Straus offers up T financing plan
Rep would tap property tax growth in project area
STATE HOUSE NEWS SERVICE
AS MBTA OVERSEERS consider paths forward for the Green Line Extension, a top House official has proposed a locally-based financing scheme for that and other transportation projects.
Rep. William Straus, a Mattapoisett Democrat and co-chairman of the Transportation Committee, recently filed legislation that he said would allow the property taxes on new growth in a set area around a transportation investment to pay off the bonds on the project – with the state acting as the final guarantor.
“It’s new growth revenue that is occurring because somebody else – state and federal government – have come in and funded this major infrastructure project,” Straus said. He also suggested “value capture” could be used to help finance the South Coast Rail to his district.
The state already has an I-Cubed infrastructure program, which sequesters state tax revenues and shares risks with host communities and developers, and a district-improvement financing program, which captures property taxes on new developments – and which Straus said is more targeted than what he has in mind.
Under Straus’s bill, he said, local officials could enter an agreement with the secretary of transportation, identifying an area around a proposed project where property taxes levied on new development would be siphoned off to finance the cost of the project.
“There’s no question in my mind that were this legislation in place it would be a new tool that would help finance the completion of the project,” Straus said. Noting that the legislation would not create a “new tax,” Straus said, “We can no longer think of the state government as a 100-percent grant writer.”
The proposal could generate some tension at the local level, where property taxes are the prime source of funding for local schools, police and fire departments, and other services.
With the estimated cost of the Green Line extension ballooning from about $2 billion to as much as $3 billion, state officials are seeking ways to trim the cost of the 4.7-mile trolley line extension to Somerville and Medford and find new ways to pay for it.
In addition to changes in management, a potential new construction contractor, and a new project scope, MBTA Fiscal and Management Control Board Chairman Joe Aiello told reporters one of the key areas of focus for the board’s upcoming meeting about the Green Line Extension will be “where do we find the extra money.”
Transportation Secretary Stephanie Pollack has indicated that value-capture – the term for the financing scheme Straus described – should be part of the discussions.
“We’re creating value by building it. We’re not taking all of that value away. We’re not asking them to pay the whole $2 billion price tag or anything close to it, but the issue is as part of the process of getting the price down and the revenue up, so that they meet in the middle and we can build that project,” Pollack said last month on Herald Radio.
Somerville Mayor Joe Curtatone, who has long advocated for the project, has also endorsed that type of approach in general and said it could contribute a “significant amount” to the project.
“We don’t’ have a really great menu of value-capture tools in the Commonwealth,” Curtatone said this summer. While unable to estimate how much the city could raise through developer contributions and other leverages on growth, Curtatone said, “You have to be able to capture the value of your project to pay off that borrowing. We think it would be a significant amount.”
Somerville helped build its new Assembly Square neighborhood, which has a new Orange Line station, by using I-Cubed and district improvement financing. The developer also kicked in $15 million for the station.
In a different type of arrangement, the shoe company New Balance is funding the creation of a new commuter rail station near the company’s real estate development in Brighton.
Straus said value capture could be used for highway off-ramps or for the proposed commuter rail linking New Bedford, Fall River, and Taunton to Boston’s South Station.
“I think this is a tool that would be suited to that project as well,” Straus said.
Straus also said he doesn’t anticipate South Coast Rail’s price tag, recently pegged at $2.2 billion, would go up the way the Green Line Extension did, attributing a bulk of cost pressure on a novel procurement method used for the trolley project. Transportation experts have criticized the state’s implementation of the procurement.
Running along an existing commuter rail track through hot real estate markets right outside of Boston, the Green Line Extension would entail laying 4.7 miles of trolley track and the purchase of 24 cars and seven total stations, according to the state’s federal grant application.
Transportation advocates say value-capture could be part of transportation financing in Massachusetts, though it can’t completely take the burden off government to contribute dollars for projects.
“Trying to generate money for the project from value-capture is going to take more than going up and down the corridor speaking to property owners and asking them how much they’re going to contribute,” Metropolitan Area Planning Council Executive Director Marc Draisen told state transportation overseers earlier this year. “Rather it takes a clear understanding of the value-capture techniques that have been used routinely in many other parts of America.”
Draisen suggested the state hire a consultant to recommend value-capture approaches that could be used along the planned Green Line Extension, and he said the council would be willing to contribute to such an endeavor.