Rushing to a standstill

City allowed developers to skirt requirements in stalled $700m Downtown Crossing project

Demolition left only a segment of the Jones, McDuffee, and Stratton Building standing. Demolition left only a segment of the Jones, McDuffee, and Stratton Building standing. (Globe Staff Photo / David L. Ryan)
By Donovan Slack
Globe Staff / March 26, 2009
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Boston officials, eager to pump new life into the fragile Downtown Crossing neighborhood, set aside key elements of the city's zoning code and overlooked the absence of mandatory developer submissions in accelerating the $700 million commercial and residential project at the old Filene's site.

A Globe review of city files shows that officials forged ahead furiously through the early stages of the market downturn and the credit crunch in late 2007 and early 2008, even allowing the developers to demolish a key city block before filing necessary forms with the Boston Redevelopment Authority, including a required statement of financial interests.

When the credit markets collapsed and the economy imploded in the fall of 2008, the city was left with a massive hole in a high-profile district, one historic building shorn in half, and a wall of another, Filene's, stripped away. The site has sat dormant for the last four months, like a bombed-out block in a war-ravaged city, laying bare a truth about building in Boston: Developers working on private land are under no obligation to rebuild blocks that they have already torn down.

With anger growing among residents and business operators, Mayor Thomas M. Menino has asked city officials to search for ways to resume work at the blighted site.

"This is the nucleus of that neighborhood," Menino said.

Menino also asked city planners to rethink their practice of pushing through permits for development projects without closer scrutiny of financing and extracting stronger commitments from developers. There are no requirements that the city secure performance guarantees from developers, and such guarantees are typically not required in other US cities, which also have partially completed projects because of the economic downturn, specialists say.

"The mayor will not countenance holes in the ground," said John Palmieri, director of the Boston Redevelopment Authority, the city planning agency. "He has made it abundantly clear that he will not tolerate this blighting of the downtown."

But in the case of Downtown Crossing, the city does not appear to have much leverage, and Menino, who is preparing a potential reelection bid this year, is finding that he can do little now to force the developers to fulfill their grand promises.

"They're trying to figure it out," Palmieri said of the developer, a partnership of New York-based Gale International and Vornado Realty Trust. "What we've told them is, 'Let us know what you need.' We'll be as responsive as we can."

The Globe review of public records shows the city has already cut corners repeatedly. The review also found the developers contributed to Menino's campaign fund, a common practice among developers in the city.

Campaign finance reports show that Gale and Vornado executives contributed a total of $1,550 to the mayor's coffers during the review process; that included $500 in the weeks before they first applied to do the project, $250 on the same day they received a demolition permit, and another $500 one month later. They gave $300 more last November, after work had stopped on the project.

A spokeswoman for Gale International and its chief executive, John Hynes III, declined to comment for this report, as did a spokeswoman for Vornado Realty Trust, whose earnings report shows net income of $395 million in 2008.

The mayor said he had nothing to do with accelerating the Filene's project, and any campaign contributions he received were coincidental.

"I didn't have any role in pushing this forward," Menino said.

Palmieri, the BRA executive director, said that even if every step had been followed to the letter by the agency and the agency had scrutinized the project's finances more closely, the result arguably could have been the same. He said there was no way the agency could have anticipated the economic recession that halted progress on the project.

Nevertheless, Palmieri said he is following through on Menino's order that the agency review finances more rigorously. Such reviews previously have included informal conversations in which developers tell city planners how they intend to finance construction.

Palmieri said he is also putting a stop to practices that have allowed construction to begin before projects are fully vetted.

"We'd like to look at this as an opportunity to tighten up the way we conduct reviews," Palmieri said.

Records show the developer first applied to construct the project in November 2006, outlining plans for a sparkling condominium tower flanked by a hotel and a refurbished Filene's building that would house retailers on the upper floors and place the renowned Filene's Basement back into its old space. The plans were especially sensitive because Filene's is listed on the National Register of Historic Places.

The requirements for winning approval of such a large development are laid out in city zoning and building codes, which spell out each step developers must take and criteria the project must meet.

Among the first of those steps is submission of a statement of financial interests in the proposed project, listing who will benefit from the project and to what extent. That form, according to the zoning code, is to be signed under penalty of perjury and filed with the city clerk, among other entities, to "foster public understanding" and confidence in the city's land-use decisions.

The Filene's developer filed no such form with either the city clerk or the Boston Redevelopment Authority, the Globe review found.

Nevertheless, based on the rest of the hefty application submissions, the Boston Redevelopment Authority board of directors voted in August 2007, amid clear warnings of rapidly deteriorating credit markets, to give preliminary approval to the redevelopment plan.

The developer next was supposed to sign an agreement outlining what it would do to mitigate impacts of the project on the neighborhood.

An undated, preliminary mitigation agreement was drafted with public input in 2007 but was never finalized or signed. It would have required the developer to provide $2.8 million for improvements to streets in the area and set up a $250,000 endowment to help fund educational programs and preserve the nearby historic Old South Meeting House.

Conditional upon the signing of that agreement and other factors, the developer was supposed to obtain a certification of compliance affirming that each step in the approval process had been taken and each criterion met. It never obtained the certification.

The zoning code explicitly prohibits the city from issuing any building permit without the certification of compliance.

Nonetheless city planning officials authorized city inspectors in October 2007 to issue permits to demolish half the block, including the back side of a century-old building that housed a major glass and ceramics retailer and wholesaler, the Jones, McDuffee, and Stratton Co. The demolition also included the shearing off of one wall of the Filene's building.

Two months later, they signed off on the issuance of a permit to renovate and refurbish what was left of the Filene's building. And in April 2008, they allowed inspectors to grant a permit to dig the large hole and begin constructing slurry walls and part of the foundation of the tower.

The BRA's chief architect, David Carlson, who gave written authorization for the permits, said the Filene's project was allowed to skip steps in the process because the developer needed to meet a commitment to Filene's Basement that the iconic retailer would be able to move back in and reopen in 2009.

Carlson said such shortcuts happen "occasionally" in about 10 percent of proposed development projects.

The director of development review for the BRA, Heather Campisano, maintained that such practices do not violate the zoning code, because the permits issued were not for the "full building" of the project, but rather for small pieces.

"You can interpret it to mean any host of things," she said.

Donovan Slack can be reached at