Thursday’s meeting of the Finance Committee of the Board of Aldermen. - Photo by Ashley Taylor

By Ashley Taylor

At Thursday’s meeting of the Finance Committee of the Board of Aldermen (BOA), city legislators clamored for more guarantees from Assembly Square developers, Federal Realty Investment Trust (FRIT), to offset the risk of posting $25 million in bonds to fund the square’s infrastructure.

The board is now considering whether or not to authorize bonds for the Assembly Square District Improvement Financing (DIF) project, as the Mayor has requested.  The considerations are many.

At the last Finance Committee meeting, Alderman-At-Large William White asked for a guarantee that, at the “core-and-shell” development phase, additional property tax revenues from the DIF district’s three proposed blocks would cover debt service payments.   At Thursday’s meeting, City Assessor Marc Levye reported that FRIT had calculated the “itemized cost addressing each item described in the core-and-shell definition,” and said that the numbers had proven optimistic from his standpoint.

According to the assessor’s calculations, the blocks, would result in a tax increment of $2 million in 2014, the date FRIT estimates the “core-and-shell” phase would be complete, and would more than cover the debt service on DIF bonds ($1.2 million) due that year.

In a previous projection, the assessor calculated the tax increment from the DIF blocks based on the percentage of construction expected to be complete each year.  He calculated the value of the incomplete buildings as a percentage of their predicted value at complete construction.  Levye’s value for the 2014 tax increment, assuming 75 percent construction completion, was $1.4 million:  $0.6 million lower than the new estimates by FRIT, but still enough to cover the debt service in 2014.

In no case would the tax increment from the “core-and-shell” stage be anywhere close to the $15 million in bonds that the city would have floated by that date, during the first two parts of the bond plan.  However, this would only be a concern if construction halted at the “core-and-shell” stage; over the 30-year stretch of the DIF plan, taxes generated by the DIF’s three development blocks are predicted to more than cover bond repayment.

City Planner Monica Lamboy provided the BOA with additional information about the storm water outfall conduit that $3 million in DIF bonds would help fund.  The conduit would reduce pollution of the famed Mystic River.  “At present, the marketplace and the land area that will be Assembly Row drains into the Somerville marginal conduit, which is actually a sewer line that flows to [the] Deer Island [sewage treatment plant].”  During heavy rains, Lamboy said, storm water may “exceed the capacity of the pipe, and then what we have is what’s called a combined sewer overflow,” which causes sewage to flow the Mystic River.   The new storm water conduit would direct storm water into the river through a separate artery.

FRIT currently owns most of the land in Assembly Square, including land that will be the site of new infrastructure.  The city plans to buy the infrastructure, including the storm water conduit, from FRIT once it is complete.  Accordingly, they want to avoid paying to maintain and repair it in the future.

There will be a one-year warranty on all the new infrastructure at Assembly Square, which Lamboy reported was considered “standard for infrastructure projects.” Gewirtz asked to extend the warranty to two years.

Aldermen also requested a timeline for development of the rest of Assembly Square outside the DIF land area.  FRIT’s David Webster said, “We can’t tell you with any certainty the dates for the balance of those buildings, because it’s entirely dependent on the market.  We can’t build empty office and lab buildings that don’t have tenants.”  Those additional buildings would include 1700 residential units in addition to the 400 planned for the DIF area.

White expressed concern about focusing too much on residential units:  “What I’m concerned about is 2100 residential units, be they condos, be they apartments, without any R & D and without any office [space],” a key concern among activists.

Gewirtz maintained the debate over whether the city should finance the infrastructure at Assembly Square at all.  She brought up the 2006 Executed Covenant between FRIT, IKEA, and the city, which states that, “FRIT covenants that it will construct all roadways and infrastructure serving the Streetworks Master Plan and the new IKEA (except as located within the inland site).  This infrastructure includes, without limitation, water, sewer, stormwater, gas, electricity, telecommunications, fire suppression, and cable television serving the Streetworks Master Plan.”

Gewirtz commented,  “In [the 2006 covenant], it says FRIT is going to build the infrastructure, and now we’re back at the table saying, ‘no, you’re going to pay for the infrastructure,’ and I am concerned about that.”

Yet the covenant also includes District Improvement Financing, stating that the parties agree to “cooperate in good faith to seek necessary approvals…for funding under the Infrastructure Investment Incentive [program], the District Improvement Financing…or any other governmental program reasonably sufficient to pay for infrastructure…to facilitate and accelerate, to the extent possible, development at Assembly Square.”

Gewirtz was originally the only alderman to vote against the DIF proposal in committee on November 30, 2010.  She then voted to approve an amended version of the DIF proposal at the December 2 Special Meeting of the Board of Aldermen.  What changed her mind, she said over the phone, was a resolution proposed by White.  The resolution states, in part, “that the designation of the Assembly Row DIF does not obligate this Board to approve any bonding required to fund any improvements in the Assembly Row DIF,” and “that in connection with any bond request, this Board will be provided with a development agreement between the City and [FRIT] relating to the obligations of the City and [FRIT] and the funding for the Assembly Row DIF.”  Currently, she feels that those obligations are too murky.

“In the next phase,” she said, “what I wanted to learn was what were going to be our guarantees, our assurances, our commitments, with respect to bringing in…R & D and more of a guarantee in terms of the infrastructure creation.  And unfortunately, at this stage, that has not materialized.”

Curtatone disagrees.  “All promises have been kept,” he said.  “If we can’t trust each other and work with this developer, then we should shut the lights off and go home.” He says that the covenant represented “a snapshot in time” and that they will amend it to reflect changes that have occurred since that time.