The Boston Finance Commission has raised questions about plans to turn the Winthrop Square Garage into the Hub’s tallest skyscraper, prompting a City Council investigation.
A long-awaited and highly critical report on Mayor Thomas M. Menino’s plan to transform a city-owned parking garage into the Hub’s tallest skyscraper has prompted the Boston City Council to launch an investigation.
The report from the Boston Finance Commission, or FinCom – a city watchdog agency – said the deal could be a financial disaster for taxpayers.
“I am deeply concerned about the loss of revenue for the city,” said City Councilor at Large Samuel Yoon, who has asked the administration to provide lease and operation documents on the city-owned Winthrop Square Garage, site of the proposed $1 billion tower in the city’s Financial District. “At a time when we’re scratching and clawing for money to fund summer jobs and public safety, the city cannot afford to simply hand cash over to the [Boston Redevelopment Authority].”
FinCom’s report said the BRA’s handling of a similar parking lot deal on lower Washington Street cost taxpayers millions and warned the same thing could happen at the Winthrop Square Garage, the site of a proposed 1,000-foot tower.
Menino denied any wrongdoing. In an interview with Banker & Tradesman, he dismissed FinCom’s report and its executive director, Jeffrey W. Conley.
“His allegations are incorrect, as usual,” Menino said. “He doesn’t know what he’s talking about. We’re going to run the garage and we’re going to keep the money.”
At stake are millions of dollars in future revenues from the Winthrop Square Garage located at the intersection of Franklin, Federal, Summer and Devonshire streets. The FinCom report said the proceeds from the sale of the garage and future revenues from the operation of the facility should go to the city of Boston and not the BRA, an independent agency with its own budget. Last year, Menino issued a Request for Proposals seeking a developer to transform the garage into a mega-tower.
While the city owns the garage, it has been operated by First Federal Parking Corp. Under the terms of the lease dating back to the 1950s, the city receives $76,875, a modest amount, the FinCom report said, given that the garage produces about $2.5 million annually. The lease is set to expire on June 30, giving the city an opportunity to increase the amount of cash it gets for the property.
‘A City-Owned Asset’
FinCom fears that the BRA’s handling of the Winthrop Square Garage will echo mistakes made on Hayward Place, a city-owned surface parking lot in Downtown Crossing. The BRA took that property by eminent domain in 2001 and later sold the lot to Millennium Partners-Boston for $23 million.
Millennium made a down payment to the BRA of $13 million that was intended to be used for construction of a new school in Chinatown. The other $10 million has not been paid and the school has not been built. For the first two years of the lease, Millennium made annual payments of $537,000 to the city. Now, the company operates the parking lot, but the city receives none of the proceeds. In addition, because the parcel is owned by the BRA, Millennium is not required to pay any real estate taxes.
Last fall, the BRA approved Hayward Place at the site, a $200 million mixed-use development that will include 277 housing units as well as create 19,000 square feet of ground-floor retail space and below-grade parking. But plans are stalled for the 155-foot-high building and construction may not commence until 2013.
Robert McCann, acting director of the BRA, declined to be interviewed.
Susan Elsbree, a BRA spokeswoman, said the city received rental income from the lot between 2001 and 2005, but she did not know how much. Since 2005, the city has not collected revenues from the lot, she said, but the city was paid the first payment installment for the parking lot.
“It’s not like the city has not received any funds in that time frame,” Elsbree said. “We were paid $13 million, which is more than the parking revenue.”
Originally, the BRA planned to take the Winthrop Street Garage by eminent domain, but Elsbree said the land-taking is one of the options under consideration.
Elsbree said a garage operator for Winthrop Square will be in place on July 1 and the city will continue to receive revenues from the parking garage until construction begins on the tower. But in a letter to the BRA’s McCann dated April 6 and obtained by Banker & Tradesman, Menino wrote that he agreed with the agency’s efforts to establish an escrow fund for net parking revenues for future “city” use. The letter also recommended that the Off Street Parking Facility Board continue to receive income based on its current arrangement – less than $77,000 – not the $2.5 million.
“If the BRA controls the garage, the city may only receive $76,875, while the BRA will keep the remaining profits in an escrow account,” said FinCom’s Conley.
But Elsbree insisted that the city, and not the BRA, will receive the money even if it is in an escrow account.
“What happened at Hayward Place will not happen here,” she said. “We have learned from that experience. Construction did not commence when we expected it to.”
In November, Trans National Properties was the sole developer to respond to a Request for Proposals for an 80-story building to be constructed at 115 Winthrop Square. In January, the BRA designated the Boston-based company to develop the site pending a three-month review of financial documents.
At the time, the BRA said the recommendation was the first milestone for the downtown project – expected to be Boston’s tallest building – which will include 1.5 million square feet of office and retail space and an acre of public space. The mayor has made construction of the tower a priority for his administration.
“The garage lease expires in June and it’s an excellent opportunity for the city to generate some significant short-term revenue until the development goes forward,” said Conley. “Our concern is that what the BRA says and what the BRA does are often different.”
In an interview with Banker & Tradesman last month, Steven B. Belkin, Trans National founder, said he planned to operate the garage. But a spokesman said the BRA informed them that those plans have changed in the last few weeks and the city will issue an RFP for a garage operator.
Yoon, whose district was promised a new school, said he does not oppose construction of the new tower, but is convinced that it will take up to 10 years before construction begins.
“What will we do with the garage in the meantime? Yoon asked. “It’s a city-owned asset, so we should stand to benefit from the revenue generated. Chinatown is still waiting for the new school that was promised with proceeds from the Hayward Place lot.”
Asked about a school for Chinatown, Elsbree said Yoon should talk to the Boston School Department.
“The money is still being held to be used for the school; we are not building a school. We are holding the money. As soon as the School Department needs the money, we are ready to give it to them,” she said.
