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BRA left millions in fees untaken, audit says

Failure to collect fees, enforce pacts with developers

Boston Mayor Martin Walsh said he was shocked to learn that the BRA still keeps most of its records on paper.

Jessica Rinaldi/Globe Staff/File

Boston Mayor Martin Walsh said he was shocked to learn that the BRA still keeps most of its records on paper.

Boston’s chief development agency failed to collect millions of dollars in lease payments and fees owed by developers for affordable housing, according to an audit that uncovered deep problems in the agency that has controlled building projects in the city since the 1950s.

The audit of the Boston Redevelopment Authority described an agency incapable of performing basic functions, such as tracking payments, collecting rents on public property, and enforcing agreements with developers to improve roads and parks in exchange for city approval of their projects.

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The review was ordered by Mayor Martin J. Walsh, who said he was shocked to learn an agency that oversees billions of dollars in development keeps most of its records on paper and has not collected huge sums of money because it does not have a centralized system for monitoring its contracts.

“That should not happen,” the mayor said in a briefing Wednesday. “If somebody gets a parking ticket we put a boot on their car for $30. And here we have multimillion-dollar deals where money is left on the table.”

For example, the BRA did not know for seven years that a developer leasing property at the government-run Marine Industrial Park in South Boston owed the agency nearly $1 million. In another case, the agency failed to collect $600,000 in affordable housing funds and other fees from developers of a massive project in the Fenway.

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City officials are attempting to collect the owed funds, but they acknowledged Wednesday they do not know how much more is lost in the system.

“There is a distinct possibility we’re not enforcing the terms of leases in other instances,” acting BRA director Brian Golden said.

‘We’re going to step through this very carefully to make sure that. . . we don’t hurt the growth of the city.’

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In some respects, Walsh said, the audit uncovered more urgent problems than he had anticipated. He has ordered a deeper review of the agency’s agreements, leases, and contracts and will target how the BRA reviews projects and other planning functions.

Walsh’s predecessor, Thomas M. Menino, declined through a spokesman to comment on the audit. The most recent BRA director under Menino, Peter Meade, could not be reached for comment.

The audit clears the way for Walsh to launch a wholesale restructuring of the agency, which the mayor had promised during his campaign last year. He had held off until the accounting firm KPMG LLP finished its audit.

He has already stripped the BRA of control of a $20 million fund for affordable housing that is financed by fees on developers. Another city agency, the Department of Neighborhood Development, will now administer those funds.

“I would like to be further along than we are today,” Walsh said. “We’re going to step through this very carefully to make sure that, as we make adjustments, we don’t hurt the growth of the city.”

The KPMG audit did not address the BRA’s decision-making process or approvals of specific projects; instead it focused on more nitty-gritty operations, such as monitoring and enforcing agreements with developers, managing documents, and collecting payments from tenants.

Throughout its 26 pages, the audit revealed those systems either do not exist or are wholly inadequate. It faulted the BRA and its sister agency, the Economic Development Industrial Corp., for failing to follow standard business practices — from filling out employee evaluations to tracking the spending of millions of dollars in housing funds.

Golden, whom Walsh appointed as acting head of the BRA, said that failure to monitor agreements and follow commonly accepted business practices is pervasive within the agency.

“We don’t have objectively clear standards that ensure fairness for everybody we do business with,” Golden said. “If you have no rules, by definition you are operating in an arbitrary universe.”

Golden has worked at the BRA since 2009, serving as executive secretary, a top-level position. But Golden said the problems flagged in the audit were not in areas he had previously managed.

Walsh said Wednesday that Golden will remain acting director for the “foreseeable future,” but he has not made any final decisions about the future of the position.

The audit did not make any mention of Menino, but many of the failures it uncovered focused on development deals made during his tenure.

The audit is validation of critics’ long-held concerns that the BRA approves major building projects without ensuring developers follow through with promised community benefits, such as building more affordable housing.

In one section, the audit said the BRA lacks a written policy defining how affordable housing financed by developers will get built or even accurate records showing what it did with those funds.

In some cases, the BRA did not collect the money in a timely manner.

It cited the Fenway Triangle project being built on Boylston Street, where Samuels & Associates was supposed to pay the city $600,000 for affordable housing and other benefits, but no payments had been made as of June 1.

In a statement, Samuels & Associates said it is negotiating a lump sum payment to cover its obligations to the BRA.

“We expect to make the payment immediately upon agreement on the final calculation,” Samuels said.

An official at the Fenway Community Development Corp., which advocates for the construction of affordable housing in the neighborhood, said the audit raises questions about whether the BRA has failed to collect money from other major development projects.

“If it’s true on one case, we certainly need to know how many other cases it’s true for,” said Richard Giordano, director of civic engagement for the Fenway CDC. “It’s a very frightening thought. If you spread this across five or 10 major projects, that could be millions of dollars not paid and how would we know about it?”

The audit found that the BRA and the Economic Development Industrial Corp. could not provide a list of properties in the city with deed restrictions that preserve affordable housing or require a payment to the agencies upon the sale of the property.

Overall, the audit found, the EDIC as of April 2014 was owed more than $4.3 million in overdue rent payments, while the BRA was owed almost $800,000, including more than $295,000 from Pappas Enterprises Inc., which has developed several large projects in South Boston.

Pappas could not be reached for comment Wednesday.

The audit also noted the BRA has a substantial portfolio of property in the city but is not generating revenue from many of these parcels, nor does it have a plan for selling or developing them.

KPMG recommended a real estate management team be established within the BRA to monitor leases and oversee its properties.

Golden, the agency’s acting director, acknowledged it will take months to reshape the BRA and establish new rules for reviewing projects and enforcing developer agreements. But he said the agency is worth saving.

“If you look at its history, the BRA has created one of the great cities of the world and that has benefited the people who live in it,” Golden said. “But it’s really hard to convince people of that when you’re looking at a mess like this.”

More coverage:

4/1: Developers urge Walsh to clarify BRA process

3/7: Walsh lays off 14 in BRA shakeup

12/12/13: Walsh puts brakes on swift revamp of BRA

Casey Ross can be reached at cross@globe.com.
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