New legislation supports projects that spur additional private investment in weak markets

A new bill supporting high impact development projects in Gateway Cities – where the market gap between development costs and returns continues to deter investors– was heard September 10 in Springfield. Gateway City mayors from across the state and a host of community leaders testified at the hearing on HB. 311 – An Act to Promote Transformative Development in Gateway in Gateway Cities.

“As Springfield is one of the original Gateway Cities, we’ve long been interested in helping create and support new tools to help spur investment in these important cities,” said Mayor Domenic J. Sarno. “The passing of this bill would serve as a remarkable catalyst to bring new jobs, market rate housing, and private investment to Springfield and cities throughout the Commonwealth.”

The legislation focuses on public support for projects that catalyze significant follow-on private investment, leading over time to the transformation of entire downtowns or urban neighborhoods. The approach seeks to repair weak real estate markets in former manufacturing centers like New Bedford, Springfield, and Worcester, where economic revitalization efforts are underway, but are not yet strong enough to transform these cities or to provide the economic contribution critical to the state’s overall economic recovery.

Brockton Mayor Linda Balzotti has worked tirelessly to attract developers to revive historic buildings in her city’s downtown, many of which have sat mothballed for years. “Like Gateway Cities all over Massachusetts, downtown Brockton has the infrastructure to be a major economic center. The frustration we face every day is simply not having the tools to support redevelopment projects with the power to get private capital flowing back into the community.”

Supporters believe successful passage of HB. 311 would not only give Gateway Cities tools to plan and execute projects, but would also send a strong signal to developers and investors that the Commonwealth is serious about reinvesting in its urban centers.

“This legislation creates tools that are tailored to the unique challenges and untapped potential of the state’s Gateway Cities,” said Benjamin Forman, Executive Director of MassINC’s Gateway Cities Innovation Invitation Institute,” at the hearing held by The Joint Committee on Economic Development and Emerging Technologies. “A recovery that lifts all boats will only come when we address head on the market gap that keeps private capital out of regional economic centers across our Commonwealth.”

For developers who have great difficulty finding financial backing for Gateway City deals, the legislation offers a chance to make their projects a reality. “Gateway Cities offer remarkable opportunity for the growth of the Massachusetts economy. But the market rents available, either for housing and commercial uses, don’t support the cost of new construction or the substantial renovation of existing buildings. Only if there are other sources of funds – patient money that can wait for a return – can desirable projects be financed,” said Ted Carman, President, Concord Square Planning & Development.

The legislation, co-authored by Gateway Cities Legislative Caucus chairs Senator Benjamin Downing (D-Pittsfield) and Representative Antonio Cabral (D-New Bedford):

• Creates a new Gateway Cities Transformative Development Fund at MassDevelopment. The bill capitalizes a new $125 million fund with three components: revolving loans for commercial development, large grants for public infrastructure improvements in major redevelopment projects, and equity protection for homebuyers rehabbing residential properties in neighborhoods surrounding transformative projects.

• Expands and improves the Economic Development Incentive Program. The bill increases the EDIP cap from $25 million to $75 million. This is urgently needed given that projects located in Boston’s strong market regularly consume a large majority of this program’s resources. The bill would also raise the credit percentage from 10 percent to up to 40 percent for commercial projects in Gateway Cities (currently only manufacturing employers may receive a 40 percent credit).

• Expands and improves the Housing Development Incentive Program. The bill increases the EDIP tax credit to support market rate housing from $5 million annually to $15 million and allows these funds to support up to 30 percent of project costs (the current ceiling is 10 percent).

• Expands and improves the Historic Rehabilitation Tax Credit. The bill increases the cap on historic tax credits from $50 million to $60 million and provides awardees certainty that they will receive the full 20 percent of rehabilitation costs as authorized under the current statue.