The Columbus Center Watch

State pulls $10m slated for Columbus Center

Boston Globe
By Thomas C. Palmer Jr.
Globe Staff / April 8, 2008

In what may be the death knell for the problem-plagued Columbus Center project over the Massachusetts Turnpike, the state said yesterday it is withdrawing a $10 million grant the developers were counting on.

Though state funds are a relatively small portion of the overall financing, the developers contended that the $10 million - and a second $10 million grant they applied for - were crucial to making the project financially feasible.

Columbus Center developers received preliminary approval from state officials for the first $10 million, known as a MORE grant, last year, but the state did not act on the second request. MORE stands for Massachusetts Opportunity Relocation and Expansion Jobs Capital.

"The administration is redirecting those funds to other projects that will result in more immediate job growth and economic development," Kofi Jones, spokeswoman for the Executive Office of Housing and Economic Development, said yesterday. "The developer can apply for funding in the future, but no commitments are being made," she added.

Construction on the $800 million hotel, residential condominiums, and retail project between the Back Bay and South End, which struggled through 11 years of permitting and vigorous opposition, has been on hold since last month.

The developers had not yet received any of the grant money, plus another $15 million loan from MassHousing, and asked Turnpike officials for permission to suspend work for up to 18 months, pending either approval of the funds or an improvement in the economic climate.

The request for the construction delay "triggered our decision" to withdraw the funds, Jones said.

But it remained in dispute yesterday which came first - the request to delay construction or the state's decision not to provide the $20 million.

"We needed to know how and when the funds that were previously committed to the project would kick in," said Alan Eisner, a spokesman for the developers, a team including the local firm WinnDevelopment and the California Public Employees' Retirement System and its investment advisers.

The project's estimated cost has zoomed from $350 million to $800 million since planning began in 1997.

Gregory P. Bialecki, state-permitting ombudsman, who was involved in negotiations, said the grant money was redirected in part because the developer could not guarantee it would start on the Columbus Center buildings soon after it finishes the deck over the roadway that will serve as the foundation.

"We asked them to demonstrate to us within the last 60 days it was really true that if the MORE money came through, everything else was all set," Bialecki said. "At a meeting, I was not persuaded."

In any case, the decision not to award the $10 million may spell the end for Columbus Center. That prospect - like the project itself - drew contrasting reactions yesterday."This is a shame," said David I. Begelfer, chief executive of the National Association of Industrial and Office Properties. "You have one of the better urban projects I've ever seen."

"Most any other city or state would be tripping over themselves to make this happen," he said. "To take the money away at the end is unconscionable."

However, state Representative Marty Walz, a Boston Democrat, was relieved Columbus Center would not receive public subsidies. "I'm delighted," she said. "I thought this was an inappropriate use of taxpayer money. If this developer can't or won't go forward, the process should start all over again."

Another critic of the state funding for the project, House Speaker Salvatore DiMasi, said in a statement: "The Columbus Center project appears to be facing extreme financial difficulties . . . high-priced, luxury condominium projects of this kind should not benefit from state subsidies."

Massachusetts Turnpike Authority executive director Alan LeBovidge yesterday said the agency had recently reached a lease agreement with the developers to build the project on air rights over the Turnpike. But, before that lease could be finalized by Governor Deval Patrick, he heard back from the developers. "We got notified that they were stopping because of the MORE grants not being available," he said.

LeBovidge said the authority told the developers it was willing to negotiate a delay in construction of up to 18 months. But he also said he is concerned about what the developers will do in the interim, with an idle work site holding a substantial amount of equipment and materials.

"They've got to do something with all the things dug up, partial walls ripped down," LeBovidge said. "I don't want to leave it there for 18 months."

After a construction loan fell through last year, the developers decided to start work anyway, funding the construction on the deck with their own money, and even going so far as to give the Turnpike Authority a $270 million guarantee that it would be completed. Eisner said WinnDevelopment has already spent about $40 million on the project and the California pension fund has spent about $70 million.

Columbus Center was one of 23 projects that received preliminary approval for a total of $87.9 million dollars in job-creation grants. "This is the only one where the preliminary award has been redirected," Jones said.

Thomas C. Palmer Jr. can be reached at tpalmer@globe.com.

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