I-Cubed Fact Check
Based on the back-and-forth here I obtained some clarifying information related to the potential financing of the infrastructure improvements around Westwood Station. I don't have any substantive updates on building, traffic calming, etc., but here's what's going on with I-Cubed. My information below is the best I was able to learn, but please understand things change constantly and this is not an "official" report from the Town. I'll update this with comments if I've gotten anything wrong here...
What is I-Cubed? The best description of this program I have found is on the Beverage and Diamond law firm web site where they say:
I-Cubed is a financing arrangement whereby the Commonwealth of Massachusetts, the municipality and the private developer share the cost and risk associated with the construction of public infrastructure needed to support a certified economic development project. In order to be certified, the project must be approved by the municipality, the Secretary of Administration and Finance and MassDevelopment and meet the criteria set forth in the statute and regulations. The public infrastructure improvements for a certified project will be financed by bonds issued by MassDevelopment. During the construction of the project, the debt service on the bonds will be paid by the private developer through municipal assessments that will reimburse the Commonwealth for the debt service cost. Once the commercial component of the project is occupied and generating new state tax revenue, the debt service related to that component will be paid by the Commonwealth. If there is a shortfall in the state tax revenues generated by the project, the municipality will reimburse the Commonwealth for that amount. The developer may agree to cover this shortfall, but is not required to do so.
What taxpayer money would be at risk? If the Town agreed to participate, the Town would be responsible for paying the debt servicing costs if the developer failed to pay. To make a personal finance analogy, that is more like mortgage insurance, not co-signing. The developer misses a payment, the town makes the payment.
What safeguards would be in place? The Town would require the developer to maintain a cash fund with 2 years reserve payments to cover these costs. Other safeguards may be described as the details are made public prior to the April 26 FinCom hearing. That's kind of like a "secured" credit card.
Money for jobs, not cash to developer. This is not cash that goes into the developer's pocket but money that would be paid to cover the costs of roadwork performed by contractor companies to implement the road designs deemed necessary for the development. Now obviously, it's money the developer doesn't have to spend, so it frees that cash up for other things, but it goes directly into paying construction work (creating jobs). If the developer goes away, the roadwork remains. Although some might characterize what's left as a "highway to nowhere," it is also significantly improved commercial real estate.
How much money is involved? Originally, there was an unpopular proposal to fund $50 million of improvements through I-Cubed. The state agreed to finance $49 million of that (and the costs increased) leaving $6 million to be financed through I-Cubed.
Why Westwood is involved in the loan? The state is prohibited from taking a real estate lien in an investment, so in order to provide some security interest to the lender of the loan, the state wants the Town of Westwood to be a party to the loan. That means, if the borrower defaults, the Town can potentially perfect on the lien and take ownership of 142 acres of land.
Why the Town will never perfect that lien. If the developer were to fail to make payments on the loan, other security holders would become very interested, very quickly. Although not a perfect analogy, consider the impact of tax liens on a foreclosure property. Would a bank allow the town to take possession of a half million dollar house because the owner has abandonned the property and was no longer paying taxes? Of course not. The bank will foreclose the property and make sure those tax liens are paid, so they can sell it and satisfy the $400K mortgage. If the 142 acres of land in Westwood Station is worth at least $6 million, other lenders will make sure the debt is paid to avoid losing their collateral.
I think there is a legitimate question though...if this is such a great idea, why doesn't the state just finance the full $55 million?
Why the rush? There is a big incentive for the state to get this project going before Fall 2010. The infrastructure money will create jobs and promote economic development in the region. The purpose is not just to benefit Westwood's property tax base but to take immediate action to stimulate the economy. There are other projects in the state that could put people to work and time is of the essence to take advantage of this opportunity. However, the I-Cubed program requires a 2/3 approval at Town Meeting from the "underwriting" town. Logistically, that means this must be voted on at the May 3 Town Meeting and discussed by FinCom beforehand. If it doesn't get voted on, it doesn't happen.
Why the delay? There has been plenty of press coverage about the concerns and objections of the Town of Canton in particular because this project will sit on their border and provide no direct economic benefit but many potential detriments. It is a complicated story that I do not have all the facts to, but to summarize, the resolution of Canton's concerns has been an ongoing negotiation between Westwood, Canton, and the Governor's Office. Without the cooperation of Canton, the project was at risk for further delay in addition to the still unfavorable economic conditions.
I would like to see more of the back and forth discussion...to see greater transparency into the political process of balancing these interests, but as in any negotiation, most parties are extremely reluctant to expose that to public scrutiny. Every piece of information is a potential weapon in the fight--to be manipulated and incorrectly interpreted to serve the agenda of one party or another. This matter was only resolved in the past week, leading the Westwood Selectmen to request FinCom leave the discussion open so the placeholder article could be discussed at the April 26 hearing.
What's next? The Board of Selectmen will draft an article for voting at Town Meeting and present their arguments at the April 26 FinCom hearing. In advance of this, the Town will mail an update to all residents summarizing the article, the pros and cons, and the implications of the risk they are asking voters to approve. At Town Meeting on May 3, the article will require a 2/3 supermajority to pass.
