The Hynes Convention Center has been transferred to the state’s Pension Reserve Fund in lieu of a $145 million allocation.

The recent transfer of the J.B. Hynes Veterans Memorial Convention Center into the unwelcoming arms of the Massachusetts Pension Reserve Fund was anything but conventional, and the move is raising eyebrows – and questions – in many corners.

At least one critic said that the transfer is geared more toward keeping the Boston facility from being sold than it is an effort athynes-conventcenter-bos.jpg creative financing for the pension fund during a budget crisis. According to Stephen Adams, president and chief executive officer of the Pioneer Institute, a nonpartisan policy think tank, state legislators authorized the new stewardship not only to plug a $145 million hole in the budget but to protect the facility from being converted to a new use. Gov. Mitt Romney had supported an earlier proposal to sell the Hynes.

“They tucked it over there and protected it, which is completely irresponsible,” Adams said. “It’s also created enormous uncertainty around future bookings, so everyone loses – except the employees at the Hynes.”

For the first time in the pension board’s history, the state bestowed a building, and an adjoining parking garage, instead of its usual cash contribution. Board members, worried that the move will set a precedent, are also skeptical about the state’s $145 million valuation of the transfer, a figure decided upon without an independent appraisal.

James Rooney, interim director of the state Convention Center Authority, said he doesn’t know where the $145 million figure came from – his organization doesn’t have an estimated value for the facility; it’s never before needed one.

The Hynes will be transferred to the pension board as part of the state’s 2004 fiscal budget. However, lawyers for the convention authority and the pension board have not worked out the final details. Rooney said the building would change ownership sometime within the next year. As part of the deal, the state will maintain the remaining two years of debt service on the facility, which totals $12 million annually.

The Legislature’s vote, which effectively transferred the property last month, freezes any potential sale of the Hynes until at least December 2006. Even then the board can only sell it to an owner that continues to use the site as a convention center business.

Adams, whose organization has conducted numerous studies on the Hynes – a major economic driver in the Back Bay neighborhood – since 1996, said that the board has good reason to be concerned about the transfer.

“If the pension board is forced to hold this asset in place, then they will be short $145 million,” he said.

Adams said that neighboring hoteliers are concerned that a sale of the convention center would hurt their industries and fear that transferring the facility out of state control would allow its eventual transformation into office and retail space.

But the fate of the Hynes is still uncertain. The pension board hasn’t officially accepted the transfer and may vote on the matter at an October meeting. The board wants proof that it won’t be embroiled in a financial crisis by taking on the Boylston Street structure, although it is not clear at present whether a vote refusing the transfer authorization would have any impact on the Legislature’s decision.

Board members say that the decision sets a dangerous precedent and limits the pension fund’s options by prohibiting what many consider a potentially significant sale.

Others want the gift revoked.

“The Hynes Convention Center is a white elephant,” said board member George F. McSherry. “As fiduciaries and trustees, we should tell legislators that we’d rather have nothing. It is nothing because it’s not going to earn anything.”

‘Drastic Mistake’

The Legislature also bestowed the Boston Common Parking Garage, located below the convention center, to the trust. Pension board Executive Director James B. G. Hearty said that the garage pulled in $6 million in cash last year. While there are stipulations prohibiting the center’s sale, there is only one restriction in regards to the parking garage – it must continue operating as a parking facility.

Board Chairman Timothy P. Cahill, the state treasurer and receiver general, said it is the first time that the state under-funded the pension and provided something “in lieu of” money. However, Massachusetts General Law says that while the governor is required to recommend the equivalent of at least 1.3 percent of the permanent state payroll be allocated annually to the pension fund, any decision is subject to legislative approval.

“This is part of the legislative process; it came up in the Senate. We weren’t able to overturn it but we’ve made it very clear that we prefer cash. That will always be the first choice,” Cahill said.

McSherry said that accepting the properties would violate its fiduciary responsibility to only take cash. Staff members said that they wrote letters to the state, clearly explaining why the board would not feel comfortable accepting real estate instead of its usual cash allocation.

“Next year there’s going to be an even bigger shortfall and they’ll say: ‘What can we stick them with?'” McSherry said. “We’ll get abandoned school houses – pretty soon we’ll own the whole enchilada.”

Robert Brousseau, who represents the State Teachers Retirement System and is a retired teacher himself, said he doesn’t know of any other state pension fund that accepts surplus properties.

“It establishes a precedent that could repeat itself next year,” he said. “We’re not in the business of disposing of or managing real estate.”

The Pension Reserves Investment Trust combines the assets of the state employees’ and teachers’ retirement systems into a professionally managed investment fund. The board, created in 1983, is responsible for controlling the fund. As of June 30, the total assets reached almost $28 billion.

“A drastic mistake is being made,” McSherry said. “We’re going down the wrong road.”

There are many uncertainties surrounding the Hynes, questions only complicated by the facility’s transfer to the pension board. With the opening of the Boston Convention & Exhibition Center in South Boston next year, some are unsure that the Hynes has much of a future.

“No other city has two major convention centers,” Rooney said. “There’s a lot of questioning taking place around operating both facilities, it also creates uncertainty in marketing and selling. Will it close in the future? How do you book it, how do you sell it?”

However, Rooney refutes comments that label the Hynes a “white elephant.”

“That flies in the face of its performance. It has been a very successful convention venue,” he said. “That implies that it’s something that’s not successful but the opposite has occurred – it’s stimulated the Back Bay. The correct debate is, does Boston need two convention centers?”

If the pension board gets stuck with the Hynes, the legislation requires its continuance as a convention center unless the board submits a report detailing failed efforts to retain that use of the facility. Some say that there’s definitely a market for the Hynes, although not as a convention center.

“Clearly it would be mixed use,” said Marci Griffith Loeber, executive director of Cushman & Wakefield’s Boston office. “That would be complementary to the Prudential Center,” which is located nearby.

Loeber said that the facility would be a challenging sell, based on the current market conditions and the difficulty of justifying office space with high vacancies. However, she said that the Back Bay location, combined with the adjoining Prudential Center would make it attractive to developers.