By JACK ENCARNACAO
The Patriot Ledger
Novenber 14, 16, 17, 2009
SATURDAY: First in a three-day series
Redevelopment of the former South Weymouth air base remains grounded, for reasons ranging from the cost of the land to a heavy reliance on the bond market.
WEYMOUTH — The agency in charge of the former South Weymouth Naval Air Station has spent about $42 million in the past decade to redevelop the land. But the only new building there is a marketing center – where potential tenants are pitched sites that the developer still can’t access. More than a decade after military use of the property ended, about two-thirds of the developable acreage is still owned and controlled by the Navy.
The lack of progress contrasts sharply with what has happened to closed bases elsewhere. Of the 24 bases the Navy marked for closure in 1995, the Weymouth base is one of only three that have not been transferred out of military hands. Four of the six Air Force bases that were marked for closure that year have been completely transferred, as have 25 of 34 Army bases. Several bases that closed around the same time now boast bustling industrial and commercial development.
The reasons behind the stalemate in South Weymouth center around bad decisions, bad timing and, in some cases, plain bad luck. They include a revolving door of leadership at the base oversight agency, South Shore Tri-Town Development Corp., a funding structure that relies heavily on the bond market, the Navy’s refusal to hand part of the base over for free, and a lack of tax rates for the properties to be developed.
Tri-Town’s first few years were characterized by raucous meetings and time-consuming personality clashes. It took well over a year for the agency to hire its first director. The agency then spent 18 months negotiating with a mall developer, but the deal fell apart amid local opposition.
Bill Ryan, a former Weymouth selectman who was active on the base redevelopment issue and later went to work as a spokesman for LNR Property Corp., the company hired to develop the former base, said time was wasted debating the mall plan proposed by Mills Corp.
Ryan said state and federal agencies were making it clear that a traffic-clogged megamall was not the best option for the massive property, particularly when it became apparent that a new Route 3 ramp to the property would not be approved.
In 2002, Tri-Town negotiated for about six months to make MassDevelopment the project manager of the base, but local control issues complicated the discussion. By the end of the year, Tri-Town board members decided to seek a private master developer for the property, a model they had earlier avoided.
In September 2002, Tri-Town hired LNR to build what came to be known as SouthField.
Facing the bond market
The 1998 law that created Tri-Town set the agency up to issue bonds to build on the base. But last year when it was time to seek $110 million in the bond market, potential investors balked at the risk.
“If this thing was ready to go two years ago, and I mean fully ready to go to the bond market, I don’t think they would have had a problem getting the funding,” said David Begelfer, CEO of the Massachusetts chapter of the National Association of Industrial and Office Properties. “Clearly, no one knew about how bad things were going to get.”
Tri-Town’s failure to raise money by selling bonds has frustrated LNR, Tri-Town’s main source of cash for the SouthField project.
So LNR in April stopped making its payments, which last year made up 78 percent of Tri-Town’s budget. LNR views the money – annual payments that grew from $400,000 in 2004 to $3.1 million last year – as a line of credit to Tri-Town to cover infrastructure costs. Just like that, there was no way to pay Tri-Town’s four-person staff orbond counsel. A deal was worked out after a three-month impasse, but it won’t prevent a similar standoff in the future.
AT A GLANCE
1,400: Total acres of the former South Weymouth Naval Station to be transferred from the Navy to Tri-Town, then to developer LNR Property Corp.
549: Acres transferred so far.
324: Amount of developable land currently owned by LNR Property Corp. Homes and a film production studio are planned for the land. Remaining acreage is protected open space.
2,855: Total residences to be built, a mix of single-family homes, condos and apartments.
2 million: Square footage of commercial space planned for the property.
Phase 1: 500 homes. First residents originally expected to move in during spring 2009. Construction has not started.
Phase 2: 800 to 1,000 residences and 300,000 to 650,000 square feet of retail and industrial space. It was expected to begin in 2010.
Phase 3: 300 to 800 residences and 300,000 to 700,000 square feet of commercial space. It was expected to start in 2014.
The issue raised several fundamental questions about the structure of Tri-Town and whether it can pull off one of the biggest development projects in New England.
The law that established the group allowed it to seek up to $110 million in bonds to foster development. This would mean annual debt payments of about $10 million. So far, there has not been anything approaching a revenue structure that could handle such debt. The debt load would be unusually large for a small town. Weymouth, which has seven times more households than the 2,855 that are planned for the base, pays $9 million a year in debt service.
Under the state law that established it in 1998, Tri-Town is supposed to make its bond payments with revenue from the taxing of base land. Even though LNR took title to 324 acres of the base in 2006, only in recent weeks has the state been given an outline that lays out how taxes would be determined.
A spokesman for the state Department of Revenue attributed the delays to Tri-Town’s small staff – four full-time employees and one part-time controller. He also said Tri-Town was at a disadvantage compared with cities and towns that have years of statistical data to help build revenue forecasts when setting tax rates.
James Wilson, a former Tri-Town chairman and chief financial officer in Weymouth, attributes much of the tax-plan delay to the Navy’s 2006 decision to seek $43 million for the base from Tri-Town rather than give the property away for free.
For SouthField, setting a tax rate is crucial because it shows prospective bondholders that there is revenue that can be counted on. It also establishes an expense for developers and potential tenants to know about before joining the project.
Bruce Steadman, president of the Plattsburgh (N.Y.) Airbase Redevelopment Corp.,said his agency avoided issuing bonds for its redevelopment of a base that closed in 1995. Banks and investors with the kind of money the agency would need would not see a reliable enough revenue stream to ensure that they would be paid back from the bonds, Steadman said.
“You have a start-up with no money with a promise to pay and no hard assets, except for some land,” he said. “If you’re sitting 500 miles away in a 35-story skyscraper, you look at that and say, ‘I’m firing this guy that brought this to my desk.’”
Steadman said Plattsburgh focused on getting smaller, piecemeal loans from local banks instead. Once momentum built, several moneyed players wanted to be involved.
“We thought, ‘We’re not going to hit any home runs; we’re going to hit singles and doubles,’” Steadman said.
At Kelly Air Force Base in San Antonio, Texas, overseers would not have been able to get the $30 million they needed to redevelop the base strictly from the bond market. The Greater Kelly Development Corp. secured federal loans that allowed it to make improvements that Boeing Aircraft wanted to see before becoming an anchor tenant. This created wider interest in the development.
“We did have to put up a lot at the front end,” said Rudolph DiLuzio, a Medford native who at the time ran the firm hired to be the support contractor for the San Antonio project. “We did a market analysis of what industries were expanding, what they were looking for, and how they matched up with what we had.”
One of the big differences between the successfully redeveloped bases and the Weymouth base involves the free transfer of military land. Base developers in Plattsburgh, N.Y., and San Antonio, Texas, received their base land – a total of 5,400 acres – for free.
In 2005, officials in Weymouth and voters in Rockland and Abington approved the SouthField development plan. But a base closure law that allowed the Navy to change how it handled closed bases had already passed. The Navy was now seeking “fair market value” for its property.
Tri-Town only expected to have to cover the costs of water and sewer infrastructure on the base – about $40 million – not the cost of the land as well. Suddenly, the Navy was seeking $43 million for the base land, mostly to recoup the cost of the environmental cleanup.
The project has been at a relative standstill ever since. A bill filed by U.S. Rep. William Delahunt seeks to allow the free transfer again, but it seems to have little momentum.
LNR says it has purchase-and-sale agreements with four commercial tenants who are waiting on the Navy transfer before closing their deals.
State Rep. Ronald Mariano said the current stalemate is regrettable, but he’s optimistic. “Tri-Town is doing as well now as it’s ever done,” the Quincy Democrat said. “Have we had missteps and setbacks? Absolutely. But by the same token, LNR has had setbacks and missteps. It was trial-and-error for a while there. But I think we’re on the right track.”
LNR Payments to Tri-Town’s budget
In 2002, Tri-Town hired LNR Property Corp. to be master developer of the Weymouth air base. Ever since, the company has helped fund a majority of Tri-Town’s operating budget, which previously was almost entirely supported by government grants.
LNR’s payments have grown significantly from year to year as Tri-Town has taken on more complex tasks, like environmental permitting, formulating a tax plan and attempting to enter the bond market.
LNR considers the money a line of credit that Tri-Town is responsible for paying back incrementally. Tri-Town board members have bristled at that interpretation, saying the agreement between the parties puts no timeline on when and how the money will be paid back.
The following contributions to Tri-Town’s budget reflect only a fraction of what LNR has spent on the project. The company says it has spent a total of $80 million developing SouthField. (Years below refer to fiscal years.)
2004 – $400,000
2005 – $477,907
2006 – $1,479,996
2007 – $2,794,485
2008 – $3,145,201
Source: Tri-Town annual reports
TIMELINE
A look at the protracted approach to redeveloping the former South Weymouth air base.
1995
South Weymouth Naval Air Station included on a list of sites to be closed under the Base Realignment and Closure law.
Oct. 1, 1997
Base closes after congressional vote. Navy buildings vacated one by one after a decommissioning ceremony.
1997
A 30-member Naval Air Station Planning Committee deals with a proposal by Mills Corp. to build a 2.1-million-square-foot megamall on the base. The plan fades away over the next two years as officials push for something other than a mall.
August 1998
The Legislature creates South Shore Tri-Town Development Corp. to serve as public overseer of the base redevelopment and to be in charge of bonding for the project. The legislation establishes a 20-year life for Tri-Town.
2001
After the mall plan is put aside, a more modest plan backed by MassDevelopment calls for office buildings and 500 to 700 units of housing for senior citizens. Local control issues complicate the discussion. Tri-Town seeks a waiver from the state to begin an initial phase of the project.
2002
In granting the waiver, the state’s then-secretary of environmental affairs, Robert Durand, calls for the development of villages with more housing, close to existing commuter rail service. That sparks a change in thinking at Tri-Town – one that moves the board away from both of the previous plans.
2002
A change in the Base Realignment and Closure law allows the Navy to seek “fair market value” for its closed bases.
October 2002
Tri-Town selects LNR Property Corp. to be master developer. LNR begins supplying capital to help Tri-Town operate. Tri-Town is responsible for governing LNR as it develops plans.
May 2003
Navy transfers, for free, 549 acres of the base to South Shore Tri-Town Development Corp. The transfer includes 324 developable acres. (The land would later be transferred to LNR. The Navy would also later seek “fair market value” for the rest of the base.)
September 2004
LNR unveils the Village Center Plan, a new master plan calling for 2,855 units of housing and incorporating principles of “smart growth,” a term used by community planners to describe developments that include a mix of residential and commercial buildings near existing transportation and utilities.
June-July 2005
LNR’s Village Center Plan and zoning bylaws are approved at town meetings in Abington and Rockland, and by the Weymouth Town Council.
December 2005
LNR files a Notice of Project Change with the state and is granted a waiver to allow some construction prior to acquisition of the entire base from the Navy.
2006
Navy begins to indicate it will seek fair market value for the Weymouth base instead of transferring it for free.
May 2006
LNR announces that it will call the redeveloped base SouthField.
November 2006
Construction begins at the base entrance on Route 18. Runway demolition follows. Construction of 250 condos, 160 townhouses and 90 single-family homes does not begin as expected.
March 2008
A deal calling for Tri-Town to pay the Navy $43 million for the rest of the air base is reached. The dollar figure includes the cost of an extensive environmental cleanup. Later in the year, Tri-Town fails to obtain money in the constricted bond market to pay for the deal. It later begins a push in Congress to get the land for free.
August 2008
The Legislature passes, and governor signs, a bill that extends Tri-Town’s life until 2053. The agency originally was to have dissolved in 2017, after full redevelopment of the base.
June 2009
Frustrated by a lack of return on its infrastructure investments, LNR holds back on annual payments to Tri-Town until the agency can demonstrate a “viable path forward.” Tri-Town says it will stop operating without the money. An agreement for payment in installments is reached.
MONDAY: Second in a three-day series
The board charged with redeveloping the site focuses on local interests, while agencies that successfully developed other bases take a more regional approach.
Intense local interests could hamper Southfield project in Weymouth
WEYMOUTH — The chairman of the board is a veteran firefighter. He’s flanked by a jovial real estate professional, a cranky banker, a stone-faced police officer and a cautious county treasurer. This is the group in charge of SouthField, one of the largest redevelopment projects in New England.
“We have a vested interest as residents, as opposed to having someone in the western part of the state (coordinating the project),” said Jeffrey Wall, chairman of the South Shore Tri-Town Redevelopment Corp.’s board of directors.
“The interest is there, and the concern is there, to ensure (the project) doesn’t impact communities adversely.”
Perhaps that’s the problem. Tri-Town, as the agency is known, has long faced an identity crisis as it pursues the massive redevelopment of the former South Weymouth air base. Members of the board need the regional vision it takes to pull off a project of SouthField’s size, but also a streak of provincialism to ensure that their towns get the maximum cut of the growth revenue.
“It is hard to reconcile those two things,” said state Rep. Ronald Mariano, one of the authors of the bill that created Tri-Town. “It was supposed to be a joint development, with the two entities working together to come up with a plan that works. With the changes that occurred in leadership on both sides, it’s been a series of stops and starts.”
In key ways, the board differs from other boards created to run military-base redevelopments. For one, the way the members were appointed was less than formal. It’s hard to learn much about them. Their résumés are not on file in their respective town halls. Rockland representative and police officer Gerald Eramo did not return phone calls to his home and the Rockland police station over a month-long period. The other board members spoke about their backgrounds to reporters, but none included any development experience.
People with experience in successful base redevelopment say there is no cookie-cutter approach to forming a redevelopment board. But a consistent theme of success is running a base redevelopment agency like a business, not a protectionist local board.
“Step back and operate it like a business (because) the marketplace is who you really have to satisfy,” said Bruce Steadman, CEO of the Plattsburgh Airbase Redevelopment Corp. His agency turned a closed New York base into a mixed-use project that has produced $100 million in tax revenue in 10 years.
Since it was formed in 1998, Tri-Town has spent about $42 million on developing the base. No homes or commercial buildings have been built there yet. The results look much healthier at the former Fort Devens, which was developed by the quasi-public agency MassDevelopment. Devens went from primarily a military base to a thriving business center that, in 10 years, is 85 percent completed.
In attracting industry giants such as Bristol-Myers Squibb to the property, the Devens Enterprise Commission and MassDevelopment needed to call on people with backgrounds in development. “It’s always better talking to someone that knows the language,” said Kurt Macnamara, who developed the Devens Recycling Center on the property. Macnamara said it’s hard to be attracted to a base property if the oversight board members seem more oriented toward protecting their turf.
“It can get emotional for (board members) instead of factual,” he said. “That scares some companies. … to go into a town. They’re working off a completely different mindset.” Unlike Tri-Town, members of the Devens commission are appointed by the governor. Two Tri-Town members are appointed by the Weymouth mayor, two by Rockland’s Board of Selectmen and another member by Abington’s selectmen.
MEET THE PLAYERS BEHIND THE PROJECT
Local officials know SouthField could produce revenue for the base towns if they are awarded fire and police service contracts – or can sell their municipal water to the base property. Without these deals, the towns have little financial interest in seeing the project through to completion. Mariano said he wanted to change that, but he didn’t find the political support for it.
“The fact of the matter is for 10 years there has been no drain on any of the three towns for this property,” he said. “I think just token payments that would have to be dealt with yearly would have kept this development on the front burner for the three towns.”
The state legislation that established Tri-Town calls for board members to have some level of expertise in real estate development, finance, planning, engineering or municipal government.
The complexity of base development can easily seem overwhelming to board members, said Colin McPherson, an accountant and a former Weymouth representative on Tri-Town. “The process is just almost unbearable as a board member,” he said. “You can line up seven or eight agencies and the ninth agency can put a hold on (the project).”
Some stark contrasts with the makeup of Tri-Town can be seen at the former Kelly Air Force base in San Antonio, Texas. That base, marked for closure the same year as Weymouth, is seen as a model of how to take a closed base and turn it into a viable economic engine. Today it is the site of a healthy aerospace industrial park called Port San Antonio, with a nearly $3 billion annual economic impact on the city.
Texas legislators decided early to spread the authority for appointing people to the Greater Kelly Development Corp. All 11 San Antonio city councilors and the mayor would have appointments. The corporation hired a staff of 12 people and got to work. By 1997, most of the 1,900-acre property had been transferred out of Air Force’s hands.
The board conducted a national search for an executive director, and it brought in someone who had done the job before. Bruce Miller is credited with the “Rickenbacker Renaissance,” which saw the closed Rickenbacker Air Force Base in Ohio transformed into an industrial area that attracted $500 million in investment.
That contrasts sharply with Tri-Town, which last year hired Kingston’s town administrator, a longtime local official, as its first CEO. Prior officials in similar top roles at Tri-Town included an engineering executive from Marshfield, a municipal development director from New Hampshire and a general manager with the regional chamber of commerce.
None had any achievements to their credit on the scale of a military base redevelopment. Steadman, the Plattsburgh Airbase CEO, said the real change at his base came when New York Sen. Ronald Stafford stepped in. The powerful official used his clout to install Daniel Wineke, a turnaround specialist who had reversed the fortunes of an ailing plastics manufacturer, to run the base development.
“It just had to be somebody who wasn’t a political animal,” Steadman said. “It was someone who came in and looked at it and said: ‘Here’s our product, here are our customers, and here’s how we’re going to market.’”
Reach Jack Encarnacao at jencarnacao@ledger.com.
TUESDAY: Third in a three-part series.
MassDevelopment’s conversion of the former Fort Devens northwest of Boston is just one of several examples of how an old base can put to productive use.
DEVENS: A base redevelopment formula that works
By ALLISON MANNING
The Patriot Ledger
November 17, 2009
DEVENS — Military personnel who lived at the former Fort Devens Army base wouldn’t recognize the Devens of today. There’s a vibrant center of town, with a hotel, a conference center and new construction. Residents and commuters visit the post office, go to the gym, fill up their cars’ gas tanks and grab coffee at Dunkin’ Donuts. Kids play lacrosse and Ultimate Frisbee fans compete in tournaments on the former base’s green fields.
Construction crews are finishing a $750 million Bristol-Myers Squibb pharmaceutical plant, which is to begin producing a rheumatoid arthritis drug in 2011. Several other businesses, including Anheuser-Busch, Procter & Gamble and Evergreen Solar, call Devens home. Golfers in carts drive across roads to the next hole at the highly regarded Red Tail Golf Club. “”
In the residential area, Colonial homes and small ranches, once used by military officers, are now renovated and occupied by about roughly 250 Devens residents.
Not everything has changed, though. The Army still occupies 5,000 acres of the base for training and Reserve purposes. And other remnants of the base’s history remain, such as the Fort Devens cemetery.
The progress at Devens contrasts sharply with the empty hangars and boarded-up buildings at the former South Weymouth Naval Air Station.
But Devens had several advantages in its explosive redevelopment, including having as its master developer a state-backed quasi-public agency.
Roughly 600 acres of the Devens property remains to be developed. The rest produces $3.7 million in annual revenue for the Massachusetts Development Finance Agency, also known as MassDevelopment.
The agency in charge of the South Weymouth redevelopment project, South Shore Tri-Town Development Corp., essentially started from scratch in 1998. The progress has been limited to some roadwork, land clearing and construction of a small building used for marketing.
Devens’ journey began in 1993, when the state Legislature designated an agency that later became known as MassDevelopment to be the principal developer, and appropriated $200 million to be spent over a 40-year period.
Back then, residents and officials figured it would take decades to develop the base. But 15 years later, the development is almost complete.
“MassDevelopment, in the end, had access to considerable resources,” said Lucy Wallace, a member of Harvard’s board of selectmen who was on her town’s planning board in the 1990s. “They were borrowing with the Commonwealth of Massachusetts backing up their borrowings. That’s a pretty good way to go to the bank.”
MassDevelopment can provide low-interest bonds to developers; the typical municipality can’t.
But Devens isn’t perfect. In 1994, Ayer, Harvard and Shirley voted on the 40-year reuse plan for the base. (The Army still controls most of the base land in Lancaster, for training purposes.) The towns essentially gave up their rights to decide what businesses would go in their back yards, and that meant they would forgo development revenues. But it also means they were freed from the demands of revitalizing the massive property.
The reuse plan they approved defines a number of development and residential zones. The development zones include manufacturing, distribution, innovation and technology.
And while Devens residents pay taxes to MassDevelopment, they don’t vote for the officials that make their local governing decisions.
“It’s not exactly taxation without representation,” MassDevelopment Chief of Staff Meg Delorier said, noting that residents vote for the governor, who appoints the 12-member Devens Enterprise Commission.
The commission acts as the planning board, zoning board of appeals, board of health, conservation commission and historic district commission.
The towns still wield some power with the reuse plan, which cannot be changed unless all of the towns agree. MassDevelopment, which would like to add housing stock in the Vicksburg Square area of the base, has been unable to change that area’s zoning because of resistance from Ayer. There are 102 housing units, and MassDevelopment is limited to a total of 282 by the reuse plan.
The biggest challenge for the redevelopers has been branding an expanse of land that for decades was known as Fort Devens – a place physically and psychologically sealed off from the surrounding towns.
But business managers at the former base said they have been happy with MassDevelopment’s pro-business stance, bonding opportunities and quick 75-day permitting process.
“They really get it,” said Kurt Macnamara, principal developer of the Devens Recycling Center. “It’s an opportunity to build the perfect town.”
Allison Manning may be reached at amanning@ledger.com.
AT A GLANCE
$3.7 million
Annual revenue to MassDevelopment each year through taxes
$750 million
Cost of Bristol-Myers Squibb pharmaceutical plant, set to begin producing a rheumatoid arthritis drug in 2011
250
Residents live in renovated homes, once used by military personnel
5,000
Acres the Army still occupies for training and Reserve purposes