Thursday, June 30, 2005

Arguments Against an RFP

Over four hundred people attended the Public Hearing on the Milton Centre project at Pierce Middle School. A large number of residents voiced their thoughts on the project generally, and the wisdom of issuing an RFP specifically. I estimate that 55% spoke against issuing an RFP, while 45% spoke in support of doing so. Many of the arguments offered by opponents were arguments against the Milton Centre concept per se, opposition to which seemed to form the basis of their stand on an RFP for the DPW yard. Their arguments against an RFP continue to proliferate, creating the impression for those who don’t examine their claims that a significant number of legitimate concerns exist which support the notion of doing something, anything, other than issuing an RFP. I’m going to discuss some of these arguments which have been made at the Public Hearing, on their website, and in their mailings.

An RFP Is a Contract

This argument holds that an RFP creates a legal obligation on the part of the Town to proceed with one of the respondents to the RFP, and that not doing so creates a legal liability for the Town. This claim was made by one of the opponents fairly late into the public hearing, despite the fact that our consultant, Jon Witten, stated unequivocally at the beginning of the hearing that this was not the case.

Here are the pertinent facts on this topic. The Massachusetts Office of Inspector General is responsible for oversight of Chapter 30B, the Massachusetts law governing the disposal of government owned property. It’s September 2001 Bulletin reports on the controlling case on this very issue. The case, Mangano v. Town of Wilmington, 51 Mass. App. Ct. 857 (2001), found that municipalities may cancel plans to sell or dispose of property it owns. According to the IG, “The Appeals Court held that the omission of specific language in M.G.L. c. 30B authorizing the cancellation of an RFP did not prohibit the town from withdrawing the property from bid. Municipalities have broad powers to control and dispose of real property on terms they deem appropriate.” The Inspector General’s office wrote supporting the Town of Wilmington in this case.

A couple of facts of this case are interesting. The Town Meeting had already approved the transfer of the land in question to the Selectmen for disposal. And the formal RFP document issued by the Town neglected to mention that the Town reserved a right to reject all proposals. Despite this, the court upheld a community’s right to reject the bids and cancel plans to dispose of the property. Anyone interested in the Findlaw report on the case will find it here:

So no fears of a legal obligation should stand in the way of the issuance of an RFP.

Milton Centre Will Produce a Net Loss in Revenue

This claim was advanced at the public hearing and is contained in a letter, with “analysis”, to the Board of Selectmen from resident Doug Anderson. This letter was on the opponents website but has been removed. It represents a refinement of original assertions that the Milton Centre proposal was a “Big Box” retail development. No knowledgeable person would claim that “Big Box” retail is the proper way to characterize some shops, a bank, office space and a supermarket. The contention here is that the development will generate more costs to the town than it will cover in revenue.

The basis for this claim is a study done for the Town of Barnstable by the nationally known firm, Tischler and Associates in 2002. One of Tischler’s specialties is assessing the fiscal impact of various types of development. Their study for Barnstable can be found here.

If you search for this study on the internet you will find it referenced on a number of single issue websites whose sole purpose is to oppose some type of development. Even some media have picked it up and offered it as an analysis which is descriptive and definitive for the various types of development it analyzes, anywhere in the United States. Now, when I read the study it became clear that there were a number of elements in the analysis which could vary, not only from one part of the country to another, but even from one community to another in Massachusetts. In other words, the Tischler study for the Town of Barnstable is a custom analysis reflecting the specific circumstances of that community. Its conclusions regarding any type of development cannot be extrapolated to other communities as if it were a formula.

To confirm my thinking I called Paul Tischler, President of what is now TischlerBise in Bethesda Maryland. Since I’m in the service business myself, I knew he wouldn’t want to spend too much non-billable time talking to me. I was brief. Was he aware of the widespread retailing of his Barnstable study on the internet? He was. Was it the case that the Barnstable study could not be taken as having established norms for the various types of development examined in that study? Yes it was. And didn’t that mean that one couldn’t simply take the resulting data on positive or negative revenue for a given category of development and apply it to another community? Yes, that is what it meant. We discussed just two variables with effects on the outcome of any analysis – assessing methodology and tax rate philosophy. The second of these proves most instructive. The Tischler analysis of fiscal impact takes a comprehensive approach to estimating revenue and service costs to arrive at a net impact. For all development types, property taxes represent the most significant contributor to the revenue side. Barnstable is like most communities in Massachusetts in that it taxes residential and commercial properties at the same rate, so all the revenue projections in the Barnstable study reflect that. Milton, like about 105 other Massachusetts communities, has a split tax rate. We tax commercial property at twice the rate of residential property. So all other factors being equal, the commercial developments assessed in Barnstable would produce twice the property tax revenue in Milton that they produce in Barnstable. The substantial change in outcome from this one variable would also affect the claims made by opponents that residential development, even tailored to empty nesters, produces more net revenue than the commercial development envisioned in the Milton Centre Project.

So the claim that the Shops at Milton Centre will produce negative revenue, based on the Tischler study for Barnstable, is not the case and does not present a rational reason for not issuing an RFP.

Milton Centre Will Not Produce $500,000 in Tax Revenue

Over and over again opponents have questioned the gross tax revenue scenario offered by Milton Centre LLC. The only strong argument made in support of this was made by John Connery of Connery Associates in a letter to the Selectmen. His analysis predicted tax revenue of $360,000.

Of course the town of Milton could make its own estimate, along with any other proposals which came out of an RFP process.

In any event, at the Public Hearing the attorney for the developer stated his client would be willing to guarantee the $500,000 tax payment to the town, making this argument moot.

So the claim that we won’t see $500,000 in tax revenue is not a reason to refrain from issuing an RFP.

Decide What We Want First

There are many variations on this theme. There’s the “we’re letting the developer drive the process” theme. There’s the “residential would be better” theme. There’s the “let’s go through a process of deciding what we think is best” theme.

The developer is not driving this process. We are. Yes, his response to our Community Development Plan started the ball in motion. Thank God somebody started something. And yes, he has made a proposal that many consider attractive. But if we issue an RFP it will be based on our “terms” as we lay them out in the document. We will decide how broad we want the exploration to be. If we don’t like anything we see, we can walk away. And if we decide to advance the consideration of Milton Centre’s proposal, or anyone else’s, we still have an extended process of review and discussion, culminating in the Town Meeting.

The opponents of Milton Centre have proposed a residential alternative to the mixed use commercial plan of Milton Centre, in whole or in part. Their claims about more tax revenue have been discussed above. This approach ignores the consensus view that Milton cannot continue to rely on the taxes paid by residential homeowners, but must seek, in keeping with proper community planning, to increase alternatives such as commercial development. While a well thought out residential development will indeed produce revenue, it will also increase the Town’s dependence on the home owner to fund necessary increases to our revenue stream in future years.

The Community Development Plan finished just a year ago recognized the need to expand our commercial tax base. The public forum echoed this obvious need. The report states:

“Based on the input received at the Economic Development forum, there is a strong interest in redevelopment of Milton’s commercial areas, re-zoning existing but nonconforming business uses to commercial, and potentially rezoning additional areas for limited commercial development.”

Town Administrator David Colton echoed the plan’s findings on economic development in his letter to the Milton Times.

“The future remains bleak. Since 2001, our reliance on the property tax levy has increased by approximately 5% of total revenues. The Property Taxpayer’s share has increased over that period by over $9M. Nonetheless, the direct and essential public services provided to the residents of the Town of Milton are in extreme peril. The Town needs to consider its options for dealing with the cost of services, including commercial development, and it is not enough to just say, “Build it somewhere else.” The amount of income garnered from commercial, industrial and personal property taxes has been falling since FY 2000 and now stands at the lowest level in at least 19 years! . With the exception of the 2 Granite Avenue office building, the community has not added to its commercially zoned districts since they were carved out in the 1930’s. Since that time the population of the town has gone from approximately 16,000 to over 26,000.”

Some semblance of balance between residential and commercial development must be found if we are going to fund our services at a reasonable level without raising our residential property taxes to a point which creates great hardship for many Milton residents. With virtually no undeveloped land for development, the CDP recognized the need to get more from what we have, including re-zoning certain sections of the town for commercial development. The DPW yard was one of the major recommendations in this area.

The suggestion of building a residential development at the DPW yard quickly compounds the problem. Where will the DPW yard be moved? Who will foot the bill for a new facility? One of the areas suggested for relocating the DPW yard is the State DPW yard on Granite Ave. We would then not only be exacerbating our reliance on residential property taxes, but we would be allocating one of the few commercially developable pieces of land in town for a municipal use. The result of this double folly would be to remove two promising developable sites from our almost non-existent stock.

The most frustrating part of this argument against issuing an RFP is the last one, which says we need to undertake a process to decide what we want. We’ve already done that. It’s called the Community Development Plan. It involved citizens, town employees and state assistance. It is responsive to what everybody involved in town affairs – our elected and appointed officials, the Warrant Committee, and Town Meeting Members – know is a crying need for our town. And it is now being ignored by those who wish to defeat commercial development and want to pretend we haven’t already assessed our needs and decided on a wise direction.

Whether the Shops at Milton Centre is the best response to those needs is yet to be determined. But that the response should be commercial development is directly responsive, and we should not be dissuaded from that.

Since we already have a development plan which outlines what we want, suggesting we need to do it again because some people don’t want it is not a reason for not issuing an RFP.

Milton Centre LLP Has an Unfair Advantage

I’m told that this argument is now being embraced by Selectman Mullen as a reason not to issue an RFP, even though he left the clear impression at the Public Hearing that we should proceed with “terms” and with other locations included.

Does Milton Centre LLP have an advantage? Of course they do. They have purchased land to enhance their development proposal, provide more buffer for abutters, and to relocate and build a new DPW yard for the town- one of the roadblocks noted in our Community Development Plan. But how is this advantage unfair? To whom is it unfair? Other developers? Should we be worried about other developers, or should we be worried about the very best result for the town of Milton? Should we ask Milton Centre not to offer additional buffer zones made possible by land acquisition? Should we ask them not to offer us land to relocate our DPW yard so we can develop the current one as our Community Development Plan recommends? Should we decline their offer to build a new DPW facility? All in the interests of being fair to other developers, with the result that none of the proposals will offer Milton as much value as we otherwise could have had. We’ve seen the proposed developer vilified as a profit motivated company who does not place Milton’s needs first. Well, I’ve got news for you, that’s true of all developers. It’s up to us to put Milton’s needs first, and we do not do that when we look a gift horse in the mouth because of some misguided notion of fairness. A notion that seems to have as its true motivation the desire to kill a proposal that will likely provide more overall value to the town than others.


I'm heading off to my childhood home in Maine on Saturday to enjoy a 1950's style 4th of July celebration.

Happy 4th of July!


Blogger Lantigua said...

Mr. Mathews,

Once again you’ve avoided any balance in your blog. Your biased arguments aren’t giving justice to the higher issues the RFP process and the associated players. I truly hope nobody in this town uses this site as their only reference in town politics. I feel you give too much credit to Milton Centre LLC and slam your neighborhood defense group at every turn. A recent Boston Globe article (6/26) referencing bloggers pointed out how some are paid to promote an agenda. Are you one of these? If not, you seem to do quite a bit of work in the interest of the developer.

You spend your time defending a developer. A developer who says he wants to help the town. We’re all been given the pleasure of three Selectmen’s meetings and we’ve yet to see/hear from Mr. Quincy directly. Instead, he’s put his lawyer out there. We haven’t been given the plan details in written form. Does this sound like a town member looking for the best interest of the town? Or, is it just another developer trying to make a buck? You say the developer responded to our own Community Development Plan. If this is true, why did his group started purchasing properties prior to the release of said plan? Something doesn’t add up.

The development group’s investment is in excess of two million dollars to date. They wouldn’t have invested so much money, time, and effort if they didn’t think this was a sure thing. They really have lined up their political ducks in a row. The first draft of the RFP was a tribute to the efforts and vision of the developer. There wasn’t one restriction written into the RFP. Essentially the developer could build anything he wants within existing Milton’s building codes. The draft RFP shows the innocence and ignorance of Milton in dealing with big time development firms. Yes, they did promise $500,000. This is something we can hold then to, but there’s no restriction in square footage allotted to the space. They will simply add more retail space to make up for the difference. We could be looking at 200,000 sq. ft.

If you’re having trouble understanding how a Mall can produce negative/minimal gross revenue, let me explain. It isn’t in the gross, but in the net revenue on the whole. The Mall will produce a positive cash flow for the town. But, the surrounding neighborhood will line up for tax adjustments. I can think of a dozen streets where all the residents will be lining up to have their tax rate adjusted. I’ll be in that line too. Additional town services will be needed to accommodate Mall needs. Both of these will result in a negative impact on the tax base. Thus, the net revenue won’t be close to the $500,000 impact we would all hope for. This isn’t even taking into account the lawyer fees. If you think this process isn’t going to be fought at every turn in the courts, you might be underestimating the deep pockets on the hill behind the DPW. Heck, I’ll contribute to a legal fund against the developer when/if it gets that far. Something is very wrong about the process to this point and it should be stopped, or better yet slowed down.

You think it isn’t a bad thing there’s only one developer in play. Sure, they had the foresight to purchase the land surrounding the DPW and other land for a land swap. I can’t imagine a scenario where limiting your options can be a good thing. If our town does progress to a point where we want to issue an RFP for the DPW yard, we’ve limited the option of pressuring one developer by the existence of another. How can we be sure we’ll get the best deal for the town if no other developer can compete? Your argument doesn’t hold water.

There are only two hurdles for the developer at this stage: The Residents for Milton’s Future and the Town Meeting Members. With over 2 million invested in this project, the developer is feeling pressure to close the deal. There’s a chance for the people of Milton Center to help shape (what seems to be an inevitable) RFP in the best interest of Milton. If an RFP can be designed to suit the people of Milton Center and still provide the $500,000 promised by the developer, wouldn’t that be the best of both worlds? But, your relentless attack on their group could potentially weaken their leverage. After all, isn’t leverage the best commodity in negotiations? *Kudos* to you for unwittingly working against the interests on the town.


Douglas Lantigua

11:51 PM  

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