation that is normally required for an eminent domain taking. A competitive bidding process brought in several design proposals; the high bidder proposed a zoning-compliant 150’ apartment building -- housing, as the RFP suggested to bring 24/7 life to the area -- and offered $23 million in cash.

But the BRA did not sell it, ignoring the bidding requirements and ignoring the high bidder. Instead, the BRA leased it, with an option to buy, to a lower bidder -- a friend of Menino’s who happened to be the developer of the Ritz Millennium towers across the street, and who was proposing an office building, a 9:00 - 5:00, street-deadening use. Only by funneling the City property through the BRA could Menino direct it to his favored developer, and to give him a deal that ignored the terms of the competitive bid, because the BRA doesn’t have to use a bid process to convey its land; it can just give it to anyone it chooses, at any price. Further, because the BRA now owns the land, any sale or rental proceeds will go to the BRA, not to the City’s treasury. Indeed, the developer is now collecting parking revenues of about $3 million a year, and he pays no property taxes, while he sits and speculates on that land.

The lease ends in 2013. At that time, the lease allows the developer to take back his deposit ($13 million that was supposedly going toward a public high school) and all the interest it has earned in the ten year lease period. He can walk away from the deal, and have first right of refusal on purchase of the land for the same ten-year-old price of $23 million. But he will probably get a Chapter 121A agreement, whereby the zoning height limit is erased, and he can negotiate his own payment-in-lieu-of-taxes. He can buy it for a price that he bid for a 150’ building, and construct a tower of 400’ or 500’ or whatever the Federal Aeronautics Administration says will not be a danger to airport flights. And he can pay little to no taxes for 40 years. Most important, he can control the use of the parcel next to him, so as to maximize his own value; keeping the planned public high school away from his luxury tower is probably the most important value-enhancing privilege he is getting from this arrangement.

What will the City Council do when the lease is up? Will it try to get back control of the land and sell it to the highest bidder who will obey the law and pay taxes? Or will it sit by while the Mayor and the BRA let Millennium walk away with this land for a fraction of its value, build whatever they want at some height multiples of the zoning, and enjoy a forty-year 121A tax break?

You decide.

Here are links to relevant documents.
You can also Google “Hayward Place” Boston for more newspaper stories.

The RFP here
Menino’s permission to take Hayward here here
BRA Order of Taking by Eminent Domain here
The Lease here
My lease analysis here
My comment letter on Millennium’s Project Notification Form here
My complaint to the Inspector General here
City Council hearing order on Hayward Place here
Article by Tom Keane here
My response to Keane here
Column by Steve Bailey, Boston Globe here
Google search “Hayward Place Boston” here
Kevin McCrea’s YouTube video

What to do with the HUD $?

Wed, 12 Aug 2009 00:00:00 -0400

Mayor Thomas Menino has tentatively selected three construction projects for the first $15.7 million of $40 million in federal HUD (US Department of Housing and Urban Development) gap-loan funds available to Boston for economic development. To be eligible for this loan, the rest of the financing or equity must be in place, the project must create at least one full-time job for every $35,000 loaned with at least half the jobs going to moderate- or low-income people, and it must be at least 20,000 square feet in size.

Let’s look at the way Menino is using the program.

A 4,000-square-foot upscale grocery store in a luxury South Boston condo building will get $700,000, and a 1960s-style boxes-in-a-sea-of-parking shopping mall-definitely not "Greentown" in Beantown-located in the mayor’s neighborhood of Hyde Park is in line to get $5 million to start construction. But the big-ticket item is the Sawyer Enterprises 235-room W Hotel in Boston’s Theater District, slated to get a $10 million loan to complete construction. This project already received a huge city subsidy and a custom re-zoning by the BRA that doubled its height to 300 feet, upping its value.

The W Hotel is already built, but insists that its four-star "brand standard" requires a restaurant-even in this restaurant-rich downtown location-for which the operator can’t get financing. So the HUD loan is just for the interior fit-out of the restaurant-plus a spa and a "destination theme lounge" (the bar).

The developer says the hotel will create 300 jobs, meeting the HUD formula. But the construction supported by the loan, the 6,000-square-foot restaurant, will create only 75 jobs, according to the application. (The spa and bar total only 10,000 square feet and create only 58 more jobs.) However, HUD accepts the developer’s math counting the whole hotel as "the project," so it technically qualifies.

But what is Menino accomplishing with this choice?

Of the 300 hotel jobs, 270 will be low-wage service jobs for low-income people. As often happens, the unintended consequence of HUD’s requirement will be to support profitable upscale commercial developments while perpetuating an economic underclass of the "working poor." Bellhop and chambermaid and waiter are honest days’ work, but seldom at a livable day’s pay. And it’s not necessarily likely that these jobs would go to Boston residents. Of the 275 construction jobs for this project, only 25 to 38 percent went to residents, despite the 50 percent goal. Would residents fare better with these permanent jobs? Could many of these service, low-wage employees really afford Boston’s cost of living, when even white-collar workers flee to more affordable destinations? With the high poverty and unemployment rates in some of our neighborhoods, I think Menino should focus public community development resources in a more bottom-up growth strategy.

What would happen if the money went elsewhere? Well, Boston’s hotel occupancies and rates have been crushed by the economic downturn. If the W, which has been in the making for ten years, is delayed until the restaurant operator can get a private loan, will the city’s hotel needs go unmet? In fact, won’t the addition of 235 more hotel rooms now simply draw business away from existing hotels, and reduce their viability? Some might even be driven out of business; is it the government’s role to tilt the competitive playing field and choose which will survive?

Indeed, the W Hotel and Residences chain itself is having foreclosure problems already, having entered foreclosure in Arizona this April. Mayoral candidate Kevin McCrea (whose candidacy I support) blogs about asking the mayor why this loan was being made when there was so much need among poor people hit by the recession; Menino reportedly answered, "because one of the investors pulled out of the W hotel project and [it] was in danger of foreclosure." Saving this mega-corporation from its investment mistakes at public risk on the pretext of trickling down a few unlivable jobs is not really community development. It is simply corporate welfare.

A HUD loan is an important opportunity for community uplift. Public resources should support projects that would generate not just jobs but actual livelihoods-and businesses that would serve, as well as hire, low-income people. The narrow goal of "creating jobs for low-income people," however benevolently meant, is misdirecting public resources to short-term payoffs that further increase the wealth gap. In fulfilling our valid-but incomplete-poverty-targeting criterion, these projects will produce mostly low-wage, dead-end jobs for poor people, serving relatively well-off people. We pay for this disparity in crime, shattered families, and unsustainable consumer debt, the root of the current economic collapse.

Menino has set aside only 10 percent of the HUD loan pool for as-yet unspecified smaller neighborhood-based projects. I think we should put all of our HUD assistance into small local businesses that hire and serve residents in disadvantaged communities, which are always hit hardest in downturns. That would create the most jobs, employ the most local residents, and cut crime by bringing stable employment to neighborhoods whose residents have virtually no job prospects in the current economic environment. This would truly be community development, the underlying purpose of HUD, and the legitimate role of government.

Credit is now our most precious resource. Before the designation process goes any further, the City Council should hold hearings, preferably out in the neighborhoods, to discuss where this money should go. The first Council hearing was a 25-minute introduction to the loan program on February 2 at City Hall by the Department of Neighborhood Development, which administers it. That hearing was attended by only two Councilors, Bill Linehan and Mike Ross, who asked that the Council be updated as specific decisions were made. This is the time. I have asked the three mayoral challengers, Councilors Michael Flaherty and Sam Yoon and McCrea, to respond to this column, and their responses will run next week.

I think we can get more bang for our bucks, and more economic justice, which would be a good investment for all of us.The candidates respond with their positions on the HUD cash

Published in South End News

August 27, 2009

The four mayoral candidates, Mayor Thomas Menino, South End developer Kevin McCrea, and At-Large City Councilors Michael Flaherty and Sam Yoon, sent in their responses to last week’s Shirley Kressel column "What to do with the HUD $?" Below are their answers in their entirety.

Michael Flaherty:

Since the Boston Invests loan program was first announced last December, I have been concerned about how these critical federal funds will be administered in our neighborhoods and have also questioned the city’s ability to hold developers accountable for delivering the community benefits tied to these loans, such as jobs for low- and moderate-income workers. My doubt stems partly from reports last March that the BRA (Boston Redevelopment Authority) was considering absolving developers of the stalled Filene’s redevelopment project from paying $12 million in linkage and community benefits payments. Also troubling is that the city did not include in its loan eligibility criteria strict local hiring mandates, particularly given the fact that these loans are intended to strengthen our local economy.

By definition, these types of loans are intended to support development and create jobs in distressed communities. At a time when all of our neighborhoods are reeling from the economic downturn, this gap-loan funding should be more evenly distributed throughout our communities instead of targeted at a handful of large projects. This could have been achieved by administering more of the funding to our city’s diverse small businesses and start-up companies, which would have ensured that each of our neighborhoods could benefit from new growth and new jobs. Soliciting input from residents about how to distribute the federal dollars would have further guaranteed the investments would be made in projects backed by the community. The city should also have used these funds to incentivize green design and construction by prioritizing allocation of the funding based on the sustainability of prospective projects.

While the city claims that the awarded development projects may create up to 2,000 permanent jobs and hundreds of construction jobs, I question that these jobs will go to Boston workers and will provide the training necessary to prepare workers for long-term career paths, not just short-term employment. In March, I advocated on behalf of the Chinatown community for the W Hotel to include job training and English language programs for area residents seeking employment at the hotel. As a longtime supporter of improving our city’s abysmal compliance with the Boston Residents Jobs Policy [which requires at least fifty percent of the total employee worker hours in each trade to be by Boston residents, at least twenty-five percent by minorities, and at least 10 percent by women], I believe that compliance rates on awarded projects should be regularly posted online and shared with community organizations that help residents find employment.

All of these strategies would help ensure that the Boston Invests program is making the right kind of investment-in our city’s workers and families.

Kevin McCrea:

Menino’s business dealings show him to be a Reaganesque "trickle down" economist. I was at the Burke High School recently where a panel of Menino’s cabinet people explained how the Recovery money would be spent. During question time, an African-American woman asked if there was any money for a hard-working woman who had lost her job and was facing foreclosure. The answer was "no," but we’re looking into that. An African-American man asked if there was any money for job training for adults at Madison Park Trade School. The answer was "no," but we’re looking into that. I asked why we were giving millions of HUD money to the W hotel? The answer was "because they were facing foreclosure." I appreciated the honesty. In Menino’s world, if you are a rich developer selling multi-million-dollar condominiums downtown and are facing crisis, you are eligible for government handouts. If you are poor or working-class and need help, they are looking into it. I question why we aren’t using the HUD money to finish the Ferdinand Building in Dudley Square (which the mayor promised to do four years ago) and bring both construction and permanent jobs to the inner city. I favor the economic model espoused by Nobel Prize winner Muhammad Yunus where more loans of fewer dollars are given directly to working-class people to help them start and expand their small businesses, which tend to hire local, and more directly benefit the local economy.

Mayor Thomas Menino

It is unfortunate that Shirley Kressel’s August 12 column, "What to do with the HUD $," takes such a cynical view of my administration’s mission to encourage job creation and continue development despite the current economic downturn. The Boston Invests in Growth program will provide a shot in the arm to stalled real estate development projects and keep Boston moving forward using the federally subsidized Section 108 program. Make no mistake, this funding will put people to work and encourage growth in our city.

Ms. Kressel attacks three projects that will bring jobs and economic vitality to our neighborhoods. To start, the "upscale" grocery store that she refers to will be located in an area of the city that has no grocery store at all. Ms. Kressel also misrepresents a Hyde Park project as a "1960s-style" shopping mall when it is anything but. This project will incorporate a neighborhood village market feel into its design, and it is also in an area of the city badly in need of services like a full-scale supermarket. I’ve been a longtime proponent of local, healthy food options, and this project will offer residents easy access to wholesome food.

Located on the border of Hyde Park and Mattapan, the new development will bring vitality, services and jobs to a site that has been home to a dilapidated paper factory that has scarred its landscape for many years. If you ask neighbors, they will tell you how excited they are to welcome this project.

Ms. Kressel, however, reserves most of her displeasure for the W Hotel project, which she argues is receiving too many public resources while not returning enough in the form of wages and services to the residents of Boston. She fails to understand that the W Hotel will provide low-barrier, entry-level jobs to many folks that urgently need them. The fact that there have been over 3,000 applicants for those jobs indicates as much. Furthermore, the Starwood Hotel chain, more than other hotels, has a model of internal upward mobility that allows newcomers, non-English speakers and low-skilled workers to move up to better paying and supervisory jobs.

Ms. Kressel’s argument also ignores the fact that the last time the city used Section 108 resources to fund a hotel, as was the case with the construction of the Westin at the Boston Convention & Exhibition Center, it profited $ 6.2 million on a $15 million dollar loan. Those dollars were then used to fund other greatly needed community development projects.

While the Section 108 resource was initially seen as a way to jumpstart stalled projects as well as ongoing projects that had lost parts of their financing as a result of the tight credit market, we wanted to see that smaller neighborhood economic development projects benefited as well. Consequently, ten percent of the total funding was set aside for this purpose. If there is a pipeline of such projects to fund, we will do so. To date only one has come forward despite our best efforts, an indication of the difficulty of financing at this time. We believe that a prudent mix of both neighborhood and downtown development projects create jobs and opportunity for a spectrum of Boston’s residents.

Arguing that lending to these projects is a form of corporate welfare is simply a misunderstanding of how the program works. These are not grants, but loans that carry hefty interest rates. If not for the tight credit market and their inability to gain financing through conventional lending mechanisms, developers would not approach the City for this resource at all. We believe that when private sector lenders walk away from good development it is the role of government to do what it can to keep the economy rolling and people employed.

Ultimately, Ms. Kressel implies that resources are being squandered, when nothing could be further from the truth. Every one of the developers of these projects would attest to the fact that the Department of Neighborhood Development (DND) has been rigorous in evaluating the quality of their project. Moreover, we have adequate resources to fund more projects. Initially, the Boston Invests in Growth program requested $40 million in Section 108 resources from HUD. However, DND has secured a total of $69 million, which will allow the city to consider funding many worthy new projects.

In this tough economy, we owe it to all of our residents to use every resource that we can access to keep Boston on the right track for sustained economic growth and smart development.

Sam Yoon:

Boston’s development process is dangerously flawed and in need of a complete overhaul. The lack of cohesive vision, strategy, and accountability in the way the mayor is using $40 million in HUD funding is just one more reason why we need change. The Boston Redevelopment Authority needs to be eliminated and replaced by a city planning agency, bringing us in line with every other modern city in America.

It is time to end top-down, politically driven planning in our city, especially during these difficult economic times. We need to embrace community-driven, bottom-up planning that would provide real community economic development for Boston residents and neighborhoods.

In fact, there are dozens of worthy community projects in the pipeline right now. For years Boston communities have fought for and planned for new uses of vacant land for housing, youth services and small, local business development. Nonprofit and ’good guy’ developers have teamed up to work with communities to map out visions for development and job creation in our neighborhoods.

But as was suggested in the article last week, some of these projects were stalled because of lack of financing. So while the W hotel gets $10 million, Jackson Square in Jamaica Plain and Bartlett Yard and Parcel 3 in Roxbury wait. These projects should be the priority, not the afterthought, for federal gap-loan funds.

Forty million dollars in HUD funding was intended to jumpstart community development and job creation. This funding does not belong to Tom Menino. We also need a real community-planning agency. Because unlike the BRA, this agency would belong to the residents and taxpayers of Boston.

Shirley Kressel
Published in South End News

No preferential treatment for debates

Wed, 27 May 2009 00:00:00 -0400

As the mayoral campaign officially begins, the debate issue is heating up. The three challengers, City Councilors Michael Flaherty and Sam Yoon and businessperson/activist Kevin McCrea, are eager to bring their messages to the public in structured forums. (Disclosure: I am supporting Kevin McCrea’s campaign.) But as in past elections, incumbent Mayor Tom Menino is trying to avoid situations that expose him to unscripted questions.
This is puzzling; with polls showing a high approval rate, what could he be afraid of? His renowned public relations skills are all about "being there"- at ribbon-cuttings and shovel-slingings, at senior events, at his spring neighborhood park coffee hours, handing out potted plants and hearing suppliant questions. But as one who has asked him questions, I know how hard it is to get an answer - a sincere, complete, not-coy, no-word-games answer - to a question he doesn’t like. And there are many questions he doesn’t like. He is rarely at contentious public meetings, the ones about development, institutional expansion, financial problems, etc.
Now, Menino has put us on notice that he is too busy to attend candidates forums, as if competing against lesser mortals to keep his office is optional. However, under growing pressure from challengers and the media, he has finally deigned to participate in three "debates," although from past experience we can expect some very constrained criteria for these encounters.
He’s already begun his conditional campaigning. Menino declined to attend a candidates forum held on May 22 by WBUR radio (www.radioboston.org/), claiming a schedule conflict, and consenting to pre-record an interview with the host. Too politely, WBUR allowed him to set his own terms. In his way, he took advantage of the free airtime, but he pointedly made the public forum a low priority, he didn’t lower himself to appear together with his challengers, and, very important, he avoided the possibility of unfriendly questions from anonymous callers.
As it turned out, Menino said some things that needed questioning. Asked about the quasi-public Boston Redevelopment Authority’s (BRA) lack of accountability, he asserted that the BRA brings its budget before the City Council for annual review. In fact, it does not. Just ask Council President Michael Ross, who had a few pointed words on this topic at the recent council budget hearing on the BRA. And, asked about the conflicting planning and development missions of the BRA, a combination of powers that enhances the mayor’s personal control over development approvals and tax breaks, Menino insisted that city planning and project promotion cannot be separated - because the latter couldn’t know what the former is doing if they worked in separate offices. In fact, he said, he’s planning to put the Boston Transportation Department (BTD) into the BRA as well, so they can all work together!
This casually dropped announcement is very big news. All the BTD’s powers - including review of development proposals - as well as its $31 million budget, would fall into the BRA’s hands, as did the enormous budget and property assets of the EDIC (Economic Development Industrial Corporation, on the seaport) when the BRA took it over in 1995. The EDIC has increased the BRA’s effective budget from about $17 million a year to over $45 million, and EDIC money now pays the salaries for many BRA employees, including Director John Palmieri. Absorbing BTD, the BRA would run a $75 million empire, with plenty of room for even more of its well-paid bureaucracy to hide. And that doesn’t count the BRA’s cozy relationship with the Department of Neighborhood Development, which routinely, on mayoral orders, "sells" valuable city-owned property to the BRA for one dollar (e.g., 24 parcels in Dorchester that the BRA then sold for $2.4 million). Remember: the BRA is not a city department, it is a quasi-public independent authority, with a separate treasury. Given Menino’s close connection with the BRA, taking this significant department out of Council jurisdiction could aggravate the imbalance between our domineering executive branch and our anemic legislative branch - and divert even more city money out of our budget and into the BRA’s black-box, golden-salary factory.
This radical announcement might have inspired some questions by callers, were Menino available to take them. The mayor is a master at managing the media. It is no accident that he chose to unveil this in a sequestered setting, on a Friday afternoon before a long holiday weekend.
The challengers had other ideas about the BRA. Flaherty vowed to rein it in, make its planning section stronger (unlikely since the BRA took over the Boston Planning Board in 1960 specifically to marginalize planning) and its development review more consistent and publicly responsive. That’s a surprising promise, because, in 2004, Flaherty led the Council to perpetuate the BRA’s powers and free it from Council control. Yoon agreed with candidate McCrea that the BRA should be done away with altogether and replaced with an accountable community development-planning agency. So, what will these councilors do about the mayor’s new consolidation plan?
The media, neighborhood groups, and good-government advocacy organizations should host many more forums. And in addition to serial interviews, scripted statements and Q-and-A segments, we should have some debates where the candidates can question each other and follow up on the answers.
But let’s treat all candidates alike. Menino should be required to participate as the others do - or not at all. For campaign purposes, he is simply one of the candidates, nothing more; whether he served well or not, he has no entitlement to this office. The heavy advantages of incumbency have deprived us of our democratic process for far too long. We should appreciate any challengers that have the courage to face the enormous barriers, and give them every opportunity to compete on a level field.

Shirley Kressel
Published in the South End News

Yoon has rhetoric, now he needs the action

Wed, 18 Feb 2009 00:00:00 -0500

City Councilor Sam Yoon’s mayoral candidacy, like his council run, is the fruit of America’s long-overdue equal-opportunity revolution. But diversity is no indicator of performance. Despite eloquent rhetoric and great expectations, his performance as a leader for a "New Boston" has been disappointing.

He began his 2006 term by breaking a campaign promise and marching in the gay-hating Southie parade: a first failure of leadership, and a warning of things to come. In a candidates’ meet-and-greet at the Leather District in 2005 moderator Chris Betke asked Yoon if he would march in the parade, Yoon said he would not.

Yoon’s first act of community heroism, in 2006, was to take a stand for a Chinatown branch library. But the library is in limbo, tangled up in Mayor Tom Menino’s maneuver to site a $100,000,000 new arts academy (so he can add the current school building to the Red Sox’s Fenway Monopoly board). Why doesn’t Yoon demand that the city take back Hayward Place, an acre of city land in Chinatown that Menino had the Boston Redevelopment Authority (BRA) seize by eminent domain (without payment) and funnel to the Ritz Tower developer, Millennium Partners, in 2003? That land had been slated for a public high school - a perfect use to combine with a library. The parcel fetched a $23 million bid. But Millennium got a free lease, pays no property tax, and collects $3 million a year in parking fees that the city should be getting, while he ties up the land. Yoon wrote about it in 2007, urging increased scrutiny of the BRA and city finances. Why doesn’t he hold a series of public hearings? Why not bring it up at the public discussions about school and safety cuts? Silence is complicity.

He campaigned as a champion of transparency. But when Menino let the BRA seize - again, without payment - the leasing rights for the city’s Winthrop Square parking garage, Yoon bargained away a public hearing for a BRA promise to share parking revenues with the Boston Housing Authority. The garage is city property; he could have sent city money to the BHA directly, without a BRA taking, and without sacrificing transparency. Instead, he legitimized the BRA’s property grab, and left the public in the dark - just to get political points as the public housing hero. But he didn’t even check where the money went. A public record request filed by South End activist Kevin McCrea, also a mayoral candidate, unearthed documentation that the BRA transferred $2 million to the BHA-but it was city money, and transferred other funds to the BHA -- but in amounts inexplicably exceeding the garage’s income. The mayor still plans to let the BRA take the much more valuable Winthrop land redevelopment leasing rights. And we still need a public hearing. The council should stop the BRA’s takings of city land. That’s the kind of leadership we need. Yoon isn’t there.

In fact, when he arrived in City Hall, gliding on the coattails of then-councilor Felix Arroyo and the New Boston "Team Unity," he only reluctantly agreed to co-sponsor Arroyo’s home rule petition to re-establish a planning board, free of the BRA and accountable to the council again.

Yoon wasn’t on the council in 2005 when it was sued (Kevin McCrea et al vs Michael Flaherty et al) for 11 Open Meeting Law violations. Those secret meetings led to a vote liberating the BRA from most council oversight, but on condition of certain BRA reporting requirements. The BRA, of course, ignored the transparency requirements. So I asked Yoon to initiate a reversal of the vote. He told me to go ask Felix Arroyo to do it. So much for Team Unity. And leadership.

Recently, the failing and downsizing Renaissance Charter School applied for a $10 million interest-free loan from a program for needy inner-city schools (as well as $20 million in tax-exempt bonds). It is basically a private school (sponsored by the for-profit Edison Project), and has reportedly boosted its scores by ousting disabled and badly-behaved kids. The money should have gone to real public schools, which serve everyone and are starved for resources. Yoon didn’t speak out.

As a member of the rules committee, he participated in the secretive creation of a new Council staff position, paying a $50,000 staffer a pension-boosting $70,000 salary to analyze how the Council could exempt itself from the Open Meeting Law. When this was revealed at a September 2008 rules meeting, his public-integrity suggestion was that the motion for adoption stipulate a public hearing. But Councilor Maureen Feeney watered that down to "public participation" and he didn’t fight back.

He chairs the Post Audit & Oversight Committee, which he chose so he could pursue accountability and efficiency. Where are the dozens of audits we need on waste, fraud and abuse? On the BRA’s takeover of our treasury? On those hastily-mumbled council votes giving staff bonuses, to (as they put it) "get rid of excess money," while wage freezes and layoffs loom?

In December, Yoon held a hearing on simplifying the language of council minutes and posting information about city boards and commissions. The public pled for broader reforms, and Yoon seemed sympathetic, promising a working group including good-government organizations and interested citizens. I got giddily hopeful. I actually thought he’d just leap in and start a transparency movement by example, posting his legislative record, all filed dockets, no-bid city contracts, financial documents, etc. I thought he’d get all council meetings recorded (no more hiding in the Curley Room), end the useless $60,000/year stenography contract, and order transcription of videos, disregarding an obscure, unenforceable 1947 law prohibiting city-funded publication of council deliberations and honoring current open-access laws. So far, his transparency movement is somewhat slower than the speed of light. In January, he proposed an ordinance for disclosure of corporate subsidies (waiting for a hearing), and in February, a resolution that the council "strongly encourages the participation of city stakeholders in Sunshine Week 2009." How do citizens participate if the politicians control the sunshine?

Yoon rationalizes that the city council is too weak for him to accomplish anything; that he must be mayor to get things done. But I think he squandered his three years of opportunity. He has been complicit in irresponsible expenditures and detrimental lawmaking. He declined to claw back council power over the Boston Redevelopment Authority. He could have led charter reform improving the checks and balances between mayor and council. He could have led hiring and fiscal reform though his audit and oversight committee. He could have shaken up City Hall, pulled away the curtain, showed the rot and organized a cleanup. He could have made all the difference -- with the power of public information.

He’s been aggressive about office-seeking and fundraising, but timid about questioning, risk-taking and power-wielding. Political leadership requires words of inspiration, but also deeds of courage --- thinking out of the box but also acting out of the box.

Shirley Kressel
Published in the South End News

Flaherty’s calls for transparency transparent

Thu, 5 Feb 2009 00:00:00 -0500

City Councilor Michael Flaherty has decided to run for mayor, which is not a surprise. What is astonishing is his decision, after years under a cloud of litigation for Open Meeting Law violations, to base his campaign on transparency and open government. In a preemptive strike, he is professing a sudden epiphany about the sacredness of transparency and accountability. This strategy reveals how vulnerable he knows he is, and how central an issue transparency is becoming as public outrage grows over political corruption.

But his conversion is not convincing.

Flaherty is a practicing attorney. Yet, as president, he led the City Council in closed-door meetings for at least a year and a half, in violation of the state Open Meeting Law. He ignored warnings from Felix Arroyo and other councilors, and from the district attorney. Councilors’ attendance in meeting rooms was limited or rotated to keep the number present below quorum, a practice previously adjudicated as unlawful. And all this occurred while the Council was under a consent agreement, from a 1989 suit by the attorney general, to obey the Open Meeting Law on penalty of contempt. When three citizens (Kevin McCrea [also a mayoral candidate], Kathleen Devine, and I) filed suit against the Council in May 2005, with ample evidence in hand, Flaherty could have settled the case within 10 days as the Law provides. Instead, he pursued a lengthy defense, parsing the words of the law and ignoring its intent: open government.

The council ran out of delaying tactics and admitted to all allegations in a November 2008 motion, to be heard later this month. They ask the court not to order future compliance with the law (to avoid a contempt citation in the event of further violations), promising to respect and obey the court’s decision in good faith. But since 2007, Flaherty and his colleagues have been crafting a strategy, discovered only this September, to exempt the council from the Open Meeting Law altogether.

He says, "lesson learned." But to this day, Flaherty and his fellow councilors maintain that the Open Meeting Law keeps them from serving the people, that they need privacy to work out their agreements, to hash out their deals. "It’s a sausage factory," he once explained. We’re dealing with a virtual collapse of democratic governance and widespread subversion of fair and honest services, and he still thinks hiding the citizens’ business is good public service - and his privilege. Where is his respect, as a lawyer, for the law, and, as a public official, for the citizens?

This issue has cost the public hundreds of thousands of dollars, including legal defense fees and - listen carefully - a new $70,000-per-year staff position surreptitiously created to figure out that exemption from the Open Meeting Law.

But far more costly, the secret meetings led to a council vote perpetuating the Boston Redevelopment Authority’s (BRA) urban renewal powers - and, astoundingly, surrendering virtually all council oversight. The BRA has ignored the few reporting requirements the vote stipulated, including notice of eminent domain takings of city land, and an annual report to the Council on all BRA property transactions. Flaherty didn’t bother to enforce the reporting requirements, nor did he file to rescind the vote. If he now cares about transparency and open, honest government, why doesn’t he hold a hearing to disclose the backroom deals behind that vote, and get it reversed for failure to comply with conditions?

Like Mayor Tom Menino, Flaherty has always supported the BRA, regardless of harm to the city. Now, as a mayoral candidate, he is suddenly popping up at public meetings, blasting the Authority for ignoring "the community voice." Now he is making noises about a real planning department, after insisting for years that Boston can’t afford one. Why didn’t he sign onto former councilor Arroyo’s Home Rule Petition to create one? Why doesn’t he file his own?

At hearings where I testified against the BRA’s bogus "blight"-based development tax giveaways, he has walked in as I finished my comments, just to disagree with me. Now he’s the tax-break bloodhound, giving the assessing chief what looks like a tough grilling. But when I testified that the BRA makes millions by selling tax-break transfers to exempt-project buyers, Flaherty asked no questions. These deals - approved by Menino - are costing us unknown millions of dollars every year. He’s criticizing the mayor for freezing wages before rooting out waste; why isn’t he investigating this tax loss, to help solve our financial crisis?

Why, in view of all this, doesn’t he promise to get rid of the obsolete and parasitical BRA altogether? Because it enormously magnifies the power of Boston’s mayor.

Flaherty has had nine years to show his leadership in governmental transparency and financial responsibility. He has no accomplishments in either. He doesn’t need computer programs like CitiStat to identify the enormous waste and abuse that goes on in City Hall. He knows about it, or should. It hasn’t bothered him until now. He didn’t even attend the December 2008 hearing on clarification of council meeting minutes - barely a dust mote in the gigantic transparency void that is Boston City Hall. His filing just in January for a hearing to explore posting city financial data is too little, and too late, after nearly a decade of cynical exclusion of the public from its own business.

He is always ready with a litany of the crucial issues that face us: schools, violence, housing, etc. But between election seasons, there is nothing by way of action - at least not public action. To my knowledge, Flaherty’s legacy is a law about bar bouncers. Now, we will pay his salary, $87,500, plus a couple of hundred thousand dollars of staff time, while he runs for mayor.

Michael Flaherty says it’s time for change, for a government that cares about "kitchen-table" people, that is open, transparent and inclusive, that is prudent with our money. I agree. But there’s no reason to expect that this is what a Mayor Flaherty would bring us.

He’s been a part of the problem. Now he’s just looking to be come a bigger part.

Shirley Kressel
Published in South End News

Money may be tight, but it’s there

Wed, 21 Jan 2009 00:00:00 -0500

Sunshine for the New Year

Wed, 7 Jan 2009 00:00:00 -0500

The last City Council hearing of 2008, on Dec. 16, brought the year’s first good news out of that august body. To promote open, transparent, accountable government, Councilor Sam Yoon filed a resolution that all of Boston’s boards and commissions should post their information on the City website and an ordinance to get the City Council minutes written in understandable language. These long overdue basics are welcome reforms, and hopefully are only the beginning. The importance of transparency has recently been highlighted by revelations of ethics and accountability problems, including the Council’s 11 Open Meeting Law violations.

City Clerk Rosaria Salerno, City Council Chief of Staff Ann Hess Braga, and City Chief Information Officer Bill Oates made presentations and were pointedly questioned. Testimony was invited from good-government advocates Pam Wilmot, of Common Cause (www.commoncause.org), and Deidre Cummings, who introduced MassPIRG’s "Transparency 2.0" (www.masspirg.org), and taken from citizens.The two-hour hearing is well worth viewing (www.cityofboston.gov/citycouncil/cc_video_library.asp?id=646).

Here are some of the many useful recommendations discussed for meeting notices, meeting process, and public records of meetings - and in general.

Posting of the Council’s weekly meeting should be on the web calendar every week, together with the full and final agenda. No "late files" should be allowed except in emergencies; no "green sheet" items (past pending matters) should be brought to the floor unless they were put on the weekly agenda. The agenda should summarize each docket item in plain language, and link to postings of the full docket text and supporting documents (previous related legislation, committee reports, budgets, reports, data, hearing testimony).

At meetings, docket copies should be available, and the summary should be read in full - no interrupted, abbreviated or hastily mumbled dockets (the Council president’s way of obfuscating what’s being done). On suspension of Council Rules, the chair must state those Rules and the reason for suspension. All votes should be by roll call, for individual accountability. All Council meetings, working sessions and hearings should be video-recorded, with a continuous time stamp to facilitate searches of discussion topics - and to reveal inappropriate recesses.

The Council currently prepares no minutes for most of its committee meetings and hearings, violating the Open Meeting Law’s record provisions. But even for the regular weekly Council meeting, the publicly posted "transactional" minutes are not sufficiently informative. Full verbatim transcripts should be posted for all meetings and hearings, with links to dockets and all relevant documents. The $60,000 (over $600 an hour!) the City Council pays a stenographer to prepare those bare-bones minutes (an easy task for a Clerk’s assistant) is more than enough to produce full transcripts. Voice-recognition and other efficient technologies should be explored.

The City website should post all information on boards, commissions, trusts, funds and other governmental entities, including their charter documents and by-laws; membership, stating qualifications and pay, appointment process; budgets and expenditures, etc. Their meeting/hearing notices, agendas and records should be treated as above.

The basic agreement at the hearing was that the City should post all its information - every public document - in easily word-searchable, Google-able form. All communications, contracts, budgets, legislation, research reports, mayor’s orders, everything - every single document that records the public’s business - should be easily available to all, free of charge, eliminating the whole antiquated public record request process (and the City Clerk’s charge of 50 cents per page, violating the state-set 20 cent limit (www.sec.state.ma.us/pre/prepdf/guide.pdf).

Now, skeptical observers might suggest that Councilor Yoon’s sudden interest in transparency after three years in office is just mayoral campaign-season pandering. Perhaps. But it is much better pandering than we’re getting from the other likely candidates. Councilor Michael Flaherty is suddenly fuming about over-reaching developers, the tyrannical BRA and its disregard for community wishes, the lack of a real planning agency, parasitical 121A tax breaks, and other problems on which he has always been on the other side. Mayor Thomas Menino is, once again, touting a miraculous property tax rescue, which, as happened after his 2003 temporary relief legislation, will boomerang back on the residents once he’s safely re-elected. Council President Maureen Feeney promised to create, the week after Councilor Chuck Turner’s FBI arrest, a Special Council Committee on Ethics (no progress reported yet), all the while maneuvering to exempt the council from the Open Meeting Law. I prefer Yoon’s transparency "ploy," if that’s what it is; we’ll have time to see what he actually does about it before the election.

In fact, the most significant moment of the meeting was Yoon’s acknowledgement that many elected officials try to control public information because they don’t trust the citizens and they want to keep the control that information confers. Officials must, he said, see the public as allies in governance, not as adversaries. He announced that he will form an ad-hoc committee to work further on this - and will include interested citizens, as well as Common Cause and MassPIRG. He is certainly talking the right talk.

Whether cynically or sincerely, Councilor Sam Yoon has cracked open the door for us; now we’ll have to break it down, forcing every elected official to give us the information we need to participate in our own democratic governance. As it is graven upon our great public library: The Commonwealth Requires The Education Of The People As The Safeguard Of Order And Liberty.

A commitment to transparency should be our first requirement for public service.

Shirley Kressel
Published in South End News

Boston’s state aid subsidizes the City’s waste, fraud and abuse

Thu, 20 Nov 2008 00:00:00 -0500

Question 1 opponents threatened that eliminating the income tax would slash state aid to municipalities. In Boston, waste, fraud and abuse ("WFA") are so enormous that we may deserve to get less aid. Here are just a few examples.

Mayor Tom Menino has filled City Hall with a huge hackocracy. Back in the mid-’90’s, when Menino was first elected, I was asking at a City department why project reviews were taking so long; they told me that Menino had stuffed the department with so many unqualified patronage hires that only a few real workers remained to carry the load. By now, he has employed a dependable voting bloc to keep himself and his Council favorites in office.

In August, Menino gave his administrative chiefs hefty pay raises, retroactive to October -- almost a full year. That’s not just a raise; it’s effectively a bonus, which is not permissible in public service.

The media have repeatedly exposed no-show jobs at the Department of Public Works, at untallied costs. The DPW chief got a raise anyway.

As recently revealed by media and FBI investigations, we lose tens of millions of dollars a year in fire department pension and disability fraud, and waste millions in useless programs that have been identified in three different studies. Police details and overtime -- more millions wasted. The police and fire chiefs got raises too, bigger ones.

Mayor Menino couldn’t find any money to contribute to the public care of the Greenway park. But he gave a million dollars to the private business lobby calling itself the Greenway Conservancy, for its bloated bureaucracy.

The City grants millions of dollars annually in questionable no-bid contracts. These include "contracts" to re-hire laid-off teachers and other employees, and some very large contracts for services that seem eminently biddable.

The mayor gives decades-long, multi-million-dollar property tax breaks for projects in "blighted" areas - like the Back Bay’s four-star Irish Jurys Hotel, the glitzy Manulife tower, and just about every other tower - in the seaport, the One Beacon Street tower, the BankNorth Garden, and two or three dozen other huge and wildly profitable developments, and has now taken to waiving property taxes for such wealthy corporations as JP Morgan and The Beal Companies. I estimate about $70 million a year for this category of WFA (the City refuses to disclose accurate information, so I extrapolated from a 2003 Boston Herald study of the Chapter 121A tax exemption).

We lose about $80 million a year in Payments in Lieu of Taxes we should be getting from medical and educational institutions (and that’s at their 75 percent discounted rate).

We lose tens of millions of dollars a year in delinquent property taxes, some owed by recognized developers and corporations.

We spend almost a billion dollars, $18,000 per student, for a public school system that drives out one-third of its students and adequately educates far too few. Ask any insider where the money is going: the administrative hackocracy.

City Councilors raise their pay every two years; they are now at about $90,000 a year. This is especially outrageous in view of the fact, immediately evident from a review of past agendas, that they do not really have a job. The BRA has elbowed them out of the main role of a municipal legislative body, oversight over planning and zoning, and they have no interest in getting it back. They also have no effective role in tax or budget decisions, and little in public land disposition. The Boston Globe recently revealed that, with all the money the Council gets and has no use for, they are giving themselves bonuses. Meeting notes from a Council committee meeting state: "more staff than responsibilities" "dead time leads to bad habits." The Boston City Council: about $4.5 million a year (just in salaries) and counting. Your tax dollars at ...work?

More than $200,000 has been spent to protect the Council’s self-proclaimed right to violate the Open Meeting Law. After almost four years in court, the Council has just admitted to 11 violations, for which the City will pay $11,000 in fines.

The mayor has allocated two million dollars to have the Boston Redevelopment Authority (BRA) "study" the merits of moving City Hall from government center to the South Boston waterfront. The BRA, which, with Menino’s blessing, took City Hall Plaza from us by eminent domain in 1996 without paying fair compensation (about $400 million), will probably conclude that, yes, our government should indeed get out, so it can proceed to lease the land, at enormous profit, for office, hotel and luxury condo tower development. The City taxpayers, whose budget is separate from the BRA’s, will get none of that profit; but we’ll be paying to demolish the concrete behemoth and build a new one.

All of City Hall has more employees than responsibilities. And it has a lot of excess money, collected by maxing out every year without regard for actual need, which has to be divvied up quietly. The only thing Hizzoner cannot seem to find funding for is the Finance Commission, an independent watchdog; it’s stripped down to a director and one staff. We need an army of auditors for Boston’s WFA.

This is only a partial list of what I know, and I’ve only scratched the surface of the tip of the iceberg.

In FY 2008, net state aid was $362 million. I suspect that we waste that much. Someone needs to do a real study of Boston’s finances. Maybe that someone is the FBI.

Shirley Kressel
Published in South End News

What government should learn from Wilkerson’s arrest

Thu, 6 Nov 2008 00:00:00 -0500

The revelations surrounding Dianne Wilkerson’s arrest for corruption are most important as a glimpse into the workings of our political machinery.

It was Wilkerson who was taped, allegedly taking cash for political favors over the course of 18 months. But she couldn’t have done it alone. The records of her transactions seem to suggest that many other officials, including state representatives and senators, the mayor of Boston, the Boston city council, the Boston Redevelopment Authority (BRA) and the liquor licensing board may be involved. And her confidence in "pushing the envelope further than ever before" indicates that this was a well-trodden path. Hopefully, the ongoing FBI investigation will reveal who was involved and how regularly this kind of activity has been happening, but this incident appears to confirm what many citizens suspect: a culture of corruption in government at all levels. Of course, officials many not be guilty of blatant crimes, but some may be accomplices, or at least enablers by their silence.

This crisis of confidence is a teachable moment. What should we learn from it?

First, we need to better understand the concept of "corruption." It is not just about taking cash payoffs for specific favors; indeed, this kind of overtly illegal influence peddling is probably rare these days. Donations to officials’ campaign funds are perhaps the most common currency; they may not even be timed to reward specific actions, but serve as general positive-reinforcement for cooperation and reminders of expected indulgence when the time comes. Fattening their war chests also has the corrupting effect of keeping collaborating politicians in power and helping them financially support cronies’ campaigns, so that clean candidates cannot break in. Contribution to politicians’ favorite charitable causes has also become a popular access-buying vehicle, enhancing their public image as civic heroes.

Whatever the methods and trade-offs, we should recognize corruption as the subversion of democratic governance: fair and equitable application of laws and access to public services and resources. As noted in the Nov. 2 Boston Globe editorial titled "The grimy side of politics," federal law forbids public officials from knowingly engaging in schemes that deprive the public of "fair and honest services."

"You can’t legislate morality," the proverb says. But you can legislate an environment where morality is expected, where transparency and accountability are defined, required and predictably enforced. Here are some thoughts on doing so.

Ethics oversight processes need strengthening. The state already has an ethics commission; the Senate and House have ethics committees. Gov. Deval Patrick has now announced that he is forming an ethics task force. It should examine the narrow definition of ethical boundaries, make agencies as well as individuals subject to ethics laws, prohibit exemptions from ethics laws commonly written into individual legislation, and strengthen reporting and enforcement mechanisms.

Transparency is the prerequisite for accountability. The legislature should be made subject to the Open Meeting Law, so that most deal-making discussions - not just votes - would have to be done in public view. All committee and floor votes should be by roll call, not the lightning-fast voice votes of mumbled yeas and nays. The legislature should also be subject to the Public Record Law, which should be amended to require that every public record, with exemptions as per the law, be automatically posted on a searchable online website. Transparency laws need to be reformed to streamline the legal process and to impose penalties on the individual perpetrators rather than on the bodies, whose fines are paid by taxpayers. Those determined to cheat will find a way, but if officials knew that eventually some part of every deal, verbal or written, would surface in the public realm, they’d be much more diligent in following the rules and telling constituents and lobbyists to do the same.

The current resource allocation processes obfuscate improper uses of public money and must be reformed. A few examples: zero-based budgeting would require proposal and justification of each expenditure every year. Funding allocations should be kept out of unrelated legislation. Business subsidies should be reported in detail, by recipient, and their cost to taxpayers disclosed. Public land disposition should require competitive bids, as should procurement of services. No-bid contracting is rife with abuse, and should be tightly limited to specific services.

Public campaign financing and other clean election provisions, as well as term limits, would prevent entrenchment of power. Over-concentration of power should be countered with diffusion of leadership responsibilities, more elected rather than appointed offices, and strengthening of political party competition.

Watchdog agencies should be properly funded and empowered. Investigative and prosecutorial offices, ethics oversight bodies, auditors, reporting offices and other entities mandated to police our government at all levels must have the resources to do their jobs, and should themselves be as transparent as possible.

Public employees and citizens should have access to enforcement entities, via anonymous hot lines, the internet and other safe reporting avenues, protected from political retribution.

And we should review our anti-corruption laws. Perhaps we need more federal, state and city laws explicitly prohibiting actions that deprive the citizenry of "fair and honest services," confirming the right to good government for every citizen in our democracy.

Corruption is not a victimless crime. It steals not only our public resources but the protection of our laws, equitable access to public services and, most important, public trust in democratic government. We need to establish an ethical culture for public service and restore public confidence.

Shirley Kressel
Published in the South End News

Why this liberal supports repealing the income tax

Wed, 22 Oct 2008 00:00:00 -0400

You are about to vote on Question 1: Elimination of the income tax.
I am a card-carrying, unrepentant, far-left goody-two shoes bleeding heart liberal. Radical, even.
Yet I plan to vote for Q1.

I am not a "small government" advocate. Nor is my aim to keep a few thousand more dollars in the taxpayers’ pockets (including mine) because "times are tough." Nor do I claim that taxpayers "know how to spend that money better than the government does." Nor do I believe we should force poor people to "pull themselves up by their own bootstraps."

My motives are the reverse. I think our government is too small for the services we need, and must be funded to do all the socially necessary things individuals, and the so-called (until recently) "free markets," cannot do. But without some big change, we won’t get the government we need, no matter how much money we put into it.

In fact, I believe the state is awash in money. The endless media revelations (and we can hardly imagine what’s not being exposed) of waste, fraud and abuse ("WFA") show how much of our money our officials can throw away and still stay in office. Uncontrolled Big Dig costs. Billions in corporate welfare ("business incentives"), with no accounting, never mind disclosure, of how much they cost us and what they yield. Public land giveaways to developers. Shameless retirement-pay abuse, even after exposure. Cronyism in contracts, earmarks, and hiring. A growing hack-ocracy. One hundred fifty million dollars to a business lobby called the Greenway "Conservancy" for work that costs $12 million. One hundred million dollars a year to the film industry, although everyone knows it does nothing for economic development (It’s just a "fun thing," one high-level official explained to me). The I-Cubed program, giving $250 million to mega-developers for construction loans on their "public infrastructure" - like parking garages, recreational facilities, and landscaping. And so on.

And this barely scratches the surface. I can’t vouch for the Q1 supporters’ opinion survey claiming 41 percent of our money is wasted - but I wouldn’t be shocked if a study confirmed it.

How do they get away with it, when we’re so "strapped" for money?

They collect vast pools of taxes without regard to documented needs, so they can burn huge amounts of money on WFA and still provide enough - just enough - public services to prevent open revolt.

Now there’s another crisis and the cuts have started. Of course, the first things to go are the services to the blind, the elderly, police and parks. That’ll teach you to cut taxes!

Candidate Patrick promised if elected to cut a billion in WFA to fund services. Why doesn’t he cut WFA first?

We are told that Q1 is risky.

We hear that our state credit rating could fall, making it hard to fund state capital needs. One local observer fears it might even have unintended ripple effects, potentially endangering the government credit system at large.

We hear that local aid will be cut, and local property taxes will go up. Well, not in Boston. Our property taxes are at the maximum allowed by law. (And Boston’s government WFA is a scandal in its own right.)

We hear that the most urgently needed human and infrastructure services will suffer most. Well, that’s the point. These needs are at the bottom of the legislature’s priority list. Not every legislator’s list, but this legislature as a whole. And that will be true no matter how much we give them in taxes: genuine public services will get crumbs. So we have to send a message that we’re not going to tolerate this outrageous misuse of our money any longer.

But, we’re told if we want to send a message, do it another way.

I think we’ve tried to do it another way. In 2000, we voted for a binding initiative to roll back the state income tax over three years from 5.75 percent to 5 percent, the rate before the 1989 tax hike. In June 2002, the Legislature decided to freeze the rate at the current 5.3 percent. That November, 46 percent of the voters supported repeal of the state income tax altogether. That was ignored.

And I’m sure that this Q1 vote will also be ignored.

I spend most of my time trying to send messages to politicians. I do research, I send letters, I beg for meetings with even the lowliest of staff ("Oh, please, sir, just a few minutes of your time to look at my five-year study!"). I just can’t think of any other ways to send a message.

Except to t’row da bums out. And to do that, we need to know who da bums are. And to do that, we need information we don’t have and can’t get.

I think the only way to get our money directed to our real public needs is to cut the cash pipeline and force politicians to make choices - in public view. Poor children or wealthy corporations: let’s see what they do when they can’t serve both, and t’row out da ones who choose wrong.

So the first step is transparency, as candidate Deval Patrick promised.

I will vote against Q1 if the legislators, advocates, and citizens who oppose the tax cut demand that the legislature and the Governor’s Office be made subject to the Public Record Law and the Open Meeting Law (no more back-room deals); that all public documents be posted on the internet; and that we establish zero-based budgeting, so every year, every expenditure has to be publicly proposed and justified.

Our elected officials keep ignoring public messages at their peril. History teaches that, at some point, pent-up public wrath will really do some damage. Transparency and accountability are the preventive measures against that outcome.

Shirley Kressel
Published in the South End News

You are the bailers of last resort

Wed, 8 Oct 2008 00:00:00 -0400

The national economic system is collapsing under the weight of nothing: funny-money, clever debt "instruments" backed by, as it turns out, not-so-real estate. Our state government is in big financial trouble, and just inquired about a federal loan because we can’t issue bonds for our own loans. Yet Governor Deval Patrick has happily announced a quarter-billion-dollar (for starters) fund to lend to commercial developers who promise that their projects will pay back the loans. How does the government "free up private-market credit" when it can’t get its own? We’ll soon see.

Under the recently activated "I-Cubed" (Infrastructure Investment Incentive) law, the state will pay off construction loans for selected commercial projects’ "public" infrastructure, facilities serving "essential governmental functions" - including parking lots, landscaping and recreational amenities. The money will come from the project’s state taxes, which would otherwise go into the general treasury. These loans are beyond the state’s bond limit, because they are not guaranteed by the "full faith and credit" of the state, i.e. the taxpayers, but are backed by development revenues. However, in case of project failure to generate the promised state taxes, the city is on the hook. If the city doesn’t find a way to pay, the state can withhold local aid for schools, roads, and services.

So, if the project succeeds, the developer gets all the project profits, while state taxpayers make up for the revenues forfeited to pay his "infrastructure" construction costs. (We also get to own, and pay him to maintain, all the "public infrastructure" we build for his project.) If the project fails, city taxpayers must pay off the loans for failed real estate speculation, and also take care of whatever "infrastructure" is standing. Public risk, private profit, all backed by real estate. Gosh, what could go wrong with that?

So excited is the Administration that Lt. Governor Tim Murray, in a Worcester Telegram story, described the program as "self-funding" between the state, local communities and interested businesses. Before the era of public-private partnerships and other re-interpretations of the "private free market," "self-funding" meant money from private investors and private profits. Now the diversion of taxes to a private project is called "self-funding."

And so eager is Patrick to implement I-Cubed that he has accompanied the public subsidy with the only thing to fear more than fear itself: deregulation. The law’s regulations (public comments due Oct. 15), set numerous selection criteria and also give the Secretary of Administration and Finance discretion to waive any of them for any applicant.

These criteria are rather important. They require proof that the developer will provide all required information, that the project needs public subsidy, that the developer has financing, that the project is financially feasible and environmentally sustainable, that it will produce enough state taxes to pay off the loan, that competitive bidding of qualified contractors will be used, and that it will start in a timely manner after approval. The criteria also stipulate that only two projects will be subsidized per city, that the project wasn’t approved by the city before Sept 7, 2006 (when this law was passed), that the developer won’t get other state subsidies, that individual project infrastructure bonds won’t exceed $50 million, and that the project was approved by the city and the state quasi-public bond-issuing agency, MassDevelopment.

It’s not reassuring that the basic qualifying requirements - already often finessed by applicants and ignored by subsidy-providing agencies, can be totally waived by one political appointee to fill the Administration’s political quota for "job creation" by shifting more risk from the private developer to the taxpayers. The developer simply has to threaten that he will otherwise take his marbles elsewhere (a wink-wink bluff understood by both sides). And the city has to approve any zoning changes needed by the project, undermining comprehensive planning.

So much for transparency and accountability.

My experience with similar subsidy programs indicates that a tip of the hat and a handshake will get a developer $50 million.

If the state or city want public infrastructure to support economic vitality, why don’t they make a general plan, conduct a budgeting process where competing priorities are weighed, and pay for the works directly instead of through these arcane debt arrangements that at best serve only individual projects and at worst encourage chancy real-estate adventures by politically connected developers through public assumption of risk? Perhaps because there’s no political glory for just keeping the state and city in good working order so that everyone, including developers, benefits and we know what our cost burdens will be. Perhaps because there are no announcements at the Chamber of Commerce, no new "partnerships," no new "investments" or "incentives" - and no "job-creation" numbers to claim.

In a 2006 Boston Globe interview, then-gubernatorial candidate Deval Patrick said he would "take a dim view of using state tax incentives as a major tool for attracting business expansion in the state, saying companies whose plans turn on tax breaks probably aren’t worth attracting." He said, "business creates jobs, not government. Governments create a climate where businesses can thrive," and, "a business that makes a decision on the basis of a tax break alone, that’s a business that’s on its way out of business."

But the politics of "business incentives" has prevailed and the Administration invests heavily in corporate welfare, even, as I have witnessed, when the corporation says outright that the subsidy is not part of its decision to build or relocate.

Now, the state, its troubles compounded by another overly-clever debt-shuffling gimmick - the collapsing Turnpike Authority, to which the state shifted the Big Dig construction-cost risk to escape "full faith and credit" bonding - is planning to ask the floundering federal government for financial help. It’s not exactly a bail-out - yet.

In any case, the "full faith" bailer of last resort is you.

Shirley Kresel
Published in the South End News