Milton’s paradise lost? Part 3: Endanger seniors by delaying ambulances

October 21, 2014 | Affordable Housing, Boston, Chapter 40B, Cities, Development, Homeownership, Housing, Inclusionary zoning, Milton, Rental, Zoning | No comments 89 views

[Continued from yesterday's Part 2 and the preceding Part 1.]

By: David A. Smith

“What is dark within me, illumine.”
John Milton, Paradise Lost

Milton, as we’ve seen in preceding two parts, is a town where time – at least in the sense of real estate development – has largely stopped, though with the stasis of its built environment, three inexorable byproducts of Father Time are compelling slow change in its composition:

1. Aging of its population.

2. Obsolescence of its housing and real estate stock. 

3. Appreciation in value of its homes, coupled with rising income relative to its neighbors.

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

Slowly, gently, and perhaps unthinkingly, Milton is squeezing out its poorer citizens:

An estimated 350 households [Out of 9,650 possible, or 4% -- Ed.] would qualify as low-income by HUD’s definition, with incomes within 60% to 80% of area median income (AMI) and potentially qualifying for affordable homeownership.

Not only is the town losing poorer people, it’s losing out on younger people:

Demographic trends suggest that those in the child formation period of their lives are decreasing, likely related to the difficulty that younger families and workers face in finding housing they can afford in Milton. For example, those age 25 to 34 decreased from 13.4% to 7.2% of the total population between 1990 and 2011.

Without affordable housing, a town becomes demographically and economically exclusionary.  And without inclusionary zoning, a town falls short on affordable housing.

Younger people prefer to rent, and we’re not filling that demand,” said Selectman Tom Hurley. “What rental properties we have are mostly old two-family houses, which are not attractive to younger people.”


Richer than its neighbors in every direction

The end state of that exclusivity is a population where all of ‘those people’ live somewhere else, which Milton has achieved, outstripping the median income of all its abutters, Norfolk County, and the state as a whole:


For historical reasons dating back 350 years, both Cohasset and Brookline are islands of Norfolk County surrounded by other counties

[Though Milton is in Norfolk County, Boston to its north is in Suffolk County: geographic niceties not being among the Pilgrims’ competencies – Ed.]

“The age gap is significant, and we’re losing out on generations of people unable to move in,” said Planning Board member Emily Innes.

Others encouraged officials to iron out the kinks in the planning outline sooner rather than later.


We’re ironing out the kinks now

In fact, that is clearly shown by the comparison of production over the last ten years:


Everybody else is growing … not Milton

Other than Braintree and Norwood (perhaps neighboring communities, but not abutters), both of which are laggards, the other communities found ways to do something rather than just talk about it.  Dedham, Needham, and Randolph all doubled their affordable housing quotient, even as Milton stayed constant.

Milton is a town that wants to live in the past – and has a cavalcade of excuses why it can’t live in the present.

4. The anti’s and their cavalcade of excuses

The anti-development coalition has a mutable and in some ways mutating capability to generate reasons, each of them facially plausible, why development should be rejected, conditioned, modified, delayed, studied … or any combination of those. 


Reason after reason after reason why we can’t we can’t we can’t

Building permit activity for new dwellings has dwindled to less than 20 new units annually.

This for a town of 27,000 people.

This trend is not surprising in consideration of the limited amount of developable land and the high costs associated with new housing development as the costs per home are up substantially from an average of $186,650 in 1990, down to $170,500 in 1995, rebounding to $315,000 in 2001 and up to $475,000 in 2004.

It is a remarkable cavalcade, and because the Miltonians are so innovative and dedicated, its exploration could serve as a how-to guide for NIMBY’s everywhere.

4.A. Zoning and setbacks

Zoning, as I’ve posted many times, is a community’s first line of anti-development defense.  Anything that violates the zoning cannot be built, or if built can be forcibly demolished (provided the abutters persist).


74 Bubier Road, before it was torn down


… and after

Thus Milton has comprehensively zoned itself to prevent growth:

Challenges: As is the case in most American communities, a zoning bylaw or ordinance is enacted to control the use of land including the patterns of housing development. Like most localities in the Commonwealth, Milton’s Zoning Bylaw provides for relatively low housing densities and constrains the construction of affordable housing. The Bylaw contains four principal residential districts and four special purpose districts, each with its own requirements as summarized in Table IV-1.


If you don’t like acre lots, how about two-acre lots?

The Residential A requirements mean single-family dwellings on one-acre lots; AA puts that same manse on a two­-acre lot, and between them, A and AA encompass most of Milton. 


All those A and AA acres are out of bounds to affordable housing

Residential C, one-quarter-acre lots with narrower street frontages (75 feet), essentially recognizes the facts on the ground, the existing very old neighborhoods that abut Boston’s Mattapan (to Milton’s north across the Neponset River) and Quincy (to Milton’s east) – areas already built out and with less potential for growth or large-scale development.


Residential C is the red-lined sections abut Boston (to the north) and Quincy (to the east)

A town that down-zones inoculates itself against any development, and thus shunts the affordable housing into other communities (such as Boston) – whereas the state has a public interest in distributing affordable housing broadly throughout all the communities.  Hence the public purpose of Chapter 40B: to enable the state (when proposed with a feasible pro-affordable-housing proposal) to override local zoning that is demonstrated to be exclusionary.

4.B. Traffic

In today’s publicly transparent arena, where anything that can be gaffed is instantly re-gaffed via Twitter, no one wants to be on the record as opposing affordable housing; instead it’s much simpler to oppose the means of affordable housing – such as transportation.  After all, if the people can’t get to our town from our wonderful town, that’s not a housing problem, is it?


Naturally, the larger the development, the worse the traffic, as best seen by the large-scale property whose developer will be for Miltonians the personification of evil, and their future is ‘self-begot, self-raised’:


Self-begot, self-raised/

By our own quick’ning power

The proposed development, put forth by Texas-based Mill Creek Residential Trust, would add 276 rental units on a 22-acre parcel between Brush Hill Road and Hemenway Drive — a private country way off Green Street. Most of the development site is in Milton, but a small portion lies in Canton, and abutters from both communities have been outspoken in their opposition to the project.

Of course they’re outspoken NIMBY’s; they benefit from the lovely woods, and they have no reason to care about families who don’t live in Milton or Canton right now.

According to Mass Housing, however, the project appears to meet the general eligibility requirements of the housing subsidy program, is financially feasible, and is proposed on a site that is appropriate for residential development.

The developers are also likely to face an uphill battle in the court of public opinion –

Development is never favored in the court of public opinion of rich towns; only poor towns want to bring in construction and revenue. 

As discussed in earlier parts of this post, Milton has some of that Bostonian-style density in the areas close to Mattapan (now all zoned Residential C), but the farther south one goes from Mattapan Square, the bigger the lots, the lower the density, and the less affordability – and the Milton Mews location is in the less-developed and higher-value part of town: 

In addition, the developers must also contend with the residents of Hemenway Drive, who have put together an entire binder full of information, complete with maps, charts, and other pertinent documents that outline their chief concerns, including traffic impacts on Route 138.


And think of the bicyclists!

Route 138 northbound, entering Milton

Remember, Hemenway Road is proposed only as supplemental access, not principal access.

Plans presented by the developer, Mill Creek Residential Trust, included Hemenway Drive as a potential emergency access road.

That’s potential emergency access, not regular access.

For local opponents of development, the traffic argument is the most beautiful to use, because it is infinitely renewable, it can never be categorically disproven (as it relates to the future), and, very occasionally, it might be right:

More than 130 residents came before selectmen Thursday night to protest the Mill Creek Residential Trust Milton Mews project on Brush Hill Road.

Yet the opponents occasionally reveal their prejudices when they go over the top:

Christine Seidman, a Milton resident and Harvard Medical School professor, said increased traffic could endanger seniors suffering from cardiovascular disease by delaying ambulances.


Seidman is only worried about the elderly, nothing more

Save the elderly!  Keep traffic clear!


So it’s Pakistan … it could happen here!

MassHousing’s eligibility letter did mention Hemenway Drive in its recommendations section, stating that emergency officials had raised questions about emergency access and that the developer would have to “clarify legal rights in and obligations relative to” Hemenway Drive.

If indeed the traffic volume were to rise dramatically, Milton’s roads (Route 138 and Route 28) seemingly could be upgraded to handle the traffic:


Route 28 in Milton, looking north (Prudential Tower in the distance)

But if access is the solution … why that creates its own problem for the developers to solve!

[Continued tomorrow in Part 4.]


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Milton’s paradise lost? Part 2: You will be hard pressed

October 20, 2014 | Affordable Housing, Boston, Chapter 40B, Cities, Development, Homeownership, Housing, Inclusionary zoning, Milton, Rental, Zoning | No comments 44 views

By: David A. Smith

[Continued from Friday's Part 1.]

“We know no time when we were not as now.”
John Milton, Paradise Lost

As we saw in yesterday’s Part 1, the Town of Milton is currently grappling with the challenge of preparing, approving, and then submitting to DHCD a Housing Production Plan, in hopes that DHCD will approve the plan to produce more housing in general, and thereby enable Milton to stop the production of more affordable housing in specific, by defeating or delaying the many development proposals pending before the Milton’s Planning Board.

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

Even within the quirky communities of Massachusetts, Milton has its points of uniqueness, particularly its combination of a streetcar suburb bordering Boston along the Nepnoset River and an enclave of the horse-hiking, and homesteading set whose land use patterns are little different from antebellum New England.


Norfolk County statistics from 1858, included just for the heck of it

7,590 horses

18,851 cows and oxen

976 sheep

6,763 swine

94,448 people

2,656 people in Milton

The rural Milton is en-moated by natural and human barriers: the Blue Hills Reservation, the absence of Route 138 exits (except for Route 138, about which much later), the Neponset River and its magical public-transport-repellent properties.


Few ways in, few ways out

As the map shows, the commuter roads Route 128 and Route 3 (the Central Artery) skirt Milton: Route 28 goes through the town’s east side, and Blue Hill Avenue (Route 138) runs along the way, with the old Dorchester Railway line having been converted into the Red Line’s right-angle extension to Mattapan and Lower Mills.

Inside that conveniently under-accessible space are Milton’s 9,650 housing units, so to have 10% affordable housing, the town will need 965, and its current 4.5% translates to roughly 435 affordable housing units, leaving 530 as its deficit.  To boost supply one half a percent per year means adding 48 affordable homes a year, and if achieved, it would take Milton eleven years to get to its 10% minimum requirement.

In fact, available evidence suggests that Milton is actually shrinking its affordable housing supply, because population is level, the town is not building, and the town is becoming richer.  Statistics from 2006:

Milton is growing slowly, gaining only 996 residents [3% of population – Ed.] from 1990 to 2004.

Milton is becoming increasingly affluent. The median household income in 1999 was $78,986, up almost 50% from the 1989 median income of $53,130 and well above the median income for the Boston region of $55,200.

A total of 259 new homes built in a decade

In the entire decade from 1990 through 2000, Milton built 259 homes.  Even if every single one of them was new, that’s an average annual supply increase of 26; and even if every single one of these new homes was affordable, that’s still less than half the rate required for Chapter 40B one-year safe harbor.

In fact, Milton hasn’t grown appreciably in fifty years:


Carefully not growing for five-plus decades

During that half a century, the relationship of suburbs to cities has changed dramatically, while Milton has been resisting that change.

3. The need

Massachusetts, like every urban or urbanizing political unit, has an ongoing chronic need for affordable housing; and because urbanization drives up land value, that need requires affirmative public policy.  Throughout the whole state, out of 2,692,000 housing units, 247,100 are in the Chapter 40B ‘Subsidized Housing Inventory (SHI)’, or 9.2%.

Only 43 (12%) have met the 10.0% threshold, and were it not for large leaders like Boston (18.5%), Springfield (16.2%), Cambridge (15.2%), Worcester (12.8%), New Bedford (11.8%), and Fall River (11.3%), our production would be sorry indeed.

Lest you think that the 10% standard is impossible to meet in Milton’s vicinity, consider Milton relative to all of its abutting communities, as drawn from the Massachusetts subsidized housing inventory (April, 2013; caramel font):

                                    Dwellings          Affordable        Percentage

Boston                         269,482                 49,971              18.5%

Canton                            8,710                       870              10.0%

Dedham                        10,115                    1,096              10.8%

Milton                              9,641                       426                4.4%

Quincy                          42,527                     4,089               9.6%

Randolph                      11,980                     1,288             10.8%  

Milton’s affordable housing percentage, even on the generous standard allowed by Chapter 40B (which counts all rental at affordable), is less than half any abutting community, and the evidence of Canton, Dedham, Quincy, and Randolph, suggests that all those communities used the goad of the Chapter 40B crowbar threat to find ways to produce the needed housing. 

Nor, sad to relate, is Milton Massachusetts’ worst offender.  In fact, it’s just about median: 166 of the 352 cities and towns that DHCD tracks (47%) have worse affordable-housing percentages than Milton, including my home town of Marblehead (3.9% affordable). 

Milton’s affordable housing shortage is no sudden phenomenon.  Milton has had this shortage for at least a decade (probably longer), to judge from the 2006 statistics:

·         Those living in poverty remain a significant population comprising almost 700 individuals and approximately 100 families and should have access to public assistance to meet their housing needs.

·         The population has remained predominantly white, but minority residents more than doubled from 6.2% in 1990 to 14.6% of all households in 2000.

·         The town’s aging population is decreasing somewhat, to 4,234 residents 65 years or older in 2000 from 4,512 seniors in 1990.

·         Population growth was highest in the 45 to 54 age range, suggesting that aging baby boomers will create a need for more housing that is smaller and easier to maintain.

The situation is no better today:

The [2014] housing production plan also outlined a stark picture of Milton’s neediest residents. Nearly one-fifth of local households were earning less than $35,000, compared with more than half who earn more than $100,000, according to the report.

The gap exists, and is widening, because of two factors distinctive to Milton:


The widening gap

1. Milton is two towns intermingled – one blue-collar urban, the other white-collar suburban verging on landed gentry.

2. Milton has been fiercely anti-development for half a century.  Perhaps it initially feared becoming another Boston, when in the 1950s and 1960s its southern and southwestern neighborhoods – Roxbury, Dorchester, Mattapan – had a big influx of ‘those people’, most of whom weren’t white.

The town has a negligible supply of purpose-built affordable housing.  The Milton Housing Authority owns 39 elderly one-bedroom apartments at 65 Miller Avenue, and 12 three-bedroom family apartments throughout the town, plus 144 Section 8 Housing Choice Vouchers, and the only affordable property in the town is Unquity House, 139 elderly apartments (probably Section 202) developed by Milton Residences for the Elderly, a local non-profit founded in 1968.

The result is a town whose housing stock is aging, whose people are aging –


Residents of Fuller Village, Milton

The town also has a population comprising mostly families and senior citizens, with the latter segment projected to grow rapidly as the baby boomer generation ages. Coupled with high rents and rentals typically being in older homes, Sunnarborg said Milton hosts relatively few young adults and is not attractive to older folks looking to downsize.

– and whose inequality is rising, as natural forces of the market (scarcity of supply) and demography (people die) are changing the town’s income mix:

And Milton needs affordable housing, because its absence of new supply is slowing squeezing out the middle and lower classes:

Approximately 45% of Milton’s households do not have sufficient income to afford the median sales price of $460,000 as of March 2013, and about 34% of households cannot afford the lowest rent advertised for a two-bedroom unit of $1,600.  These high housing costs obviously have the most severe impact on those on the lowest rungs of the income ladder, but the effects of such high housing prices have spread well into the middle class. Clearly if you do not already own a home or are not earning a substantial salary, you will be hard pressed to purchase a home in Milton.

This is exactly the phenomenon Ms. Sonnarborg observed eight years ago:

Almost one-third of the total population five years of age or older moved to different housing during the last five years. Housing turnover drives up housing prices in an escalating real estate market, and typically the buyers are more affluent than sellers, fueling demographic changes in the community within a relatively short period.

The result is a town whose bottom quintile can live in Milton only because they have been living in Milton, and when they move, for economic or biological reasons, they will not be replaced:

The median home price in Milton hovers around $460,000, which would require an income of about $96,250.

Milton has few if any homes priced at $200,000 or less and accessible to those earning at or below 80% of area median income.

Milton, and towns like it, are the reason Chapter 40B exists – because natural land-use economics, coupled with normal human like-lives-with-like clumping, results in towns becoming exclusionary without having to vocalize the desire to do so.


“If you don’t already live in this town, you probably can’t afford to.”

[Continued tomorrow in Part 3.]



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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 | 1 comment 138 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?


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.


A thrillah in the making?

1. The issue

Milton mulls housing production plan


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.


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.


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?


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.


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;


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 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’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.


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.


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 133 views

[Continued from yesterday's Part 1.]

By: David A. Smith


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.


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.


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.’


$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 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:


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%.


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.


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.)


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. 


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 183 views

By: David A. Smith

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.


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.


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. 


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.


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.”


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. 


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?


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.


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 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?


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.


[Continued tomorrow in Part 2.]

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