Developers of the proposed Chestnut Hill Square are looking for the neighboring Newton's cooperation in a state-funded program that would provide $15 million in infrastructure improvements to Route 9 and other nearby roadways.
The Infrastructure Investment Incentive program, otherwise known as I-Cubed, involves the state issuing bonds to development projects that are eventually paid back through the sales and payroll taxes generated by the project.
Representatives from the project's developer, New England Development, met with the Finance Committee Monday night to stress the importance of the bonds, and the need for the city's approval before moving forward with the application.
"There is no way for us to do this project without having I-Cubed funding," said John Twohig, a Boston-based lawyer who represents New England Development. "Two hundred thousand square feet doesn't pay for $15 million in improvements."
The benefits of the funding include widening of Route 9, improvements to Hammond Pond Parkway as well as the Langley Road-Route 9 intersection, Twohig said. The developer expects more than 500 construction jobs will be created with the project along with another 500 permanent jobs.
Twohig said both Gov. Deval Patrick and Housing & Economic Development Secretary Gregory Bialecki encouraged New England Development to seek I-Cubed funding for the project, which will create a supermarket, health club, medical offices, and a parking structure at the former Omni Foods site on Boylston Street.
If the city agrees to cooperate with New England Development and the state program, it will ultimately be responsible for project bonds and the debt service if there is ever a point where the Chestnut Hill Square project cannot pay the bonds. However, as Twohig emphasized throughout the meeting, that scenario is very unlikely.
"For it to get to the point where the property is worthless and developer is out of business and jobs, there would have to had been a major catastrophe in the economy," Twohig said.
According to a FAQ sheet provided by the developer, the project is expected to pull in around $2 million a year from new state tax revenue while the annual debt service for the bonds will come in around $1 million. The developer expects it will pay off the 30-year bonds in 14 years.
Moreover, the program and developer have implemented other "safeguards" for the city to prevent the scenario where Newton would have to pay back the bond service, Twohig said. For example, the project will put away $2 million in a reserve account for the debt payment and the city has the right to lien and assess the property if the debt is not paid.
Twohig added that the bonds will only be issued once the developer shows it has a certain amount of leasing already in place. All other "outstanding issues," including appeals and lawsuits, also have to be resolved before the I-Cubed program can go through.
Last week, an appeal filed against the Newton Board of Aldermen's decision to grant New England Development special permits was settled and dismissed in court yesterday.
Newton Chief Financial Officer Maureen Lemieux explained Monday night that the I-Cubed program and the bonds issued to New England Development would not affect the city's ability to acquire bonds itself (essentially, its credit rating). However, Finance Committee Chairman Lenny Gentile said it will be important for the city to do its "due diligence" and double-check with Moody's, a service that issues bond ratings to the city.
Gentile said it is important that the aldermen understand the risk involved, even if it is minimal.
New England Development will continue talks with the city through August/September and eventually look for I-Cubed approval by October. If all goes well, the bonds are expected to be issued by November of this year.
The committee voted to hold the item, which would authorize a joint application for I-Cubed between the city and New England Development. Aldermen will take up the item later this summer.
Developer gathering tenants
According to Douglass Karp, New England Development's executive vice president, crews have already started some abatement work with potential asbestos on the site, but major steps forward on the project will have to wait until the developer has a good idea the I-Cubed program will go through.
Moreover, Karp said the developer has made a deal with Equinox Health Clubs for a facility in the development and they are "working closely" with a supermarket as well.
"The leasing is coming together," Karp said. "We're excited about the tenant mix."
Karp also noted the 29 utility poles that will have to be relocated for the road and site work, all of which are owned by different cable, electricity and telephone companies. The developer is currently working with those utility companies and are hoping to have all the poles moved a year from now to allow for roadway construction.