Rivera’s old-school push for change
Mayor makes use of some 'old Lawrence' tactics
AT DANIEL RIVERA’S INAUGURATION as mayor of Lawrence in January 2014, he was hailed as the guy who would take the city in a new direction. Even though he squeaked into office by just 81 votes over the scandal-plagued incumbent, William Lantigua, Rivera was toasted as the politician who would get the city back on track. Sen. Elizabeth Warren said her former campaign aide represented a fresh start for the city. US Rep. Niki Tsongas called Rivera a change agent. Rivera, a former city councilor and veteran, vowed to restore Lawrence’s pride, rehabilitate its image, and repair the damage done by the Lantigua administration. Embracing his role, he printed up business cards that identified himself as the mayor and CEO of Lawrence.
No one said turning Lawrence around would be easy. Back in 2012, Boston magazine famously called Lawrence “the most godforsaken place in Massachusetts” in a story under the headline “City of the damned.” Lawrence has long been plagued by poverty, corruption, and rival political cliques that often combine to create paralysis. Problems tend to get swept under the rug until the rug becomes so bumpy they can no longer be ignored. The state regularly finds itself stepping in to rescue Lawrence from itself: The schools are under state receivership and the city’s finances are monitored by a state overseer.
One of the first bumps in the rug that caught Rivera’s attention was a lease between the city’s School Department and the owner of the building a few feet behind City Hall. The 10-year lease, signed in 2003 with an effective date of Jan. 1, 2005, committed the city to paying rent as well as maintenance, upkeep, and any new taxes assessed on the building, which housed the school department’s administrative offices. The lease was written that way because the city, when it negotiated the agreement, planned to buy the building in a year or two at most. But Lawrence officials never followed through. They kept paying rent—which added up to $3.8 million over the next 10 years—and neglected to maintain the building properly. The bump in the rug became even more pronounced when the state receiver for the school system cut his central office staff by 30 percent and shifted resources to the schools themselves. When Rivera came into office, the city was paying a hefty rent for a dilapidated building that was only partially full.
“It was wicked expensive,” Rivera says. “We really just looked at that number we were paying on the lease on top of what we were paying for maintenance and for utilities and taxes and water—all the things that property owners usually pay in leases—and we were paying all of it. It was just too expensive for us.”
It was a fuzzy, poorly thought out proposal and DiAdamo, a retired trial attorney, was not amused. He says he heard the mayor’s remark about $3 million in code violations and feared his tenants were in danger. Under the terms of the lease, it was the city’s job to maintain the building in proper working order, so it seemed to DiAdamo as if the newly elected mayor was trying to shift responsibility for the city’s failure to maintain the building to him. DiAdamo wrote the mayor and other city officials, asking them for details on the code violations. He pointedly noted in his letters that the lease held them legally responsible for the upkeep of the building. They didn’t respond.
Rivera says he didn’t like the tone of DiAdamo’s letters and the legal threats they contained. In an interview at the time, he made clear he would not be intimidated. “He should not expect we’re old Lawrence and roll over just because he threatens to file a lawsuit,” he said, referring to the corrupt ways of his predecessors.
More than a year later, Rivera has done what he set out to do. He moved the School Department out of DiAdamo’s building when the lease expired at the end of 2014 and relocated its offices to temporary space. He is in the process of purchasing a rundown building downtown and plans to gut and rehab it for the School Department. He insists the School Department’s new home will give a lift to the struggling downtown area and ultimately save the city money.
But to pull the deal together, Rivera had to engage in what some might call “old Lawrence” tactics. He sidestepped public bidding laws by partnering with a state authority to purchase the new building. Using questionable cost comparisons, he then convinced the City Council to approve a plan to borrow $8 million to fix up the structure. The deal also carries significant risks. The School Department move will give life to a downtown eyesore, but it leaves behind a vacant building at the city’s core. DiAdamo is also suing the city, alleging it violated the terms of the lease. If Rivera loses in court, he could be on the hook for not only rehabbing the School Department’s new building but also its old one. It could turn out to be an expensive way to make a point.
FROM DIPLOMACY TO ALL-OUT WAR
Rivera acknowledges his suggestion that DiAdamo donate his building to the city was not fully formed, that it was more of a creative idea than a concrete proposal. Yet he thought it could be a starting point for further discussion. He says that became impossible when DiAdamo put on his lawyer’s hat and began writing letters to the city. By the end of March 2014, two months after the men originally met in the mayor’s office, DiAdamo was suing the city and there was no turning back for either side.
Rivera decided he was going to move the School Department out of its existing office space when the lease ended at the end of 2014. The question was: Where would the agency go, both short-term and long-term? Short-term, the mayor decided to move the School Department into the basement of the old high school building, converting abandoned classrooms into offices. Long-term was more problematic. The mayor wanted to consolidate several agencies renting space around the city into one location downtown. He issued two very similar requests for proposals looking for a solution, but neither yielded the results he wanted. DiAdamo responded to both RFPs.
“They really are the state’s economic development ninjas,” Rivera says of MassDevelopment. “They’re really versatile. For a community like ours, where we’re not Boston with the Boston Redevelopment Authority or Newton that can pay for all sorts of stuff, we Gateway Cities rely on them to help out.”
MassDevelopment helped out by finding a downtown building for the School Department. Through an affiliated limited liability company called Frost Properties LLC, MassDevelopment negotiated a deal with the Spanish Free Methodist Church of Methuen to purchase an ugly, rundown building at 370 Essex Street in downtown Lawrence for $505,000. Officials say MassDevelopment often uses the limited liability company to conceal its involvement because building owners tend to jack up their prices if a government agency is involved.
Mark Sternman, a spokesman for MassDevelopment, says the arrangement does not violate the public bidding law because of an exception written into the law covering transactions with state government. The exception presumably was created so municipalities could purchase surplus state land without going through a public bid process. Whether the law envisioned a state authority acting as Lawrence’s agent in a land purchase is unclear. The state Inspector General, who monitors compliance with the law, declined comment.
Sternman says it was not clear at the time Frost Properties LLC made an offer for the building at 370 Essex Street whether the LLC would go on to develop the property and lease it to the city. He says the city ultimately decided to buy the building, so MassDevelopment purchased the property on June 9 and will sell it to the city and supervise the rehab on behalf of the city.
Rivera says there was no intent to circumvent the public bid process. “This actually helped us enhance at the end of the day the public’s bang for the buck,” Rivera says. “It allowed us to act like a private entity, to do something to get the lowest price on a property, which we would not have been able to do ourselves. If we had done a bid process, we would have probably paid more for it.”
Once MassDevelopment secured a purchase option on the building, the next step for the city was to find a way to pay for the building and its rehab. Rivera and his staff developed a presentation for a City Council hearing on May 5 showing that the purchase and renovation of the building at 370 Essex Street would save money for the city in the long run, which convinced the councilors to vote 8-0 for the proposal.
Rivera proposed issuing $8 million worth of bonds to pay the $505,000 purchase price and the $7.5 million rehab. The debt service on the bonds would be $422,418 a year for 30 years, or a total cost of $12.7 million. At the end of the 30-year period, the bonds would be paid off and the city would own the property free and clear.
The key slides in the presentation compared the cost of buying the new building to leasing DiAdamo’s building. Initially, the slides show the DiAdamo lease costs less ($384,000 vs. $422,418) but with inflation adjustments it begins to exceed the purchase option around 2021. Over a 30-year period, the lease cost totals $16.3 million compared to $12.7 million for the purchase. The difference is even more dramatic when projected utility and maintenance expenses are included: $24.8 million for leasing over 30 years versus $16.5 million for buying.
Sean Cronin, the state fiscal overseer for Lawrence, says the mayor’s presentation was convincing. “My concern was that it at least break even, if not save money,” he says. “I think this is a positive thing for the city.”
But the mayor’s analysis is faulty on two fronts. First, it’s unfair to compare the bond cost of purchasing the new building to the DiAdamo lease. The lease was written more than a decade ago on the assumption the city was going to buy the building, which it never did. Moreover, Rivera had already canceled the lease, so it would have made more sense to compare the purchase of the new building to the purchase of another building. What if, for example, the city purchased a much larger building and was able to consolidate all city offices in one location, thus cutting down on other lease costs?
Second, Rivera’s presentation fails to note that DiAdamo’s building is twice the size of the building the city is purchasing. That’s why costs such as heat and electricity are so much higher at the DiAdamo building; there’s more space to heat and light. On a square-foot basis, the DiAdamo building is actually a lot cheaper than the building the city is purchasing. The city also estimated annual maintenance costs of $131,165 a year at the DiAdamo building, with no explanation how that amount was calculated. Court records indicate the city spent $168,692 for outside maintenance services for the building from 2008 through 2014, or about $28,000 a year, on average.
Rivera says he thinks the comparisons the city used were fair. “It’s what we were paying versus what we will be paying,” he says.
THE BIG RISK
The big risk with Rivera’s decision to buy a new School Department building is how much the city is going to have to pay to resolve the lawsuit with DiAdamo. The lease is clear that the city is responsible for maintenance and upkeep of the building, and Rivera said in January 2014 that the building had $3 million worth of code violations.
At a deposition of the mayor on December 4, 2014, DiAdamo asked him where his numbers on code violations came from.
“I don’t recall,” Rivera said.
“You just made them up?” DiAdamo asked.
“No,” the mayor said, as his lawyer objected. “I know we talked about numbers but I don’t remember what the exact number was.”
As the deposition went on, the mayor seemed unclear about the terms of the lease and dodged questions about comments he had made that the lease was “crazy” and the city had been “duped” into signing it. “All I know is the city is in an agreement that is not favorable to the city financially and I wouldn’t have signed the lease,” Rivera said.
Mary Bergeron, the assistant superintendent of the Lawrence School Department, who was at the meeting in the mayor’s office with DiAdamo, said in a separate deposition that Rivera’s $3 million estimate of code violations was a surprise to her. She said she reported the number to her boss and the facilities manager for the school system, and pointedly asked the facilities manager if he knew anything about $3 million in code violations. “He looked at me and said, ‘I have no idea,’” she said.
City officials apparently tried to fix many of the building’s problems as the lease wound down at the end of last year. Dozens of crumbling ceiling tiles have been replaced, their bright whiteness contrasting with the faded color of their neighbors. Other work was also done as the mayor vowed to return the building to DiAdamo in the shape the city received it.
Yet William DiAdamo, Carmine’s 50-year-old son, who runs his own legal practice out of his father’s building, says the city only scratched the surface. He says he and his father brought in a number of specialists to check the building out. He says the specialists have identified a number of concerns, including a labyrinth of electrical wiring snaking across the top of the ceiling tiles; a roof that needs replacing; air conditioning systems that don’t work properly; a water line located in the main electrical room; ceiling tiles that have suffered severe water damage since the city vacated the premises; and lots of structural and electrical work for which no building permits could be found.
William DiAdamo estimates the cost to fix the problems could run as high as $5 million, and possibly more if walls need to be taken down to review work for which no permit was obtained. “Everything’s got to be gutted,” he says.
Carmine DiAdamo, now 73, says he got into the real estate business at the request of city officials. He says former mayor John Buckley approached him in 1984 about buying the building at 237 Essex Street, which is behind City Hall and across from the District Court. DiAdamo says Buckley was worried that federal officials would withhold historic preservation money for a brick and cobblestone plaza outside the building unless the façade of the structure was restored to its original form. The owner at the time wasn’t willing to spend the money. So DiAdamo bought the building, rehabbed it, and moved his law firm in and rented space to a number of other businesses.
In 1988, DiAdamo says, he bought the building next door at 255 Essex Street, again at the urging of city officials who wanted the School Department to move in. DiAdamo joined his two buildings together and, over time, the School Department expanded to fill nearly all of the combined space.
By 2002, DiAdamo says, the market for downtown office space had improved and he wanted to sell. He says city officials told him they wanted to buy the building but couldn’t swing the purchase immediately, so in November 2003 he negotiated a lease with then-mayor Michael Sullivan and then-school superintendent Wilfredo Laboy that in many ways was the equivalent of a sale.
The city was given an option to purchase the building and a right-of-first refusal if any other buyer stepped forward. The city agreed to make lease payments, plus “pay all the expenses of building maintenance, repair, and replacement.” The annual lease payment was set at $344,300 minus $72,000 in credits for utilities ($58,896) and building maintenance ($13,200) for which the city would be responsible. The net lease payment was $272,300, adjusted annually for inflation.
“Our general intent was to grant a tenancy to the School Department at no additional cost, but not expose me to future, unpredictable increases in the future,” DiAdamo wrote to two officials at the Lawrence School Department in October 2003.
The city had an independent appraisal done on the building in 2004 that indicated all systems were in good working order. The value of the building at that time was estimated at $3.1 million.
Carmine DiAdamo says he didn’t spend a lot of time thinking about the building after the lease was signed, but he remembers that Laboy was making lots of changes. DiAdamo says Laboy had a new office built and ripped up the existing carpeting because he didn’t like the color (he preferred purple). Laboy also put up a number of new walls and installed a massive printing press in the basement.
In 2009, Laboy was suspended from his post and later found guilty on five counts of fraud and embezzlement and one count of possessing alcohol on school grounds. Evidence indicated he directed school employees to run personal errands for him in school vehicles on school time. He also used the printing press in the basement to run off materials for an association he belonged to and his son’s pizza shop.
The dispute over the DiAdamo lease appears to be about money, but, like most happenings in Lawrence, everything is viewed through a political lens.
Carmine and William DiAdamo say they are not political players in town, but they know plenty of people and have made enemies. William has done legal work for the city in the past, including a handful of civil rights cases for the administration of former mayor Lantigua, the man Rivera defeated by 81 votes.
“I had a good relationship with Willie. I like him. It was clear to me after Rivera was elected that I was persona non grata,” says William DiAdamo. “I do think the genesis of a lot of this is political. There wasn’t an enemies list, per se, but we were associated with the enemy.”
Rivera denies that. “I don’t have any personal issue with these folks. All I’m trying to do is solve a problem,” he says. “The problem we had was that we were paying too much for office space, much of which we didn’t need any more. We tried to get the best deal possible. Because there’s a lawsuit, I can’t really get into how the risk for the city is not as great as some people are saying. But there’s no vendetta. We’re just trying to get the city the best deal possible, and owning a property is way more advantageous for the city than the leasing process.”
Most officials in Lawrence are siding with the mayor on this issue. The state fiscal overseer, Cronin, gives Rivera credit for changing the political dynamic on issues. “He’s certainly willing to have discussions and get away from the old ‘this is how we do things,’” he says.
Modesto Maldonado, the president of the Lawrence City Council, defends the mayor’s decision on the School Department building, but he wishes there had been more time to review the deal. The mayor pressed for quick action to avoid an interest-rate hike that could drive up bonding costs.
Maldonado says he has noticed that the mayor sometimes acts before he has all the facts. He noted that the mayor fired a number of city employees immediately after taking office, including the girlfriend of Lantigua. The firings were good politically for Rivera, but most of the dismissed employees are challenging their dismissals in court.
A Superior Court judge ruled in mid-June that Rivera must reinstate one of the individuals because he was denied the chance to appeal his firing to the City Council. The employee is entitled to back pay and benefits—costs the city could have at least partly avoided if the mayor had negotiated with the employee rather than firing him, Maldonado says. Decisions on the other firings are expected soon.Maldonado says the firings were in violation of City Charter rules. In fact, he and the rest of the City Council invited the mayor to attend a meeting so the councilors could share their concerns, but the mayor declined.
“Like any mayor, he wants to show that he’s different from the others,” says the City Council president. “Sometimes, when you act differently, you have to be careful that you don’t do the same thing or worse.”