By Matthew L. Brown
Chapter 40T would allow neighborhoods to access cheap capital
Folks in the west end of Worcester may not have any interest in paying for new sewer lines on Grafton Street, and at this point, the city council probably isn't too high on adding much to the bonded indebtedness column of the municipal budget.
That's where a proposed law that developers, economic development types and municipal officials say would give neighborhoods access to billions in special bond financing comes in.
Special projects
The proposal currently before the legislature is called Chapter 40T, and it would allow individual neighborhoods or groups of property owners to form special development districts and bond for development projects without affecting the town or city tax rate.
Taxpayers within development zones established under the proposed 40T law, not all the town's taxpayers, would be responsible for paying the bonds.
City-funded development projects and the tax increases necessary to pay for them have a way of bringing out the worst in residents. Discussions about project costs can quickly bring cultural, economic and simple geographical differences into sharp relief.
"There are different needs for different areas of the city," said Craig Blais, executive vice president of the Worcester Business Development Corp. And getting all the citizens of Worcester to agree to expensive taxpayer-funded development projects of which they'll never realize the benefit can be next to impossible.
And these days, those projects "can't be handled by the city government itself," Blais said.
Under 40T, project costs are "paid by the property owners who are benefiting," said Harold R. Davis, economic development director for the town of Douglas and consultant with New England Economic Development. "And you can pay it back over 35 years instead of 20 years" like general obligation bonds.
Davis said Massachusetts, with its high cost of living, high home prices and high property taxes, desperately needs legislation like Chapter 40T. But the commonwealth is far behind other states when it comes to adopting the local improvement district and special assessment financing for development.
"About $15 billion of this type of financing is done in about 35 states per year," Davis said.
Ron Roux plans to develop a village-type town center in Upton on the site of the former town dump. He'd like to be able to use Chapter 40T to help finance the project.
Under Massachusetts' 40T proposal, the Massachusetts Development Finance Agency (MDFA) would issue the local improvement district bonds, and projects are eligible for tax exempt bond financing.
"In a lot of communities, they have failing septic systems, but the rest of the town doesn't want to have the town bond" for a large-scale septic project. "Those people can get together and set up a local improvement district," to take on the project, Davis said.
But the program wouldn't be just for septic systems, sewer lines, street improvements and sidewalks. Almost any neighborhood with enough support could form a local improvement district, and could undertake new projects, housing projects or downtown revitalization projects.
In Upton, developer Ron Roux would love Chapter 40T to finance his massive village center development project.
Roux's Hallmark Cos. is building a village-type town center in Upton on the site of the former town dump. Roux said the project could include housing, municipal buildings, ball fields, open space and 125,000 square feet of retail and office space.
"Towns are struggling, the state is struggling, and lending institutions are being cautious," Roux said. In those conditions, forming special assessment districts for long-term bond financing of development projects may be the only way to get things done, Roux said.
"It's something that's done on a major, major scale in most states in the country," he said. "You don't need to go to the legislature, in most cases, to accomplish what we're trying to accomplish here."
Laura Canter, executive vice president for financial programs with MDFA, said 40T is the "missing link" in development project financing.
There are programs in which municipalities pay for projects and programs in which developers pay for projects with contributions from the state.
But 40T, "is the only one where it's the private party paying," Canter said. She said she was "aware of a number of projects that would be interested in pursuing 40T-like financing."
Canter said 40T "gives a real tool for negotiating who pays" for a project.
0 Comments