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Deal-making routine for builders, cities in Mass. – Information – The Patriot Ledger, Quincy, MA

Most states in the U.S. have laws that allow cities and town to charge developers fees to cover the impacts that their projects have on municipal services and infrastructure. But Massachusetts has no such law, leaving municipal leaders to work out deals with developers on an ad hoc basis.

After months spent trying to convince the developer behind a residential project near Scituate’s Hatherly Beach to address her concerns about losing what she called a “wildlife oasis” near the water, Christine Loeb learned last year that the company had offered to do something else: build the town a baseball field.

Loeb, who had lived in a house next to the proposed project for 15 years before moving to Canton, was not impressed.

“To me, it certainly wasn’t enough compensation for the negative impact it will have,” she said. “They’re making so much on the entire development that it’s really a mere pittance.”

Scituate is not alone in making these kinds of deals with developers. Hingham in recent years received money for a new fire truck and work on its sewer pump station from one developer, and for the replacement of classroom windows from another. Hanover collected $200,000 from a developer a few years ago for traffic improvements and affordable housing, while Quincy, which is going through an unprecedented building boom, has collected $1.68 million in the past five years for roadwork, bicycle lanes and other projects.

Municipal leaders say they need these deals to help cover the costs that cities and towns bear when a new development is built, including increased demand on police, fire and school departments, water systems, roads and other infrastructure that keep communities working.

Some developers agree, saying the deals give them the flexibility to make their projects work for the communities where they’re doing business.

But others say the deals make projects more expensive and unpredictable, adding to the high cost and shortage of housing that many consider a crisis in Massachusetts. Critics also say the deals can corrupt the local approval process for construction projects and tend to favor developers with deep enough pockets to sweeten the pot for cities and towns.

Advocates have pushed the Legislature for a decade to adopt rules that would replace the deal-making between developers and municipal officials, but so far none of the proposals have made it to the governor’s desk, leading many to negotiate their own agreements in what Peter Lowitt, former director of the Massachusetts chapter of the American Planning Association, calls a regulatory “wild, wild west.” 

“Massachusetts has among the worst planning and zoning statutes in the country. We’re right up there with Montana for worst in the country,” he said. “And this is one of the reasons why.”

Quincy considers new way to pay for developments’ impacts

The exchange of money and gifts between developers and the communities where they build dates back nearly to the dawn of municipal planning, starting with cities and towns requiring landowners to pay for the roads and pipes that serve their projects, or even to set aside land for public amenities, such as parks or schools for residents of a newly developed community.

But planners say the practice took a dramatic turn in the 1970s and ’80s as municipalities struggled to keep up with their growing costs, particularly under tax-capping laws like Massachusetts’s Proposition 2½, passed by voters in 1980. Instead of asking developers to make improvements directly related to projects, cities and towns began asking them to foot the bill for more townwide improvements, such as the new classrooms that might or might not be required for the children living in a new apartment building, or a fire truck that might be called upon to put out a fire there.

Facing a backlog of infrastructure projects and a shortage of tax revenue, California and Florida in the 1970s adopted “impact fee” laws that allowed communities to collect money from developers to pay for infrastructure. Other states followed suit over the following decades and by 2015 a total of 39 states had some kind of impact fee law on the books, according to Duncan Associates, a leading consultant on impact fees.

But Massachusetts lawmakers resisted despite a decade-long campaign by planning advocates, including the Massachusetts Smart Growth Alliance, a coalition of nine Massachusetts-based policy organizations. The group had pushed for an impact fee law as part of a comprehensive zoning bill, but dropped the provision last year after the bill repeatedly failed to garner enough support. 

“We feel impact fees could be a way of giving developers more predictability in terms of how much they‘re expected to pay for local infrastructure to support their development,” said André Leroux, the alliance’s executive director. “For the municipalities, it could also be helpful for them to have real infrastructure plans and a way of paying for it.”

With no law on the books in Massachusetts, except for specific types of projects, such as casinos and marijuana facilities, the courts have been left to decide what fees cities and towns can require of developers. The result has been a set of restrictions on fees municipalities can charge developers, but almost no limit on what developers can offer to sweeten a deal.

In a 2003 decision upholding the legality of an $8 million payment offered by a power plant developer to the town of Bellingham, a dissenting Justice Francis X. Spina wrote that the circumstances of the deal represented “government and private interests at their shameful worst, and are most likely to involve the most needy towns.” A Land Court judge who reviewed the deal called it “offensive to public policy.”

Town officials in the past have also expressed reluctance to accept gifts from developers. In 2007, when a developer offered to donate $100,000 to build a “shorewalk” between the Greenbush train station and Scituate Harbor, then-Scituate Selectman Joseph Norton questioned how accepting such gifts, or even the impact fees allowed by law, would look to residents.

“My concern is that what you’re calling an impact fee others call a bribe,” he said at the time. “Someone else will say they’re buying their way.”

But when the development firm Toll Brothers came to Scituate a decade later with plans to develop the site of a former military testing facility, town officials were all ears. In addition to agreeing to build the town a ballfield and paying it $200,000 to use as the town sees fit, Toll Brothers agreed to restrict residency to people 55 or older, which means residents of the development won’t be sending children to Scituate schools, and to maintain roads on the site as private ways so the town won’t have to plow or repair them.

“We were able to have a good dialogue, and the planing board and the selectmen ultimately came up with a special permit that I think was a win for the town,” said David Bauer, the Massachusetts division president for Toll Brothers, which is preparing to build 142 townhouses and 10 single-family homes as part of a development called Seaside at Scituate.

Bauer said negotiations like the one that led to the Scituate deal give developers and municipal leaders the flexibility to craft agreements that address a community’s specific needs and priorities, whether it be sewer line extensions or a new ballfield. But he said he frequently walks away from potential projects when a community demands too much or doesn’t want to deal.

Paul Healey, a Hingham selectman who helped broker a deal in which the developer AvalonBay Communities agreed to pay the town $1 million toward the purchase of a fire truck, also sees the benefit of a system that gives local officials the flexibility to extract concessions from developers that fit their community’s needs. In the case of Avalon, which built 250 apartments at the Hingham Shipyard as part of a project called Avalon II, Healey said he suggested the company pay to help replace the town’s aging ladder truck because such a vehicle would be required to fight a fire in the tall buildings Avalon was seeking to build.

“Doing it right, it’s a lot of work, but it’s worth it, because you come up with a good project that’s successful for the community and one that the developer hopefully is satisfied with,” he said.

Planners and developers say these deals have become more common in Massachusetts as cities and towns unable to charge impact fees have instead tightened zoning bylaws to require developers to get special permits for more kinds of projects, rather than allowing them by right. When developers are required to seek a special permit, which local boards can issue at their discretion, they must agree to conditions that can include a variety of on- and off-site work and payments to the town.

Amy Dain, a researcher working on a forthcoming report for the Smart Growth Alliance, reviewed the zoning bylaws of 100 cities and towns around Boston and found that one-third of them had no areas where multifamily homes could be built without a special permit. Of the remaining two-thirds, many allowed them only in areas that had already been built out or couldn’t be developed for other reasons.

The result, planners say, is a system where developers and municipal leaders engage in ad hoc deal-making that leads to concessions that vary dramatically from town to town and project to project.

“You’ve got planning boards that aren’t really trained in the complications of negotiating a real estate deal,” Dain said. “It’s like every city and town is making it up.”

Critics also say these concessions have helped drive up the cost of construction, making newly built homes unaffordable for many buyers and renters. A study by the National Association of Home Builders found that the regulatory costs of construction had increased 29 percent between 2011 and 2016, making up 31 percent of the cost of multifamily developments.

“These concessions have had a major impact on the cost of residential development in Massachusetts,” said Benjamin Fierro, a lawyer with the Home Builders and Remodelers Association of Massachusetts. “That affects affordability and that affects availability. There’s no question about that.”

But Fierro said there may be room for compromise between the planners who want to see a state law that helps determine up-front development impact fees and the builders in Massachusetts who have traditionally opposed such proposals. He said many developers would welcome a law that would give them some predictability in determining the cost of their projects, but they fear being required to pay a fee while also being forced into the kind of ad hoc negotiations they now face.

“The problem is you start with certain cost assumptions and then as you get into the process, because of these negotiations, you don’t know what that cost is going to be,” Fierro said. “So if we had a sort of uniform rational system in Massachusetts of impact fees and costs, that would be welcome as a general proposition, but that’s not what’s on the table.”

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