BRA cuts deals at expense of affordable housing
Boston Redevelopment Authority board members “didn’t have a clue” that they were giving a secret benefit to a friend of Mayor Thomas M. Menino when they approved construction of luxury housing near Boston Common, admits board member Paul Foster.
Foster and his colleagues, who oversee the most powerful government agency in the city, simply did what they almost always do: They unanimously approved the BRA staff recommendation. Their 2011 vote for the upscale residences at Millennium Place was one in a string of 1,492 consecutive board votes unanimously supporting whatever the staff said — almost always with no discussion or questions.
In the three minutes they took to approve Millennium Place, board members didn’t discover that the staff had quietly tucked a potential $5.9 million discount on development fees into the deal with Anthony Pangaro, the longtime Menino campaign contributor who represented Millennium. The fees are earmarked to help build affordable housing in a city that sorely needs it.
“It was not shown to anyone on the board to my knowledge,” Foster said after a reporter pointed out to him the fine print in BRA documents outlining the break for Millennium. “I never got a briefing.”
No government agency outside of the Menino administration has been watching the Boston Redevelopment Authority for years — not the state, not the City Council, not even the BRA’s own board — leaving agency staffers free to cut deals with certain developers while charging others extra, and to spend the fees collected from developers as they see fit.
A four-month Boston Globe investigation has found that the BRA has allowed at least four other developers breaks on affordable housing fees valued at a combined $3.4 million without disclosing them publicly — and without offering similar discounts to other developers.
Meanwhile, the BRA has diverted at least $6 million from housing fees it has already collected for unrelated purposes such as a new health clinic. The staff approved diverting another $4.5 million for a community facility and a new public street.
So far, the BRA has spent just $18 million on affordable housing since Menino established the housing program in 2000, less than a quarter of the $75 million the agency should have collected if the BRA had consistently followed the rules, the Globe found. The rest either has not been collected, was diverted to other purposes, or languishes in a BRA account.
“It looks like they left a lot of money on the table,” said Ezra Glenn, an urban studies lecturer at Masschusetts Institute of Technology, after reviewing a Globe analysis of the BRA fee discounts for certain developers.
“They may want to reconsider the way they do it,” added MIT professor Albert Saiz.
BRA officials say they charged Millennium the lower fee because they were initially unsure whether the project would consist of condos or apartments, which are charged at a lower rate. But they didn’t say why the deal did not include standard language requiring Pangaro to pay more when he decided to build 265 condos averaging $1 million each — or why the staff didn’t point out the potential discount in their report to the board.
BRA officials also struggled to explain how they decide who gets the money from the housing fund, acknowledging that at least $6 million has gone toward BRA salaries, a conference, and purposes other than affordable housing.
“It’s not like we’re taking money and putting it in some kitty, one of our funds or something,” said Peter Meade, a Menino loyalist who came out of retirement in 2011 to run the BRA. He argued that even the money spent on BRA salaries was housing-related.
That’s little help to housing advocates who say they’ve struggled for years to get information out of the BRA on how to tap into the fund to build inexpensive homes.
“There is no open, public bidding process for getting that money for affordable housing projects,” said Lydia Lowe of the Chinese Progressive Association. “You have to be on the inside to even know about it.”
Menino, who declined to be interviewed for this article, apparently has had concerns about the BRA’s performance as well. The mayor recently announced he is asking the state Legislature and the City Council to transfer the affordable housing fund to a separate city agency that runs its own housing program using fees from developers of office buildings and other commercial properties. That agency, the Department of Neighborhood Development, has spent virtually all of the $114 million it has collected from commercial developers to help create 10,000 affordable housing units since the late 1980s.
“We used every nickel and dime of that money to leverage new affordable housing units,” said Evelyn Friedman, who oversaw the Neighborhood Development housing program until last year. “The mayor was adamant that he wanted affordable housing units mixed in the downtown high-rises because he wanted diversity of income, not a downtown with only all high-income people.”
But the BRA’s problems with the affordable housing fund are emblematic of larger issues at an agency that, until the launch of a new website in October, provided little public information about its work — the BRA hasn’t even issued an annual report since 2009 — and makes most of its decisions in private negotiations with developers under the watchful eye of Menino.
Menino in control
The physical transformation of Boston may well be the enduring legacy of Menino’s record 20-year watch, including the birth of an entirely new neighborhood in South Boston’s Seaport District, thousands of new construction jobs, and a population that has reached its highest level since the 1970s.
But the BRA may be squandering the opportunity created by the historic boom to channel residential development to where it is needed most — toward middle-income Bostonians who have watched the cost of living rise twice as fast as their earnings since 2005, according to a recent Northeastern University study.
In a city where the average household income is about $49,000, almost 60 percent of the housing units approved by the BRA in 2011 were “luxury” properties far out of reach to the vast majority of residents, based on a review of BRA-approved projects.
“The basic problem is that all development is done on a completely ad hoc basis” with no overarching plan, said Herbert Gleason, Boston’s corporate counsel from 1968 to 1979, in an interview this fall; he died earlier this month. “We need a mayor who respects the process and planning and the legal requirements” of public meetings.
Meade says his is not an agency with deep problems, and that, “by all rational measures,” the BRA has presided over growth that has touched all parts of the city. In January, Meade will leave along with Menino. During his tenure, Meade has been a determined and highly visible advocate for Menino’s vision of development in the city, and he worked hard to keep up the flow of major new projects.
“The mayor said, ‘I need someone who can get stuff done.’ And that was my priority, to get things done,” Meade said. “And now we are one of the hottest cities in the country.”
In November, Boston voters chose a BRA critic in Mayor-elect Martin Walsh, who during the campaign proposed overhauling the agency to make it more publicly accountable, giving the City Council oversight of its operations and finances. He has recently said serious reforms of the agency will wait to at least the second half of 2014, but as a candidate, Walsh said he wanted to make project reviews speedier and more open, making it harder for BRA staff to stop projects by inaction.
“The BRA must be reformed for efficiency and transparency,” Walsh said during a mayoral campaign in which several other candidates bashed the development agency’s penchant for secrecy and seeming favoritism.
Currently, the BRA is accountable to no one except the mayor, who appoints four of the five board members as well as the director. The City Council has little say because the agency’s budget doesn’t come from tax money and no outside agency reviews BRA spending or fee collection.
“I am unaware of any independent audit of the BRA for years — and it needs to happen,” said Matt Cahill, executive director of the Boston Finance Commission, a state-appointed watchdog agency. “It’s a governmental agency and its operations should be transparent.”
The five BRA board members are supposed to provide a public check on the BRA, but none have professional expertise in development, and they do little more than rubber-stamp deals that were negotiated privately, records show. A Globe review of the board’s 2,348 votes from January 2009 to June 2013 show that the board approved every single staff recommendation, all but five of them unanimously.
A unanimous voice
Led until recently by an 80-year-old community activist, Clarence “Jeep” Jones, board members generally meet once a month in return for a $10,000 annual stipend and a coveted City Hall parking space, swiftly approving one project after another regardless of what people say in opposition.
For instance, when Mark Kerwin of the Museum of Fine Arts came before the board in September, alarmed that an office tower proposed by nearby Wentworth Institute of Technology would seasonally cast a shadow over the museum’s main entrance, Jones cut Kerwin off after his allotted two minutes to speak were up.
“Questions?” he then asked fellow board members.
As usual, there were none. Less than a minute later, they voted unanimously to approve the 18-story tower, brushing aside Kerwin’s request for a study of whether it would diminish one of Boston’s iconic sculptures, “Appeal to the Great Spirit,” the Native American on horseback that has greeted museum visitors for generations.
BRA board members appear not to have much of a behind-the-scenes role either: Their official e-mail accounts, reviewed by the Globe, contain almost no discussion of BRA business — or anything else.
Foster, the board’s vice chairman, acknowledges that the board is passive, but he said that is because the BRA staff does its job so well, often working with developers over months or even years to resolve neighborhood concerns. For instance, the staff held numerous community meetings about the office tower near the MFA.
“By the time it comes to us, it’s all vetted. The community has had its say,” said Foster, the only board member who agreed to discuss the broad range of the board’s work. “We sometimes ask some questions, but in 99 percent [of the cases] all of our questions have been answered.”
The BRA staff, led by MIT-trained planner Kairos Shen, is respected for its competence, and it follows a policy of not allowing projects to come before the board until all major issues have been addressed, including those raised at community meetings. Meade said it is not uncommon to pull projects off the board agenda at the last minute when new issues crop up.
But the staff works under exceptionally close supervision from Menino, whose aides regularly sit in on meetings with BRA staffers and who in the past has been involved in selecting architectural details such as the design for the top of a skyscraper. And there is little question where BRA staff loyalties lie: 25 of the 44 top-paid employees are Menino campaign contributors, campaign finance records show.
Menino has said criticisms about his micromanaging of development “make me crazy,” but he has poked fun at himself for his outsized role. In a memorable 2011 video spoof, Menino played the role of godfather Vito Corleone advising disappointed developer Don Chiofaro how to win approval for a waterfront office tower, something that eluded Chiofaro during years of clashes with the mayor.
“Why did you go to the BRA?” Menino asks Chiofaro, stroking a stuffed cat for effect. “Why didn’t you come to me first?”
It was funny, but it contained an essential truth developers figured out years ago, which is why senior BRA staff would sometimes learn about new projects when they were summoned to Menino’s fifth-floor office at City Hall and found the developer already sitting there. Developers even coined a verb, to be “Chiofaro-ed,” meaning to turn the mayor against your project.
Meanwhile, Menino insiders such as his close friend Henry Kara, his campaign treasurer Harry Collings, and James Greene, whose wife is a paid political consultant to the mayor, all have emerged as major figures representing developers before the BRA during the Menino years.
Collings, a former senior BRA official, holds the distinction of shepherding one of Boston’s largest housing projects in years through the BRA in near-record time. At Collings’s urging, the BRA approved 503 new units for the AvalonBay condo project on Nashua Street in February in just 89 days, while similar projects sometimes take years to win approval.
A promise goes astray
Menino, the self-styled “urban mechanic” who never moved out of his modest Readville home as he climbed the political ladder, has long stressed the creation of housing for average people an important goal. In 2000, he signed a groundbreaking executive order requiring most major residential developers to set aside some units in their projects for households making middle incomes and below.
By 2006, he had issued three more executive orders expanding the affordable housing investments he was requiring from developers. The rules in effect today require major developers to set aside 13 percent of their units for households making roughly $72,000 a year or less. If developers don’t want to do that, Menino allows them make a contribution to the affordable housing fund big enough to build the affordable units elsewhere.
But by 2011, the affordable housing program had strayed from its original intention in ways Menino himself may not have fully understood. That April, the city issued a press release boasting that the city had created thousands of affordable homes, the result of Menino making housing “a priority within all city agencies.”
“We have made sure that the housing that has been built is an asset to our neighborhoods and serves households of all incomes,” Menino said in the statement.
But the project Menino chose to highlight —
Collings, now a consultant to developers but then the BRA’s executive director/secretary, acknowledged that the affordable housing fund was specifically set up to provide housing. But he argued that Fenway residents were eager for a state-of-the-art health center.
“The community brought it up,” said Collings, who prior to joining the BRA had been the long-time development and public relations director at the Fenway Community Health Center, which received the money. “It’s what they wanted.”
In fact, the Community Development Corp. in the Fenway, a group that normally backs affordable housing projects, did go along with the money going to the center, which was the subject of a city zoning commission hearing.
However, some BRA staffers say they suspected the expenditure was probably improper at the time. They surmised that the Fenway funding “came out of the McCann playbook,” a reference to former BRA official Paul McCann, who had a reputation for bending agency rules and eventually got in trouble for collecting a pension and a BRA consulting salary at the same time.
BRA records show that millions in affordable housing dollars from a related Samuels & Associates project, called Fenway Triangle, may also be diverted from affordable housing at the city’s direction. Under the company’s 2013 agreement with the BRA, the developers are supposed to pay as much as $8 million to the affordable housing fund. But the deal allows them to spend up to $4 million of that on a new city street leading into their project, providing a public benefit, but also enhancing the value of the real estate.
“Once public agencies determined that the new street should be built, the city, community, and developer all were eager” to build it for the “benefits to both the project and the community,” Samuels & Associates said in a statement.
The multimillion-dollar fee discount for Millennium Place hinged on an apparent loophole in the housing program. The Millennium Place developers in 2011 told the BRA they had not yet decided whether to build apartments or condominiums, which would have required larger payments to the affordable housing fund. They agreed to pay the lower fee for an apartment project, then later built luxury condos without paying the higher fee.
For Pangaro, that shift allowed his client Millennium to pay $200,000 for each affordable unit rather than the $348,000 the company would have paid, based on a Globe analysis that included a review of the prices of the first 110 condos sold there. Since Millennium Place was supposed to set aside 40 affordable units, that adds up to a savings of $5.9 million.
Officials at Millennium Partners say they followed the rules “as applied by the city of Boston in 2011,” noting that the affordable housing payments were the result of lengthy negotiations.
Beyond business as usual
But Saiz, the MIT associate professor of urban economics and real estate, said they way the BRA administers the affordable housing program is flawed, giving developers an incentive to claim they’re going to build apartments even if they’re really planning condos because the affordable housing fees are lower.
“There should be some kind of after-the-fact assessment of the project” to see what developers really built, Saiz said.
The Globe analyzed about a dozen of the scores of affordable housing agreements signed by BRA representatives and developers in the last decade, finding strong evidence that the BRA has been applying the rules unevenly.
At Waterside Place, for example, developer John Drew appeared to pay the appropriate amount into the housing fund, based on the MIT professors’ analysis of the rules. But the BRA applied a less stringent version of the formula at The Victor and the Seaport Apartments, saving the developers $680,000 and $603,200 respectively in housing fees.
BRA spokeswoman Susan Elsbree said all three projects are located on state-owned land where the affordable housing program doesn’t apply, meaning that the developers’ payments were voluntary.
However, state agencies historically have followed BRA rules, and the agreements with Waterside Place, The Victor, and Seaport Apartments say simply that they are complying with the city’s affordable housing program. Only the deal with Seaport, developed by Menino friends Joseph Fallon and Henry Kara, notes that the affordable housing payment is voluntary.
BRA officials had no comment on two other apparent fee discounts worth a combined $2.1 million at the W Boston Hotel and Residences, as well as the Fenway Triangle development near Fenway Park. Samuels & Associates said that its contribution at Fenway Triangle was “calculated in accordance” with city regulations.
Meanwhile, other developers report that the BRA wouldn’t allow them to pay into the affordable housing fund at all, requring them to take the more costly step of selling some of their new units at below-market prices.
Developer George Georges said he wanted to pay into the housing fund for his 24-unit condo project in Charlestown, but the BRA staff “made it clear it just wasn’t going to happen . . . It would have saved us a lot of money. But the BRA never seriously considered it.”
Affordable housing advocates now say they would have objected to the special discounts — if they had known about them.
“If any developer was not held to the policy, that’s a serious problem,” said affordable housing advocate Joe Kriesberg, head of the state association of community development corporations. “The policy was put in place to ensure equal and transparent treatment for all developers.”
The end result of the deal-making and diversions has been dramatically fewer resources available for affordable housing — and difficulty at the BRA even to account for the money. In response to Globe requests, the agency produced varying accounts of where the affordable housing money came from and where it went, and various documents purporting to account for developer fees appeared incomplete and sometimes contradictory.
BRA officials now say they have collected $44 million from developers under the program since 2000 and expect to receive another $23 million for projects already approved. The agency has spent or committed to spend $30 million on dozens of affordable housing projects in Dorchester, Roxbury, and other neighborhoods. By the BRA’s accounting, that leaves $14 million in the bank, with millions more yet to be collected.
That is a stark contrast with the other Boston city agency that funds affordable housing, the Department of Neighborhood Development, which gets its money from fees on developers of office buildings and other commercial enterprises. Neighborhood Development rarely has significant cash in its bank account because there are always new projects awaiting funding.
And that’s how it should be, according to Glenn, the MIT lecturer.
“The idea of tens of millions of dollars in affordable housing funds going unused is very troubling,” Glenn said.
Critics say the problems in the affordable housing program reflect an agency operating without meaningful scrutiny, something that the mayor enabled by keeping a passive board that rarely asked questions. Menino could have replaced board members at a moment’s notice since most were serving beyond the end of their terms, but he chose not to.
“Because they don’t turn the place into a three-ring circus as folks in Washington have done doesn’t mean they don’t care, that they don’t work,” explained BRA director Meade.
But Meade’s predecessor, John Palmieri, found the disengaged attitude of the board disheartening, depriving him of a community sounding board in shaping the urban landscape of Boston.
“A more engaged board would serve the city well,” said Palmieri. “A larger, more representative board of seven or nine members that included civic leaders, senior executives of the financial services and business community, and council representation, would . . . encourage the kind of healthy debate that improves the decision-making process.”