Construction of Columbus Center, a 1.3 million-square-foot, mixed-use development slated to be built over the Massachusetts Turnpike in Boston’s South End, has stalled because of financing gaps.

Deal or no deal? That’s the question being asked by the developer of Columbus Center, the controversial mega-project slated to be built above the Massachusetts Turnpike in Boston’s South End.

“Right now we’re dealing with a $17 [million] to $25 million shortfall and if we can’t fill the gap with some combination of financing the project won’t get built,” said Alan Eisner, a spokesman for Boston-based WinnDevelopment. “The developer has already put in $38 million. He won’t be able to put in another $17 million.”

Construction was expected to begin last year on Columbus Center, the $650 million air-rights project that would be built “in the air” on a seven-acre deck over the highway and railroad tracks near the Back Bay MBTA station. When completed, it would connect the Back Bay, South End and Bay Village neighborhoods, which are separated by the turnpike’s giant chasm.

But problems over funding have plagued the massive development as construction costs have soared since its approval from the Boston Redevelopment Authority in 2003.

The 1.3 million-square-foot proposal includes a 35-story glass tower and four 11-story buildings that will house 451 condominiums, a 180-room hotel, 917 parking spaces and nearly an acre of open space. Other amenities include a spa, restaurants, grocery store and day-care center.

Project proponents say the plan will create a new urban village complete with housing, parks and an array of retailers that will replace one of the city’s worst eyesores. But the question of whether to provide public funding for Columbus Center has been a hot-button issue on Beacon Hill.

Roger M. Cassin, managing partner of WinnDevelopment, has sought public financing, while a trio of Boston legislators whose districts contain or abut the project site – including House Speaker Salvatore F. DiMasi – have opposed taxpayer dollars for the private development.

DiMasi joined state Reps. Martha M. Walz and Byron Rushing to defeat legislation that would have provided a $4.3 million grant for Columbus Center. This summer, Sen. Dianne Wilkerson, a Roxbury Democrat who also represents the project area, placed legislation in the economic stimulus package to defray the cost of building the concrete and steel decking, but the item was removed from the state budget.

“We did not believe this was an appropriate use of tax dollars,” said Walz. “Why should we use millions to subsidize a developer’s profits when we could put that money into schools?”

Wilkerson defended the legislation saying Columbus Center will create employment for thousands of construction workers, 350 permanent jobs, as well as beautify a blighted area of the city.

Walz insists that in dozens of public hearings about Columbus Center, Cassin promised that he would not seek public money in exchange for an increase in the project’s density. But Walz said Cassin reneged on his promise.

“This is another example where the developer said one thing and is doing something completely different,” said Walz.

WinnDevelopment’s Eisner said no such promise was made. He noted that the Civic Vision for Turnpike Air Rights, a planning document created by city officials and residents, states that subsidies should be considered to help defray the high cost of building over a highway.

“At every step, they contemplated that public assistance was needed,” Eisner said. “Through the community process, more than $40 million in public benefits was negotiated from the project. If we were to receive everything we wanted [in public funds] it would barely equal what we gave away in parks, groundwater systems, affordable housing and other amenities.”

Negotiating Terms
WinnDevelopment is seeking $31.3 million in public assistance, including a pending $15 million low- interest loan from MassHousing, the state’s affordable housing bank that lends money at below-market rates to support construction of affordable housing.

But Eisner said public financing for Columbus Center has been scarce at a time when the project’s budget has skyrocketed. Deck construction costs alone, he said, have increased to $118 million from $54 million in 2003.

“The $4.3 million to defray the cost of the decking was defeated on Beacon Hill, we sought up to $15 million in federal tax credits and got zero and we received only $6.5 million in tax deferments from the city,” said Eisner. “In outright grants we got a $1 million Community Development Action Grant (CDAG) and will apply again this year for another million. That’s it.”

Later, Eisner called to say that the $6.5 million from the city was an approximate number and represents a “very generous contribution to the project.”

Still, critics charge secrecy has surrounded project financing.

Romney administration officials quietly approved the $1 million CDAG earlier this year for Columbus Center despite opposition from DiMasi, Walz and Rushing.

Philip Hailer, a spokesman for the state Department of Housing and Community Development, said the agency approved the grant following a rigorous review by an independent consultant. State law requires that the awards be used to stimulate economic development and leverage private investment, create jobs and revitalize distressed areas for public benefit.

But while DHCD routinely releases information about CDAG awards each spring in press releases and on its Web site, the 2007 grants were not listed or publicized by the press office.

“We did not issue a press release for the new awards,” said Hailer. “We just didn’t do it. If I get a chance to do it, I will, but I haven’t had an assistant for a year and a half Â… sometimes I list them and sometimes I don’t. But there’s nothing more to it than that. If you think we’re trying to hide it, that’s not the case.”

Walz said she saw a letter earlier this year from DHCD to the House speaker about the approval. But she said she thought it was curious that the agency failed to publicize the award and inform the public.

“DHCD probably knew that their decision would not be popular among the affected neighborhoods and the relevant elected officials and they decided to keep the news relatively quiet,” said Walz. “This is another effort to keep the spotlight off this project.”

Eisner confirmed that WinnDevelopment is seeking more favorable terms from the Massachusetts Turnpike Authority for air rights and is renegotiating terms of the 99-year lease.

In February, WinnDevelopment agreed to pay $12.2 million for turnpike air rights. In addition, the MTA is entitled to an additional payment of the net proceeds from the development of up to $3.5 million if the project meets specific financial returns. The lease also provides the MTA with 1 percent of every condo resale and 2 percent of rents for the next 75 years. Eisner declined to say what kind of new deal WinnDevelopment wants from a new lease.

“We’re negotiating,” he said.

Marc Draisen, an administrator to the Metropolitan Highway System Advisory Board, a state board that reviewed the lease, said the Turnpike Authority refused to provide information on how the lease price was determined.

“We are a public agency required by law to review this deal and advise the Turnpike Authority whether it’s in the best interest of the commonwealth,” Draisen said. “But this is the first time in my memory that the review raised so many issues regarding financing. We asked the turnpike how they came up with the value of the Columbus Center air-rights project and they turned us down.”