October 29, 2008
The thing we should all be focusing on is, what price did the City of Tacoma sell the airport to Pierce County? Although the market value, according to Mike Slevin (the city’s interim public works director), was estimated to be anywhere between $10 million and $20 million in recent years as reported in an article written by Niki Sullivan in the News Tribune. The sale price was determined to be $5 million.
In the end the sale price has been dropped to $3 million, why? Turns out, according to the article, federal law dictates that the sale price is determined by expenses incurred over the previous six years. After an audit the the City of Tacoma could only come up with $3 million, thus the sales price.
This begs the question, what have been the expenses incurred the previous six years by the City of Worcester at ORH? The debt expense has been about $600,000 per year so that is about $3,600,000 over 6 years. On the other hand, there has been subsidies on the operating expenses at varying levels by MassPort. My best guesstimate is that the City of Worcester's share is probably around $3,000,000.
Does that mean the most that we could sell the airport for is $6,600,000?
Southgate and Grand streets will soon be torn down to make way for a three-story, 25-unit affordable housing project. That dream came closer to reality yesterday with the news that the state Department of Housing and Community Development has awarded the $7 million project a $1.9 million grant and $3.3 million in tax credits spread over 10 years.
Jahn before you leave the comment, the cost breaks down to 280,000 per apartment. The most important thing, however, are the buzz words "affordable housing project". In other words, all the units must be for low to mod income.
One other trick that I have learned is formation of the company developing the property. In this case the developer is newly formed corporation called Mechanics Guild LLC, which is a partnership with Stepone Inc., an affiliate of Horne and Johnson (a Natick architectural firm), and the South Worcester Neighborhood Center (SWNIC). Why does this work good?
You take advantage of the non-profit status of SWNIC by transfering ownership of the parcel to the non-profit entity (SWNIC) for $1 , apply for Brownfields clean-up money and avoid having to pay the monies back since the grantee was a non-profit. Once the clean-up is done, you transfer the parcel back to the newly formed corporation. We have seen this before on Mason Street.
October 28, 2008
The number of owner occupied units was cut (think to 6 units but I could be wrong from the original 25) to provide the required number of parking spots. People were still unhappy with a 20+ unit apartment building, but were at least happy that there was enough parking. Still unhappy, I asked when the next zoning board meeting would be held for the remaining variances? Answer: There will not be another Zoning Board Meeting, since the revised plans did not need any variances.
Once it was realized that there would not be neighborhood support, the plans were altered so that there would be no need get neighborhood support for a variance. Ironically this was done by reducing the number of owner occupied units, the original intent of the purchase of the land and what the abutters had wanted all along, not a 20+ plus unit apartment building.
The next step was for the developer to apply to whatever agencies that they need to apply to, but they would build the apartment building first (that nobody wanted) and not the owner occupied units (that everyone wanted) later. You can not make this stuff up?
- Grants become loans
- Owner occupied townhouses become 20+ unit apartment buildings
- Neighborhood support, once realized not attainable, is merely circumvented
- Owner occupied townhouses are replaced by a large 20+ unit apartment building
October 27, 2008
April 20, 2006 Worcesteria in WoMag talking about Southgate Place:
I can not find it on-line, but I have a copy of Worcesteria for that issue. Scott Zoback mentioned the project and refers to the monies from CEDAC as grant to purchase the old City Builders for $490,000. It also referred to a plan calling for 25 owner-occupied townhouses on the site. In other words, I am not nuts and did not imagine all of this.
January 5, 2007
As an abutter, I receive a notice to discuss the plans at the Neighborhood Center and that SWNIC was looking for the neighborhood support. Why? SWNIC is going for a variance on January 8th, 2008. Plans, however, are just for 11 townhouses and for the first time that I ever heard-- a low rise 21 unit mulit-family dwelling unit is mentioned??
The variances were many:
- 93 feet of frontage
- 21 parking spots
- 5 ft 4 inches of relief of front yard setback
- 4.01 feet of sideyard setback
- relief from floor area ratio
- relief from number of stories (1)
The neighborhood meeting went quite badly with most people being upset with a 21 unit apartment building. Needless to say the meeting ended up with no support for the project.
January 8, 2008
I, as an abutter, showed up at the meeting with many other abutters to oppose the variance. The developer requested a postponement was it was granted. We left that night with the promise that we would meet with the developer again to discuss our concerns.
October 26, 2008
Careful for what you wish for, boys and girls, because Mr. Park and company might just tell you all to go pound sand.
After all, Berkeley Investments, not the city, owns the CitySquare development site, which includes the former outlet mall, the two office towers and the parking garages. In 2004, Berkeley paid $30.3 million for the property, and it has been paying property taxes on it since. The city has no ownership or control over the property.
True, Berkeley is partnering with the city on CitySquare — the city will be providing public money for the demolition of the mall and the construction of new roadways and infrastructure — but should the City Council be telling Berkeley whom to negotiate with or criticizing the company for not moving quickly enough?
If Berkeley just wanted to sit on the property, wouldn’t it be well within its right, as long as it continued to pay property taxes to the city?
Berkeley is a successful development company and one would think it knows what it is doing. They certainly aren’t going to rush into something just for the sake of making some local elected officials happy. They want to make sure that whatever they do makes the most sense for them and the project. It is, after all, not the best economic climate for major development projects.
October 24, 2008
Let me say this again the South Worcester Neighborhood Center does an A+ (Excellent) job when it comes to human services--its core mission. Our neighborhood needs this agency.
What is their model? They are a public charter (typically underfunded), that lease planes, to serve secondary airports (utilizing subsidies from the underlying airports) to popular leisure destinations. Typically even the leisure destinations that they are serve are secondary--Sanford not Orlando, St Pete not Tampa, Punta Gorda not Fort Myers.
Novel Approach? What about:
- SouthEast Airlines
I am hoping Direct Air is a success, but calling their approach "novel" is far from the truth when there are 4 airlines that I can think of in the last three years that used the same buisness model.
October 23, 2008
After voting to approve the purchase of the former City Builders parcel for $495,000 from a grant from CEDAC, it was called to our attention by one board member, after reading the documents, that this "grant" had to be repaid. In other words it was not a "grant" at all, but a loan.
At our next board meeting it was not explained that the "grant" in fact really was not a "grant", but a loan. After much discussion another vote was taken and it was voted to approve the loan (much closer vote) and still buy the City Builders property. The plan then was to build 20 plus owner occupied units with duplex style housing with off street parking.
Part 9: When 20+ duplex style owner occupied units turns into one 23 unit apartment building for low to mod income tenants.
October 22, 2008
The South Worcester Neighborhood Center decided to move on to the former City Builders site, which is roughly bounded by Southgate/Grand/Armory Street. For years it was a good business in the area that probably employed 10-15 employees, went out of business about 5-7 years and was bought by a private party, who rented out various parts of the property. I can honestly say it was underutilized and did not look good to the passerby. In other words, when the site was brought up as a potential development site even with Cambridge/Hacker on the table, I listened.
During the Spring/Summer of 2006, it was presented to board that we could buy this parcel for $495,000. My first reaction was this was "way too much money". I was told, however, that we could buy this parcel with a grant, not a loan, from the Commonwealth of Massashusettts from an organization called CEDAC.
We could in essence take control of this property for free, so I voted for the purchase. How could we lose?
Part 8: When a Grant becomes a loan.
October 21, 2008
Before I do, however, let me tell everyone who reads this blog that the South Worcester Neighborhood Center does an A+ job when it comes to human services. Why we got into low to mod income "big business" housing projects never made sense to me. I consistently voted against it and was a big mistake. We should focus on what we are good at and get out of this type of developments.
That said, one would think after Cambridge/Hacker Street, when the South Worcester Neighborhood Center would basically have been foreclosed on and potentially put out of business, except for the fact Holy Cross co-signed, that the low to mod income income housing projects would be over. You are wrong.
Not only has another parcel been purchased with a loan from the Commonwealth of Massachusetts but grants have already been approved. Details to follow.
I have received some e-mails on this so let me explain. The Commonwealth of Mass and City of Worcester gets various monies from the Federal Government whereby they give grants to help developers build housing, either rental or ownership, for low to mod income housing.
The Federal Government does not want these grant monies be given out for low to mod income then the underlying project to become market housing. How do they protect themselves? Answer: affordability period!
In other words the money will be given the the project under the condition that the project remains low to mod income for a certain stipulated period of time. I have seen most often 15 years, but it can vary.
Here is the big key. What happens if there is a violation during the affordability period? The money has to be paid back not by the developer by the PJ (Presiding Jurisdiction) that gave the money.
Lets take an example:
- City of Worcester gives $250,000 in grants for a low to mod housing project
- Developer goes under and the units are bought by non low to mod income people during the affordability period.
- City of Worcester owes the Feds $250,000
Now I simplified the explanation, but it is pretty close. Bottom line is that when the City of Worcester gives out these grants, there is a certain amount of risk back on the City that they may have to pay this money back.
October 20, 2008
I read a story in the Telegram about a property on LaGrange Street by Clive McFarlane. The long and the short of it was that the owners of the condos had walked and that the place was a mess. This property has now been placed into receivership under the state’s Abandoned Housing Initiative. Now the property is managed by Worcester Community Housing Resources.
Although I doubt Cambridge/Hacker would have been mismanaged to this degree and forced to be placed into receivership, I have no doubt that the South Worcester Neighborhood Center would not have been able to pay interest on $1,060,000 loan. This begs the question then what would have happened if Holy Cross had not co-signed on the loan?
By now BankNorth would have foreclosed and taken title to the property. If they had a) decided to rent or b) sold any of the remaining 9 units to people of non low to mod income, a pro rata portion of the grants would have had to be repaid back by whatever PJ (presiding jurisdiction) had give the monies in the first place.
Bottom line.. The fact that Holy Cross has been paying the monthly interest has not only 1) stopped the loan being foreclosed but 2) saved the PJ ( Presiding Jurisdictions) from having to pay back the monies (650,000) that were granted to this project for falling into non compliance. Who are the PJ's? They are the CIty of Worcester and the Commonwealth of Massachusetts.
In other words Holy Cross has taken a bad situation and bought everyone alot of time to make this project, that was intended, to keep all the grants in compliance by paying the monthly interest. My guesstimate is that the monthly interest is $5,000 per month. Thank you Holy Cross!!!!
October 19, 2008
First the project was simply too big and did not fit into the character of the neighborhood. This is a neighborhood full of 3 deckers scattered with a few single family homes. Then considering how small parcel of land, 12 units was not only too dense but simply does not fit into the neighborhood and looks out of place. A tri-plex with with underneath parking for one car and one outside parking, in the 500-600K versus 2,000,000, would have been a much better plan.
Second, the zoning board has to stop allowing variances for all of these low to mod income projects. This project was relieved of 12 parking spots in a neighborhood that already has no off street parking as well as 270 feet of frontage. Don't get me wrong the zoning board works incredibly hard at no pay, but this project never would have been approved if it was a private developer. There is understanding in the City of Worcester that the CDC's get any variance they want since they are building low to mod housing. This needs to stop.
October 18, 2008
We all know the current real estate market is soft. A private developer might consider renting the remaining 9 units, until the market turns. This is not an option here since the grants were for owner occupancy!! If these units are rented then the $650,000 has to be paid back by the PJ (presiding jurisdiction which means whoever gave the grants), since it violates the terms of the grants for owner-occupancy.
Bottom line these units not only have to be sold, but they need to be sold to a person of low- mod income, another requirement of the grants. In other words, we need to find 9 people of low-mod income to buy these units for owner-occupancy at average price of approximately $118,000 per unit to pay off the 1st bank loan to BankNorth.
Problem is that I only see these units appraising out no more then $75,000 per unit and that is with an extremely aggressive appraiser. What next? Answer: Try to get more grants to lower the price on the remaining units.
Lets say we were able to get another $225,000 in grants ($25,000 per unit times nine units) then we could lower the price to $93,000 per unit (118,000 break-even less the new subsidy of $25,000). I still not sure these units would sell even at $93,000, maybe 2 or 3 but not 9, since the credit markets for low-mod income (sub prime) is not good.
If something like this were to happen, then the new total of our tax monies (you and my money) invested in this project would be $975,000 ($650,000 plus the new $225,000 in extra subsidies).
Part 3 tomorrow--final thoughts on Cambridge/Hacker Street.
October 16, 2008
To give people an idea of how these projects work, in this blog I want to give you a breakdown of a project done by the South Worcester Neighborhood Improvement Corp (SWNIC), of which I am a board member. Here is a general breakdown of the finances of the Cambridge/Hacker Street project, and is quite similar to how the other projects are done.
My numbers may not be to the penny, but they will give a fair an accurate portrayal of the finances. In total, the cost to build these 12 owner occupied units was $2,050,000 broken out as follow:
- BankNorth Conventional Loan $1,400,000 in first position
- City, State, Federal Grants $650,000 (HOME, CDBG Funds, etc)
Keep in mind these grants (650,000) do not have to be repaid if a certain number of the 12 units (forgot the number-think 9?) were sold to low-mod income home-owners. In other words all you really need to break-even is to raise $1,400,000 from the proceeds, not the $2,050,000.
Problem is that only three units have sold for about $340,000 (TOTAL PROCEEDS FROM THE 3 SALES), which has lowered the BankNorth loan to approximately $1,060,000. SWNIC has no money to pay the interest on this loan and now Holy Cross, the co-signor on BankNorth loan, has been paying the interest on the loan, which is not a small number.
In total to date, $2,050,000 has been invested, of which $650,000 is our tax money, into Cambridge/Hacker Street and three owner-occupied units have been produced.
Next blog over the week-end following up on this.
October 15, 2008
Jahn, I watched a little of the City Council and I think there were three potential sites that Unum was looking at:
- City Square
- Washington Square parcel
All public financed/subsidized properties--- not one private entities. Why would they move to another privately owned building in Worcester when they already own a building in Worcester?? Answer: In the end after the money/subsidies that will be thrown at UNUM, they can probably save a boat load of money renting new digs and renting or selling their old pad.
Maybe UNUM is not looking to pay market rent for their new temporary home, since I still feel that they will ultimately leave the City of Worcester and consolidate in Maine and Tennessee. What better exit strategy then to rent new space, below market value, while divesting in your real estate holdings.
Ultimately if UNUM were to move to City Square and this became the catalyst then it would be a good thing. At the same time I don't think any of us had UNUM in mind, when all of the public monies were spent on the above three development parcels to attract business to Worcester.
Lastly got to agree with Councilor Palmieri on this one, I did not realize Gateway Park was to be an office park?
Not Direct Air's fault but people losing 20% of their retirement monies last week are not looking to book trips to Florida. Lets hope we get an update on sales soon.
October 14, 2008
I did send a letter to the airport regarding my belief that ORH should privatize the airport by conducting an RFP to long-term lease or outright sell the airport. It was noted in the minutes of the February, 2005, and dismissed as noted as "already included in the IMG scope of work." IMG, in fact, did look report on this in their $100,000 report and dismissed it as something "a public/private partnership is not likely at this time". I never knew how they could know this without conducting an RFP?
I wonder if Chicago Midway or New Orleans also had to go through Robert Z Nemeth to solicit bids to privatize their airports.
October 12, 2008
- no mention of any pending negotiations with Direct Air, which was announced on September 5th, or any other airline.
- no mention of status of negotiations with MassPort
- no mention of what IMG is doing with the $100,000 that we have spent on them to retain and recruit an airline.
- another extension of one year was asked for on the DOT Small Community Air Service grant which was set to expire in September after already being extended for one year.
- two photo shoots as reported by ex Airport Director Waldron
- Meeting started at 6:45 and ended at 6:51?
From now on I will keep checking the Airport Board minutes, but I am not going to comment on it anymore. I just got to believe that most of the real work is done outside the official board meetings, so reading these is actually pretty useless and a waste of time.
October 11, 2008
Here is how it works a CDC sells a house for $200,000 and the home-owner gets a real mortgage for say $170,000 that they make payments on. The City of Worcester kicks in the other $30,000 through their HOME funds from HUD, which the home-owner does not pay back. In the end the CDC walks away with $200,000, the home-owner typically puts down little or no cash and the second of Worcester has liability for the $30,000.
What liability? Well, if a person who is not low-mod income takes ownership during the affordability period, typically 15 years but I have seen longer, the City of Worcester (not the CDC) owes $30,000 to HUD. There are already alot of these soft second mortgages that have violated the affordability period that they City of Worcester now has to pay back. I hope someone inquiries into this and ask for a report detailing what we owe.
The News Tribune reports Tacoma has been trying to sell the money-losing airport for two years.
October 10, 2008
Over the past ten years, I have been to about 30 meetings on this. This is no exageration, to date not one single job has been created and pretty much nobody knows where the South Worcester Industrial Park (SWIP) is.
In November, 2007, the City of Worcester was able to RFP a large parcel of land (11 acres) referred to as 49 Canterbury Street. It is a large fenced in lot bounded by Canterbury, Gardner and Southgate Street. It was big step and will eventually be the first/anchor tenant of the SWIP.
There were two bidders:
- Absolute Machine: an abutter bid 50,000 for expansion of existing business
- Pharmasphere: start-up company bid $1 with promises to invest approximately $15 million to invest in a 50,000 square foot facility
Pharamasphere was awarded the bid "because it proposed to move forward quickly and create jobs for workers with a range of skills and educational", click here for the Telegram story announcing the award this past January, 2008. Myself I thought supporting existing local businesses an awarding the parcel to the abutter bidding $50,000 made more sense then a start-up bidding $1, but I digress.
Next step was to complete what is referred to as a Terms of Conveyance (TOC). Although the TOC to transfer the property was only suppose to take 30 days, per the RFP, the Terms of Conveyance was signed 9 months later on September 4, 2008. I have had a chance to read the TOC and do not like the terms at all.
The actual transfer of the property for $1 will now take place no later then ten days after a building permit is obtained. O'kay I can accept this, but what I can not accept is the deadline to get the building permit. The deadline is September 1st, 2009.
Let me get this right. Pharasphere won the bid for $1 in January, 2008, because they were suppose to "move forward quickly" and now they have until September 1st, 2009 to obtain a building permit before they have even have to take title to the property within ten days for $1. It gets better, or should I say worse.
Even if they do not have the building permit on September 1st, 2009, the TOC can not be terminated until September 1st, 2010 as long as Pharmasphere "has pending applications to obtain such permit and is diligently pursuing such permit." How does one interpret or enforce a "diligent" standard. This winning bid of $1 in essence can tie up this 11 acre parcel, that nobody is paying taxes on, until September 1st, 2010.
One of the reasons given for the long time period is that Pharmasphere is having a tough time raising venture capital for this start-up, which is understandable especially in light of recent market developments. At the same time one must wonder how this project was ever considered to be one that would in fact "move forward quickly" without firm commitments already in place. The better question, however, is why enter into a TOC that can tie up this parcel for two years when it is a "tough time" to raise monies for start-ups and there are no loan commitments in place?
Maybe we should not have signed the TOC and rebid the parcel.
During that time, we have seen a couple not only survive but thrive like Allegiant and USA3000. One I always forget--Vacation Express. Imagine direct flights to Mexico, Costa Rica and the Caribbean.
October 08, 2008
1 RFP the entire airport
Although we have been talking about privatizing the airport for 4-5 years, it looks like this will become a reality.
2 Status of Avports
Found out that Avports was not given the information that they requested, but are still looking at the numbers that were on-line.
3 Estimated Savings to downgrade to General Aviation
Nobody has worked on this.
At least one thing is being done.
October 06, 2008
On the blog we have been begging the City for four years to put an RFP out on the entire airport to either 1) long-term lease or 2) outright sell ORH. In fact I meant with then Chairman of the Airport Commission some three (or was it four) years ago to explain privatization and he asked me to submit a letter to the board, which I did. It was blown off because IMG said that there would be no suitors. How they knew that without ever putting out an RFP never made sense to me.
Councilor Petty the bid on Chicago Midway is not the first example of airport privatization. In 1999, Stewart Airport in Newburgh was leased out for 99 years to National Express, a Eurpoean company, at an up front cost of $35 and a percentage of the annual sales. National Express has completely turned the airport around and has resold the remaining years of the lease to the Port Authority of New York and New Jersey.
MassPort has been a great partner and savior for ORH the past ten years, but 18 months we have been negotiating this sale. Maybe we need to open up the process to all buyers, like Avports who have already expressed an interest, by condusting an RFP. That said, why do we need to hire someone to do the RFP.
In closing, this is good news but it should have started five years ago.
October 05, 2008
- Forced retirees to go on Medicare, which I agree with
- the Beattle Invasion
- the cost of the sewerage upgrade by the EPA
- collections by the Commonwealth are below expectations
- Question 1
- credit crunch
There is no other way to look at this decision then simply being bad management. The hidden cost of two employees, benefits etc, can not be overlooked and kudos to the City Councilors to insist that we make these contracted positions.
October 03, 2008
October 02, 2008
October 01, 2008
- business after hours
- once per year regarding the dual taxes
- promoting our sports teams (Tordanoes and Sharks)
These three things are not bad things, but a strong Chamber of Commerce should be doing a whole lot more then that. Can I ask readers of this blog it they are members, why? If they are not, why not. We personally are not..
Anyone hear anything from Destination Worcester or Choose Worcester? My business is one block from all three of these organizations, I have no idea who they are, what they do or what they do for businesses in the City of Worcester.
Imagine if all of these groups were effective as the Research Bureau?
Did any of these buildings have a "Certificate of Building Closure" as required by the ordinance? All empty buildings are suppose to have one. If they are out of compliance the fine is $300 per day.