Milton’s paradise lost?: Part 1, A suburb of Boston

October 17, 2014 | Affordable Housing, Boston, Chapter 40B, Cities, Development, Homeownership, Housing, Inclusionary zoning, Milton, Rental, Zoning | No comments 77 views

By: David A. Smith

“What think’st thou then of mee, and this my State,
Seem I to thee sufficiently possest
Of happiness, or not?”
John Milton, Paradise Lost

Judging by their words as reported in a recent Boston Globe (September 11, 2014) article, for the happy residents, Milton is an Eden threatened by evil: threats are being mounted to traffic, to public safety, to town services, to the environment – why, the very elderly are in mortal danger.  What snake slithers around our paradise, seeking to ensnare the Miltonians in its coils?

sistine_02_adam_eve_serpent

It’s the knowledge of affordable housing

Sources used in this post

Milton’s 2002 zoning map; pdf

Karen Sunnarborg housing study of Milton (February, 2006, pdf; green font)

Chapter 40B fact sheet, 2007; pdf

Boston Globe (June 21, 2012; deep purple font)

Massachusetts subsidized housing inventory (April, 2013; caramel font)

Boston Globe (March 22, 2013; powder-blue font)

MyTownMatters blog post (April 15, 2013; midnight blue font)

Canton Citizen (June 27, 2013; mumble font)

Boston Globe (August 21, 2013; olive font)

Boston Globe (October 31, 2013; pink font)

Canton Citizen, (November 14, 2013; red font)

Boston Globe (April 27, 2014; buff blue font)

Boston Globe (July 24, 2014; robin’s-egg-blue font)

Town of Milton draft housing production plan, September 25, 2014; pdf, orange font)

Boston Globe (September 11, 2014)

CHAPA’s Chapter 40B fact sheet, pdf

Affordable housing, and the influx of ‘those people’ – and as has become my wont of late, this post will be comprehensive and multi-part, because the microcosm of Milton so perfectly and completely encapsulates all the forces of anti, and all the myriad stratagems they use to cloak their anti-ness in pro-ness of something else – and so much of it is in the public domain, that I and my faithful Google can piece together the whole temporal quilt, and find the image in the images.

michael_glove_montage

A thrillah in the making?

1. The issue

Milton mulls housing production plan

john_milton

They also serve who only sit and blog

‘Milton,’ it should be noted, is not a person, not an entity, but a political body with multiple heads (only a smaller number of them actually vote), and sloth and fear are always the incumbents.

By Jaclyn Reiss

September 11, 2014

This statement would be more compelling if Milton’s embrace of affordable housing was a new thing, a road-to-Damascus revelation, but in fact Milton (or more properly, its elected selectmen and the voters who come out to town meeting) has been fractiously and inconclusively ‘mulling’ more affordable housing while doing nothing about it for almost a decade.

entering_milton_closeup

Affordable housing not welcome here

Milton officials are mulling over a plan to introduce more affordable housing to the town –

Mulling would also be more compelling if the plan had, as Chapter 40 B requires, hard targets and firm commitments.

– amid a developer’s controversial Chapter 40B proposal for the former Hendrie’s Ice Cream site.

Nothing so concentrates the mind as the knowledge that new Texas-developer affordable housing is planning very high density development, and potentially there is nothing the town can do to stop it.

Filing a housing production plan with the state would give the town more control over projects proposed under the state’s Chapter 40B affordable-housing law, said state Senator Brian A. Joyce of Milton at a joint Board of Selectmen and Planning Board meeting last week.

brian_a_joyce

Senator Joyce is urging Milton to turn in its term paper, even if eight years late

Under the statute, developers can bypass some zoning bylaws in communities where less than 10% of the housing stock is considered affordable. Currently, Milton has about 4.5%.

It would be one thing if Milton were experiencing dramatic growth and expansion, and somehow the affordable housing had failed to keep up, but despite having been reviewing Chapter 40B and employing the indefatigable Karen Sunnarborg to produce revision after revision, Milton has experienced virtually no growth for at least a decade – the result, one must underscore, of an interlocking set of anti-development policies and circumstances – and Chapter 40 B has been around for multiple decades .

But if [x] the state were to accept Milton’s housing production vision, and [y] the town [were to increase] its affordable units by half a% of the total housing stock in a given year, “that would give us a one-year safe harbor to allow the town to say no to any 40B project that has not already received its site eligibility letter from the state,” Joyce said.

For a town to miss one year’s housing plan filing deadline may be attributed to carelessness; to miss a decade’s worth takes genuine avoidance – and invites the conclusion that Milton is slacking off mightily, hoping and expecting (alas correctly) that other neighboring communities (especially Boston) will develop affordable housing, leaving Milton untouched.

“It is a little embarrassing to say we want to have affordable housing in the town of Milton, but we have not been able to pass a housing production plan,” said Deborah Felton, executive director of Fuller Village.

A little embarrassing?

deborah_felton

A little embarrassed by her town’s lack of production

[One may judge Ms. Felton’s commitment in the context of Fuller Village’s strongly expresse4d opposition one of the potential affordable developments, Milton Mews, about which more below – Ed.]

Of even the ‘new’ houses, more than likely many of them are demolition/ rebuilding, so unless Milton is somehow going to quadruple its production, Senator Joyce’s idea is a pipe dream.

opium_pipe

I had colorful visions of affordable housing production …

… and then the opium wore off

If words were homes, Milton would be overhoused, as the town has been endlessly discussing its plan.  They discussed it in January; they discussed it in June.  They got nowhere, and as of this writing have no housing production plan submitted to DHCD, much less approved.

Before we convict the town of arrant hypocrisy and willful obstruction, we should start from first principles: Does Milton need affordable housing?  How did it get itself into having so little (roughly 4.5% of the inventory, well below half the 10.0% requirement)? 

2. The town

According to available information, including among other things an extremely thorough Affordable housing plan study by Karen Sunnarborg (February, 2006, pdf; green font) and the companion Town of Milton draft housing production plan, September 25, 2014; pdf, orange font), which the town is mulling.

Milton, in fact, is actually two towns mixed together;

escher_heaven_and_hell

A mixture of two things

1. A legacy streetcar suburb of orthogonal streets, small lots, modest houses, a commercial district, a spillover from larger Quincy (3½ times Milton’s population) and much larger Boston (24x Milton’s population).

milton_1858_large

Milton in 1858: note inset map of Lower Mills

The town of Milton has a significant historic heritage. It was settled in 1634 as an agricultural community. The colony’s first powder mill was constructed in 1674, and the town’s valuable water power sites and proximity to Boston attracted the necessary investment to develop 18th century Milton into an important industrial community and commercial trading center. The laying of streetcar lines transformed Milton into essentially the community it is today – a suburb of Boston.

milton_1858_railway_village

Milton’s Railway Village neighborhood abutting Quincy:

Distances measured in rods

Boston’s Dorchester neighborhood, just across the Neponset River, shows higher density, achieved by smaller lots, greater use of transit-oriented development (Dorchester was one of the original streetcar suburbs), and as a result, lower property values and lower household incomes.

milton_1858_lower_mills

Lower Mills, the Neponset, and the railroad

(Which a hundred-plus years later would become the Mattapan extension of the Red Line)

You are what you live in, and what you live in depends on what you can afford – and everybody instinctively knows this.

2. A rural throwback, with Curry College (founded 1879, 131-acre campus, 2,100 undergraduates), tiny Milton Academy (founded 1798, whose motto is “Dare to be true”), an honest-to-God ‘organic’ farm (on 160 acres), stone-walled roads, two-acre lots, and people who like their splendid isolation.

milton_academy_field_hockey

Ready for field hockey?

[Continued Monday in Part 2.]

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Stock-taking?: Part 2, “An unconfirmable plan”

October 16, 2014 | Bankruptcy, Bonds, California, Debt, Markets, Municipal bankruptcy, Pension funds, Primer posts, Stockton | No comments 107 views

[Continued from yesterday's Part 1.]

By: David A. Smith

jack_o_lanthern_04_teeth

Do I have your attention now?

Yesterday we saw, via simultaneous articles in The Sacramento Bee (October 1, 2014) and Los Angeles Times (October 1, 2014; navy font), that despite the City of Stockton’s willingness to keep paying CalPERS at 100% even as other creditors were taking big haircuts, one of those creditors objected, and the Federal judge correctly ruled that state law cannot pre-empt Federal law.

Predictably if understandably, the public employee unions and their members see this as a major threat:

As a result, Klein’s ruling reverberated throughout the legal world and among public employee unions.  Dave Low, chairman of a union-backed [Public employees’ union, SEIU – Ed.] coalition called Californians for Retirement Security said “the judge has sided with Wall Street in a decision that has the potential of devastating citizens, employees, and making bad situations worse.”

Those who lack law on their side tend to use the more colorful language, in hopes of distracting readers.

Stockton retirees called the decision a slap in the face.

barney_slap

Oh the humanity

“Employees operated in good faith,” said Anthony Delgado, a retired Stockton police officer who attended the hearing.

So did bond investors.

On the other hand, Dan Pellissier, a pension-reform advocate, welcomed the ruling. But he said Stockton, by sticking with CalPERS, is squandering an opportunity to reduce its pension costs and spend the savings on more police, firefighters and city services.

dan_pellissier

Pellissier wants Stockton not to squander its second chance

Until now, public pensions in California were believed to be off-limits, even if the government provider went bankrupt.

‘Believed,’ in this context, means ‘claimed by pensioners and their funds and never confirmed in any court.’

stockton_overpromised

$800 million underwater… probably worse

Lawmakers could scale back benefits, but only for newly hired workers, as the Legislature did last year. A bankruptcy judge did rule in Detroit last year that pensions could be reduced for existing workers and retirees, but CalPERS argued that ruling wasn’t relevant because there are additional protections in California law.

Notice how, for the public employee unions and their pension funds, every time they lose, that isn’t relevant.  Of course, it was, and I said so when it happened, as well as pointing my finger at CalPERS (December 4, 2012, Part 1, Part 2, Part 3, and Part 4).

four_culprits

Four parts, one culprit

City officials have said they have no choice but to stick with CalPERS.

Nonsense; there is always a choice, and it should be examined, and as neither the Mayor nor the City Council seem ready to do so, we can do it for them:

herman_kahn

Somebody has to think about the unthinkable

If it doesn’t pay the pension fund in full, default [to CalPERS] would occur –

Default to bondholders and other creditors has already occurred:

– and the city would either have to make a one-time payment of $1.6 billion to keep pensions whole or let CalPERS slash benefits by 60%.

stockton_city_council

The Stockton city Council (Mayor Silva fourth from the left)

Now we see how the system works: CalPERS operates like a piggy bank for municipalities that disconnects them from their pension obligations – and the idea that these obligations are sacrosanct becomes ludicrous. 

The city cannot impair pensions and continue to function as a city,” said Stockton lawyer Marc Levinson in remarks to the judge.

Sure it can, just as it can impair any other obligation. 

The result would be a mass exodus of employees, the city said –

Would it?  The market’s response depends entirely on supply and demand: of capital (for the bond markets) or of people (for the public employees).

– creating an enormous setback just as the troubled city, saddled with poverty and a high crime rate, is starting to get back on its feet.

If those employees leave, couldn’t Stockton hire others out of its 31,500 (10.7%) unemployed?  Or contract some city services to the private sector (like Camden did, and it’s working in Camden).

He noted that the city has already laid off about one-fourth of its workforce and rolled back salaries. The approximately 2,400 municipal retirees have had their city-paid health insurance completely eliminated. The city’s budget has been trimmed by $90 million a year.

Stockton is also raising taxes:

Last fall, Stockton voters approved increasing the sales tax to 9.0% – expected to generate $28 million annually – in order to beef up city staffing, particularly police officers.

Calfironia_sales_taxes_by_city

Remarkably, Stockton’s city taxes aren’t that high

That’s a valid (if questionable) political choice: bad for business, possibly shortsighted, but a valid choice.

“The retirees and the city’s employees have already given enough,” said Jason Rios, a lawyer representing retirees in the case.

Well, he would have to say that.

The average retiree gets a pension of $24,000 a year, according to Rios.  But some employees, particularly police and firefighters, get considerably higher pensions. A “midlevel sergeant” in the police force can expect a $68,000-a-year pension after putting in 25 years, according to city testimony.

I’ve reported elsewhere about the euphonious vesting provisions (two-and-half-to-twenty-five and so on) that result in employees retiring early with vast pension benefits due them.  They justified these benefits by saying that the pension fund could be invested well enough to pay for it – and that was if not a lie then a huge leap of faith. One that triggered a relentless, voracious hunt for higher yielding asset classes – and that triggered the global asset collapse we are still paying for. 

Everything connects to everything else, and when it comes to markets, if the reckoning isn’t today, it will be tomorrow, because markets always clear, even if their signals aren’t always clearly visible:

San Bernardino, the other California city in bankruptcy, actually suspended its payments to CalPERS for several months, and some city officials suggested they would fight CalPERS in court.  

Earlier this summer, San Bernardino worked out a settlement plan with the pension fund. The details haven’t yet been disclosed.  (But San Bernardino’s getting ready to sell weed, as I predicted many cities and states would.)

arnold_joint

Oh, man, I got so stoned I thought I was da guvanah

This must imply that CalPERS gave San Bernardino most of what it wanted, and CalPERS wants to keep that hushed up (which it can do because the bankruptcy is still pending).

The practical effect of Klein’s ruling is unclear. It depends in large part on whether Klein will accept Stockton’s financial reorganization plan – a plan under which the city promises to keep making its annual $29 million pension payments in order to retain its relationship with CalPERS.

If Stockton gets Klein’s approval and can resolve its bankruptcy without slashing pensions, the impact of Klein’s ruling is blunted somewhat.

The judge is giving Stockton a time out to rethink, renegotiate, and potentially to replan:

In declining to rule right away on the city’s plan, Klein said “I need to reflect more carefully.”

This isn’t about politics or sympathy, it’s about the law, because it’s in a court of law, and while the judge is doubtless hoping for Stockton to accommodate Franklin Templeton, political economy will likely mean that Stockton will wait until he rules before engaging in substantive negotiations.

“The city has now wasted millions of dollars attempting to cram down an unconfirmable plan,” Franklin’s lawyers argued in court papers. “The time has come for the city to abandon that foolish game, end its crusade, acknowledge its obligations under the bankruptcy code, and propose a realistic and reasonable plan of adjustment.”

Judge Klein will rule October 30, and if I know anything at all about bankruptcy, he cannot confirm the plan. 

jack_o_lantern_02_laughton

Actually, I’m not looking forward to it

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Stock-taking?: Part 1, “Simply Invalid”

October 15, 2014 | Bankruptcy, Bonds, California, Debt, Markets, Municipal bankruptcy, Pension funds, Primer posts, Stockton | 1 comment 120 views

By: David A. Smith

jack_o_lantern_01

Yes, Your Honor; yes, I get it

As politics is the process that advances the interests of the majority, law is the process that protects the interests of the minority, and when those who make the laws find themselves forced to live with laws others have mad, including the bankruptcy laws and the Constitution from whence they derive, the results can be comic, as reported (without the humor) in The Sacramento Bee (October 1, 2014) and Los Angeles Times (October 1, 2014; navy font):

A bankruptcy judge handed CalPERS and organized labor a decision they’ve long feared Wednesday, declaring the city of Stockton has the right to reduce pension payments and even sever ties with the powerful pension fund.

Only as I’ve studied the issue have I figured out the sneaky game that CalPERS and the public employees’ unions play.  It works like this:

1. Cities promise to pay public employees generous pensions.

2. Cities sign up for CalPERS as the insurance company to make the pension payments.  They pay CalPERS premiums to fund these insurance policies.

3. If the city gets in trouble, CalPERS and the employee unions say that the city can’t cut its CalPERS payments, because these are protected by California law.

Using the pension fund as an intermediary elevates the city’s obligation to pay the premiums over other city expenses – or it has, at least in the public and political consciousness. 

It creates a ruling that undercuts CalPERS’ contention that public pensions are ironclad and municipalities must make their contributions, no matter what.

If they were that ironclad, then state law would trump federal law.  And that is ending, as it must, in a series of bankruptcy courts including Vallejo, San Bernardino, and Detroit:

CalPERS has always fought any attempt by a city to reduce its pension obligations. When Vallejo went bankrupt in 2008 and hinted it might try to lower its annual payments, CalPERS said it could take the city to court.

Comes now Stockton.

The verbal ruling from U.S. Bankruptcy Judge Christopher Klein was groundbreaking. It pierced CalPERS’ aura of invincibility and made clear, for the first time, that public employee pensions in California aren’t sacred.

judge_christopher_klein

Engaging in political sacrilege

Two years after Stockton filed for bankruptcy protection, buried under more than $200 million in bond debt, a judge has declared that a municipality can walk away from its obligations to the California Public Employees’ Retirement System.

As usual with popular journalism reporting on finance, the metaphors are overwrought and inaccurate.  Stockton isn’t walking away from anything – it’s restructuring everything.

Reconfiguration

It’s always possible to reconfigure

Judge Christopher Klein said, “California public employee retirement law … is simply invalid in the face of the supremacy clause of the United States Constitution.”

Though like everyone else I knew the term, I didn’t understand bankruptcy until I had experience with it (as a professional, thankfully, not as a principal).  It’s simplest to imagine bankruptcy as an economic death and resurrection.

By filing for bankruptcy, the old entity (the debtor) enters a kind of purgatory.  (Sorry for the Puritan metaphors, but we must remember, American bankruptcy was invented by Boston Puritans.)  The debtor’s sins (liabilities) and virtues (assets) are identified, counted, and balanced.  The debtor’s soul (its bankruptcy trustee) proposes a rebalancing, which the court judges and finds either equitable or wanting. 

pantokrator_01

I find the plan equitable

When the rebalancing is complete, the soul is reborn (the debtor emerges from bankruptcy), and all past debts are settled, usually at fractions of their face amount.

While it’s evident that bankruptcy is financially beneficial for debtors, less obvious but more important is that bankruptcy is financially beneficial for economies and societies, because it resolves what would otherwise hang over for years or decades.  Before bankruptcy there was debtor’s prison, which was punitive but entropic, and in those eras credit was extremely scarce.  Bankruptcy sped up capital’s formation and re-formation, and motivated entrepreneurial risk-taking.

In the particular case of Vallejo in California, despite dire warnings, the City’s bankruptcy filing proved to be the best thing that could happen to its economy.

Bankruptcy depends on adjudicating competing claims fairly … because without that fairness of capital claims, then the supply of credit would shrink, as nobody would lend to borrowers likely to be disfavored.  Thus, in judging the debtor’s liabilities, the court classifies them by collateralization (are specific assets pledged against specific liabilities?) and then priority.  All claims of similar priority must be given a similar haircut.

same_haircut

Don’t take it personally; all haircuts are the same

And that, finally, brings us to Stockton’s bankruptcy and the judge’s ruling:

Klein’s ruling was prompted by a legal protest from Franklin Templeton Investments, which is due to be repaid just $4 million on a $36 million loan it made to the city during better economic times.

Observe that the City of Stockton itself didn’t raise the issue – it’s a political entity, after all, made up of public employees – so the principle of equity was left to another creditor to voice.  That’s why we have bankruptcy.

Franklin Templeton wants Stockton to reduce its CalPERS payments to free up more cash to repay the loan.  It said the proposed repayment amounts to just 12 cents on the dollar, while other creditors are due to receive 50 cents to 100 cents on the dollar.

“That’s discrimination, and it’s unfair,” said James Johnston, a lawyer for the San Mateo investment firm. He also said CalPERS was seeking “exalted status under California law.”

james_johnston_jones_day

Johnston is anti-unfairness

Think of it as the Creditor Fairness Act – though you wouldn’t know this from the Bee’s slanted phrasing:

Franklin wants a better deal from Stockton even if it comes at the expense of the pensions.

The bond fund is being treated four times worse than the employees’ pension obligations (12 cents instead of 50 cents) – and its bonds are bought by the same type of people who get pensions. 

pension_liabilities_bonds

Either way, it’s a stream of payment obligations

Although agreeing to pay CalPERS in full, Stockton has said in court that it could not pay more than 12% of the $32 million it owes Franklin.

Pensions are debts; bonds are debts.  Why are pension debts more equal than bond debts?

because_you_said_so

Got any better arguments?

While we’re on the subject, who benefits from those pensions, and how much are they?

The average 2013 CalPERS pension for those who worked 30 years or more and received a full year’s pension was $64,448 for the year.

Got that?  Work for the State of California for thirty years, retire with $64,500 annually for the rest of your life, even if you take another job.

sa_weet

For those who retired in 2000 or later, the average pension was $68,403. This is more than twice the maximum Social Security benefit of $31,704 that a private retiree receives.

Now we see the beauty of the CalPERS-funding end run: It’s not the retirees asking for the money, it’s mighty CalPERS.

Because of Stockton’s pledge, CalPERS attorney Michael Gearin downplayed the decision and said it doesn’t force the city to cut its pension payments.

gearin

Gearin up for a fight

“It doesn’t establish a precedent. Those were his comments about a hypothetical city” that wants to cut ties with the California Public Employees’ Retirement System, he said.

Mr. Gearin is mouthpiecing for his client, hoping to buy a news cycle or two. 

Nonetheless, CalPERS was disappointed.

Devastated, maybe?

jack_o_lantern_03_upset

Not devastated, fighting mad

Because if one bankrupt city gets away with cutting its CalPERS payments, and thus reducing its retired employees’ pension benefits, that may encourage the others!

Theresa J. Pulley Radwan, associate dean for administration business and a law professor at Stetson University in DeLand, Fla., said Klein’s decision could put public workers’ pensions more at risk during bankruptcies.

She said the ruling is not binding on other bankruptcy courts, but that those courts typically look to one another’s rulings in similar cases. “I would be surprised if other courts did not find the same thing,” she said. 

Of course they’ll notice; wouldn’t you?  CalPERS, the monolith revealed, may find itself under attack from dozens or scores of similar cities and towns.

About 2,000 municipal agencies cover their employees through CalPERS.

Stockton, hundreds of other municipal agencies and the state annually pay $8 billion to CalPERS to cover their workers’ retirements. Stockton owes the pension agency more than $15 million this year.

Eight billion a year goes in – that’ll pay a lot of legal bills, and there will be a lot of legal bills, because at this point, any city manager or city creditor is going to use Judge Klein’s ruling as the basis for challenging preferential settlements to retirees.

Klein compared the Stockton-CalPERS relationship to a retailer using bankruptcy to opt out of a bad shopping-mall lease. “The city’s contract with CalPERS could be rejected,” the judge said to a courtroom packed with lawyers, city officials and retirees.

The judge is absolutely right.  Creditors are creditors.

It raises questions about whether cities that have filed for bankruptcy would be free to slash their pension contributions — and even use the money to repay other debts. 

Or the cities could use the money to pay current obligations – like current employees – rather than past ones.

good_idea

[Continued tomorrow in Part 2.]

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Month in Review: August, 2014: Part 2, Longest

October 14, 2014 | Boston, Cities, Density, Development, Eminent domain, Harbor Towers, Housing, Infrastructure, Month in review, Urban renewal, Verticality, Zoning | No comments 113 views

[Continued from Friday's Part 1.]

By: David A. Smith

In the long, long month of August, I wrote three long pieces, none longer than the final one, a post that set a dubious personal record – ten parts! – in which I covered two hundred years of Boston history as seen through a time-lapse recollection of a single site – water that became land – in That’s rich, Harbor Towers: Part 1, Towering contradictions:

As part of my e-ringside seat for the revival of Don Chiofaro and his visible efforts at diplomatic euphemism after his release from political Coventry, where he’d been banished by now-retired urban autocrat Tom Menino, I was recently perusing The Boston Globe (July 23, 2014)’s article describing Mr. Chiofaro’s show-and-sell of his envisioned towers and his dollops of verbal design goo, when I hit this nugget:

bg_chiofaro_towers_01

What are those ugly gray things to the left of Chiofaro’s nice proposed towers?

A rendering showing a view of the new Harbor Towers buildings from the harbor. The new buildings are at the center of the rendering, to the right of the existing Harbor Towers buildings.

We believe the proposed development is historically and contemporaneously inappropriate in scale, height and density for a location adjacent to two Boston treasures, the Rose Kennedy Greenway and the harbor,” wrote two trustees of Harbor Towers

And I thought, that’s rich, coming from the likes of you. 

To appreciate fully the sanctimonious unintentional irony of that righteous garbage, one must understand how Harbor Towers gained its place on the waterfront, and to do that requires journeying back in space, time, and nine more post installments, to the very beginning of Boston, as I covered in Part 2, 1700 to 1960, “Currency around the world”:

india_wharf_1857

India Wharf, 1857

India Wharf!  Even the name was exotic, calling the youth to ship the high seas in search of adventure.

The focal point of all this activity was India Wharf, built in 1805 by the dean of Boston architects, Charles Bulfinch. “An address on … India Wharf was currency around the world,” writes Kay.

india_wharf_1899

India Wharf, 1899: the other wharves has grown as long as Long Wharf

It also played host to the India Wharf Rats Club, a renowned gentlemen’s club where, it was said, women could enter, so long as they didn’t ask about the long, shiny cylindrical object—a whale’s penis—hanging from the ceiling.

Then came the streetcars – public transport for the mid and late nineteenth century – and the subway.

With motorized transport, the waterfront fell into desuetude, only to be revived through slash-and-burn urban renewal, out of which sprouted the twin peaks of Brutalist Harbor Towers, which in turn became first an outpost for swinging urbanites in the rough-tough-downtown-Seventies, and then the vanguard of the post-industrial urban revival, as covered in Part 3, The 1960s, “Arguably a Mistake”, Part 4, The early 1970s, “A really bad reputation”, Part 5, The 1980s, “You will find yourself making excuses”:

Built in an area that had once been wharves and warehouses, Harbor Towers may have been ahead of their time. For much of the 1970s, the immediate surroundings remained something of a wasteland.

Economic revival came slowly to downtown Boston, but it did come, and then an opportunity arose:

They converted to condos in 1981.

When the towers were developed, the Section 207 program had some very mild affordability restrictions: (high) limits on residents’ income levels (possibly not calibrated for family size, so a swinging bachelor like Derek Sanderson could quality), and a gentle review of rent levels.  Under President Reagan, the Section 221(d)(4)’s were entirely decontrolled, because in Reagan’s view (which at the time astounded me, but in later life I have come to appreciate) adding supply was enough impact, especially given that the program was a lending  program, not a subsidy program, and the program paid for itself (in interest rates and mortgage insurance fees).

With the shift from rental to occupant ownership, the residents’ profile changed, and along with it changed their incentives and behaviors. 

In 1985, four years after the rental buildings were first converted to condos, Hurricane Gloria roared in and blew out 70 of the towers’ windows.

hurricane_gloria_forecast

Be prepared! For cheesy graphics!! And bad hair !!!

With occupant ownership had come two different factions:

The trustees representing Tower I—which, by virtue of being closer to the water, has more moneyed residents—called for all of the complex’s 1,716 windows to be replaced. The Tower II board wanted to junk merely the most dysfunctional ones.

With the two sides at an impasse, the trustees moved to try to at least stop the indoor rainstorms by sealing up the vents. This meant the units no longer had proper exhaust systems—which turned out to not matter much, since the spaces between the windows and the deteriorating concrete walls were still wide enough to allow air (and some inclement weather) to flow in from outside.

Over the decade, the market set prices, the units cleared at the market price, and gradually the towers filled with people for whom the location and views compensated for the traffic noise and lack of walkability.

fort_hill

At the foot of Batterymarch street (which still exists), within sight of Long Wharf

(From the Bonner map, 1722)

Boston’s revival revalued the downtown, and made the waterfront, which had evolved from a commercial center to an urban sludgebank, into a visual and experiential amenity demanding cleanup, and with that came metropolitan demand for new urban infrastructure (the Big Dig) and, in consequence, a dramatic increase in the value of waterfront property, as unrolled in Part 6, The Big Dig: “You don’t have to look at Harbor Towers”, Part 7, The condo assessment, “Cut my losses and get out”, Part 8, The HVAC replacement, “A certain godlike remoteness”, Part 9, The new neighbor, “A two-star hotel always under construction”:

Even as the Harbor Towers residents were distracted by internecine intra-building disagreements over how to fix their decrepit and collapsing HVAC system, their landward neighbor (both of whose existing International Place towers were taller than theirs) was sizing up another investment opportunity, and in 2008 Don Chiofaro achieved his objective: in financial partnership with an institutional investor, he bought the Harbor Garage.

With that purchase, Mr. Chiofaro suddenly had a two-part foothold into Harbor Towers’ decision-making:

Harbor Towers residents lease several hundred parking spaces in the garage. (The 624 units have long-term leases for spaces that are set to expire in 2022.)

Mechanical equipment for Harbor Towers is located in the garage building.

As President Nixon’s aide Chuck Colson said, when you’ve got them by the mechanical systems, their hearts and minds will follow.

colson_reporters

Now that I have everyone’s attention …

Mr. Chiofaro’s move was as shrewd as Robert Kraft’s systematic real-estate-based annexation of the New England Patriots, first by buying land next to crappy old Schaefer Stadium; then in 1988 buying the stadium itself out of bankruptcy court.

Football Games Partiots  vs  Dolphins   1982

Built on the cheap, run on the cheap: Schaefer Stadium, December, 1982

In 1994, when the new owner wanted out of the leased to move the team to St. Louis, Mr. Kraft made a deft counteroffer to buy him out.  Mr. Chiofaro had a similar long-term view: own property, and sooner or later you’ll be able to develop it to its economic and zoning potential.  When that happens, of course, those formerly aggressive new arrivals will present themselves as guardians of tradition, as I concluded in Part 10, “Coming from the likes of you” :

Epitaph for the living Towers

young_woody

Money is better than poverty, if only for financial reasons

If 90% of life is just showing up, then ninety percent of becoming an architectural icon is longevity: “Politicians, ugly buildings, and whores, all get respectable if they last long enough.”

chinatown_cross_05

“‘Course I’m respectable.  I’m old.”

Todd Lee, the architect on the 32nd floor, has lived in the building three separate times: once after his first wife took ill, once after she died and he wanted to “live like a monk,” and again after he married Karen C.C. Dalton, a charming art historian from Texas now teaching at Harvard. “I don’t know of any building in the city that has affection like this,” he says. “People who live here understand what an anomaly it is, and how extraordinarily lucky they are.”

In a sense, Harbor Towers is kind of an island,” says Peter Forbes. “They fight everybody on the outside, and when there isn’t anybody on the outside, they fight each other on the inside.”

red_wedding_01

The trustees send their regards

“There have been coups left and right when one group gains ascendancy over another. But their victories seem to be short-lived, and then somebody else comes in and dethrones them.”

It’s not often the city finds itself with the opportunity for a transformative moment,” Chiofaro said. “But that moment is now before us.”

I close this odyssey where I began it, with that trustees’ letter quote:

“We believe the proposed development is historically and contemporaneously inappropriate in scale, height and density for a location adjacent to two Boston treasures, the Rose Kennedy Greenway and the harbor,” wrote two trustees of Harbor Towers.

That’s why I so instantly thought, that’s rich, coming from the likes of you. 

Cities belong to the future more than they belong to the past; and in a technological society, cities must become progressively more technological and more vertical – tradition is worthy not just because it is old but because that age connects the future to things we value because they have proven valuable in the past.  Though a suburban kid by birth, I have over the many decades been seduced by the concept of cities and by the reality of my cities:

super_gulp

39 years working in Boston

Boston where I have worked for 39 (gulp) years, and Cambridge where I have lived for (double gulp) 43 years. 

double_gulp

43 years living in Cambridge

Cities claim the right to be messy; the right to be politically tortuous; to be periodically infuriating; to be crowded and often unmanageable; to be loud and jostling and sometimes dirty; to be under-infrastructured and under-serviced.  Out of this, cities produce innovation and human enterprise and civilization.  To quote Harry Lime:

borgias_pope
Starting the Renaissance was collateral damage

Like the fella says, in Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love – they had 500 years of democracy and peace, and what did that produce?

harry_lime_goodbye_holly

Goodbye, Holly

The cuckoo clock.

On behalf of cities, I claim them all.

 

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Month in Review: August, 2014: Part 1, Long, longer

October 10, 2014 | Boston, Cities, Density, Development, Eminent domain, Harbor Towers, Housing, Infrastructure, Month in review, Urban renewal, Verticality, Zoning | No comments 179 views

By: David A. Smith

Whether by accident, laziness, or design, during August I wrote only three posts, but they were all mega-expositions: 3, 7, and 10 parts. 

tall_taller_tallest

Long, longer, and longest

The shortest was my piece about New York City (where else?), and the New York Times’s headline writers missing the point about properties that have become Vertically obsolete: Part 1, Several families in Sunnyside?:

Despite its author, Josh Barro, writing a good article about the complications of inclusionary zoning, the New York Times (June 7, 2014) chose a headline that sends the reader on a long misdirection:

Affordable Housing That’s Very Costly

As we’ll see, that’s misoriented in two ways: (1) the cause isn’t the housing but something else, and (2) when assessing whether it’s ‘costly,’ as the late great Henny Youngman replied when asked, “How’s your wife?”, compared to what?

henny_nyc

If you ask how costly my wife is, you can’t afford her

Abington House, at 500 West 30th Street near the High Line in West Chelsea, is a new luxury residential building and, like a lot of new luxury developments in Manhattan, it’s extremely expensive. The cheapest two-bedroom apartment now listed there rents for $5,850 a month. That gets you only one bathroom; a two-bed, two-bath can run as high as $8,695.

But 78 apartments in the building, or 20% of the total, are set aside as affordable housing under New York City’s “inclusionary zoning” program. That means 19 two-bedroom apartments are priced from $687 to $873 — about a 90% discount to market rents.

The rent reductions are enormous … but even more enormous is the implied loss of capitalized value from them, which we can calculate as:

($5,850 – $687) = $5,163 per month x 12 months =

$61,956 annually / 5.0% cap rate = $1,239,120

The rent buydown inherent in that apartment cost the developers the equivalent of $1,240,000; using the higher market rents, the effective discount is ($8,693 – $873) * 12 / 5.0% = $1,877,000.

Those apartments were granted to 19 households that make from $25,612 to $42,950 a year and won a housing lottery the city held last year.

These figures work out fairly close to 30% of income for rent, so in fact it is genuine affordability – and it’s been created with zero cash outlay by City of New York.  Have we found the perpetual motion machine?

jobs_not_a_chance

Hint: No, as I demonstrated in Part 2, High implicit subsidies?, and Part 3: The political barriers to rezoning:

A city must manage its verticality, both with the zoning it permits and with the bargains it strikes when emerging hot markets, driven by urban immigration, a changing and growing economy, and improved urban infrastructure, transform the development potential of some neighborhoods (like the case-study’s former Garment District) so that they become worth rezoning and upzoning.

Inclusionary zoning generated fewer than 3,000 new affordable units from 2005 to mid-2013, according to an analysis from Brad Lander, a New York City councilman.

To be sure, 3,000 new affordable apartments are nowhere near enough to keep up with the effective demand, but they’re free (no city budgetary cost or appropriations outlay), and Mayor de Blasio has shown no conception at all that he can see the system as a whole, and that if he wanted to make real progress, he could reform rent stabilization to eliminate obvious abuse, eliminate overhousing, or comprehensively make over the criminally incompetent NYCHA.  Coincidentally, all of those would require genuine executive action or political courage.

cowardly_no_courage

You have no courage only if you believe you have no courage

At least one part of New York City, a cluster of Orthodox and Hasidic neighborhoods in northern Brooklyn, has welcomed increased density. Developers in South Williamsburg have aggressively pursued the right to build dense, boring apartment blocks to accommodate the area’s rapidly growing Hasidic population — and the added capacity has helped keep prices relatively modest, far below those on the north side of Williamsburg.

What the Hasidic know, the mayor evidently does not know; that his proposal (if enacted, which is unlikely) will hurt New York City, which desperately needs a more pro-development climate.  The mayor shows signs of localized myopia, thinking the entire city is like his own gentrifying neighborhood of Park Slope (where property values rose 17% in one year).

Despite my hatred of rent control and rent stabilization, my encyclopedia of rent control’s harmful effects was missing the one that Mr. Barro has flagged – it preserves the vertically obsolete out of a misguided belief that the built environment is fully built.  So rent control not only strangles the apartments, it strangles development (much like San Francisco’s well-meant but idiotic sunset zoning).

For now, inclusionary zoning may be politically necessary to make that additional density possible, even if the cost per affordable apartment is very high.

It isn’t high; New York City is paying the surcharge of development-blocked and rent-stabilized vertical obsolescence.

nyc_brownstone_boarded_up

Time to take this down so something taller can go up?

Longer posts exploit the blog medium – no word count or news hole, no pre-emption of an in-depth feature by breaking news, the ability to delve into the past to contrast what was confidently said back then (by those with a stake in influencing a decision) versus what actually transpired, and hence to provide rounding and texture to what the twitterati want to compress into Manichaean black and white, as shown by the protracted tussle among Atlantic City, Donald Trump, and feisty (now late) Vera Coking over whether You have the right to remain: Part 1, Immovable:

Vera Coking could have been Susette Kelo; in fact, she was Susette Kelo … but in 1998, she won her eminent domain taking case.

02_vera_coking_1998

She won? Vera Coking in 1998, after winning

At the time nobody beyond the antagonists – and we have Donald Trump as the Eeeevil Developer, in fact as an Eeeeevil Casino Developer in a city known mainly for its sins – quite appreciated that Ms. Coking’s victory for property rights would be a defeat for Atlantic City, and for Ms. Coking herself. 

boardwallk_empire_good_story

The first rule of journalism, too

If journalists did not invent survivorship bias, they are its most dedicated proponents, if only because the living give better interviews than the departed, and a lucky winner (or unlucky loser) makes for good storytelling, and even if the storytelling has to invert logic, as reported in The New York Times (July 21, 2014):

In the eminent-domain tussle, Ms. Coking proved herself to be Part 2, Anachronistic, Part 3, Stubborn, Part 4, Unreasonable, and Part 5, Ornery:

As I would have guessed, behind Ms. Coking’s successful litigation was pro-bono assistance from the Institute for Justice, the same folks who seven years later would take Susette Kelo’s case all the way to the Supreme Court:

”If this kind of analysis is adopted throughout the country,” said Dana Berliner, a staff lawyer with the Institute for Justice, “it will be a revolution in condemnation law and a very important restraint on the ability of government to take private property and hand it over to other private parties.”

Seven years later, Kelo would be that revolution.

Ms. Coking’s house is wedged between the Trump Plaza Hotel and Casino and Caesar’s Palace, so close to Trump Plaza that visitors knocking on her front door can feel the spray from sprinklers used to water the hotel’s grass.

The three owners had prevailed, but then a funny thing happened: two of them sold.  The price for the Sabatinis’ restaurant tripled, from $700,000 to $2,100,000.

claire_sabatini_trump

We love our restaurant, but for 3x its value?

Claire Sabatini, who eventually, perhaps reluctantly, sold

Mr. Banin did even better, as his pawnshop’s sale price rose tenfold, from $169,500 to $1,600,000.

”I never thought that in the U.S. because one party wants something it will be backed up by the government,” said Peter Banin, 42, a Russian immigrant and a goldsmith, runs the Golden Island, a jewelry business and pawnshop. ”Here, you buy it, you pay for it, you work to pay for it again, and then CRDA says, ‘I want this.”’

That is the conundrum of eminent domain, one inherent in urbanizing, verticalizing, and technologizing cities.  For his property and his emotional distress, Mr. Banin (who as a pawnshop owner would have been very familiar with the concept of economic necessity and putting a price on memories) was at least both vindicated and compensated:

Finally, though the Sabatinis and Mr. Banin eventually became reluctant if profitable sellers, Ms. Coking remained, to the last, Part 6, A holdout, and Part 7, The owner:

After decades of happily running her boarding home, Ms. Coking was eventually relocated to the ground floor before her family moved her out.  Now 91, she lives at a retirement home in the San Francisco Bay Area.

I find myself immensely happy for her.  But her property eventually closed, and was eventually foreclosed and sold at auction:

Soon bidders began driving the price up in increments of $5,000.

An hour later, the bidders were down to two.

The winning bidder, whose name was not disclosed, took the home for $530,000 plus the 10% auction commission.

Notwithstanding the lack of confirmation, I think it was on behalf of Trump Entertainment; why else would the buyer choose to be anonymous?

turmp_smug

Because I’m shy?

Our concept of private property derives from the pre-technological and agrarian era: a homestead was land that a family settled upon, built upon, fenced, and defended.  The homestead had no infrastructure: the homesteader built his own water and sanitation; there was no electricity, and vehicles followed dirt paths and roads.  The homestead owner had the right to remain foolish; the right to remain stubborn; ornery; as long as he remained independent, no one could tell him what to do with or on his own property.

keep_out_sign

Past here, you do not own and have no right to enter

But the modern world depends on infrastructure; infrastructure depends on networks; and infrastructure establishment costs are usually greater than can be supported by the recurring revenues from users.  If a city is to sustain infrastructure, therefore, government must finance and subsidize it, and if the infrastructure is to be retrofitted into a previous urban grid, then eminent domain is necessary. 

In many ways, this tussle between Ms. Coking and Atlantic City was prefigured in Aldous Huxley’s 1932 Brave New World, which envisioned an entire society of benevolent government in which everyone’s property rights – in fact, everyone’s personal rights, including their right of life – were subject to the all-knowing benevolent state, as personified by the aptly named Mustapha Mond (word code for ‘devil’s world’):

“In fact,” said Mustapha Mond, “you’re claiming the right to be unhappy.”

“All right then,” said the Savage defiantly, “I’m claiming the right to be unhappy.”

“Not to mention the right to grow old and ugly and impotent; the right to have syphilis and cancer; the right to have too little to eat; the right to be lousy; the right to live in constant apprehension of what may happen to-morrow; the right to catch typhoid; the right to be tortured by unspeakable pains of every kind.”

There was a long silence.

“I claim them all,” said the Savage at last.

Mustapha Mond shrugged his shoulders. “You’re welcome,” he said.

[Continued next week in Part 2.]

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