$50 Million in State Bond Funds Support Fan Pier Region Construction Projects

Boston’s Fan Pier gets a $50M funding from I-Cubed

Article Courtesy of:  Mass High Tech

The section of South Boston’s planned Innovation District known as Fan Pier has won approval for $50 million from a state-run public-private program for development, part of which will be the new 1.1 million square foot headquarters for Vertex Pharmaceuticals Inc.

Fan Pier Boston Photo: New England Real Estate Journal

Fan Pier Boston Photo: New England Real Estate Journal

Vertex signed a 15-year lease for the space in May, becoming the largest commercial lease in the history of Boston.

A release from the office of Lieutenant Gov. Timothy Murray stated that the Innovative Infrastructure Investment (I-Cubed) program will dole out the $50 million to “support public infrastructure improvements at Fan Pier – primarily streets, sidewalks, and public parks – as well as to “support the construction of Fan Pier’s second and third office buildings and the future home to the 1.1 million square foot global headquarters for Vertex Pharmaceuticals.” Already on the site is One Fan Pier, which is the home of the MassChallenge startup accelerator and business plan contest.

According to the release, the construction will support 2,000 construction jobs and when it is finished, the Fan Pier region will be able to support 1,800 new jobs. The I-Cubed program brought together the state, the City of Boston and the owner and developer of the space, The Fallon Company. The money in the program comes from bonds, according to state officials.

Fan Pier is a 21-acre site which, when complete, will have a hotel, condominiums, additional offices, retail and restaurants, the release stated.

Last month, Vertex (Nasdaq: VRTX) and its partner, the Johnson & Johnson division Janssen Pharmaceutica N.V., won regulatory approval in the European Union for Vertex’s hepatitis C drug, known in the U.S. as Incivek. The drug was approved by the U.S. Food and Drug Administration in May and brought in revenue of $75 million in the first five weeks on the market.

About I-Cubed

Patrick-Murray Administration Issues Regulations for Innovative New Program to Spur Economic Growth and Job Creation

BOSTON—Wednesday, September 24, 2008—Lieutenant Governor Timothy P. Murray announced today that the Patrick-Murray administration has filed draft regulations to implement a new program aimed at supporting job growth and economic development in the Commonwealth by creating a new partnership between the state, communities and businesses to finance major new development projects.

The announcement made at the Boston Chamber of Commerce breakfast, highlighted how the program, known as the Infrastructure Investment Incentive Program (I-Cubed) will help finance significant new public infrastructure improvements necessary to support major new private development. The new development will result in additional jobs and new revenues for the Commonwealth and for cities and towns.

”This innovative financing program is another tool we will use to promote and support smart economic development in the Commonwealth,” said Lieutenant Governor Murray.  “The projects I-cubed will help are those that will produce jobs and new local and state revenues.  They are projects that are smart investments and those that otherwise would not be possible.”

The program will provide $250 million in state funding to make infrastructure improvements necessary for new private developments.  The infrastructure improvements will be financed from the new state tax revenues generated from the private development. Until the private development is completed and occupied, the developer is assessed for the debt service cost on the bonds issued to fund the improvements.  Once the project is occupied and generating new state tax revenues, the Commonwealth pays the debt service.  If there is a shortfall in new state revenues, the municipality is responsible for covering the shortfall.

The I-Cubed concept was first approved by the Legislature in 2006, in response to a proposal by Boston Mayor Thomas Menino, but was not implemented by the previous administration. The Patrick-Murray Administration, working with the Legislature, improved upon the original legislation earlier this year, authorizing the investment for certified economic development projects throughout the Commonwealth.

“If we were looking for an economic boost, we just got one,” Senate President Therese Murray (D-Plymouth) said. “The Senate has been a big supporter of I-Cubed legislation, and I’m happy to hear the announcement today of regulations that will get this program working for the Commonwealth. The I-Cubed program will allow us to make significant improvements to our infrastructure that will support and encourage private development projects around the state, with an emphasis on economically distressed areas. It will create jobs and spur economic development at a time when we need it most.”

“Governor Patrick and Lieutenant Governor Murray have provided the strong leadership to make the I-Cubed Program a reality,” Mayor Menino said.  “Now, Boston along with many other cities and towns have a new way to provide the infrastructure investment that is necessary for growth.  This legislation allows us to be more competitive in changing economies in ways that we could not be previously.”

The regulations filed today give priority to projects in economically distressed municipalities as well as to projects consistent with the administration’s Growth Districts Initiative and to projects that commit to obtaining LEED Silver certification from the U.S. Green Building Council.

Projects will be financed using bonds issued by MassDevelopment and will be secured by a general obligation of the Commonwealth. Developers must demonstrate that their projects are likely to result in new state revenues that are at least 1.5 times the projected debt service on the related bonds. Developers must also demonstrate to the administration that projects would not otherwise have been built or expanded to the proposed level if not for the state investment.

Infrastructure improvements eligible for funding under this program must be at least $10 million and cannot exceed $50 million. Further, no more than two projects may be financed through I-Cubed in a single city or town, and cannot receive any other public financing such as tax increment financing, tax credits for economic development incentive programs, or community development action grant.

I-Cubed is another tool for supporting partnership between municipalities and the Commonwealth.

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With $50M, Fan Pier becomes second I-Cubed grant recipient

By Kyle Cheney / State House News Service  |   Saturday, October 22, 2011

Fan Pier, a 21-acre development on the Boston waterfront that the Patrick administration estimates will lead to 2,000 construction jobs and 1,800 permanent jobs, will get a $50 million lift from the state, officials announced Wednesday.

Lt. Gov. Tim Murray on Wednesday used a speech before the Greater Boston Chamber of Commerce, to announce the investment, which will support improvements to streets, sidewalks and public parks along the waterfront and aid construction of two office towers, one of which will house the new global headquarters of Vertex Pharmaceuticals.

The funding was approved through a program known as the Innovation Infrastructure Investment program, or I-Cubed. The program is intended to divide risk among the state, project developers and local communities, all of which seek to benefit from the completion of major developments. The grant means $60 million has been allocated under the program, which has a $250 million authorization.

Projects approved for I-Cubed funding receive up to $50 million in bond finance provided by the state. Under a bond agreement, revenue generated as a result of the project would fully fund the state’s debt liability. However, if the revenue falls short, the municipality in which the project resides would make up the difference.

The administration said Vertex’s headquarters – estimated at 1.1 million square feet – would become the largest commercial lease in the history of Boston, and the Fallon Company’s Fan Pier project would be the largest private-sector construction project in the country.

Fan Pier includes 21 acres along the Boston Harbor waterfront with 3 million square feet of planned redevelopment that will include mixed-use housing and commercial space, including a five-star hotel, condominiums, offices, retail and restaurants.

Since its inception, I-Cubed funding has only been approved for one project other than Fan Pier: a $10 million investment for Assembly Square in Somerville. An application for I-Cubed funding for a movie studio in Plymouth was rejected, and backers of I-Cubed funding for Westwood Station withdrew their application. Administration officials said other projects have applied and are under review.

Critics of the I-Cubed program have argued that it is designed to support Boston-based projects, rather than to benefit the entire state. In 2008, before any projects had been approved for I-Cubed funding, Sen. Mark Montigny (D-New Bedford) pointed to Fan Pier as an example of a Boston-based project that might seek to obtain program funding, along with the Boston Convention and Exhibition Center and a Somerville development.

“It’s pretty clear where most of the resources go,” he said at the time, suggesting that the fund would be steered toward projects whose backers have “friends in the building.”

Montigny did not respond to a request for comment Wednesday.

Murray told the News Service after Wednesday’s speech that I-Cubed is simply an “outgrowth” of district improvement financing programs, called DIFs, available to communities around Massachusetts.

“It’s something that I think, as more communities use it, there’s a higher comfort level for other communities to use it,” he said. “As we look at projects across the state, I think both the DIF and I-Cubed can be a future tool. There’s a pretty rigorous analysis that takes place and if that analysis shows that the projected revenues are going to be there, after due diligence, I don’t see any limitation on how we can use it … At the end of the day, it’s got to pay for itself so there’s a high threshold there.”

In a statement, Boston Mayor Thomas Menino praised the investment. “This grant shows that not only does Boston continue to drive the state’s economic engine but that we are truly still growing despite these tough economic times,” he said.

House Speaker Robert DeLeo (D-Winthrop), Sen. Jack Hart (D-South Boston), Rep. Nick Collins (D-South Boston) and Rep. Jeffrey Sanchez (D-Jamaica Plain) also issued statements supporting the grant award.

Article URL: http://www.bostonherald.com/business/real_estate/view.bg?articleid=1375280

Comments

  1. As I have detailed (http://www.mysouthend.com/index.php?ch=columnists&sc=city_streets&sc2=&sc3=&id=122458), the Mayor and the Governor have subverted the I-Cubed law and defrauded the taxpayers of the Commonwealth. The true cost of the bond over 30 years will be $99 million, which added to the $10 million in Life Sciences money and a $12 million City tax increment financing tax waiver (for which it is also not eligible, but they pulled a separate trick on that) will cost the city and state $120 million. And the “1,800 new jobs” is a fictional number, consisting of 1,240 existing jobs to be moved across the river from Cambridge, 200 jobs Vertex promised as it sets up its new campus, and 300 jobs that are mentioned as a vague aspiration (or imagination). The project doesn’t even qualify for I-Cubed because it won’t hire enough new employees to pay off the bond with their income tax payments, so the income taxes of the whole existing Vertex work force (suddenly classified as “retained jobs” — another trick) are going be made available for diversion, as necessary, from the public budget and dedicated to this bond service.

    Many of the amenities covered by this construction bond will be parks, sidewalks and other things that are part of the typical “community benefits” packages required for the kind of zoning relief Fallon is getting. Now, he gets his extra square feet, but we pay for our own public benefits.

    Recent progress in Hepatitis C research by another company http://www.bizjournals.com/boston/news/2011/10/10/vrtx-slides-on-rivals-hep-c-trial.html may knock the wind out of Vertex’s sails. This move may not even take place; Vertex has been on and off with Fan Pier leases for several years.

    Where is the legendary “free market” that is supposed to fund private business? If the market doesn’t want to “invest” in this, why are the taxpayers forced to do so?

    This is just gravy given to Fallon and Vertex, who could easily pay their own costs, by politicians who want to pretend that they are “creating jobs.”

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