Blogging Bayport Alameda

September 16, 2013

The Devens in the details

Filed under: Alameda, Alameda Point, Business, Development — Lauren Do @ 6:06 am

So, in comments section there is a reference to the base redevelopment at Fort Devens in Massachusetts.   The redevelopment (still in progress) at Devens is generally heralded as a success because, well, I guess because they managed to get some large scale businesses in and limit the amount of housing that was built there.   But while it is held up as an example that you don’t need housing to finance infrastructure, less publicized is how Devens got to the place where it is.   There’s this great case study that goes through how Devens was successful in becoming Devens, but also shares some of the growing pains that it is currently experiencing.

My big takeaway is that a Devens style development could not happen at Alameda Point because there is no way, no way, that the key elements that existed would ever happen in Alameda.  From the case study:

The [Devens Enterprise] Commission [consisted of 11 members, with the Governor appointing the majority] was given control of Fort Devens governance for at most 40 years, at which time a more permanent arrangement would have to have been created, whether by a new town or the reintegration of Devens into the host towns. The Commonwealth paid $17.8
million to the Department of Defense for Fort Devens in 1996 and underwrote $200 million in bonds for infrastructure investments, advertising and planning. Despite future revenues, the project was anticipated to break even only after 30 years.

At present, residents of Fort Devens pay taxes to the Commonwealth, vote in one town and send their children to school in another. The Commonwealth pays for municipal services and pays neighboring towns for education costs.

[T]he Army has spent approximately $144 million on site cleanup

With a 30-year payback schedule, the towns [Shirley, Ayers, and Harvard] could not have born the costs of requisite infrastructure improvements. The site’s expected returns over 20 years were expected to be around $95 million, not even half of the initial bonds.

[T]he DEC created incentives to make Fort Devens more attractive for private investors. Most importantly, it provided 75- day 1-stop permitting review process for development projects.

In addition to this incentive, companies that move in to Devens enjoy low real estate taxes, discounted utilities through MassDevelopment acting as a municipal authority. Other assistance from MassDevelopment includes logistical support, a professional fire station, a State Police building, grounds maintenance, and utility providers, all on site.

Finally, as a quasi-public agency, MassDevelopment can offer incentives that a private developer could not…When the company wanted to expand capacity to fabricate panels, the Governor’s Office arranged a deal with MassDevelopment to lease land to Evergreen at a heavily discounted rate while financing infrastructure through a grant program.

So about that housing…

Despite the many jobs and services, there are only 102 occupied units at Devens. These units, 25 percent of which are affordable at 80 percent of area median income, are renovated officers’ housing located around the center of the main base by Devens Common and the playing fields. Under current regulations established during the initial Devens disposition, only 180 more units are allowable. These have yet to be built on account of a change in the style of housing that MassDevelopment plans to provide. Previously, large lot suburban single family homes were to be constructed, but the DEC is updating its zoning to allow for more compact development in line with the Commonwealth’s “Smart Growth” goals.

As regional housing supply tightened, however, and prices in Massachusetts have come to be seen as a major economic weakness, the Commonwealth has been unable to increase housing at Devens, despite two studies indicating respectively that it could absorb 2,700 and 2,300 units over the next 20 years.

Without a resolution, MassDevelopment may seek legislative relief from the housing cap in order to construct more units in the future.

So to sum up for those that didn’t want to read the whole thing.   Devens was developed essentially by the state (aka Commonwealth of Massachusetts) with a massive subsidy and a super streamlined permitting process (75-day 1 stop permitting, unreal!). Incentives such as heavily discounted land leases in addition to financing infrastructure. No existing residents meant no opposition to anything. Essentially everything that Alameda Point does not have. So was it the commercial only designation that brought businesses to Devens, or was it all the incentives and public financing that comes from that quasi-public agency acting as the developer.

The ironic thing is even though some would hold Devens up as a model of how an only commercial development is the most successful, Devens is grappling with the issue of housing right now and how much to build and what it should look like. So I guess even the perfect commercial development struggles with housing issues as well.

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17 Comments

  1. You miss the point.

    Devens has been more successful than Alameda (which has had zero success) because they operated within the federal framework and within financial and other realities. They didn’t hang themselves with a decade-ish delay by ignoring those realities and trying to turn it into their dream factory.

    Also, minor quibble with this part:

    —————————————–
    Devens was developed essentially by the state (aka Commonwealth of Massachusetts) with a massive subsidy and a super streamlined permitting process (75-day 1 stop permitting, unreal!). Incentives such as heavily discounted land leases in addition to financing infrastructure. No existing residents meant no opposition to anything. Essentially everything that Alameda Point does not have
    —————————————–

    No reason Alameda couldn’t have a streamlined permitting process. It’s a simple choice by city. Same for discount leases. And while there are residents there now, they weren’t tehre when process began, and in any case are renters whose leases can be terminated should any action ever come to pass.

    Comment by dave — September 16, 2013 @ 7:48 am

  2. The key point in Devens is that even after decades, it will not have generated a single penny in funding for the area. $200 million in bonds will likely have cost Massachusetts tax payers upwards of $400 million (dave can correct this assumption) in bond repayments over their lifetime. Devens will have generated >$100 million in its first 20 years. MA tax payers will have paid $300 million for what exactly? 2,000 jobs?

    My argument with the Devens model isn’t that it’s not a great dream, it’s that with all the costs associated with development, it’s not realistic unless you are one who believes that hundreds of millions in tax payer funding should go to bristol-meyers squibb, etc. It is not consistent with Alameda’s decades help fiscally neutral policy, which has been a bedrock of the redevelopment of the NAS since the late nineties.

    I agree with dave’s statement, I have no specific vision that I think has to occur at the NAS, as long as it’s financially viable, and in fact I think “literally do nothing” is better than a lot of the options Alameda might pursue. The reason housing continues to get introduced into the conversation is because it’s one of the only things that will provide funding to create the jobs that most people claim to want and it will create the place that most Alamedans have said they’d like to see out there.

    As a city, we need to ensure that our Master Infrastructure Plan (MIP) provides the financial data that we need to make the decisions as to how to move forward. Right now it doesn’t do that. We also need to ensure that the city has a disposition strategy that allows flexibility and opportunism in the city’s decision making, but simultaneously guides those decisions to ensure that the city isn’t saddled with a Deven’s-like financing deficit.

    At the end of the day, tough choices about how to move forward (or not move forward) in various places at the base are going to need to be made. 17 years after the base closing, we’re somehow still in the delirious “build it and they will come” phase, where any idea is viable, if you only want it hard enough. Until we are able to move past it, we’re either going nowhere, or we’re moving forward with a blindfold on, just hoping that something, anything works out.

    Comment by JKW — September 16, 2013 @ 7:51 am

  3. How refreshing to hear JKW even consider the “literally do nothing” option! Is JKW the same as jkw? Is this the guy sitting on our Planning Board?

    Meanwhile, from a flyer distributed at the Mastick Open House: “Alameda CTC is estimated to receive $63 million over 4 fiscal years [2012-2016] from the OBAG [1 Bay Area Grant] program for transportation investments in Alameda County. Per the OBAG requirements, Alameda CTC must use 70% of the funds to support Priority Development Areas [PDAs].”
    For anyone who doesn’t know, Alameda Point is Alameda’s major [only?] PDA. The City doesn’t want to lose the grant money and it seems a shame to spend it all on consultants and studies. But it’s hard to develop a transportation plan when there’s no there, there. yet…

    Comment by vigi — September 16, 2013 @ 9:35 am

  4. I am quite surprised to see JKW promote doing nothing at Alameda Point. For reasons I stated earlier, it would be to our detriment to do nothing at Alameda Point. We have an opportunity to be part of the Bay Area regional growth and the city stands to prosper.

    The development of Alameda Point is about where most developers would be at this stage, having recently taken on the project since the removal of Sun Cal. If a developer had this project, they would be in the planning and entitlement phase, which is where the City is right now. The purpose of the EIR is to provide the public with information about the environmental impacts of the project and ways to minimize the project’s impacts – which is what the City is doing.

    Specific projects and the financial data of those projects are usually not presented until the planning and entitlement process is complete – especially for a project this size. But the city has shown in the MIP a timing and phasing plan that is consistent with most developments of this size.

    Comment by Karen Bey — September 16, 2013 @ 11:11 am

  5. I think the bond market will have a lot to do with seeing that we aren’t “saddled with a Deven’s-like financing deficit.” According to the infrastructure financing proposal, developers will be required to pay into the infrastructure fund to bring the infrastructure to their site. The city’s ability to supplement the costs of infrastructure are extremely limited – limited by the lease revenue currently being generated at Alameda Point.

    One point about “not doing anything.” I think we kissed that option goodbye when we accepted the land. It’s now part of Alameda, which is something that is going to take time to sink in. It’s not “old NAS” anymore, it’s the west end of Alameda. Seamless or not, it’s integrated. We have a responsibility to maintain our city. Hopefully we figure something out before desperation sets in and the fiscal neutrality requirement is abandoned and bonds are sold to fund infrastructure that are backed by the general fund.

    Comment by Richard Bangert — September 16, 2013 @ 11:29 am

  6. #4. I’m not saying “do nothing” I’m saying that I will support doing nothing over planning projects that saddle the city with on-going financial deficits. I’m not going to knee jerk support a project, just to say “we did something, yay for us.” There are options on how to get there, but heretofore, there has been next to no discussion about what they are. To that end, I have been pushing to have the data available to have those conversations and for these conversations to happen. The first, a starter, will be at the joint planning board/city council meeting on Sept. 25, the beginning conversation for the city council to decide how to dispose of the property.

    #5. accepting the land did not require us to “do something, anything.” The city could just as easily decide to let the land rot as it could approve a unsupportable, politically palatable project. They could just let the infrastructure fall into disrepair and not fix it, or giveaway the land to people who are willing to take on the responsibility of paying the cost to fixing it with no city liability. City ownership is nothing but a political impact, will people buy into the false determination of required development that you suggest, or won’t they? In reality it simply provides the city the option to develop none, some, or all of the land as it decides it wants to.

    I’m concerned about the types of decisions that the city has already made, with cheerleading from some of Alameda’s more active voices (none of whom would be confused with housing advocates, dave 🙂 ), that we need to avoid. This would include supporting the VA in it’s current plan, based on a promise of $12 million in “free” utilities which will likely have a negative financial impact for the city of Alameda, unless the city changes its current thinking.

    Water companies (like EBMUD) prefer to have their water lines run in a loop to flush out sediment and keep problems from occurring. At Alameda Point, this would mean that the $12 million in “free” infrastructure from the VA will be matched by a continued loop around the historic district, putting the city on the hook for tens of millions of dollars of additional water lines, plus their annual upkeep, plus their life-cycle replacement. The City is going to need to stand strong and insist that either the VA take on the costs for the full loop, or accept a non-loop implementation (the city can retain the option for completing the loop later if there’s ever development to support it). Additionally, the City will need to ensure that the VA takes on the maintenance and replacement costs of the “free” infrastructure (I believe the current plan is for the city to take on the “free” infrastructure). If the city ever develops the reuse area, they could structure a deal where that future development would assume their share of the infrastructure. But that’s hardly a foregone conclusion.

    Comment by jkw — September 16, 2013 @ 12:51 pm

  7. The challenge for the city and for us as a community is that – the city is acting as the developer which is a new role for the city; but this is what the community wanted.

    Deal points are negotiated by the developer and their team of experts behind closed doors. What you’re suggesting is that the city should negotiate their deal points in a public hearing setting – and no developer would agree to that. They would lose their ability to compete in the market place.

    But since this is a new role for the city – I agree there are some issues like process that need to be addressed.

    Comment by Karen Bey — September 16, 2013 @ 1:36 pm

  8. 6. 5 here. “They could just let the infrastructure fall into disrepair and not fix it” There are businesses and residents there. And the VA’s facilities will be an important asset to the community. Letting the place crumble may be a hypothetical choice, but it’s not a real one. I didn’t say build something, anything. At the bare minimum we need to maintain the infrastructure, and, in my opinion, tear down the eyesores. Speaking of which, the Antiques Faire is going to need a new home. They don’t need underground utilities to hold a fair. Doing nothing would be irresponsible and an embarrassment to our community.

    One of the scenarios you mention – “giveaway the land to people who are willing to take on the responsibility of paying the cost to fixing it” – is probably what the deals are going to look like anyway. In other words, “We’ll give you the land if you spend $X on new streets and utilities.

    Somewhere between penciling out and gridlock is where we’ll probably end up.

    Comment by Richard Bangert — September 16, 2013 @ 2:10 pm

  9. The scenario I cited is “you pay to fix the infrastructure, you pay to maintain it, you take on the cost of life-cycle replacement.” Not just “you buy it, we’ll take care of the rest.” Having a developer build “free” infrastructure, only to saddle the city with unsustainable costs of maintenance and replacement isn’t “penciling out” in my book. In Devens, the development hasn’t even covered its initial bonding costs, let alone it’s annual upkeep and saving for future replacement. The state is out $200-300 million, the local community even more.

    IMHO, the only irresponsible embarrassment would be building something that saddles our kids with costs that don’t cover themselves in terms of financial returns. Devens is currently a model for just such irresponsible development.

    Comment by jkw — September 16, 2013 @ 3:13 pm

  10. 9. What would you add to this list from the city to achieve a sustainable infrastructure system? “Community Facilities District financing, assessments, Infrastructure Financing Districts, infrastructure fees, improvement funds, public grants and loans, and private equity.” The CFD and IFD don’t sunset. What are they for if not annual upkeep and saving for future replacement? The money can’t be funneled to another part of the city.

    So, you’re against having the state of California give us an outright grant of money for infrastructure (out of their municipal bond pool)? Because it’s not going to pencil out for the people of California to have their money go to economic stimulus on an old military base? In what century will bridge tolls pay back the $6 billion just spent for a section of the Bay Bridge?

    Comment by Richard Bangert — September 16, 2013 @ 5:16 pm

  11. I’m enjoying this exchange as much as any in quite a while. Informative and constructive. I have to ask you Richard, with regard to 10. how does a state bond for a City development compare to a bridge project (hugely over budget or otherwise)?. Motive to get that bridge built is obvious ( safety, economic engine, etc.) , but how would development at Alameda Point compare? I don’t think it’s a matter of being against state money as much as realistic expectation. Massachusetts must have an entirely different outlook on sate spending if their schools are any indication.

    Comment by M.I. — September 16, 2013 @ 6:06 pm

  12. In addition to the 2008 case study cited by Lauren in this post, it’s worth reading a more recent one from last year http://www.devenscommunity.com/sites/default/files/devens_commercial_report_062012.pdf I would not call the following excerpt indicative of a model of irresponsible development as stated in comment #9: “Devens private sector and nonprofit establishments had estimated combined sales of more than $1.06 billion and employed 2,589 people. Spending by Devens private sector and nonprofit entities supported an additional estimated $393 million in spending throughout Massachusetts supply chains and an additional estimated 2,618 Massachusetts employees.”

    11. My only point is that #9 suggests free money from the state of Massachusetts to fund infrastructure did not pencil out and therefore was really masking a failed economic experiment. The bridge comparison was only to show that there’s plenty of money for public works projects which doesn’t necessarily get repaid. Cities get money all the time, including federal stimulus money, and their is no expectation of paying it back. In the case of the state of CA, if it gives us money that comes from their bond sales it doesn’t have to be tied to the financial strength of the businesses on West Tower Ave to be justified. It’s tied to the tax collecting strength of the state. It would be a grant. If the unions get behind it, money for Alameda Point infrastructure construction is just as realistic as the obscenely bottomless pocket of money that was used to fund the new bridge section.

    Comment by Richard Bangert — September 16, 2013 @ 6:37 pm

  13. 11

    Am also enjoying. Have questions & things to add, but must be in the morning. Carry on, this is good stuff.

    Comment by dave — September 16, 2013 @ 8:45 pm

  14. #10 – I have no issue with CFD’s etc. They will be an important part of whatever solution comes to pass.

    The idea that the state is going to funnel $100 or $200 million to Alameda Point is rather pipe-dream-y. The state wants to drop that kind of dough in Alameda, grab it and run. I don’t see it happening. Even if redevelopment is re-started in one of the new forms being discussed, that money is backed by local tax collection, so it isn’t additional money, its just a different name for the same money we’re looking at.

    Those numbers from the Devens annual report are hardly compelling. BMS would have built the same factory somewhere else, the prison would have been built somewhere. the other 87 businesses might have located in the three towns that surround this area or somewhere else in the area, reducing the need for $200 million in state bonds. Those numbers don’t speak to the issue of what was developed because what was developed likely would have been developed with significantly less infrastructure cost somewhere else. I guess it’s “yay” for half-built Devens, but at a cost to other places that didn’t get the state aid.

    Devens was raised as the perfect example of a place where commercial-only development could support itself. It’s not doing so. I’ll support such an idea, if the economics of the project can be shown to pencil-out. What I mean by pencil out is no city money into the project. not for maintenance, not for life-cycle replacement and not for building the place in the first instance. That is the promise I believe the city made to its residents many moons ago, and it the one I believe the city intends to keep.

    dave pointed out that there are a lot of unknown costs right now. The first step in rectifying that is to ensure that the Master Infrastructure Plan, which is going to the City Council tomorrow night, includes all the costs for the infrastructure, so that future proposals can include revenue generation and full costs of the project and decision-makers and the community to properly evaluate each phase/proposal.

    Comment by JKW — September 16, 2013 @ 10:22 pm

  15. The combination of the no cost conveyance, private investment, CFD bonds, IFD bonds, public grants and development fees all will help make Alameda Point a success if the infrastructure is built in phases and if the city can time the market.

    But having the right development team is just as crucial. A developer friend of mine told me once — that anybody can develop in a good market, but it’s the developer with an exceptional team that can develop in any market.

    Comment by Karen Bey — September 17, 2013 @ 6:41 am

  16. 14. Yes, BMS may well have built their $750 million plant somewhere else. They were looking at one of the Carolinas, among others. So, Massachusetts got something for their money. Real property investment, annual payroll, and taxes.

    Not saying I expect $200 million from the state. But free money is not a sign of failure. If it were, half the corporations in this country would be failures because of all the tax breaks, avoiding taxes by sheltering profits overseas, direct subsidies to industries like agriculture, lack of pricing into their products the true costs to the environment which government has to absorb, and on and on.

    Comment by Richard Bangert — September 17, 2013 @ 8:06 am

  17. #16. Sounds like we have some agreement. BMS, a company that can afford a $750 million plant benefited from $200 million in free infrastructure (at a cost to the public of ~$400 million). Not a failure for them. They and the other 86 businesses have generated $95 million. So taxpayers are out ~$300 million. We clearly disagree on whether that was a good or bad thing for taxpayers.

    You can argue semantics all day long. in the End, it’s the city, not the state, that will be funding this project. In Mass. the state had to pay $400 million to generate $95 million. That’s what they received for the project, plus some small incremental increase in sales tax. Again, that’s just looking at the initial infrastructure costs, not the on-going. So the loss to the state/local area is greater. In Alameda, the city will be on the hook for these costs.

    I define success (or penciling out) for any project at Alameda Point as a project that builds something the community wants and raises more revenue than it takes to build, maintain and replace the infrastructure. Devens fails that test in my view. I’m completely open to the fact that the Devens model might well be able to succeed. But so far, no one has provided the back-up to show that it can pencil out.

    Comment by jkw — September 17, 2013 @ 9:23 am


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