Newton officials worry about tax status of Riverside development

Newton stands to gain as much as $2.2 million in annual real estate taxes if a mixed-use development next to the MBTA’s Riverside Station moves forward.

But city officials want to make sure they’ll be able to collect the money, and are backing state legislation that would close what they worry could become a tax loophole for private developments built on Massachusetts Bay Transportation Authority land.

“There is obviously a real concern now,” said Elizabeth Dromey, the director of Newton’s Assessment Administration.

The Riverside project’s developer, BH Normandy, has said that it plans on paying all of its taxes, and the MBTA also is offering words of assurance that the property would not be exempt from local property taxes. But Newton officials want to make sure that the state law is clear on the issue.

The tax status of MBTA property came to a head in March when the state Appellate Tax Board ruled in favor of the private developer of Boston’s South Station in a challenge of its tax bills. The tax board found that under state law MBTA property is tax exempt, even if it’s leased for business purposes. The board granted the developer, Equity Office Properties, a full refund of $2.6 million in taxes for the two years in question. Boston is appealing the decision.

The board’s ruling could have implications statewide, Dromey said.

The tax board’s decision came as Newton’s Board of Aldermen were reviewing whether to give BH Normandy a special permit to build apartments, stores, restaurants, and offices on a 9-acre MBTA-leased site at the Riverside Station.

The city’s review of the project is still on track, said Candace Havens, Newton’s planning director.

“Certainly, it could impact the project, but I can’t speculate at this point as to what the impact would be,” Havens stated in an e-mailed comment on the tax board’s decision. “Our department will be following this topic closely over the coming weeks, however.”

Stephen Buchbinder, the land use attorney for BH Normandy, said the tax-exempt status of MBTA land hasn’t come up in his discussion with the city.

“We’re contemplating paying taxes,” Buchbinder said. “That’s always been our intent from day one.”

Bill Renke, the president of the Riverside Station Neighborhood Coalition, said he was surprised to hear that taxes have popped up as an issue on this project. Much of the discussion around Riverside in recent months has been about the traffic and environmental impacts, he said.

BH Normandy wants to build a 10-story office building, 290 apartments, and 20,000 square feet of shops on the site near Interstate 95 and the Massachusetts Turnpike.

Still, Renke said he expects Newton’s aldermen to settle the issue of taxing Riverside before approving the special permit for the project.

“I didn’t realize this was unsettled,” Renke said. “Clearly, if there was no tax benefit to the city, I think there would be quite the disturbance in the community, about why we’re doing this.”

The question of how to tax private development on MBTA-leased land has come up before in Newton, Dromey said.

Several years ago, the city and the developer of a residential complex, Arborpoint at Woodland Station, negotiated a written agreement over the taxes on that project, Dromey said.

The city has since collected taxes on the Arborpoint development without any problems, she said.

Newton city officials haven’t determined whether a similar arrangement would be necessary at Riverside.

According to the MBTA, which has 850 lease agreements that produce an annual revenue of $15.2 million, the Riverside development will generate taxes.

“Private development built on T property is already fully taxable, as Riverside will be,” Kelly Smith, an MBTA spokeswoman, said in an e-mail Tuesday afternoon.

State Representative Liz Malia, who sponsored legislation to tax MBTA property leased to for-profit businesses, said with the increased popularity of transit-oriented development and the Appellate Tax Board’s decision, the state law needs to be clarified.

“We need to clear up any confusion,” Malia said. “We absolutely feel like our commercial properties should be paying their fair share. The police, fire, public safety don’t come at no cost.”

The legislation is being discussed in conference committee and has garnered little attention. But the MBTA said this week it would oppose this effort.

“This is not something we support because it ultimately takes money away from the MBTA at a time the T can ill afford to lose any funds,” said Kelly Smith, a spokeswoman for the MBTA.