Category Archives: NAIOP Government Affairs

Massachusetts Needs Regulatory Reform to be Competitive

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A MassBenchmarks report from the University of Massachusetts shows the national economy grew by 3.2 percent in the 4th Quarter of last year, while the state’s grew by only 1.8 percent.  This comes after a stellar performance in Massachusetts with the local economy and job growth outpacing the nation since the 4th Quarter of 2009.

The take-away from this is something we already knew: Massachusetts is a unique place, but we are not so special that we can coast our way to recovery ahead of the nation.  Although this may be an economy “pausing to catch its breath,” as the report suggests, the real risk is that just like the recession of 2000, we end up falling short. 

Consider this a wake-up call.  We cannot afford to be complacent; we must go on the attack, doing everything in our power to make this region more competitive, more business friendly, and more efficient. 

If we are to be truly competitive, we must confront the cost of doing business in Massachusetts.  This includes the direct costs of operations (taxes, fees, insurance, utility costs), but also includes indirect costs of time and resources necessary to comply with the complex, multiple layers of regulations, policies, rules and guidance affecting all employers throughout the state.       

With fewer resources available, now is the time for government to do more with less.  We must be more efficient with resources within our regulatory agencies, and we must allow businesses to focus on job growth rather than wasting time managing redundant and often-outdated or ineffective regulations and rules.  For many years, cost-benefit analyses have been required of all agencies for new regulations, but this has never been taken seriously. The attitude seems to be that businesses are “lucky to be here” and can easily afford any regulatory imposition placed on them.  Government has the responsibility to protect the public, but to ignore the costs and the impacts they have on the economy is not protective of a public that is dependent on job revenue to fund its operations.

Things are improving, however.  In Governor Patrick’s second inaugural speech, he specifically mentioned this issue and the importance of job growth.  During the past 18 months, the Governor and his agency heads took a top-down review of new regulations, and we applaud them for that effort.  Now we call upon them to go further by reviewing our existing regulations to ensure that they are doing the job that they were intended to do; that they are consistent with the statutes authorizing them; that they are the most cost effective and efficient means to their goals; and that there are not better ways to accomplish what they do (e.g. privatization or self-certification).

We may never be the lowest-cost state, but let’s develop the reputation of being a state that understands the needs of business and works actively to make interactions with government as smooth and cost effective as anywhere else.

Workforce Housing, Not Zoning Bills, Key to Economic Growth

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Earlier this week I testified before the Legislature’s Joint Committee on Municipalities & Regional Government on two “zoning reform” bills, the Land Use Partnership Act (LUPA) and the Comprehensive Land Use Reform Partnership Act (CLURPA).  Supporters of both bills claim that the legislation would encourage real estate development in Massachusetts.  Representatives from the real estate industry, however, disagree.  NAIOP believes that these bills contain many problematic elements which could hinder economic development at a time when it is needed most.

The bills make a number of changes to Chapter 40A; some would apply statewide and other changes would apply only in “opt-in” communities.  The legislation does have some positive aspects: zoning protections to special permits and site plan approvals, and limiting subdivision rules and regulations to subjects not already covered elsewhere by local ordinance or bylaw (e.g., stormwater management, off-site traffic impacts.)  However, other parts of the bill would reduce existing predictability and add financial risks for new business growth.

The most concerning aspect of the legislation would significantly alter the zoning freeze that exists under current subdivision law.  It would limit the zoning freeze to a specific proposed development plan, rather than just the land shown on a plan.  As a result, the freeze would be lost with any change in project use and/or density.  This would be a serious problem for commercial real estate developers who would be unable to respond to a changing market. 

Commercial projects require large initial investments in land, site work, and infrastructure for developments that are generally phased and take many years to complete. Without the protections of a subdivision zoning freeze that allows for flexibility in project uses as the markets change, financing would be very difficult to achieve and fewer projects would move forward. 

To truly encourage economic growth, the focus should instead be on creating workforce housing.  While housing costs have dropped recently, a lack of single family, smaller scale, higher density homes fuels the exodus of 23-40 year olds – a key population demographic for economic growth.  This is an issue of great concern to business leaders who struggle to attract the best talent when competing with other states that provide such housing opportunities.

If the Legislature is intent on addressing the Commonwealth’s competitiveness and its housing, it needs to take a different approach.  We urge the Legislature to work with the Patrick Administration, municipalities, and the business community to create a new program establishing zoning districts that permit the construction of a modest number of affordable, small, single-family homes.  The future of our workforce depends on it.

DEP Funding Essential for Economic Development

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Though the real estate development industry may not always be an outspoken advocate for environmental regulation, there is no question every developer agrees that timely and predictable permitting is critical to the success of any project. 

Unfortunately, if the cuts to MassDEP proposed in the House budget are approved, permitting and economic development in Massachusetts could be the unintended victims. DEP’s budget has already been disproportionately reduced by 40% in less than a decade, devastating a staff that has dropped from 1,200 employees in 2002 to about 745 under the proposed FY ’12 House budget recently passed.  Although all of the other agencies under the Energy & Environmental Affairs Secretariat received an average 1% cut from the last fiscal budget, DEP was cut by 10%.  

In development, time is money.  If developers are unable to get environmental permits within a reasonable timeframe, the resulting delays could  kill a project – especially during this fragile economic recovery.

As the Senate develops its budget (expected to be released next week), it must consider the importance of adequately funding DEP.  Under the House budget, DEP may be forced to close one or more regional offices and eliminate another 20% of its permitting staff.  NAIOP strongly suggests that, at the very least, the Senate apply the same percentage cut to DEP used for sister agencies.

Given the current fiscal crisis, budget cuts are an unfortunate reality.  But we must avoid cuts that are so deep they undermine the very economic growth and job creation essential to our recovery.

Public Access – Yes, Vacant Space – No

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I recently testified before the Legislature’s Joint Committee on the Environment, Natural Resources and Agriculture in support of one of NAIOP’s top legislative priorities, An Act to Revitalize the Commonwealth’s Waterfronts (SB371). The bill would address an issue that waterfront owners in Massachusetts have been grappling with for years – facilities of public accommodation (FPA) requirements under Chapter 91, the state’s program for regulating all activities and development on the Commonwealth’s tidelands and other waterways.

Under existing state regulations, the state Department of Environmental Protection requires the ground floor of many waterfront properties to be leased only for uses allowing full public access. Unfortunately, the FPA requirements do not vary by location and do not take into consideration local land use, density, market demand or proximity to street and pedestrian traffic.

Planning studies, including one completed in 2006 by the Boston Redevelopment Authority (BRA), have shown that the required FPA space in existing and proposed projects greatly exceeds the potential demand for such space.  Many of the ground floor FPA areas within existing projects are vacant or have had trouble attracting successful users, some for as long as ten years.  Except for hotels and restaurants, which are defacto public spaces, very few non-maritime projects in the City of Boston have successfully achieved the FPA requirements.  If such projects cannot be successful in downtown Boston, then they have little chance of succeeding in Boston’s other neighborhoods or in other coastal cities and towns where there are fewer pedestrians, less transit and much less density.

The resulting vacant space represents a significant loss of local property taxes.  In these challenging times, this revenue could make a big difference for our schools and communities.  There is no question that the existing FPA requirements impede investment and economic development in waterfront areas.

On behalf of NAIOP, Senator Anthony Petruccelli of East Boston filed the bill to reform the existing FPA requirements.  He is quite familiar with the many projects in his community that have not been able to move forward due to these onerous requirements.  None of these changes would limit public access to the waterfront.  Furthermore, the bill would allow local zoning to regulate interior ground floor use rather than the arbitrary requirement in place under existing law.  It empowers a community to determine what is best for its waterfront. 

This is not a new issue, but it is something that can no longer be ignored.  Now is the time for the legislature and DEP to make the changes necessary to promote economic development while preserving the public’s access to the waterfront.

SJC Decision Affects Landlord Liability

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The Massachusetts Supreme Judicial Court recently ruled in Bishop v. TES Realty Trust that a commercial landlord has a statutory duty to correct an unsafe condition, if the landlord has received written notice from the tenant.  In its decision, the Court determined that G.L. c. 186, § 19, which concerns a landlord’s duty to make repairs when notified of an unsafe condition, now applies to commercial landlords. While such an obligation has been applied to residential landlords, this would be a significant change for commercial owners.

Until now, commercial landlords have only been required to make repairs to common areas or when they specifically contract through the lease to make repairs. Under Bishop, the landlord will be liable for any injuries resulting from inaction on a written notice to make repairs. 

The Bishop decision also makes “void and unenforceable” any lease provision that attempts to waive a commercial landlord’s obligation under §19.  Even if the tenant is obligated to make repairs through the lease (e.g. triple net), the landlord must make the repairs of unsafe conditions if notified in writing by the tenant.  However, the landlord may bill the tenant for the costs of the repairs.

There is no question this decision will have far reaching consequences for the commercial real estate industry.  The decision increases liability for commercial landlords and significantly impacts how commercial leases are structured.  Serious questions remain regarding how this decision will be implemented.  NAIOP is now determining a legislative strategy to respond to the decision.

NAIOP Comments on Proposed Brownfields Policy

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Today NAIOP submitted an extensive comment letter to DEP on its proposed Vapor Intrusion Guidance. NAIOP has significant concerns with the guidance document and the negative impact it would have on the redevelopment of the Commonwealth’s Gateway Cities and brownfield sites. In addition to providing a thorough analysis and review of the document, the comment letter also asks DEP for a detailed response to our comments and concerns.

Brownfields can only be successfully redeveloped when the health of site occupants is protected, the regulatory path is clear, required response actions can be performed in a timely and cost effective manner, and regulatory closure means just that.  In other words, potential developers must be comfortable that these issues can be addressed with a reasonable degree of predictability.  In many places, the draft Guidance does not accomplish these objectives.  As a result, there is a very real risk that a significant portion of the sites that will be subject to the Guidance will not be redeveloped. 

All of NAIOP’s comments are provided with the objective of improving the Guidance in a manner that is consistent with the goals referenced in recent public comments made by DEP Commissioner Kimmell.  We share the Commissioner’s interest in building upon the past success of the Commonwealth’s risk-based, Licensed Site Professional implemented, cleanup program to protect public health while encouraging the redevelopment of contaminated sites.  Unfortunately, we believe the current draft of the Guidance does not achieve these goals.  However, we very much look forward to working with the Commissioner and the Department to develop a final Guidance document that does.

Very special thanks to the members of NAIOP’s 21E Committee, especially committee co-chair Ned Abelson of Goulston & Storrs, who contributed an enormous amount of time to this issue over the past several years.

Regulatory Reform – 10 Principles on Guidance

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Recently, there has been much talk about the proliferation of regulations, both on a national and statewide basis.  President Obama mentioned it in his State of the Union speech and Governor Patrick referenced it in his Inauguration speech.

There is no doubt that there needs to be a serious review of many regulations at the state and federal levels.  Beyond traditional regulations, however, there is an area of “shadow” regulations that has been expanding through the state’s agencies – regulatory “guidance.”  NAIOP has been concerned for some time about the unlimited growth of guidance.  Guidance is taking on the power of statutes (which can only be enacted by the legislature and the Governor), and/or the authority of regulations (which must be promulgated by the agency under strict controls of the Administrative Procedures Act, including public hearing and provision for judicial review). The purpose of guidance should be to aid in the interpretation of previously existing rules and regulations; not to provide an alternative means to impose new rules without full notice and comment through “rule-making.”

Certainly, there is a place for appropriate guidance, so NAIOP would like to propose ten general principles to be followed when drafting and adopting regulatory guidance:

  1. Guidance should be issued to clarify the interpretation of existing rules and regulations.
  2. A second purpose would be to assist the agency in its review of applications and evaluation of a project’s ability to meet applicable performance standards.
  3. Guidance should be clear and user-friendly.
  4. Guidance documents should state expressly that they are for the purpose of “guidance only,” and that failure to follow guidance does not expose one to the denial of a permit application, penalties, or other sanctions.
  5. Under no circumstance should guidance expand the agency’s jurisdiction (subject matter or geographic) beyond that authorized by statute or regulation. 
  6. Guidance should be drafted with input from stakeholders. 
  7. Following internal and stakeholder review, the agency should submit the document for general public comment, allowing affected individuals to comment on the practical and procedural implications of the guidance.
  8. Agencies should add a three-year sunset clause to all guidance, after which it must either lapse or be reissued following an opportunity for stakeholder and public comment.
  9. All guidance should be clearly indexed and easily accessed on the agency’s web page.
  10. Guidance should be uniformly applied throughout all agency regional offices. Guidance should not be developed and issued by one region without the full support and backing of the entire agency.

In a recent blog, Seth Jaffe, a Partner at Foley Hoag, pointed out that this issue is clearly getting national attention with a recent court decision in National Mining Association v. Jackson.  The judge stated that EPA guidance was being treated as binding and that the guidance constituted “legislative rules because they seemingly have altered the permitting procedures under the Clean Water Act by changing the codified administrative review process.”  The Court found that EPA’s guidance exceeded its authority. 

Bottom line, to reduce the excessive cost of doing business in the Commonwealth, let’s make working on regulatory reform a priority. However, we must also make sure that we don’t offset those gains by piling on unnecessary guidance.

Without “Bricks,” Boston’s Greenway Needs Vision

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With the YMCA’s decision to pull the plug on their Boston Greenway site, the dream of non-profit institutional involvement to activate this vast swath of open space finally comes to an end. It all sounded quite optimistic a few years ago, but reality dashed those early hopes.  Although the groups that sought these sites were quite different, they all failed for some similar reasons – some within their control, but others well outside their influence. 

Most of the proponents developed their concepts at a very different time – a bull market economy.  There was a sense that endless funding would be readily available from “flush” donors. Therefore, the plans were grand and the prospects of success seemingly assured.  But even without the financial crash, there were far too many institutional capital campaigns already in the works (universities, hospitals, and cultural/arts) to allow these new projects any realistic hope of being funded, no matter how strong Greater Boston’s philanthropic community. The recession killed off all but those campaigns that were in their last phases (e.g. MFA.), leaving the Greenway projects out in the cold.

Another problem was that the state basically ran out of money on the Big Dig.  That meant that some aspects of the project suffered.  In particular, the ramps now stand out as an orphan in search of a benefactor.  The costs to cover the ramps and fully deliver a seamless parkland were too expensive for the Turnpike, so the costs were transferred to eager non-profits who were looking for downtown sites.  Unfortunately, these groups had no idea as to the ultimate premiums they would be forced to absorb.  At one point, the Turnpike actually hoped they might even be paid for the rights to develop these “challenged” sites. Now the state has to accept that these open sores will most likely remain for the foreseeable future.

Finally, we are all left with a serious problem.  Open space is simply not sufficient to attract the public to activate this long stretch of parkland.  On any given day during the summer, it is rare to see the area stretching from China Town to the Zakim Bridge used anywhere close to the extent of other city parks.  

We may not be able to attract institutional interest to the Greenway any time soon, but we must to work to find a way to make this civic space as usable and attractive as our Emerald Necklace.  Readers – what do you suggest?

State Proposing Energy Asset Rating for Commercial Buildings

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Yesterday I attended a Department of Energy Resources (DOER) hearing on its draft Commercial Building Energy Asset Labeling Program in Massachusetts. It would be the first energy asset labeling program of its kind in the world.

Initially a two – three year pilot, the goal is to require all existing commercial buildings to acquire an energy asset rating before a specific “trigger event” (e.g., building sale, re-finance, or major renovation). The lower the energy efficiency, the lower the rating. DOER’s goal is to motivate owners to invest in energy efficiency to avoid a bad score and a devaluation of the property. The proposed program would rate buildings against a “zero net energy benchmark.” As a result, most commercial buildings would be branded with a low score.

NAIOP is concerned that no business group was informed of this initiative until the white paper went out for public comment – especially given the significant impact this will have on investment and lending in the Commonwealth. The comment period closes on February 12 and NAIOP will be submitting detailed comments. In the meantime, here are the highlights from my testimony at yesterday’s hearing: Continue reading →

Economic Development Strategies for Patrick’s Second Term

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Governor Deval Patrick

Governor Deval Patrick

Kudos to Governor Patrick for his focus on jobs and economic development for his second term. Travelling within the Commonwealth, across the country, and globally to attract economic development to the state can be an effective way to market the benefits of one of the top concentrations of skilled talent in the world.

In addition, opportunities for improving the Commonwealth’s economic environment exist here at home. Recently, John Schneider wrote in MassINC’s “INCSPOT blog” about three suggestions for the Administration:

  1. Conduct a top to bottom review of regulations that affect the state’s business environment.
  2. Make higher education reform a cornerstone of your second term.
  3. Get a handle on rising costs, especially health care, energy, and local government.

I completely agree with these ideas, especially regarding the cost of doing business in the Commonwealth. Many of us know about the direct costs: taxes, fees, health care and unemployment insurance. However, the cost in both time and money that arise from the multiple layers of regulations for existing businesses are an enormous burden and make us less competitive for new growth.

We should encourage our political leaders to get out of the office and aggressively market Massachusetts, but at the same time, we need to do a top-to-bottom assessment of the rules we impose on business. The better we do on the latter, the more success we will have attracting businesses to Massachusetts.