Cities and town governments may welcome 40T as “free” private money for infrastructure they can’t afford — often because they’re giving away too many subsidies to developers already. It will be used to end-run Proposition 2 1/2, since the “assessments” are not called “taxes” and no community vote is needed. And it will be a way to escape their own bond cap. But municipalities may end up cleaning up the mess if a project is abandoned, especially if they invest public pension money in those bonds.
Other ways exist for developers to fund their infrastructure without creating private governments, e.g., betterment districts (Ch. 80), Ch. 40Q District Improvement Financing, and Infrastructure Improvement Incentive (“I-Cubed”). Why are legislators pursuing this approach?
Governor Deval Patrick is not yet admitting to any position on 40T, but he is likely to approve, having chosen real estate lawyers as top advisers. This would be ironic, since he promised to reduce property taxes. Will he empower private developers to increase those taxes, on people who cannot even vote on it?
I know that back in Ohio we had special districts that had certain governmental powers for development purposes, but I believe they were still subject to open-records laws, et al.
<
p>
Why set these districts up (not a bad idea necessarily) without the necessary regulations?
<
p>
WF
Lest we forget that every issue has more than one side, here’s a summary of the bill from NAIOP – an admittedly developer-friendly organization.
<
p>
Link is here.
<
p>
PROPOSED CHAPTER 40T MASSACHUSETTS GENERAL
LAWS:
FINANCING INFRASTRUCTURE COSTS FOR RESIDENTIAL AND
COMMERCIAL REAL ESTATE
The proposed amendment to the General Laws, adding Chapter 40T, will enable
property owners in newly created ?Special Development Districts? (?SDDs?) to
finance needed public infrastructure improvements without burdening the budgets of
the Commonwealth or its cities and towns. This financing technique has been used
with great success in other states and will prove to be a very powerful tool to reduce
the cost of housing and commercial real estate development in Massachusetts. Last
year, approximately $5 billion from tax-exempt bond funds was used to finance
roads, water, sewer and other infrastructure needs through such special districts.
Massachusetts, currently, can only access this source of capital through districts
established by special legislation. No State or local taxes or other financial assistance
is required for this program.
Under the proposed legislation, the establishment of an SDD would require the
approval of both the property owners within the boundaries of the proposed SDD and
the host municipality. The SDD would be able to finance needed infrastructure
through the issuance of its notes or bonds. This financing would be non-recourse to
both the property owner and the municipality. The debt service on the bonds would
be paid back through a schedule of special assessments on the real estate within the
SDD that has been reviewed at a public hearing and approved by the Prudential
Committee of the SDD. The Prudential Committee would be appointed by the host
municipality.
Financing under the proposed Chapter 40T could be used by developers of
commercial or residential projects with large infrastructure needs. It would also be
available as a financing mechanism for existing neighborhoods with unmet sewer or
water needs (such as Title V problems) if a city or town is unwilling or unable to
finance such improvements itself. Chapter 40T could also play a role in providing
security to, and enhance the marketability of, bonds issued under Chapter 40Q
M.G.L. (District Improvement Financing).
The legislation has been drafted and reviewed by bond counsel and underwriters
familiar with such financing.
<
p>
So — can they raise revenue by force or not? It seemed like they could, making it a tax by any other name. What’s the scoop?
shirley kressel is a fact-distorting NIMBY who is against all development and all new construction. dont mean to be a jerk here, but just look at her record on pretty much every single development project in boston.
just explain if this is true, false, or otherwise:
<
p>
Furthermore, it allow them the power to tax without 2 1/2 restraint (chapters 20A and 21C):
<
p>
<
p>
This Legislation is a travesty.
but I completely agree with gary.
I oppose only unlawful development and undemocratic, unfair legislation. And I’m willing to put my name on the line for what I say. If you want to make this discussion about me instead of about Chapter 40, have the courage to put your name on the line, and let’s compare records.
<
p>
Otherwise, I’d be interested to hear your analysis of why Chapter 40 is in the public interest.
of the idea of setting up what basically amount to neighborhood governments that have the right to tax assess without my consent.
<
p>
These kinds of developments may work well in other states where there is undeveloped land that can be built from the ground up with this in mind (think of gated communities with committees and guidelines for how long your grass can be and what size flag you can put up). But in Massachusetts (especially in our urban and suburban communities) there is little or no land available for fresh development.
<
p>
It worries me that people who have lived in their homes for however long can suddenly find themselves subject to the rulings of a pseudo-government run by their neighbors against their consent if they’re in the fewer-than-20% minority. God forbid there’s a house on the block that doesn’t get along with anyone…
Last time, one of the big objections to chapter 40T was that it authorized these mysterious “local improvement districts” to exercise eminent domain. Last year’s bill is here; see proposed ch. 40T sec. 3(d)(5). This year, apparently that language has been removed — at least, I couldn’t find it. So, it appears that the folks behind ch. 40T recognized that privatizing eminent domain was a bad idea, and now are content with privatizing the power to tax. We’ll see if that’s enough to get the thing passed.
That power was overzealous. I don’t know what I think of this, although I’m generally presumptively in favor of development, with the possibility of being convinced that it should not happen. I think that some of those opposed to this bill are predisposed in the opposite way, including Ms. Kressel, but I could be wrong. Regardless, it is those diverging starting points that color much of the debate around development issues like these. Take, for example, another one of Ms. Kressel’s (and certainly others’) concerns: that the Patrick adminstration has been taken over by development lawyers. She is, in fact, partially correct. Secretary of Housing and Economic Development Dan O’Connell, and attorney, was the head of the Development Advisory Services group at Meredith and Grew. His general counsel, and permitting ombudsman, is Greg Bialecki, a former partner at DLA Piper (which is the latest iteration of Hill & Barlow, where Gov. Patrick was a partner).
<
p>
Do these appointments mean the Adminstration has been, as I said, taken over by pro-development folks? Perhaps. But Is this a bad thing? I think it is not. Others do. Another of Secretary O’Connell’s assistants is Tina Brooks, widely known and regarded as an affordable housing activist. I have no idea if she is happy with her job and what she is able to accomplish, nor do I know if Secretary O’Connell or Mr. Bialecki are happy in their posts. But I am sure that they are not phoning it in. They may, however, be more familiar with developers as opposed to preservationists or conservationists.
<
p>
That’s a long winded way of saying that things are not always as they seem, and development is good or bad depending on the eye of the beholder.
No, but it does remove an objection. See my related comment downthread.
The eminent domain issue has been handled cleverly. Here is the testimony of Rep. Denise Provost at the June 11 hearing:
<
p>
“Even in last session’s bill, 40T districts did not themselves have eminent domain power. That bill gave 40T districts the ability “to acquire by eminent domain, with the approval of the municipal governing body…real and personal property located in the district” (Sec. 41, sec.3(d)(5)). Under the present bill, 40T districts will have the right to “acquire” real and personal property — even outside the district.
<
p>
There is no doubt that municipalities would have the power to take property by eminent domain on behalf of 40T districts, and to transfer property so taken to a 40T district. Under current federal and state law, a municipality — often on behalf of one of its political subdivisions, such as a redevelopment authority — has the power to take property by eminent domain to transfer to a private developer. A municipality may certainly exercise the eminent domain power on behalf of another “political subdivision of the commonwealth,” which a 40T district would be. The current bill is just drafted more artfully, to avoid the use of “eminent domain,” and the alarm that it causes.”
<
p>
Municipalities could also convey public property — which this year’s bill allows to be included in Districts — to such a District without following Ch. 30B competitive bidding requirements, since inter-governmental agreements are exempt from 30B.
<
p>
If a District if floundering financially, the local governments that approved them will be pressured to help them along, and land gifts would be a way to do so.
Of course it’s true that municipalities could acquire property by eminent domain and then transfer it to a 40T district. They do that kind of thing all the time — transfers of property taken by eminent domain to private developers are fairly routine. That’s unfortunate, IMHO, but it’s the current state of affairs. So it seems to me that eminent domain is no longer a factor in this legislation.
<
p>
There may well be other big problems here, such as the apparent privatization of the authority to tax and the end-run around Prop. 2-1/2. I’m just saying that eminent domain appears no longer to be in the mix in any significant way.