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Understanding & Crafting Development Agreements in Understanding & Crafting Development Agreements in
Massachusetts Massachusetts
Edward J. Collins, Jr. Center for Public Management, University of Massachusetts Boston
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Understanding & Crafting
Development Agreements in
Massachusetts
May 21, 2013
McCORMACK GRADUATE SCHOOL OF POLICY AND GLOBAL STUDIES
Edward J. Collins, Jr. Center for Public Management
This report has been funded by the Massachusetts Gaming Commission for the purpose of
providing general information regarding development agreements to municipalities that may be
considering a proposal from the developer of a gaming establishment. The information
provided in this report was developed by the staff at Edward J. Collins, Jr. Center for Public
Management at the University of Massachusetts Boston. The opinions or views expressed
herein are the opinions or views of the authors of the report and the Massachusetts Gaming
Commission is not responsible for the content of this report.
Table of Contents
Introduction .......................................................................................................................... 1
Real Estate Development....................................................................................................... 3
Site Control .................................................................................................................................. 4
Financial Due Diligence / The “Pro Forma” ................................................................................. 4
Entitlements: Zoning Permits, Other Permits, and Licenses ....................................................... 6
Financing ..................................................................................................................................... 7
Architectural Design and Engineering ......................................................................................... 8
Construction ................................................................................................................................ 8
Development Agreements ................................................................................................... 11
Components of a Development Agreement ............................................................................. 11
Development Agreements Over Time ....................................................................................... 15
How to Negotiate a Development Agreement ...................................................................... 23
Preliminary Schedule of Meetings ............................................................................................ 23
Mitigation & Public Benefits: Additional Considerations .......................................................... 27
Planning for the Worst Case Scenario ....................................................................................... 29
Conclusion ........................................................................................................................... 31
Appendices: Sample Development Agreements .................................................................. 33
Development Agreement Synopsis: MGM Grand Detroit, Michigan ....................................... 35
Development Agreement Synopsis: M Resorts Henderson, Nevada ....................................... 43
Development Agreement Synopsis: New Quincy Center Project Quincy, MA ......................... 49
Development Agreement Synopsis: Assembly Row, Somerville, MA ....................................... 57
Development Agreement Synopsis: City Square, Worcester, MA ............................................ 63
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Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 1
INTRODUCTION
Part vision statement, part road map, and part contract, a development agreement is more than just a
legal document, it is arguably the most important and complex relationship a municipality and a
property owner can enter into. The word “relationship” is used here to reflect the long term nature of
the agreement and working partnership that is to be developed through the agreement.
A development agreement describes a vision for the future – vision of what a community and a
developer have agreed upon through negotiations that take each party’s goals and needs into
consideration. In most agreements, the vision, represented through text, plans, and renderings, will be
expressed in a manner that provides an average community member with a clear understanding of what
is about to be undertaken.
A development agreement maps out the process by which the municipality and developer will realize
their shared vision. It establishes a timeline when tasks are due and assigns responsibility for each task
needed to achieve those deliverables. Ultimately, a development agreement is a contract that provides
assurances to parties, commits resources, and establishes mechanisms to address either party’s failure
to live up to its responsibilities.
To reach an agreement that is durable over an extended period of time, a process of fact finding and
deliberation must occur. If the fact finding is not thorough or the time to reach agreement is overly
compressed, mistakes can be made and needed components of the agreement missed. This will not
benefit either party as the agreement may need to be reopened and the relationship may be strained.
Or, if the municipality does not have the technical assistance needed to make an informed decision, the
entire project can be challenged by the community at large, where their displeasure may be evidenced
by opposition during the permitting process or through litigation.
This document provides information that can be useful to municipal officials, community members, and
developers involved in large scale or particularly complex developments in Massachusetts. In most
situations, similar questions arise and need to be answered in the agreement:
What are the uses, in what quantities that can be accepted by all parties? What design quality is
to be expected?
What infrastructure investment is needed? Who will fund the infrastructure? Who will build it?
What are the potential negative impacts of the project and how will they be mitigated?
What additional contribution to the community will the developer make to show it intends to be
a long term partner?
Who are all of the actors in the development and what will they contribute to moving the
project forward?
What types of guarantees will be put in place to ensure the development moves forward to
completion once all required permits are secured?
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 2
How to use this document
The report first briefly explains the real estate development business from the developer’s perspective.
It then identifies the components of a typical development agreement. Following this, it describes how
agreements change and grow over time and offers an outline of the negotiation process. The
appendices provide an overview of five development agreements and highlights interesting provisions
that may be food for thought during negotiations on future development agreements. Two of these
agreements are for gaming-related projects and three do not include gaming as a potential land use.
Copies of the actual agreements can be accessed via links found within the appendices.
This document is merely a primer, it cannot take the place of the advice of qualified legal counsel and
technical experts and is not intended to do so. Municipal officials considering entering a development
agreement for a particular project are strongly encouraged to surround themselves with a team of
qualified professionals that can guide them through the process and make sure any agreement entered
into is in the best interest of the community at large.
A note to municipalities considering entering into Host Community Agreements with gaming providers:
This Primer on Development Agreements addresses issues common to most large scale developments.
The same questions that apply to all developments – traffic, infrastructure, use mix, design, etc., will
apply to a gaming facility, as well. Where negotiations may differ when considering a gaming facility
may relate to the extent of project mitigation and community benefits to be made to offset the impact
of this particularly unique land use, including the long term financial contribution to be made by the
developer to the community, in addition to the specific statutory requirements that pertain to host and
surrounding communities.
Comments that relate specifically to gaming facilities will be highlighted in boxes throughout this
document.
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Edward J. Collins Jr., Center for Public Management Page 3
REAL ESTATE DEVELOPMENT
Real estate development is a complex business with a lot of moving parts. Like all businesses, it is
dependent on and affected by global and local conditions, over which the developer has little or no
control. When embarking on development agreement negotiations, it is important for public officials to
have an understanding of the real estate development business and the developer’s needs and
interests. By showing the developer a level of business savvy, municipal officials can come to be viewed
as collaborative partners, as opposed to obstacles to be overcome.
Among the many global factors, first and foremost is the general state of the economy. What is the
condition of the economy? Is it expanding or contracting? If it is expanding, there will likely be overall
demand for new housing, offices, and factories. Contracting economies will experience the opposite
effect, with buildings sitting vacant or abandoned. Another factor is labor supply – do area workers
have the requisite skills, are they available in sufficient numbers, and do they exhibit high levels of
worker productivity? Higher worker productivity in a particular location can be more beneficial than a
lower labor cost in another location. The balance between productivity and labor costs is becoming an
important factor in deciding whether a company expands in the US or overseas.
Among the multiple local factors that affect real estate development, space availability is of primary
importance. What is the supply and demand for a particular real estate product (for example, Class A
office, flex space, multifamily housing, etc.)? Rents and vacancy rates are often used to measure
demand for space. Of secondary significance is timing. How long will it take a developer to get local
approvals and construct the project? Timing is critical - a developer who gets its product on the market
fastest can take advantage of demand, whereas a developer who is slow to market may miss the
window of opportunity. Third is raw land availability. What is the availability of land in the appropriate
size and condition? A developer who can secure a parcel with the right location, entitlements, and
infrastructure expeditiously wins out over one who has to assemble several parcels into an appropriate
site, lay in new infrastructure, and secure special zoning permits.
Like all business people, developers want to reduce the amount of risk and minimize uncertainty in the
development process. Developers are betting their time and money that they can deliver the right
product at the right time to maximize their return on investment. Municipalities can help in this regard
by establishing clear and concise community plans, instituting fair and consistent procedures, and
embodying a willingness to negotiate development agreements to advance individual projects.
The following series of topics are just a few of the activities that a developer will need to undertake. It is
intended to be illustrative of the real estate development process, but it is not an exhaustive study of
the subject.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 4
Site Control
A developer is not going to want to invest time and money preparing studies and making plans for a site
that someone else could steal away. Therefore, the developer is going to want to find a way to secure
the site.
If a developer does not already own the site, the most common forms of site control will be:
a. Option to Purchase – the right to purchase the land at an agreed upon price one or before a
specified date;
b. Right of First Refusal – the right to match the best offer; or,
c. Purchase and Sale Agreement with contingencies – a written contract that requires the seller to
sell and the purchaser to purchase real estate at a specific price and time, provided that the
stipulated contingencies (required acts or actions of the buyer or seller) are satisfied; and,
d. Long Term Land Lease – an agreement between the owner of real property and an entity
wishing to use the real property for a described use for an extended period of time, for example,
99 years, in exchange for regular rent payments to the owner of the real property.
Financial Due Diligence / The “Pro Forma”
Financial due diligence is the financial evaluation that a developer must undertake to show the bank
that the project will cover its debt and return a required profit. It is most often depicted through a
financial spreadsheet or “pro forma.”
A pro forma is a financial report used to model the financial outcomes of a particular real estate
development project. The pro forma weighs the anticipated expenses and revenues against each other
to determine the cash flow available for distribution back to owners.
The pro forma will generate the following information essential to decision-making:
a. Gross Effective Income (GEI): total expected income from rents less expected vacancies;
b. Net Operating Income (NOI): total income after all operating expenses have been paid. (Note
that utility and property tax payments are operating expenses, while income tax and debt
payments are not.) NOI will be used to pay debt service;
c. Debt Service: the amount of principal and interest to be paid for construction or permanent
financing;
d. Total Project Cost: the total of all acquisition, hard construction, and soft construction costs;
e. Operating Cost: total annual amount spent on operations (for example, cleaning, utilities,
management, insurance, etc.) and real estate taxes;
f. Capitalization Rate or Cap Rate: the ratio of Annual Net Operating Income to cost (or value).
Here the cost is either the purchase price paid for the asset already in place (i.e., an existing
building) or the total of debt and equity funding to construct and put the asset in place. The
ratio can also be used to roughly determine the value of a property by dividing the Annual Net
Operating income by the capitalization rate (expressed as a percentage) of similar properties in
the local market.
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Edward J. Collins Jr., Center for Public Management Page 5
Five basic ratios derived from the pro forma determine project feasibility:
a. Return on Investment (ROI): the ratio of annual Net Operating Income to Total Project Cost;
b. Return on Equity (ROE): the ratio of annual Net Operating Income to owners’ equity invested,
also called “cash on cash”;
c. Debt Coverage Ratio (DCR): the ratio of Net Operating Income to Debt Service;
d. Default Ratio: the ratio of Operating Costs to Gross Effective Income; and,
e. Internal Rate of Return (IRR): the sum of discounted cash flows (annual ROEs) plus Revision.
(Revision is the profit after sale less the capital gains tax and for feasibility purposes is assumed
to take place at the end of year five.)
A developer will compare the returns projected from the pro forma of a project under consideration to
the average returns from other real estate projects in the same market and to the returns available from
other forms of investment. Individual developers will have a required rate of return that reflects the risk
for each investment. Only after the developer is reasonably confident that the project will meet or
exceed the returns on other investment opportunities will the project move forward.
For example, on November 1, 2012, the 10-year rate on a U. S. Treasury Bill, considered one of the
safest investments around, was 1.75%.
1
The average rate of return over the past 10 years of the S & P
Index was 6.91%
2
, while Real Estate Investment Trusts have generally exceeded 10% over the same
period.
3
Project lenders will be particularly interested in the debt coverage ratio and the default ratio. Most
banking institutions establish a minimum debt coverage ratio of at least 1.2, meaning that for every $1
in debt service there must be $1.20 in net operating income. Similarly, banks have set minimum default
ratios, which are the inverse of the debt coverage ratio of 0.8.
Although it is highly unlikely that a developer would share its particular business processes and pro
forma analyses with representatives from a municipality, municipal officials can elect to prepare their
own “back of the envelope” analyses to ascertain project viability and to get an idea of the project’s
capacity to deliver community benefits.
The following studies provide information that will contribute to the pro forma:
a. Market Study: The Market Study will establish the feasibility of the project by determining the
supply and demand for a specific product around that site.
b. Site Plan and Schematic Plans: Site plans and schematics will show conceptually how the site will
be built out, including location of structures and parking on the site, areas for landscaping, and
access and egress points. These plans will generally include information required to determine
whether the project meets zoning requirements (e.g., proposed uses, floor area ratio, minimum
lot area per dwelling unit, parking, usable open space, etc.)
1
US Department of Treasury (www.treasury.gov/resource-center/data-chart-center/interest-
rates/Pages/TextView.aspx?data=yield)
2
The Quant Monitor (www.quantmonitor.com/the-bigger-picture-sp-500-rolling-10-year-annual-returns/)
3
Updegrave, W. (April 24, 2012). Are REITs a Safe Investment for Retirement? Money
(http://money.cnn.com/2012/04/24/pf/expert/REITs-retirement.moneymag/index.htm)
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 6
c. Transportation Study: The transportation study will analyze existing pedestrian and vehicular
traffic patterns and project future demand by transportation mode, and make
recommendations for mitigating the impacts of the demand or improvements to the existing
transportation network to meet that demand.
d. Utility Study: The developer will need to work with the city or town engineer to determine if
adequate potable water, waste water, and storm water drainage capacity is already available at
the site for the projected build out and expansion phases. If not, a series of utility studies may
be necessary to determine the required improvements.
e. Environmental Assessment: The Environmental Assessment will help determine if there is a
potential for hazardous materials on the site or if the site could be impacted by releases of
hazardous materials in the surrounding area. Diligent fact finding will be important as the cost
of an environmental cleanup could derail the development. Additional testing will be needed
to understand the soil compaction capacity and other geotechnical information. In
Massachusetts, these studies are commonly referred to as Chapter 21E Phase I Initial Site
Investigation Report or ASTM Phase I Site Assessment Report.
f. Site Survey and Title Report: The site surveys and title report will help define the property and
its ownership history and encumbrances. Components include:
A boundary survey defines the perimeter of the property and establishes a reference point
to locate the property in relation to adjacent properties. It will generally show all structures
and improvements on the site, and may show those within a predetermined distance from
the site.
A topographical survey shows the elevation contours on the property. Boundary and
topographical surveys are sometimes combined into one document.
A title report that identifies all the previously known owners of record and what their claims
are on the property. It also identifies encumbrances of record like long term leases, deed
restrictions, and easements.
An Alta (American Land Title Association) Survey shows boundaries, structures, tangible
physical elements (e.g., utility poles, railroad tracks, drains, etc.), and certain encumbrances
on the property such as easements of record.
g. Materials Standards: Design and material standards build upon the site plan and schematics
work mentioned earlier. The quality of materials can vary greatly and actual product samples
are the best means to determine the quality offered for exterior cladding, and finishes.
Entitlements: Zoning Permits, Other Permits, and Licenses
From a developer’s perspective, securing state and local permits is a costly, time intensive, and
seemingly never-ending process. A developer will need to create an outline of the various application
and review steps, and estimate the amount of time required to navigate the process. Although
permitting is almost never easy, municipal officials will do well to encourage developers to welcome the
public process, in recognition that local community members will likely be some of the best
customers/advertisers of a project. Permitting boards and members of the public can also offer
valuable insights into how to improve the design.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 7
Financing
The typical project is financed through a combination of developer equity and private sector debt.
Developer equity is the cash or other consideration, such as real estate, that a developer puts into the
deal; it represents the developer’s capital investment in the project. Debt is the money that a developer
borrows from others that must be repaid. The debt structure of a project can be very complex,
sometimes with multiple lenders.
There are generally three phases when the developer will need financing:
a. Phase I Predevelopment: During the predevelopment phase, a developer will need financing for
site control, due diligence, and permitting. This generally comes in the form of cash equity from
the developer.
b. Phase II Development: As part of the development phase, available funding will be used for final
site acquisition, construction, infrastructure improvements, and stabilization. This is short term
debt financing required to reimburse the developer for some expenditures made in the Phase I
and to complete the development to a point when it is usable and can be occupied. It
sometimes requires additional equity from a developer to maintain a prescribed loan to equity
ratio. The term “stabilization” generally refers to the time from when a building has been
completed to when it is generating enough cash flow to cover its operating costs.
c. Phase III Post Development: After development has occurred, financial resources will be used to
retire the construction loan, often called “Take Out” or “Permanent Financing.” This medium
term debt financing literally takes the construction lender out of the deal, hence one of the
names of this type of financing. The term “permanent financing” is a bit of a misnomer since
even the permanent loan will have a term at the end of which the loan will have to be repaid or
refinanced.
In some cases the private equity and debt are insufficient to pay all the pre-development, acquisition,
construction, infrastructure, and stabilizations costs without jeopardizing the developer’s expected
return on investment and it is increasingly common for developers to seek public financing from a city or
town or from the Commonwealth. If the project supports a greater public good, such as generating
increased tax revenue or providing jobs, the Commonwealth or a city or town may choose to provide
some public financing to the project. Public financing can take many forms, including general obligation
bonds, revenue bonds, grants, loan guarantees, tax abatements, or construction by a government of key
infrastructure elements.
The Massachusetts Gaming Act precludes the use of several State programs for public infrastructure
including Tax Increment Financing (TIF), District Improvement Financing (DIF), and I-Cubed
(Infrastructure Investment Incentive Program), as well as several tax credits or deductions. A gaming
establishment is also precluded from being designated as an economic opportunity area or a designated
development district, and therefore is not subject to the benefits that may be incurred by these
designations.
4
However, the Expanded Gaming Act’s list of prohibited public financing and tax credits
does not preclude the use of Title VII Public Welfare, Chapter 121A Urban Redevelopment Corporations,
which allows for public borrowing of funds for infrastructure that will be paid back by the developer.
4
M.G.L. c. 23K, § 49(a) and M.G.L. c. 23K, § 49(b).
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 8
Architectural Design and Engineering
After needed land use permits have been issued, but before construction can begin, the developer will
work with architects and engineers to refine the initial schematics developed earlier in order to secure a
building permit and select a master contractor. The design stages can be described as follows:
a. Design Development Phase: The architect, with the project’s engineers and landscape
architects, will prepare plans showing architectural, mechanical, electrical, plumbing, structural,
and landscaping details. The plans will also include descriptions of materials.
b. Construction Documents Phase: The design development documents are further refined within
plans and written specifications and a cost estimate is prepared.
c. Bid Documents: Construction documents and bid forms will be sent to contractors to solicit
price proposals.
The Construction Documents referenced above are those that will be reviewed by a municipality in
order to secure a building permit.
Construction
Prior to the start of construction, the developer will choose a construction manager or a general
contractor and subcontractors to build the project. This decision will determine whether the project is a
union shop, open shop (no union representation) or a blended shop with both union and non-union
trades. A blended shop will generally require a negotiated labor agreement between the developer and
the various trade unions. If the developer is considering an open shop, there will be several factors that
need to be considered. If there is any public money in the project, the developer will need to comply
with Prevailing Wage laws. Additionally, the developer may also need to comply with local hiring and
training requirements, or local Living Wage ordinances, depending upon the results of negotiations with
the municipality, especially if a local financial contribution is to be made.
Site management considerations can include:
a. Hours of Operation: Some municipalities prohibit construction when inspectors are not
available and therefore restrict work to 7 am to 5 pm, Monday through Friday. However, a
developer may wish to make sure construction managers and workers can arrive on the site
earlier for coordination or meetings. Given this, they may wish to negotiate some flexibility in
hours of operation provided that municipal ordinance or bylaw allows for some level of
discretion.
b. Site Access: The National Labor Relations Board allows for the creation of separate gates for
union and non-union workers to prevent labor actions from completely closing down a
construction site. The location of the gates and appropriate parking areas will need to be
identified.
c. Subcontractor facilities: Subcontractors will want secure areas where they can fabricate
structural elements and store their tools and equipment.
d. Deliveries and Laydown: Suppliers will need to make deliveries and have building materials
stored securely on site.
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Edward J. Collins Jr., Center for Public Management Page 9
e. Performance Bonds: More and more communities are requiring Performance Bonds from the
Developer to make sure that the project can be completed on time and as designed should the
Developer default. The bonds also insure that the site and public areas around it are cleaned up
daily and at the end of the construction.
f. Public Elements: If the Developer is building any public improvements, like parks or
infrastructure, the elements will need to be built to community standards and the method for
procurement of services, inspection, acceptance, and delivery clearly defined.
g. Relationship Management: Finally, the municipality and developer will need to work
cooperatively to schedule public ceremonies like ground breaking, topping off, ribbon cuttings,
and grand opening.
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DEVELOPMENT AGREEMENTS
Components of a Development Agreement
A development agreement is a contract between a municipality and a person or entity that has
ownership or control of a property within the municipality’s jurisdiction. A development agreement is
not needed for all projects, but one may be written when a project is particularly large, transformational
in nature, and/or requires significant mitigation. A written agreement is also warranted when a
municipality is contributing in some tangible way to the project, such as selling or acquiring property,
investing in public infrastructure, or offering special tax incentives.
A development agreement spells out the terms, standards, conditions, roles, and responsibilities of each
party for a proposed development, as well as the development’s scale and uses. While that may sound
relatively straight forward, it tends to be a lengthy and complicated legal document. It is also a
document that will need to evolve over time as information becomes available, conditions change,
and/or unforeseen circumstances appear. A development agreement may not survive the term of the
Chief Municipal Officer (Mayor or City Manager) or Board of Selectmen, depending on the form of
government, unless it has been adopted by a legislative body or incorporated into a permit issued by a
Special Permit Granting Authority.
The following is a broad outline of the key elements of a development agreement. It goes without
saying that this is an important legal agreement and that competent in-house counsel or experienced
outside counsel should be involved from the outset helping to craft the provisions of the agreement. If
the municipality is of the opinion that outside counsel is required, it is not unusual for the developer to
pay the municipality’s legal expenses. Later in this document, the evolution of a development
agreement is discussed.
In general, the sections commonly found in development agreements include:
1. Introductory paragraph: This narrative generally states the date of the agreement, the correct legal
names and forms of legal entity of the signatory parties and their addresses. It also includes each
signatory’s successors and assigns by reference (e.g., Brown Development, LLC, a duly organized
Delaware limited liability company with a usual address of…, its successors and assigns… and the
City of Eastover, a Massachusetts body corporate and politic, with the usual address of…, its
successors and assigns…).
2. Background paragraphs or recitals: Background paragraphs provide an explanation for the
agreement. They address the “who, what, where, when, and why” of the deal.
Recitals are more formal statements providing the same information and usually begin with the
phrase, “Whereas.” Common examples include:
Statement of ownership or control, such as:
Whereas, Brown Development owns 120 acres at the intersection of…
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Edward J. Collins Jr., Center for Public Management Page 12
Whereas, Brown Development has a purchase option for 10 acres…
Statement of status, such as:
Whereas, the City of Eastover has designated Brown Development as its designated
developer under the City’s Urban Renewal Development Plan…
Whereas, Section 15(8) of Chapter 23K of the Massachusetts General Law requires
that…
Statement of purpose, such as:
Whereas, Brown Development proposes to construct a 250,000 square foot mixed
use development…
Whereas, the City of Eastover wishes to expand its commercial tax base…
3. The body of the agreement: Although agreements may differ, they typically include the following:
a. Project description: A thorough project description includes, at a minimum, the number of
buildings comprising the project, a breakdown of the estimated square footage of various uses
to be included in the project, and the number of parking spaces. Illustrative maps, plans, and/or
drawings will be included, as available.
b. Project timeline: A project timeline will include a breakdown of project phasing and
identification of key milestone dates such as:
the date when due diligence is anticipated to be completed;
the date by which a firm commitment of financing must be secured;
the date by which the property is to be acquired (if not already acquired);
the dates when various permits are anticipated to be applied for and issued (tentative);
and,
the dates when construction is anticipated to commence and reach completion
(including estimated dates for substantial completion, occupancy, and stabilization).
c. Statements regarding public infrastructure: If a developer is constructing public improvements,
such as roadways or water and sewer lines, for the municipality, this section will establish the
standards to which they must be built, who will be the final arbiter of satisfactory completion
(i.e., city engineer), and any other terms for delivery and acceptance of the public infrastructure.
d. Conditions from other municipal agencies that do not have discretionary permit-granting
authority: A fire department may see the need for additional vehicles as a result of a large
development, but not have the authority to require funding for the acquisition since the
department may only get involved at the building permit stage. To ensure that municipal needs
are identified, it is typical for police, fire, and DPW departments to be convened to discuss how
a project is likely to affect ongoing operations and to identify capital expenditures for which the
developer may need to provide a financial contribution by way of mitigation for the project.
Depending upon the project, the chief assessor, treasurer/collector, public health director,
recreation director, and others may also provide valuable early input into the development
agreement.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 13
In particular, if a gaming establishment agrees to provide a percentage of its revenues to a
municipality (in addition to property tax), the city auditor or town accountant may wish to
require preparation of certain reports or have access to certain financial records which could be
described in the development agreement.
e. Project mitigation: Mitigation consists of things the developer must do, at the developer’s
expense, to alleviate potential negative impacts of a project on the site and its surroundings.
Permitting authorities typically include a set of conditions requiring a developer to provide
mitigation of various kinds which may be required prior to or during construction of the project,
or which may even take effect after the project is completed and operational. The development
agreement may reference the foregoing type of mitigation but may also impose additional
mitigation requirements.
f. Public benefits: Public benefits can be defined as contributions from the developer toward
programs or improvements that benefit the community. These are distinct from mitigation in
that they may not have a direct link to the construction or operational impacts of the project.
g. Sources and Uses Statement: This section of the agreement would include, in addition to any
narrative, a table showing a breakdown of the sources and amounts of funding and a
breakdown of the costs of the project, including both hard and soft costs (e.g., architectural
design, engineering, legal services, insurance, interest, contingency, etc.). The sum of all the
sources of funding should be equal to the sum of the costs.
h. Municipal actions: In this section, the municipality will outline activities it will undertake in
support of the project. Some actions can be undertaken via executive authority and/or
committed to by the board of selectmen or councilors. However, other actions may require
decisions by independent planning or zoning boards or participants at town meeting. In these
instances, the development agreement cannot commit to their approval. Instead, the
development agreement could use statements such as, “facilitate review of proposed rezoning
for parcel X” or “apply for infrastructure financing from the Y program”. At times state agencies,
such as MassDOT or the state legislature, may need to take actions such as review a roadway
design plan or approve a home rule petition. In these instances, the municipality can commit to
forwarding the required materials to the respective entities in a timely manner.
i. Representations, warranties, indemnifications, covenants, and similar provisions:
Representations are statements of fact
5
. They can convey the authority under which the
parties are acting. Additionally they can state other important background information. For
example:
o “The City is a Massachusetts municipal corporation duly formed, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts”;
o “Company X is a Delaware limited liability company duly formed, validly existing and
in good standing under the laws of the state of Delaware and duly qualified to do
business and in good standing under the laws of the Commonwealth of
Massachusetts”;
5
Black’s Law Dictionary
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o “This Agreement has been duly authorized by a vote of the Board of Company X and
constitutes a valid and binding obligation of it”;
o “Company X owns in fee simple title the property at 123 Main Street.”.
Warranties are assurances made by the parties that specific facts and conditions are true
and will remain so during the term of the agreement.
Indemnifications are pledges made by one party to protect the other against loss
6
, such as
through third party legal action. Many indemnifications include a provision for the
developer, its successors and assigns, to either represent the municipality in court at its own
cost or reimburse the municipality for its own legal representation. An example of an
indemnification would be a “hold harmless” clause where the developer will not hold the
municipality liable for losses or damages; or will reimburse the municipality for court costs
and damages awarded by a court or through a settlement resulting from legal action
brought by someone who is not a party to the contract.
Covenants are pledges to do or not do specific actions. The developer may pledge not to
challenge the tax assessment. The municipality may pledge to provide certain infrastructure
or fast track permit review and approval.
The above provisions are typically legal boilerplate supplied by in-house or outside counsel.
j. Default and remedies: A default is a failure by one party to do something that was promised in
the agreement. A municipality is often concerned about the developer’s defaults, which may
include failure to submit a permit application by a specific date, failure to pay real estate taxes,
failure to pay prevailing wages (if there are public monies in the project), or failure to complete
construction on time and a host of other potential defaults. Typically, the development
agreement provides that a notice of default be issued to give the developer a period of time to
correct (aka “cure”) the default. If a developer fails to cure the default within that period of
time, the agreement gives the municipality remedies. Remedies are the agreed upon methods
for correcting the default.
k. Miscellaneous information: This may include statements as to the governing law, how notice is to be
made (i.e., certified mail, overnight mail, etc.), whether or not the agreement is to be recorded, etc.
4. Possible Exhibits and Addendums:
The following documents can be added to the development agreement by reference, if desired.
However, care should be taken because they may be modified over time and the development
agreement is intended to extend beyond completion of construction and into the ongoing operation
of the project.
a. Definitions of key terms
b. Regional Map
c. Local Map
d. Site plans
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Black’s Law Dictionary
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e. Site renderings
f. Local Area Master Plan
g. Transportation Studies and Plans
h. Environmental Studies and Plans
i. Required amendments to Zoning Text or Map
j. Site specific Design Guidelines
k. Special Legislation required
l. Copies of documents referenced in the Agreement
m. Developer’s biography and financial statements.
Development Agreements Over Time
Rather than considering a Development Agreement to be a monolithic document, a Development
Agreement may be viewed as one that will advance or evolve over stages. Each stage will build upon
the previous one, incorporating new elements as they are negotiated.
1. Stage 1: Initial Agreement:
At the time the initial agreement is developed, all due diligence may not have been completed and all
facts regarding the proposed development site may not be known. The purpose of the agreement at
this stage is to define the general concept of the project, lay out the roles and responsibilities of the
parties during the investigatory process, and establish an agreed upon timeline. Elements may include:
a. Concept: A description in general terms, what is being proposed by the developer that the
municipality is willing to consider. How many acres, estimated total square footage, proposed
uses, etc.
b. Technical Assistance: An acknowledgement by the municipality that it does not have the
resources or technical expertise to deal with project as conceived, and a commitment by the
developer to provide funds up front for the municipality to secure the necessary resources and
expertise.
c. Critical Path: An identification the key milestones in the due diligence and permitting process,
including any milestones relating to obligations of the municipality (e.g., to rezone the
property).
In this stage, the municipality is agreeing to work with the developer to explore the idea of the project –
to determine what challenges may exist and how to overcome them and what benefits the project may
offer the community.
2. Stage 2 – The Big Picture:
Most of the developer’s due diligence will be complete at this point, with permitting yet to come. If a
developer is satisfied with its due diligence and elects to proceed with the project, an expanded
agreement may be drafted.
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a. Project Description:
At this point, the original concept has been vetted and refined even though no permits or licenses
may have been issued. The updated description will summarize the project with enough detail that
it is recognizable to all involved. If a Master Plan is not incorporated into the agreement through
specific affirming language, the project description may include the general square footage, height,
and bulk of all the buildings, as well as the general dimensions, materials, and design standards for
the infrastructure and utilities that are to be included as part of the project. Examples of these types
of descriptors include:
a six story, 300 room hotel;
a 2,500 seat theater;
a 20,000 square foot conference center;
a 1,500 foot, 36 inch concrete separated sanitary sewer line; and,
improved signalized intersection as designed by [project engineer name here] and approved
by MassHighway, etc.
To offer some flexibility for changing conditions, the square footages, numbers of units, numbers of
rooms, etc., that describe the project can be expressed as ranges. For example, “no less than x but
no more than y.” It should be noted, however, that using figures that are just the absolute
maximum does not require that anything be developed, since zero is an option. A hotel of “up to
300 rooms” means it can be 10 rooms or even no rooms. If the municipality is counting on real
estate tax revenue, it may be in its best interest to provide for a minimum as well as maximum
development. (With regard to parking, it may be beneficial to identify the maximum number of
spaces allowed since the applicable zoning will define the minimum.)
b. Phasing:
Most large projects are constructed in phases. This is important, because the commencement of
one element may be contingent upon the completion of another or the execution of a specific
document, or some other contingency. Responsibilities for certain actions may shift back and forth
between the developer and the municipality. Since their work efforts may, in effect, be interwoven,
this complex pattern needs to be defined and put in writing in advance. For example, a municipality
or state agency may need to make improvements prior to the developer building certain phases, but
the developer may need to make a mitigation payment to the municipality before the improvement
can even be started. The sequencing of these obligations and their effect on construction start and
expected completion dates will be critical to delivering the project on time.
The municipality and developer will need to work together to determine which components (e.g.,
infrastructure and buildings) comprise each phase. The municipality will want to make sure that the
off-site improvements that support the project as a whole are in place before the first phase opens
(or a performance bond equivalent to the cost of the remaining improvements has been posted) to
prevent disruption to the community or, in the worst case scenario, failure to provide the needed
improvements. Furthermore, it is important to understand how construction of future phases will
affect existing operations, transportation, and utility systems.
With regard to the phasing of infrastructure, gaming establishments are required to submit the Gaming
Commission a construction staging plan and as part of the Commission’s approval, they will “determine at
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what stage of construction a licensee shall be approved to open for business; provided, however,… that total
infrastructure improvements onsite and around the vicinity of the gaming establishment, including projects to
account for traffic mitigation as determined by the commission, shall be completed before the gaming
establishment shall be approved for opening by the commission.”
7
c. Mitigation:
Mitigation consists of those improvements, both on and off site, that support the specific
development, as well as those that are required by regulation. Mitigation items will be identified in
infrastructure and transportation studies. Economic analyses of the impacts on the municipal
revenues and expenditures, such as the anticipated increase in public school students or potential
impacts on existing business, may identify other areas for mitigation. A developer’s responsibilities
may include new or improved public utility systems (i.e., water, sewer, and storm water), private
utilities (i.e., gas, electrical, and communications); and transportation resources including roadways,
bridges, sidewalks, and bike paths. In addition, some municipalities have municipal ordinances
requiring project mitigation such as affordable housing linkage or public open space requirements
that are linked to the size of projects and their mix of uses.
Mitigation may also include design features that minimize the project’s impact on the existing
infrastructure. For example, the retention of storm water and its reuse for landscaping may be
required on site to minimize the impact on the community’s limited potable water resources; a
shared use path may be built to encourage bicycling and pedestrian activity and thereby reducing
future traffic congestion; night-time lighting may be dimmed in order reduce light pollution,
especially in more rural areas. Many examples can be found across the country of sustainable
design techniques that reduce environmental or infrastructure impacts while also reducing a
project’s long term operating costs. More and more frequently these are included as required
project mitigation.
Other mitigation items will be identified by the Department of Environmental Protection via the
Massachusetts Environmental Policy Act (MEPA) Environmental Impact Report and the Secretary of
Environment’s Certification. At times, communities may simply reference the Secretary of
Environmental Affair’s Certificate relative to project mitigation. However, for transparency and ease
access, it is recommended that specific detail be provided in the municipality’s own development
agreement.
d. Public Benefits:
Public benefits include those investments the developer is willing to make in the community as a
good corporate citizen and which are not directly tied to impacts stemming from the development.
When working together, developers and municipal officials can be quite creative in identifying ways
the project can benefit the broader community, while also remaining within the allowances of the
project’s pro forma. Public benefits may include:
Employment agreements – this could include goals for the hiring of local, women and
minority firms or individuals during construction, goals for permanent hiring by the operator
or future tenants, or, commitment to particular outreach processes during recruitment;
7
M.G.L. c. 23K, § 10(c).
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Investments in parks and open space – this could include renovating or providing funds to
renovate an existing park or providing publicly accessible open space in excess of what is
required by ordinance;
Investment in expanded infrastructure - in some instances, if the infrastructure planned by
the developer was upsized, other development opportunities could open up to benefit the
city or town. In this case, the developer and municipality could work together to install the
larger infrastructure. The developer could provide the larger pipe, widened road, etc. at its
own cost as public benefit, the developer and municipality could share in the proportionate
cost of the improvement, or municipality could the enter into a recapture agreement where
the developer pays for infrastructure up front but is reimbursed by the community as
additional development occurs. The developer would carry the cost until that took place;
Acquisition of needed equipment – at times, project mitigation can justify the acquisition of
part of a piece of municipal equipment, such as a fire truck, based upon the number of units
added, but not an entire truck. A developer could elect to pay the outstanding balance as a
contribution to the community;
Community space - providing a “community room” within the development for public
meetings or funding for the construction of new or rehabilitation of existing community
spaces;
Participation in community events and marketing opportunities – such as sponsoring
festivals and special events or preparing marketing materials that highlight other areas of
the municipality or other local businesses;
Providing opportunities for local businesses to lease space within the development.
e. Financing:
This section will specify what the developer is paying for and what, if anything, the municipality is
paying for. Further, it would be wise for the municipality to satisfy itself that the developer has
adequate financing to complete the project. The municipality will often be dealing with a subsidiary
entity that has been specially created for the particular development project and has no assets of its
own. In that case, the most important assurance that the municipality can get is a guarantee from
the parent company that owns the assets. If financing is provided by an investment bank or
institutional lender, the municipality may want to insist on being privy to the general terms of the
financing, including anything that would be of record and is not confidential.
For items for which the developer is responsible, language in the development agreement will
include phrases like “The Developer, at its sole cost, will ….” If the municipality is participating in the
financing, the agreement will need to be specific about what kind of bond (e.g., general obligation or
revenue) is to be authorized, what votes will be needed and when, and what will happen should
they not materialize. If there is public infrastructure to be acquired by the municipality, the
agreement will include the standards with which the infrastructure must comply, the person (e.g.,
city/town engineer), who will determine whether the infrastructure should be accepted, when and
how payment will be made, and when the infrastructure will be deeded to the municipality and
whether the conveyance will be in fee simple or by easement.
At times, the developer and municipality may agree to partner in the pursuit of funding for public
infrastructure. For example, Massachusetts’ I-cubed (Infrastructure Investment Incentive) Program,
requires active collaboration between a developer and a municipality as they apply for funding from
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the Commonwealth.
As noted above, by law some types of public financing are not available to gaming establishments in
Massachusetts. Programs that specifically may not be accessed by gaming establishments include Tax
Increment Financing (TIF), District Improvement Financing (DIF), and I-Cubed (Infrastructure Investment
Incentive Program) ), as well as several tax credits or deductions. A gaming establishment is also
precluded from being designated as an economic opportunity area or a designated development district,
and therefore is not subject to the benefits that may be incurred by these designations.
8
However, the
Expanded Gaming Act’s list of prohibited public financing and tax credits does not preclude the use of
Title VII Public Welfare, Chapter 121A Urban Redevelopment Corporations, which allows for public
borrowing of funds for infrastructure that will be paid back by the developer.
f. Rezoning / Discretionary Approval Processes:
This section will identify whether rezoning of the property is needed, what the process will be, and
what the municipality would be willing to consider in terms of amendments to the zoning. Again,
depending on the process to amend the zoning bylaw, the signatories to the development
agreement may not be able to commit to approving the amendment to the zoning, but they can
commit to facilitating the process. Likewise for discretionary permits needed from a Zoning or
Planning Boards, Conservation Commission, Historic Preservation Commission, Design Review
Committee or other permit granting authority.
g. Roles and Responsibilities:
Although this section may repeat some of what has been outlined earlier in terms of project phasing
and entitlements, it can be used to clearly articulate what the municipality will be responsible for,
and when, and the same for the developer. Missteps can easily arise if one party thinks the other
party is taking a needed action and budgets can be seriously impacted if the allocation of
responsibilities, such as ongoing maintenance, has not been clearly defined.
A series of questions will likely need to be asked and answered. For example, will the municipality
take fee simple title to a new park or will public access be provided by easement? Will the
developer have any responsibility for landscaping after the park is accepted by the municipality? For
large projects and even for smaller projects, the development agreement may reference a
maintenance agreement and/or an open space agreement to be entered into between the
municipality and the developer once the project is near completion.
h. Worst Case Scenarios:
While no one wishes for a project to fail, planning for the worst and reaching agreement about the
steps to be taken before they need to be exercised, can reduce conflict and allow everyone to
respond more quickly during adverse circumstances. (See Planning for the Worst Case Scenario,
page 31).
8
M.G.L. c. 23K, § 49(a) and M.G.L. c. 23K, § 49(b).
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3. Stage 3 – More Focus:
In the final stage of a development agreement, additional detail and focus are provided. At this point,
the Developer’s due diligence will have been completed, as well as any independent studies that the
municipality has commissioned to analyze the developer’s data or address its own concerns, and the
developer will have begun the process of securing discretionary permits. With this work complete, all
parties may wish to review what was agreed in Stage 2 and redraft the language where necessary
and/or appropriate.
a. Final Project Description:
This will be the final description of the project. The description could still have ranges of square
footages and a list of potential uses, but they should be more refined than in any other version of
the development agreement. If permits have already been secured, then the language of the
approved permit(s) could be included in an addendum.
b. Labor and Sourcing Considerations:
In most instances, the development agreement will identify whether the project will be a closed
shop (union labor) or an open shop. If there is public money in the project, prevailing wage
requirements will apply and for clarity can be included in the development agreement. Local hiring,
living wage, and worker safety issues can also be detailed. Additionally, if the developer has
committed to procuring a percentage of goods and materials from local businesses, then that
commitment, including the definition of “local market,” will be needed in writing. (Issues of local
hiring and purchasing may have been pursued by the municipality earlier, but if agreement had not
been reached then, the topic could be broached again now that the developer is closer to initiating
construction.)
c. Hours of Work/Days of Work:
Insensitive contractors engaging in noisy work at all hours of the day and accepting deliveries at
night or in the early morning, will with certitude upset nearby neighbors. So that everyone,
including residents of the area, knows what is expected this section can address the hours and days
the construction crews be allowed to work, times for deliveries, and requirements for public street
closures or disruption of local utilities, if necessary. While some municipalities have noise ordinances
that constrain the hours of construction, others do not and language in the development agreement
can help everyone understand what activities are acceptable during different hours of the day and
days of the week. Even if a municipality has a noise ordinance, it could ask for greater restrictions in
construction activities, if appropriate (e.g., in proximity to hospitals, churches, schools, etc.).
d. Site Access by Contractors during Construction:
In this section of the development agreement, the municipality and developer will identify the union
and non-union gates and respective parking areas.
e. Performance and Payment Bonds:
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If there is public money in the project, the municipality could require that the developer procure
100% performance and payment bonds from the general contractor. Even if there is not public
money in the project, the municipality may consider this as a mechanism to guarantee that the
project (or components of the project) is completed.
4. Agreements regarding Ongoing Operations (Stage 2 or 3):
While considerable attention may be paid in a development agreement in getting the project to the
point that it is ready to open, less time may be spent considering how it will operate once open and
what the relationship will be between the operator and the local government. This is typically the
inverse of how time is actually spent – most successful projects will be open many more years than
they took to design and build. Therefore, time would be well spent considering how the developer
and municipality will interact after the grand opening.
Considerations may include:
a. Minimum Property Tax:
This is where the municipality is guaranteed the revenues expected from the project and when
those revenues will begin to be collected. One option is that the developer could pledge not to
challenge the real estate assessment or tax rate either for the lifetime of the project or for a defined
period of time. Going further, some municipalities have established a minimum expected property
tax payment, adjusted over time by inflation that the developer will guarantee at particular points in
time regardless of whether construction is complete or occupancy has taken place. This provision
has a secondary benefit of encouraging the developer to complete construction in order to have
revenue coming in.
Such a provision is particularly important where a property is changing use and buildings that
previously were generating property tax revenue are to be demolished. The longer the period
between the demolition and the opening of the new project, the greater the adverse impact to
municipal revenues. A collaborative developer could agree to make a payment in lieu of taxes
(PILOT) to the municipality during this period.
b. Minimum hotel or meals tax:
An increasingly important municipal revenue source for some municipalities is the hotel and meals
tax. The developer could guarantee a minimum payment in the event that various tenants do not
open on time so that the municipality receives the revenues anticipated.
c. Annual Payments:
In addition to tax payments, municipalities have negotiated ongoing payments for specific services
like police, fire, courts, etc.
In Detroit, MI, State legislation guaranteed the City a percent share of the casino’s gross receipts.
The City subsequently negotiated a one percentage point increase once an operator’s annual
winnings exceeded $400 million. At the time of writing, two of the three casinos had reached this
threshold.
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d. Minimum Maintenance Standards:
The Massachusetts Board of Building Regulations and Standards has not adopted the International
Code Council’s Property Maintenance Code. Nevertheless, the developer could pledge to comply
with the code. Furthermore, the developer could pledge a percent of revenue to be reinvested into
the property each year for non-structural interior and exterior renovations.
e. Inspections:
The fire marshal and health inspector will likely need at least annual access to a property to ensure
no violations are taking place or that a license should be renewed. For many development sites, this
is standard operating procedure and may not necessarily be included in a development agreement.
However, with gaming facilities, given their high level of security and cash handling operations, the
types of regular, ongoing inspections may need to be discussed and protocols developed to allow
municipal officials to perform their duties while taking into account on site security measures. In
addition, the auditor or treasurer/collector may need to make on-site inspections depending on the
type of revenue sharing agreement reached.
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HOW TO NEGOTIATE A DEVELOPMENT AGREEMENT
This section offers thoughts on a process to follow when negotiating a development agreement. Of
course, municipal officials will need to undertake those steps that meet their unique needs and the
circumstances of the project in consultation with legal counsel and their negotiating team.
Preliminary Schedule of Meetings
Negotiating a development agreement can begin as soon as the developer has site control. The tone of
the relationship going forward will be set at these early meetings. In negotiations where all parties act
with respect and listen to each other’s perspectives, a win-win agreement can be reached; one in which
everyone benefits from the new development and no one is taken advantage of. To have such a
successful outcome, it is recommended that all parties recognize they are entering into a long-term
relationship, and further, if one party feels it has been taken advantage of during the early negotiation
process, that ongoing relationship may be unnecessarily challenging.
1. Prior to meeting:
Municipal leadership will want to consider in advance who they will have on the negotiating team. Not
everyone may be needed at every meeting, but it may be worthwhile to consider the skills and expertise
available in house, while also considering how to supplement that expertise with outside consultants.
Most commonly a municipal team will include an experienced attorney, planning staff, engineers and
transportation planners, a financial advisor, and someone who can speak on behalf of the mayor, town
manager, or board of selectmen. Gathering these individuals and consultants together and taking them
away from their other duties will likely represent a significant cost to the municipality, so municipal
leaders may want to be direct about asking for funding from the developer to get the necessary experts
together and committed to reviewing and negotiating the development agreement.
2. First Meeting:
The first meeting can start with a round of introductions where everyone present summarizes their
background and experience. If the development team is lacking key expertise, there is nothing wrong
with suggesting, politely, and at the end of the meeting, that they add an entity to their team that offers
what is missing.
The developer should have an opportunity to present the project in general terms. How many acres is
the site? Roughly how many square feet of each land use category are being considered? How many
residential units or hotel rooms are planned? The team should also ascertain whether the developer
thinks it is going to need regulatory or financial assistance from the municipality and in what form (e.g.,
rezoning, tax incentive, etc.). This information will be refined later, but for now it will provide an idea of
the scale of the project and the anticipated level of community contribution.
Gaming legislation in Massachusetts prohibits the use of State grant programs like I-Cubed or local
funding initiatives like District Improvement Financing (DIF) and Tax Increment Financing (TIF). The
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Edward J. Collins Jr., Center for Public Management Page 24
Gaming Act does not preclude the use of Title VII Public Welfare, Chapter 121A Urban Redevelopment
Corporations which allows for public borrowing of funds for infrastructure that will be paid back by the
developer.
The municipal team may wish listen to what is presented and take notes for further (internal) discussion,
rather than reacting immediately to individual points. However, before closing the meeting, the
municipal team could take time to explain the community’s vision, plans, and goals for the general area
where the project will be constructed, and for the city as a whole so that the developer has a better
understanding of the community’s aspirations. From this initial discussion, the developer may be able
to make a self-assessment whether the proposed project is likely to gain community support. (Similarly,
the municipal team should quickly determine if the proposed project advances the community’s vision
and if further discussion could be productive. If it the project is likely to face significant hurdles,
whether these be technical issues such as zoning and infrastructure or whether it be past opposition to
similar projects, it would be appropriate for the municipal team to let the developer know
expeditiously.)
If the proposed project merits further consideration, additional details will need to be discussed:
Technical Assistance: Large and complex projects will often require more attention and technical
experience than most communities can provide. If this is the case, municipalities regularly inform
developers that they will need to provide funding for additional support during the planning,
permitting, and construction phases. Services may include planners, landscape architects,
designers, civil engineers, transportation planners, real estate attorneys, financial advisors, and
similar professionals. Additionally, the municipality may need to hire a project manager to assist
municipal officials during the course of development.
Timeline: If the developer has a target opening date, the team will want work backwards from that
date to see if all the public meetings, hearings, and review periods can be accommodated in that
window. If that schedule is not realistic, the developer should be so informed. Together, all can
then project forward using both statutory deadlines and worst case estimates to ballpark a more
realistic date, taking into account the need for community participation in the process.
Point of Contact: Establish a single point of contact or project manager for the municipality and the
developer. If no single person on the municipal team has been given overarching responsibility to
keep track of deliverables and know all that is going on, potential exists for pieces to be missed and
deadlines passed. The same is true for the developer’s team.
Next Meeting: As the second meeting is being scheduled, it would not be inappropriate to ask the
developer to have two things available for that meeting. The first would be a written narrative and
conceptual drawing(s) that can be used internally when communicating to various municipal
departments and partners. The second would be a signed letter of agreement stating that the
developer will provide funding up front for the municipality to secure the needed technical
assistance, the terms of which will be documented in the development agreement.
Shortly after the conclusion of this first meeting with the developer, the municipal team will want to
have an internal meeting. It is important to gauge the team members’ reaction to the project and
identify any issues regarding the project concept. Quickly identify areas that will need further and more
detailed examination. For instance, the municipal engineer may want to look at the existing sewer and
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Edward J. Collins Jr., Center for Public Management Page 25
potable water service in the area or the planner may want to quickly determine whether the project
generally complies with the zoning bylaw or whether modification may be needed. This review will give
the team an idea as to what existing plans/regulations will need to be updated and what additional
studies and analysis will need to be done. The lead municipal official will also likely want to begin
research on the developer, where they have worked before, what are the experiences of those
communities, who the developer’s partners are, and what are their reputations.
3. Second Meeting:
The team may wish to start the second meeting by asking for the signed letter agreement from the
developer to provide funding for technical assistance. If the developer is not forthcoming with such an
agreement, the meeting is a good time to address these concerns. Most municipal purchasing and
financial officials will require the funding to be encumbered before a contract can be executed. While
the municipality could fund the expense out of its general operating budget and then wait for a
reimbursement, forward funding from a developer will ensure that the project will not affect the
operating budget or municipal cash flow.
In addition to funding being provided directly from the developer/gaming applicant, funding for
technical assistance for the review and consideration of gaming establishments is available to host and
surrounding communities through the Massachusetts Gaming Commission via three different
mechanisms:
First, under M.G.L. c. 23K, § 15(11), the Massachusetts Legislature has required that, “not less than
$50,000 of the application fee shall be used to reimburse the host and surrounding municipalities for the
cost of determining the impact of a proposed gaming establishment and for negotiating community
mitigation impact agreements”.
9
The Gaming Commission’s Community Disbursements program does
not limit the amount of assistance to $50,000 (http://massgaming.com/wp-content/uploads/memo-on-
community-disbursements-1-29-2013.pdf). If a host community or surrounding community reaches
agreement with a gaming applicant on funding to be made available for technical assistance, the
community and gaming applicant can jointly sign and send a Letter of Authorization to the Commission.
After the Comission processes a Grant Agreement with the community, the Commission with then
provide the amount requested to the municipality via a grant agreement. If the amount requested is
greater than the $50,000 reserved, the Commission will require the applicant to provide additional
funds prior to disbursing them to the community. By issuing the funds in the form of a grant, towns will
not need to wait until Town Meeting to appropriate and begin utilizing the funds.
Second, the Gaming Commission has established a system whereby gaming applicants and potential
surrounding communities can use the state’s Regional Planning Agencies (RPAs) to help evaluate the
potential impacts of a gaming facility and advise potential surrounding communities. If an applicant
agrees to participate in the RPA process, the RPA or RPAs will convene nearby communities to review
the proposal for a gaming facility and will provide technical assistance to those
communities. Participation by potential surrounding communities is voluntary by such communities. A
community does not need to be deemed a “surrounding community” to be able to participate in the
RPA process. One of the main purposes of the RPA process is to help communities understand any
impacts from the gaming facility in advance of the filing of the gaming application with the Commission.
9
M.G.L. c. 23K, § 15(11)
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 26
Lastly, if necessary, potential surrounding communities can petition the Commission to require
applicants to provide technical assistance funding. Such a petition can occur no earlier than 21 days
after the execution of a host community agreement. According to the Commission, “[t]his [21] day
limitation is included…partly in recognition that unless a host community agreement can be executed,
there would be little reason for an applicant to execute agreements with surrounding communities.”
10
The municipality will likely want to provide the developer with an understanding of the requirements for
entitlements and permitting. It will be important for the developer to understand the sequence
involved. For example, the municipality may need to amend the zoning bylaw and/or zoning map
before an application can even be submitted. The rezoning process will likely require one or more
public hearings before the planning board and may need to be sent to Town Meeting for approval. Each
of these steps has unique deadlines, and public notification and hearing requirements. Since no one can
know the exact length of time required, it may be advisable to present best and worst case timing
scenarios. That said, it is ultimately the responsibility of the developer to know what needs to be done
and when it needs to be done. This document is not suggesting that the municipality should take on
that responsibility for the developer.
The second meeting is a good time to start outlining the development agreement. Both parties will
hopefully understand that the development agreement is an evolving document which will need to be
amended. This first outline could identify the project concept in terms of total square feet of the site,
key components and uses with their size, and number of rooms/units. At later meetings the outline will
grow to include responsibilities, timelines, financing, and other items. The municipal attorney could also
schedule a series of weekly or biweekly meeting with the developer and appropriate team members to
negotiate the terms of the development agreement.
It is recommended that the municipality’s project manager, working in consultation with the
municipality’s attorney, be the principal author of the development agreement, taking time to discuss
the draft agreements with department directors and other officials before providing it to the developer.
If the project manager uses simple language to outline the terms of the deal, the municipal attorney can
than turn it into a legal document.
4. Additional meetings:
Additional meetings will likely be required to finalize the development agreement and regular standing
meetings could be established until the document has been finalized. At each meeting revised copies of
the agreement could be reviewed. For a large, complex project to move forward expeditiously, all
parties will need to be clear on their responsibilities and be timely in their duties whether this be
preparing technical analyses, drafting an update of the agreement, or reviewing the agreement and
providing feedback.
10
“An important message to potential surrounding communities about licensing timelines and technical
assistance”, MA Gaming Commission blog, accessed on May 10, 2013,
http://massgaming.com/blog-post/an-important-message-to-potential-surrounding-communities-about-licensing-
timelines-and-technical-assistance/, revised to reflect regulatory changes proposed by the Commission on May 16,
2013 .
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 27
Mitigation & Public Benefits: Additional Considerations
The project mitigation and public benefit components of a development agreement are sections elected
officials and community members will likely examine meticulously in order to see if their interests are
being addressed. They will want to know that all requisite technical studies have been completed to the
highest quality and that municipal representatives have sought protections for the community that will
prevent potential negative impacts from occurring (mitigation) and/or that the developer is becoming a
supportive member of the community by offering some contribution that may not strictly be part of
project impacts (public benefits). This is also a point in the negotiation where the developer may feel
that a municipality is making unrealistic demands that cannot be met within the project pro forma.
Although the mitigation and public benefit sections of the development agreement will not be finalized
until various studies have been completed, a few steps can be taken early to help make the discussion
productive:
1. Vet each other’s consultant team:
While neither party has the authority to dictate who the other will use as technical experts, if both sides
are comfortable with the qualifications of the other’s experts, each will be more likely to be comfortable
with the results produced. Perception will be important here. If community members feel that a
particular consultant has not addressed their needs in the past on a prior project, they may treat that
consultant’s results with suspicion. A consultant team’s ability to communicate to non-technical people
is also an important aspect of their skill set.
2. Establish a process to be followed if the experts make different findings:
What will happen if the consultants do not agree? Will the parties select a third consultant to evaluate
both results? It is best to define the process in advance in order to not lose time negotiating the process
after conflict has already arisen.
3. Make sure the municipality has a great negotiator on their team:
Municipal officials should recognize that they often approach a negotiation seeking a “win win” solution,
whereas private interests may come with a “me win” attitude. If this is potentially the case, it will be
important to seek a lawyer or other expert familiar with the other side’s type of business enterprise, so
he or she can help define what should be expected in a mitigation and community benefit package. A
sophisticated developer should also want the municipality to be adequately equipped, because if
community members feel that a negotiation has been stacked against them, they can seek to halt the
project by voting negatively on a rezoning proposal, dragging out the land use permitting process,
and/or potentially entering into litigation to stop the project.
The Massachusetts Gaming Act includes important provisions to enhance the bargaining power of a host
community, beyond their statutory land use authorities. First, an applicant will have to work with local
officials of the host community to negotiate and agree upon the terms of a site specific proposal. The
applicant will also be required to negotiate with surrounding communities to ensure that the proposal
takes into consideration and mitigates the impact that such a development would have on surrounding
communities. Further, the site specific proposal must be approved by the host community through a
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Edward J. Collins Jr., Center for Public Management Page 28
town referendum or, if in a large city, a referendum of the voters who reside in the particular ward in
which the facility is proposed to be located.
4. Value the municipality’s in-house expertise:
The municipal employees who are responsible for the local water, sewer, and roadway network have an
important contribution to make in terms of practical knowledge and, very often, decades of local
infrastructure history and real world experience. If they say, “we tried that before and it did not work,”
take that into account and seek to solve the problem differently. On the other hand, municipal staff will
need to recognize that advances in technology can successfully address formerly insurmountable
challenges.
5. Don’t get greedy:
Negotiation classes and books teach participants to come to the table with outrageous demands to drag
the discussion toward what they want and away from what the other side desires. If everyone is aware
of this technique, is it really necessary to use it? It is important to remember that if the project goes
forward, the developer and municipality will be in a relationship for decades to come. In theory, at
least, it should be possible to start off with honest communication that helps each understand the
other’s perspective. Of course, that honesty must be reflected on both sides of the table for the success
of the business relationship and for the agreement that is drafted to be sustainable over the long term.
Municipal officials should be wary if they are the only ones readily offering information and engaging in
problem solving.
6. Try to identify public benefits that address neighborhood and municipality-wide goals:
Unlike mitigation, public benefits do not need to be directly tied to the project. A list of improvements
that benefit a broader section of the community can be considered. Additionally, not all public benefits
need to be made at the time of initial investment. Some could come in future years from a capital fund
or from future municipal operating revenues, including voluntary property tax surcharges. Development
financing is not the only funding mechanism. It is not inconceivable that a development agreement
establish a regular payment schedule that extends over a period time to be used for initially undefined
community benefits. A municipality might then bond against this long term revenue stream to make
larger capital investments in the near term – or they could directly use the funds for a series of more
modest projects.
7. Establish a contingency fund and/or process:
The best of all studies may not identify all of the potential impacts of a development project. Some may
only be discovered after opening. The agreement might establish a mitigation fund and/or process to
evaluate and address unforeseen impacts to avoid future disagreement.
8. Develop an outreach and communications plan:
Making technical information available and transparent and engaging with the public at an early stage
can help gather all perspectives and begin to generate community buy-in. Many municipal officials have
learned the hard way how vitally important it is to allow all parties to share their points of view. If
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 29
people feel they are being heard and their comments taken into account, they are more likely to support
the outcome even if it is not 100% of what they wanted. Ways to garner community support include:
Holding a meeting(s) on-site or allowing for site visits so attendees can get an understanding of
the scale of the project and how it relates to nearby properties, where possible;
Gaining an understanding of existing challenges in the vicinity and showing how the project will
either not exacerbate the problem or, preferably, will address the problem;
Creating high quality visuals so that residents can understand what the project will look like in
three dimensions instead of just through a horizontal plan; or,
Offering community members a tour of other nearby sites built or operated by the development
team.
Planning for the Worst Case Scenario
While no one wishes for a project to fail, it is recommended that municipal officials be prepared for the
worst since developments that remain incomplete can have serious negative impacts. They reduce
public revenues as anticipated property taxes are not realized, drain public resources as code
enforcement, police, and fire officials respond to site conditions, and impact the quality of life as
residents have to bear with construction fencing and debris that never goes away.
In recognition of this, some development agreements include provisions that allow the municipality to
ensure that a property does not lie fallow for years should the developer be unable to complete the
construction. Possible mechanisms and examples include:
Fines / Penalties
An agreement could include the payment of financial penalties to help ensure that construction
progresses. In the event the penalty alone is not sufficient to ensure that work proceeds, the
municipality can use the funds received to make sure the site remains safe and secure and to help
address any budget shortfall resulting from the delayed opening of the project.
Quincy, Massachusetts: “Cessation of Construction of Private Improvements. If, except for a
Force Majeure Event, the Redeveloper stops work on any Private Improvement (including, for
this purpose, any Parking Public Improvement which is part of a Private Improvement) for more
than ninety (90) consecutive days, (a) the City may give notice to the Redeveloper to
recommence such work within the next sixty (60) days, and (b) starting with the ninety-first
(91st) day, the Redeveloper shall pay the City a penalty in the same manner as aforesaid in the
amount of One Hundred Thousand Dollars ($100,000) per month for the first three (3) months
and Two Hundred Thousand Dollars ($200,000) per month thereafter until such work is
recommenced.”
For gaming establishments, the Massachusetts Gaming Commission will have established a date by
which a licensed establishment is expected to be open and operating, and will have statutory authority
to take action if the deadline is not met. Specifically, Section 10(b) of the Gaming Act states, “A licensee
who fails to begin gaming operations within 1 year after the date specified in its construction timeline,
as approved by the commission, shall be subject to suspension or revocation of the gaming license by
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 30
the commission and may, after being found by the commission after a hearing to have acted in bad faith
in its application, be assessed a fine of up to $50,000,000.”
11
Reverter / Acquisition
In the most draconian agreements (particularly appropriate where a redevelopment authority acquires
property by eminent domain for a development), there might be a right of reverter allowing the
authority to take back possession of the property. Another option would be a provision that allows the
municipality to acquire the property and transfer to a third party after a specified period of time after
construction has ceased. This Purchase Option would give it the municipality the right to acquire the
property for a predetermined price or assume the developer’s mortgage.
Somerville, Massachusetts: “Applicant shall have entered into an agreement ( "Option
Agreement') with the Somerville Redevelopment Authority ("SRA”), giving the SRA and/or its
nominee, for a period of five (5) years from the date of said Option Agreement, the right to
purchase (Option to Purchase) the Property, at a date and time to be determined by the SRA,
provided however, that the SRA shall not exercise such Option to Purchase if the Applicant is
proceeding expeditiously to develop a project at the Property conforming to the Development
Agreement, as demonstrated by the filing of an application for a building permit, the
commencement of construction, and the receipt of a temporary occupancy permit. The Option
Price shall be the fair market value determined by “mutually agreed upon," commercially
reasonable, method based on independent third party appraisals by qualified appraiser.”
“Acts of God”
The agreement could also require the developer to rebuild in the event of destruction fire, flood, or
other catastrophe, instead of walking away from a damaged or destroyed property.
Detroit, Michigan: “In the event of damage to or destruction of Improvements on the Project
Premises or any part thereof by fire, casualty or otherwise, Developer, at its sole expense and
whether or not the insurance proceeds, if any, shall be sufficient therefor, shall promptly repair,
restore, replace and rebuild (collectively, "Restore") the Improvements, as nearly as possible to
the same condition that existed prior to such damage or destruction (subject to Developer's
right to make Alterations in accordance with the terms of this Agreement), using materials of an
equal or superior quality to those existing in the Improvements prior to such casualty.”
Future Obsolescence
The agreement can also presuppose how the property will be used upon its obsolesce or needed change
of use. At times, some buildings are so purpose-built and ill-suited to future reuse that they increase the
cost of redevelopment and can thereby reduce buyer interest in a site. In this case, a commitment to
demolition could be required as part of the development agreement or a bond to offset the demolition
cost could be required.
Hammond, Indiana: The developer is required to post a bond in an amount sufficient, to pay for
the demolition of a parking deck and other improvements should the project fail.
11
M.G.L. c. 23K, § 10(b).
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CONCLUSION
Developing real estate is a risky proposition for both the developer and municipality. However, with a
thoroughly-vetted, well-considered development agreement, both parties can achieve their goals,
protect themselves from common mistakes, and create a project that will benefit the community for
years to come.
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APPENDICES: SAMPLE DEVELOPMENT AGREEMENTS
While development agreements will be unique to the individual project and municipality, a review of
multiple agreements shows that they typically include common elements and a common structure.
Attached are copies of five different development agreements and a brief analysis of each, showing how
the respective communities addressed complex development processes.
The attached agreements and the accompanying analysis are for illustrative purposes only and are in no
way intended to provide legal advice. Questions about Massachusetts municipal and real estate law
should be addressed to a qualified attorney.
Sample development agreements include:
MGM Grand Casino – Detroit, Michigan
M Resort and Casino – Henderson, Nevada
New Quincy Center – Quincy, Massachusetts
Assembly Square – Somerville, Massachusetts
City Square – Worcester, Massachusetts
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Proposed Casino District, Detroit, MI
Development Agreement Synopsis: MGM Grand Detroit, Michigan
Signatories
Mayor
Developer
Legislative Approvals
City Council
Year Executed
1998
The agreement between the MGM Grand
Detroit, LLC and the City of Detroit is one of
three nearly identical agreements that were
initially executed for the redevelopment of the
“Casino District”, formerly industrial land just north of downtown Detroit. In total,
the Casino District anticipated the construction of three casinos. After attempting
to move forward with the district approach and being unsuccessful, the City
ultimately entered into different agreements with the casino developers on
different sites. Nevertheless, the original development agreement is illustrative of a
project that required considerable land acquisition and coordination among multiple
developers.
The district plan called for the City of Detroit, through its Economic Development
Corporation, to acquire 60 acres of private land through eminent domain and combine this with 20 acres
of land the City already owned, for a total of 80 acres. The three developers pledged to reimburse the
City for their pro rata share of the acquisition and infrastructure costs provided the total not exceed
$250 million. The City pledged to contribute $50 million to acquire additional public land and make
relocation payments, payable in either cash or land. If the City was not able to acquire the site, it
pledged to work with the developers to find new sites. The agreement included significant commitments
to community benefits and provisions for local hiring and sourcing.
In the following agreement, MGM Grand Detroit proposed to invest $700 million to build a 100,000
square foot gaming floor, with 800 hotel rooms, 12 restaurants, a 69,000 square foot meeting and
convention facility, a performing arts theatre, and 30,000 square feet of retail space.
Michigan law requires a Municipal Services Fee of $4 million or 1.25% of adjusted gross receipts,
whichever is larger, annually, to assist the City in defraying the cost of hosting casino operations. At the
time, the State planned to levy a tax of 18% of adjusted gross receipts, of which 55% would go to the
City to pay for eight specific programs identified in the legislation. The City would also receive a 9.9%
share of adjusted gross receipts, which use would be unrestricted. (It should be noted that the actual
percentage today is greater than was anticipated when this development agreement was executed.)
When it was clear that the district approach would not move forward, the Michigan Gaming Control
Board adopted a resolution allowing the development of Temporary Casinos which are allowed to
operate while a permanent location was being constructed. Ultimately different agreements with the
To download
development
agreement for
MGM Grand,
Detroit, MI
(1998)
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 36
individual casino developers eventually took the place of this agreement, but it still remains of interest
due to its collaborative approach.
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Edward J. Collins Jr., Center for Public Management Page 37
Interesting and Unique Provisions:
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
1.1 Definitions.
(114) "Performance Threshold" means EBITDA [Earnings
Before Interest, Taxes, Depreciation, and Amortization
(debt payments)] … of at least Twenty‐Two Million Five
Hundred Thousand Dollars ($22,500,000) for the most
recent trailing twelve month period…
The City expects a certain amount
of tax revenue based on total
revenue and requires that the
casino meet a minimum
performance level.
2.4 Commencement of Rights and Obligations.
(a) This Agreement shall confer no rights and impose no
obligations until the Effective Date.
Notwithstanding…until each of the following conditions
has been fully met:
The City and the Developer are
signing an agreement that, while
not immediately in effect,
establishes requirements and duties
for each party and starts the clock
with regard to key milestone dates.
(d) Notwithstanding anything to the contrary contained in
this Agreement, this Agreement shall automatically
terminate if all of the conditions set forth in Sections
2.4(a)(1) through 2.4(a)(14) above are not satisfied or
waived on or before December 31, 1999.
The referenced conditions are not
considered Events of Default, and
therefore are not subject to
remedies other than the
termination of the agreement
without penalty or appeal. (See
Article X of the agreement for
Events of Default, Remedies, and
Termination.)
2.5 Conveyance of Project Premises to Developer.
(b) Within five (5) Business Days following the approval of
City Council referred to in Section 2.5(a), Developer shall
furnish EDC with a letter of credit in an amount equal to
its Pro Rata Share of Feehold Compensation and in such
form and upon such terms and conditions as are
reasonably necessary to allow City to acquire the Casino
Area and the Public Land.
The letter of credit will provide the
City with reassurance that the
Developer will acquire the land
from the City once the City secures
it from the current property owner.
2.6 Compliance with Other Commitments.
(a) Developer agrees that the Total Cost, exclusive of the
Feehold Compensation, shall not be less than Six Hundred
Million Dollars ($600,000,000).
This provision establishes a
minimum level of investment, a
figure which was not established in
the authorizing legislation.
(b) As set forth on Exhibit 8.1(g), Developer agrees to use
commercially reasonable efforts to acquire all or some of
its financing from a Detroit‐Based Business, a Detroit
Resident Business and/or a Small Business Concern and/or
to utilize Detroit‐based and/or Minority‐owned financial
institutions in serving Developer's financial needs.
The Developer commits to trying to
secure financing from local financial
institutions.
2.6 Compliance with Other Commitments.
(d) Developer agrees that no fewer than three thousand
three hundred (3,300) full‐time equivalent employees will
be employed at the Casino Complex immediately
following Completion, exclusive of construction workers,
This establishes a minimum
employment threshold.
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SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
and thereafter, subject to Section 7.17, will employ such
number of employees as may be appropriate in the
exercise of Developer's reasonable judgment to operate
the Casino Complex in a manner consistent with First Class
Casino Complex Standards and in compliance with this
Agreement.
(e) Developer agrees to use reasonable best efforts to
attain the goals of employment of Detroit residents set
forth in Exhibit 8.1(q).
The Developer commits to trying to
hire local residents.
(j) Developer shall use reasonable best efforts to ensure
that at least thirty percent (30%) of aggregate amounts
expended by Developer under contracts entered into by
Developer for the construction of, or any material
additions, improvements or modification to the Casino
Complex shall be paid to Detroit‐Based Businesses, Detroit
Resident Businesses, Small Business Concerns, minority
business concerns or women‐owned businesses.
The Developer commits to trying to
buy from local businesses.
2.8 Payment of Development Process Costs.
Upon the Effective Date, Developer shall pay to City the
sum of One Million Dollars ($1,000,000) toward its
Allocable Share of the Development Process Costs.
Thereafter, City and/or EDC shall invoice Developer from
time to time…
Funding is provided by the
Developer for dedicated project
management staff and expenses,
and third-party technical assistance
including, planners, financial
advisors, and outside counsel.
2.18 Funding of Excess Costs.
(b) If Schedule A [estimated total cost; site acquisition,
offsite infrastructure improvements, and environmental
remediation] reflects an estimate in excess of Two
Hundred Fifty Million Dollars ($250,000,000), the City,
through the Mayor, may, subject to approval of the City
Council, within ten (10) Business Days thereafter,
determine whether the project described in the EDC Plan
is suitable for public purposes. In the event the City
determines that such project is still suitable for public
purposes, the City shall proceed with the project
described in the EDC Plan. If the City determines
otherwise, the City and the EDC shall use their
commercially reasonable efforts to locate a suitable
alternate site for Developer to develop, construct and
operate the Casino Complex.
The development agreement never
officially states an actual amount
that the developer will pay for the
site; instead, the developer commits
to pay its pro rata share of the cost.
The same is true for the off-site
infrastructure. This section seems
to imply that the three developers
will not agree to pay more than
$250 million. If Schedule A exceeds
that amount then the City will
determine whether to proceed or
will it help the developer find
another site.
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SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
3.2 Financial Covenants.
Subject to Section 3.7, Developer shall maintain (i) at all
times on and after the Completion Date a Leverage Ratio
of not greater than 3.35 to 1 or Net Worth of no less than
$165 million; (ii) commencing with the end of the fourth
full fiscal quarter subsequent to Completion, a Debt
Service Coverage Ratio of at least 1.0 to 1; and (iii)
commencing with the end of the eighth full fiscal quarter
subsequent to Completion, a Debt Service Coverage Ratio
of at least 1.2 to 1. The obligations of Developer under this
Section 3.2 shall lapse and be of no further force or effect
seven (7) years after the Execution Date.
The City wants to make sure that
the Developer will remain
financially viable, especially during
the early years of operation.
4.8 Integrated Complex.
Developer agrees that it shall design the Casino Complex
as an integrated complex. The goal of the Development is
that the buildings, landscaping and other pertinent
improvements will blend together and join pleasantly with
adjacent properties to create an elegant environment,
compatible with City's urban context.
The Developer agrees to design the
facility to contribute to its
surroundings.
4.11 Infrastructure Improvements.
Provided Schedule A reflects an aggregate estimate of not
more than Two Hundred Fifty Million Dollars
($250,000,000) or such higher number as shall have been
approved in writing by Developer, Developer shall pay City
for Developer's Pro Rata Share of all reasonable and
documented hard and soft costs for Infrastructure
Improvements prior to the time that City pays any costs
related thereto…
Neither the City nor the EDC shall be responsible to pay
for or otherwise fund the construction of any
Infrastructure Improvements, such costs and expenses
being the sole responsibility of the utility in the case of
any private or quasi‐public utilities or the responsibility of
Developer in all other circumstances.
The Developer agrees to pay for
infrastructure improvements in
advance rather than as a
reimbursement to the City. The
City is not funding any
infrastructure improvements.
6.2 Performance of the Work.
(a) Developer shall cause Contractor(s) to:
(1) Provide, furnish and maintain at its expense during the
construction period of the Casino Complex an appropriate
separate facility located at the project area for use by the
PM and the PM's staff as a field office.
The Developer agrees to provide on-
site facilities for the Project
Manager.
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Edward J. Collins Jr., Center for Public Management Page 40
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
6.3 Commencement and Completion of the Work.
… Developer agrees to use commercially reasonable
efforts to open to the public for their intended use no less
than ninety percent (90%) of the retail and ninety percent
(90%) of the restaurant space within nine (9) months
following the Completion Date…
This establishes retail/restaurant
lease targets, because they are
integral to the total project.
6.6 Construction Matters.
(a) For the purpose of verifying compliance with this
Agreement, Developer and the Contractor(s) shall keep
such full and detailed accounts as shall be sufficient to
verify the costs of the Casino Complex. Subject to Article
XVII, City and/or EDC shall be afforded access to
Developer's Books and Records and Developer shall
preserve all such Books and Records pertaining to the
Casino Complex for a period of six (6) years from creation
of such Books and Records, or for such longer period as
may be required by law. Developer shall cause the
Contractor Agreement to contain a provision similarly
binding Contractor.
The Developer commits to open
book accounting for all
construction-related activities.
6.7 Failure to Complete by Agreed Upon Opening Date.
… delay in Completion will result in substantial injury and
additional costs to City and/or EDC. If Completion occurs
subsequent to the Agreed Upon Opening Date, …
Developer shall pay to City… an amount per calendar day…
equal to the lesser of (i) $118,290, or (ii) …twenty‐five
percent (25%) of the City's share of the aggregate
Wagering Tax and Municipal Services fee…
This sub-article establishes a
penalty for not opening on time,
thereby providing the City with a
revenue source to take place of
gaming revenue and taxes
potentially lost if the facility opens
late.
7.3 Radius Restriction.
(a) … neither Developer, Parent Company, any Casino
Manager … shall directly or indirectly (i) manage, operate
or become financially interested in any casino within the
Radius other than the Casino Complex or the Temporary
Casino, …
This prevents the Developer from
building a new facility in proximity
to Detroit which could siphon off
revenues from the City and/or
create a potential monopoly.
7.6 Marketing Cooperation and Coordination.
… Developer agrees to construct, at its expense, a visitor
information center (the "Center") in the Casino Complex.
This allows for cross marketing of
area amenities to casino guests.
7.10 Financial Statements; Annual Business Plan.
… Developer fails to meet or exceed the Performance
Threshold, Developer shall, within thirty (30) days
thereafter, prepare and make available to City for review
an Annual Business Plan for the upcoming twelve (12)
month period. The City shall be allowed to review and
make notes from the Annual Business Plan provided that
City shall use reasonable efforts to keep the information
contained in the Annual Business Plan confidential.
The City wants to make sure the
Developer is doing everything
possible to meet its performance
threshold and therefore tax
revenue.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 41
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
7.13 Negative Covenants.
Developer covenants that except as indicated or as
otherwise required by applicable law, at all times during
the term of this Agreement:
In addition to what the Developer
will do, this is a list of things the
Developer will not do. Some of
these include restrictions to
restructuring the development
team, including local partners.
16.1 Damage or Destruction.
In the event of damage to or destruction of Improvements
on the Project Premises or any part thereof by fire,
casualty or otherwise, Developer, at its sole expense …
shall promptly repair, restore, replace and rebuild
(collectively, "Restore") the Improvements… to the same
condition… If neither Developer nor any Mortgagee … fail
to proceed … Agreement, City may, but shall have no
obligation to, complete such Restoration at Developer's
expense.
The development (and the
anticipated cash flow from taxes) is
an asset to the City that the City
must protect. This provision
requires the Developer to rebuild in
place after damage or disaster.
(The NYC World Trade Center lease
similarly required the replacement
of lost commercial property.)
16.3 No Termination.
No destruction of or damage to the Improvements, or any
portion thereof or property therein by fire, flood or other
casualty, whether such damage or destruction be partial
or total, shall permit Developer to terminate this
Agreement or relieve Developer from its obligations
hereunder.
This section indicates that damage
or destruction does not terminate
the agreement.
17.1 Financial and Accounting Records.
… during such periods as Developer fails to meet or
exceed the Performance Threshold, Developer shall make
available and require each Casino Component
Manager/Operator to make available to City's third party
consultants ("City's Consultants") for their review, full and
accurate Books and Records reflecting the results of the
Casino Complex and, if applicable, any Casino Component
Manager/Operator's operation of the applicable
Component.
The Developer commits to open
book accounting on non-
construction-related activities only
when the Developer certifies that
the development has not met its
performance threshold. Such
financial information is typically
limited to owners.
19.1 Access and Inspection.
(a) City and/or its representatives shall have the right at all
reasonable times … to enter the Development for the
purposes of (1) inspection, (2) making of such repairs or
performing such acts that City and/or EDC shall have the
right to make or perform by the Agreement provisions, or
(3) determining whether Developer is complying with the
terms and conditions of this Agreement…
The City is given the authority to
make repairs. Municipalities
typically only have the right to
make inspections.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 42
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
20.2 Temporary Casino Site
(b) At the time Developer submits the Temporary Casino
Design Documents in accordance with Section 20.4,
Developer shall submit plans for the reuse of the
Temporary Casino Site and the Improvements thereon
subsequent to Completion.
The temporary casino may not be
simply abandoned, but must be
reused, creating a valuable
(taxable) asset for the city.
21.2 Non‐Action or Failure to Observe Provisions of this
Agreement.
The failure of City, EDC or Developer to promptly insist
upon strict performance of any term, covenant, condition
or provision of this Agreement, or any Exhibit hereto, or
any other agreement contemplated hereby, shall not be
deemed a waiver of any right or remedy that City, EDC or
Developer may have, and shall not be deemed a waiver of
a subsequent default or nonperformance of such term,
covenant, condition or provision.
If City or the Developer forget or
otherwise fail to enforce some part
of the agreement, they have the
right to go back and enforce it.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 43
M Resorts, Henderson, NV
Development Agreement Synopsis: M Resorts Henderson, Nevada
Signatories
Mayor
Developer
Legislative Approvals
City Council
Year Executed
2008
In 2008, the Henderson Nevada City Council
passed an ordinance that adopted the
Development Agreement and associated exhibits
negotiated by the Mayor and his staff with the M
Resorts, LLC. Included in those exhibits were the conceptual utility designs,
infrastructure payment schedule, mitigation details, and the approved Planning
Commission Design Review Application, Comprehensive Plan Amendment, Zoning
Change, and Conditional Use Permit.
The agreement with M Resorts LLC was for the construction of a multi-phase
development on 83 acres in Henderson, Nevada. The site was divided into four
planning areas (one Resort Hotel Planning Area and three Mixed Use Planning
Areas).
Planning Areas
Total Land Area
Resort Hotel Area #1
46.7 acres
Mixed Use Area
36.3 acres
Mixed Use Planning Area #1
8.3 acres
Mixed Use Planning Area #2
26.2 acres
Mixed Use Planning Area #3
1.8 acres
Total
83.0 acres
The Resort Hotel Planning Area #1 provided for 160,000 square feet of casino, 130,000 square feet of
theater, 190,000 square feet of non-casino restaurants, 1 million square feet of non-casino retail,
150,000 square feet of convention, 3,000 hotel rooms, and a heliport. The Mixed Use Planning Areas #1
(not to be confused with Resort Hotel Planning Area #1) and #2 allowed a maximum of 3,000 multifamily
mid- and high-rise housing units over retail. Mixed Use Planning Area #3 permitted a retail gasoline
sales establishment and three drive-thru windows.
The first phase of development on the Resort Hotel Planning Area #1 consisted of a 92,000 square foot
casino, 390 hotel rooms, 15 restaurants and lounges, a 23,000 square foot spa, a 25,000 square foot
events center, 60,000 square feet of meeting space, a 100,000 square foot outdoor pool and
entertainment plaza, and a heliport. The first phase of development in the Mixed Use Planning Areas
was a 1.8 acre gas station and convenience store complex in Mixed Use Planning Area #3.
To download
development
agreement for
M Resorts,
Henderson, NV
(2008)
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 44
Future phases, which are on hold at this time, are projected to include an additional 1,000 hotel rooms,
a 30,000 square foot expansion of the casino, a movie theater complex, retail mall, and a mixed use
development with 1,900 residential units over commercial/retail ground floors.
The City of Henderson committed to build a new 1.6 mile road connecting the resort to the Henderson
Sky Harbor municipal airport. The City also agreed to install the necessary sewer and water lines to the
project with the developer paying for a portion of the construction cost.
Mitigation for the project includes the design, construction, and equipping of a new fire station,
roadway improvements, utility extensions, construction of a new 2.5 acre park, and the undergrounding
of high voltage power lines adjacent to the property.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 45
Interesting and Unique Provisions:
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
2.1 Planned Development.
One of the primary objectives of the City and Developer in
entering into this Agreement is that development of the
Property be undertaken in an organized fashion so as to
ensure a well-integrated, unique quality resort that is
based on design concepts with a mix of resort hotel and
entertainment, commercial and residential uses. The
Parties have agreed…
This section describes the shared
vision and purpose for entering into
the agreement. The City has
chosen specific language (e.g.,
“well-integrated” and “unique
quality”) to express design intent.
2.2 Supplemental Development Standards.
For each Planning Area, Developer shall submit to City
such specific design guidelines and development
standards, necessary to properly identify and authorize
development of any particular Planning Area
("Supplemental Development Standards"). For purposes
of this Section…
The City wants to create a standard
that exceeds those currently
established in the zoning ordinance.
The section goes on to identify what
is required in the Supplemental
Development Standards submittal.
2.7 Parking Lot Landscaping.
City agrees as a provision of Developer installing
landscaping in excess of Code requirements to defer
installation of landscaping diamonds as required by Code
within the M Resort Phase One parking lots until January
1, 2014. Developer agrees…
The project will be developed in
phases. Phase II will be constructed
on a portion of property that will be
used as a surface parking lot during
Phase I. Phase II can only begin
after a replacement parking
structure is constructed. At the
time of execution (2008), the
developer believes it would start
construction on Phase II before
January 1, 2014 and does not want
to plant trees in the interior of the
surface lot and then tear them out
shortly thereafter.
3.1 Reliance on Development Standards and Applicable Rules.
The City and Developer agree that Developer is approved
and permitted to carry out and complete the entire
Planned Development [Editor’s note: Phase I] in
accordance with the standards, uses, densities and other
provisions set forth in the Supplemental Development
Standards, and in accordance with this Agreement and the
accepted Master Studies. Developer acknowledges that
the Master Studies are generally conceptual in nature…
The City is not waiving its right to
require additional studies and
planning for future phases. The
City is only approving one piece of a
much larger whole.
4.1 (a) Permitted Uses.
The Planned Development will contain a mix of hotel,
entertainment and gaming, commercial, parks and
residential consistent with the boundaries shown on the
Planning Area Map.
This open language offers a great
deal of flexibility. The City will
further define the project in the
following paragraphs. The
agreement establishes definitions
for the Planning Areas in Section
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 46
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
1.1 (Resort Hotel Planning Area and
Mixed Use Planning Area).
However, it does not identify the
number, size, or locations of these
areas.
4.2 Residential.
The Planned Development is permitted a maximum of
3,000 Dwelling Units. The Dwelling Units located in the
Planned Development shall comply with the Supplemental
Development Standards to include the following: …
This paragraph establishes a
maximum number of dwelling
units.
4.3 Resort Hotel and Mixed Use Planning Areas.
(a) Location/Uses. Developer may not materially increase
the size, square footage, height and location of the Resort
Hotel Planning Area without an amendment to the
existing Gaming Enterprise Overlay Zone Change ZCO-05-
670051 and Conditional Use Permit (CUP-05-540091)
attached as Exhibit G to this Agreement. The Resort Hotel
Planning Area and Mixed Use Planning Area shall be
permitted…
The agreement defines project
maximums for specific use
categories. The total site area is
controlled by the Zoning Ordinance
and Comprehensive Plan.
4.5 Phasing of Major Transportation Improvements.
Developer and City shall complete, and open and/or close
to traffic (as applicable), the following transportation
routes in accordance with the required improvement level
(as defined in this Section 4.5) for the M Resort Phase
One:
This section not only establishes a
time table for completing the
transportation improvements but
also goes on to define what
improvements must be made, and
whether the City or the Developer is
responsible for completing them. It
should be noted that the City is
agreeing to build certain
improvements at its own expense.
4.6 Liquor.
Developer shall be allowed to have a maximum of Three
(3) tavern licenses within the boundaries of Mixed Use
Planning Area.
By predetermining the number of
liquor licenses available to the
developer, the City has reduced
some of the developer’s risk in
attracting tenants to the project.
4.7 The Processing of Applications
(c) The City and Developer agree that the schedule ("City
Schedule") set forth below is a reasonable estimate of
service targets for the City to process Applications …
The agreement establishes a
timeline by which the City must
review, comment, and approve
applications for building permits
and future studies.
(h) Parties have entered into a separate dedicated
coordinator reimbursement agreement in the form
attached hereto as Exhibit J.
The size and complexity of the
project exceeds the City’s staff
capacity and expertise. The City
and Developer had entered into a
separate agreement by which the
City is to hire a project coordinator,
and the Developer is to reimburse
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 47
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
the City for its costs.
4.9 Short Term Mining and Processing.
City hereby grants Developer or designee an umbrella
permit for Short Term Mining and Processing together
with Batch Plant operations…
The City is allowing the Developer
to mine minerals on site to be used
in a batch plan that will provide
concrete to the project.
4.14 Nevada Power Electrical Transmission Facilities.
The intersection of St Rose Parkway and Las Vegas
Boulevard constitutes a major entry into the City of
Henderson. Currently an overhead electrical transmission
facility is located on a portion of the Property adjacent to
Las Vegas Boulevard and St. Rose Parkway. The existing
overhead transmission line on the subject property was in
existence prior… Developer, subject to an administratively
approved design review shall be required to construct
required facilities needed to transition the overhead
transmission line(s) to below ground within the Planned
Development. Construction of the underground electrical
transmission line as required by this Section shall be as
mutually agreed by the Parties.
The Developer, as a condition of the
agreement, is required to bury
certain overhead power lines at a
gateway intersection.
5.1 Construction of the Park and Trails.
Developer shall construct and dedicate to City;
approximately Two and One half (2.5) acres of public
park(s), trails and landscaping …
The Developer is required to
construct community improvements
adjacent to and within the project.
5.2 Park.
Developer shall design, construct and maintain a total of
approximately Two and One Half (2.5) acres of public park
("Park").
In addition to the design and
construction of an interior park, the
Developer must also maintain the
park.
5.3 Trails and landscaping.
Developer shall design and construct trails and
landscaping adjacent to Volunteer Boulevard, Gillespie
Street and Bowes Avenue for the full frontage of the
Planned Development as further depicted on Exhibit N.
Developer shall be responsible for maintenance of the
landscaping and lighting and City shall be responsible for
maintenance of the trail.
This section requires the Developer
to light and maintain the
landscaping.
6.1 Municipal Water and Sewer Service.
The City agrees to construct the backbone water and
sewer infrastructure that will provide service to the
greater West Henderson area including the Planned
Development. Water and sewer service will be available to
the Planned Development by November 1, 2008.
(a) Developer shall reimburse the City all actual costs
associated with City of Henderson Contract No. 2007-86-
0036, shown in Exhibit Q, which is only a portion of the
major water and sewer infrastructure necessary for full
This section is the subject of a 2007
revision to the original
Comprehensive Plan Amendment
and Zoning Ordinance Amendment,
both of 2005. In the original plans,
the Developer was to construct the
backbone of the water and sewer
infrastructure to flow through the
site. In the time between 2005 and
2007, the City designed and
entered into a construction
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 48
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
build out of the area…
contract for the backbone water
and sewer infrastructure.
6.1 Municipal Water and Sewer Service (continued).
(c) The sewer portion of the contract will be reimbursed
by a special refunding agreement, where the Developer
will reimburse the City for their proportionate share
calculated by the number of equivalent residential units
(ERU's) the Planned Development will contribute to the
sewer system.
The reimbursement calculation is
based on the number of equivalent
residential units that contribute to
the sewer system. It is not clear
what happens if the projected
number of units is not built. It may
be that the City continues to carry
the cost of the required
infrastructure until those units are
built, if ever.
8.1 Construction of [Fire] Station and Provision of Equipment.
The Developer shall cause the design of a Five (5) bay fire
station and construction on the fire station site ("Fire
Station Site") as identified on Exhibit S a Two (2) bay fire
station ("Fire Station").
As mitigation, the Developer is
required to design, construct, and
equip a new fire station.
Furnishing and equipment
requirements are defined in further
sections and exhibits.
9.1 Frequency of Reviews.
The City Council shall review the development of the
Planned Development at least once every Twelve (12)
months during the Term of this Agreement. Prior to such
review, and upon the written request of the City,
Developer shall provide a report summarizing the extent
of Developer's and the City's material compliance with the
terms of this Agreement during the period preceding such
report.
The Developer is required to report
to the City Council on an annual
basis as to its progress
implementing the agreement.
9.4 Arbitration.
Except as otherwise provided in Sections 9.3 and 9.6,
Disputes between the Parties may only be resolved by
binding arbitration in accordance with the Uniform
Arbitration Act, Chapter 38 of the Nevada Revised
Statutes.
This section establishes binding
arbitration as the method of
settling disputes.
10.2 Local Improvement Districts.
The City agrees to assist Developer, in Developer's sole
discretion, in the creation of one or more local
improvement districts…
This section discusses financing
requirements but does not identify
how the funds would be used by the
Developer.
10.3 Oversizing Reimbursement/Refunds.
The Parties acknowledge that it will be necessary for
Developer to construct and/or contribute certain public
facilities/apparatus in a manner, or at a size or with a
capacity to serve the needs of any property, development
or dwelling unit located outside the boundaries of the
Planned Development.
The City agrees to enter into a
reimbursement agreement in which
third parties would repay the
developer for upsizing
infrastructure that serves off site
developments. In some
communities this is called a
“recapture” agreement.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 49
Concept Plan, New Quincy Center, Quincy, MA
Development Agreement Synopsis: New Quincy Center Project Quincy, MA
Signatories
Mayor
Developer
Legislative Approvals
The disposition of public land requires a
vote of the Quincy City Council
Year Executed
2009
The New Quincy Center Development Agreement
took the form of a Land Disposition Agreement
(LDA), because the project required the
acquisition of two City-owned parcels. The
agreement calls for a private developer (a.k.a.,
“Redeveloper”) to acquire two City-owned parking facilities and 21 privately owned
parcels in downtown Quincy within the 50 acre redevelopment area. When
completed, the project will consist of 2.7 million square feet of space including:
571,000 square feet of retail space, 1 million square feet of office space, two hotels
with a combined total of 280 rooms, and 735 residential units. The majority of the
project will be new construction, but it also calls for the renovation of
approximately 150,000 square feet of existing space. All parking will be structured,
with the City acquiring 2,967 spaces, once complete, from the Redeveloper to
operate as public parking.
In the agreement, the project is divided into three major components: Core Public Improvements,
Implementing Public Improvements, and Private Improvements. The Core Public Improvements are to
be constructed by the City with a combination of State and Federal funding and are deemed necessary
regardless of any private investment in the area. The Implementing Public Improvements (utilities,
roadways, public spaces, and eight public parking facilities that are required to support the Private
Improvements) and the Private Improvements themselves are to be constructed by the Redeveloper,
with the City acquiring the Implementing Public Improvements upon completion and subject to specific
financial terms.
To finance the acquisition of the Implementing Public Improvements from the Redeveloper, the City
plans to issue General Obligations bonds which will be retired through a unique funding mechanism.
The LDA and subsequent contracts with the Redeveloper establish a series of payments from the
Redeveloper to retire the bond financing pursuant to provisions of MGL Chapter 121A (Urban
Development Corporations). A “121A corporation” is a special purpose entity recognized by the
Secretary of the Commonwealth with the authority and power to carry out a redevelopment project
approved by a municipality’s planning board, legislative body, and the Department of Housing and
Community Development (referred to in the legislation as the “Housing Board”). Property owned by a
121A corporation is exempt from most local and state taxation including ad valorem real estate taxes.
In exchange for this tax exemption, the Quincy Redeveloper has agreed to enter into this Land
To download
development
agreement for
New Quincy
Center, Quincy,
MA (2009)
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 50
Disposition Agreement which, among other things, requires a 121A payment to the municipality to pay
off the General Obligation bond as well as other expenses. (In this case, the Redeveloper is not retaining
the amount that would otherwise be paid in taxes for itself; instead, the Redeveloper has committed to
making a 121A payment that will be used to pay off the General Obligation bond and other expenses
related to the project.)
The project is located within an Urban Renewal District and a District Improvement Financing (DIF)
District which predate the development agreement. A DIF district commits the incremental increase in
property taxes in a defined district to improvements to be made within that district, as opposed to
expenses elsewhere in the municipality. In the case of Quincy Center, the use of a 121A corporation,
since it does not pay real estate taxes, could have had a major negative impact on the viability of the DIF
District plan. To address this situation, the executed development agreement creates a DIF
maintenance fund to compensate the City for the loss of tax increment caused by the 121A Corporation
taking the property off the tax rolls.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 51
Interesting and Unique Provisions:
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
1.01 Purchase Price.
The entire purchase price shall be increased (but never
decreased) on an annual basis equal to increases in the
Consumer Price Index for each year.
This agreement was signed and the
purchase price was set in 2009;
however, the developer is not
required to close on the acquisition
until 2014. This clause allows the
City to benefit from increased
valuation as a result of time.
1.03 Redeveloper’s Additional Payment.
The Redeveloper has agreed to make an additional
payment to the City at the time of Closing 1 in the amount
of Thirty Million Dollars ($30,000,000).
The additional payment will be used
by the City to retire bonds and
reimburse itself for costs associated
with existing or ongoing
infrastructure improvements
adjacent to the project but not
identified as Core or Implementing
Public Improvements as part of the
agreement, as well as planning
costs.
2.02 Modifications to Development Plan.
The City recognizes that, as the Redeveloper and the City
proceed through the permitting process for the
Development Plan, changes may be required in portions of
the Development Plan.
This section defines Major and
Minor Plan Changes and who from
the City can approve them.
2.04 Additional Development Opportunity.
The City recognizes that in exchange for the Redeveloper's
agreement to make the Additional Payment…the
Redeveloper needs the opportunity to expand the
development program.
In exchange for the $30 million
additional payment (Section 1.03)
to the City, the redeveloper is
authorized to construct an
additional 750,000 square feet for
gross floor area either within the
development area on land not
already owned by the redeveloper
or by adding bulk (Floor Area) to
currently planned private
improvements. This allows the
redeveloper to exceed the 2.7
million square feet of the
Development Plan for a total of 3.4
million square feet.
3.04 Cooperation; Construction, Coordination; Future Easements
and Declarations.
The Mayor shall be authorized to execute such
documentation, including a granting of easement affecting
City property, upon such terms and conditions as he
deems in the City’s best interest.
This section preauthorizes the
Mayor to execute certain
easements which usually require
City Council votes.
4.03 (b) Payments under 121A Agreements; Timing of Payments.
The City will not see a reduction in
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 52
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
Between a land closing and the commencement of 121A
Payments as described above, the Redeveloper shall make
payments to the City…in a manner to avoid any gaps in or
cessation of the City’s normal receipt of the following …(a)
real estate taxes…(b) net revenue from the parking
facilities, ..(c) personal property taxes…
revenue as the result of the sale
and demolition of the City-owned
parking facilities. This is to keep the
City’s revenues intact during the
construction period.
4.03 (d) Components of the 121A Payments.
There are two components of the 121A Payments; (i) the
New Growth Tax Component, and (ii) the Special
Assessment Component…
This section and its subsections
describe the financing framework
that makes this deal work.
The City is requiring the Developer
to create one or more
Massachusetts 121A Corporations
(See Section 4.03 (i)) to own all the
real estate within the project.
Since property owned by a 121A
corporation is tax exempt, the City
is entering into a separate
agreement (Exhibit H) that
establishes payments to the City in
lieu of ad valorem property tax.
Those payments consist of a New
Growth Tax portion and a Special
Assessment Portion. The rates,
which are negotiated with each
Step, are fixed and include periodic
escalators.
4.03 (d) Components of the 121A Payments.
(i) The minimum charge per square foot of the New
Growth Tax Payment Component is presented in Section
12 of the Development Plan by land use.
1. The first dollars of the New Growth Tax
Payment shall be used to compensate the City for
property tax revenues it currently receives on the
Redevelopment Properties.
The New Growth Tax component is
further divided into three
subcomponents. The first
subcomponent replaces the existing
real estate tax payment that is
being made to the City.
2. After deduction of the Existing Real Estate Tax
Payment, Five Hundred Thousand Dollars
($500,000) or thirty-five percent (35%) of the
residual New Growth Tax Payment (as escalated
under clause (i)(1) above), whichever is more,
shall be allocated to the City for the City's general
fund and general municipal purposes.
The second subcomponent
($500,000 or 35% of the Net New
Growth Tax, whichever is greater)
goes to the City’s General Fund for
ordinary operations of the City.
4.03 (d) Components of the 121A Payments; the New Growth Tax
component (continued).
3. After deduction of the Existing Real Estate Tax
Payment and payment of the amount required
The third subcomponent (65% of
Net New Growth Tax) is used by the
City to make bond payments for the
acquisition of the Implementing
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 53
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
under the immediately preceding paragraph, sixty-
five percent (65%) of the residual New Growth Tax
Payments (as escalated under clause (i) (1) above)
shall be allocated to fund the purchase of
Implementing Public Improvements for the Step.
Public Improvements.
4.03 (d) Components of the 121A Payments.
(ii) The anticipated charge per square foot of the Special
Assessment Payment Component is presented in Section
12 of the Development Plan by land use.
1. The Special Assessment Payment shall be
established in the Financial Submission for the
Step and will be fixed it will not escalate over
time.
The Special Assessment Payment is
also negotiated with each Step. Its
rates are fixed and do not include
an escalator. This portion of the
121A payment will be used
exclusively to make bond payments
for the Implementing Public
Improvements.
4.03 (e) The DIF Maintenance Fund Payment.
The DIF Maintenance Fund Payment is in addition to the
I2IA Payments and shall be used by the City to pay for any
municipal services, repairs or maintenance of public
infrastructure or amenities within the DIF District.
The City’s decision to use 121A as a
means of financing the
redevelopment components
negatively impacts the DIF because
the property will become tax
exempt. This would reduce future
incremental tax growth available to
the DIF. The DIF Maintenance Fund
Payment tries to address this
problem by creating a revenue
stream that would replace the lost
incremental revenue.
4.03 (g) Shortfalls and Surpluses in Reimbursement Amounts.
The City recognizes that each Step will bear the
appropriate cost of completing the Implementing Public
Improvements for that Step, and that the revenue from
that Step may not be sufficient to support the City Bonds
for the Implementing Public Improvements for that Step,
and that the Redeveloper, if it shall proceed with the Step,
shall be obligated to fund that shortfall.
The redeveloper will contribute to
debt service payments if the
revenue available in certain steps
does not cover the debt payment.
Furthermore, any surpluses are to
be used to offset shortfalls in other
steps. Finally, if the City receives
additional grant funding for the
Public Improvements, those grant
funds cannot be used to relieve the
redeveloper of making up any
shortfalls.
4.03 (i) Other 121A Matters.
One or more 121A corporations must own the fee interest
in all property within a Step (both the City Parcels and all
privately-acquired properties) until the termination of the
121A Agreements for such Step.
MGL Chapter 121A (Urban
Redevelopment Corporations)
establishes rules and regulations for
a special purpose entity with the
authority and power to carry out a
redevelopment project approved by
the municipality.
4.04 Funding for the Town Brook Culvert Restoration; …
The Redeveloper and the City have identified, as part of
The Core Public Improvements are
to be designed by the redeveloper
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 54
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
the Public Improvements, three (3) separate
improvements that will benefit the New Quincy Center
Area generally, and for which the City will seek Federal
and State Funding. [Core Public Improvements]
and are expected to cost $50
million. In the event that state and
federal funds cannot be secured,
the City is not obligated to use local
funds to pay for the Core
Improvements unless it chooses to
do so. However, failure to construct
or cause the construction of the
Core Improvements is a default of
the agreement and grounds for
termination. Furthermore, if the
state and federal funds are
insufficient to complete the Core
Improvements, the redeveloper
may choose to complete the Core
Improvements provided that there
is sufficient bond capacity and
repayment cash flows.
6.01 and 6.02 Conditions to Closing.
(This section lists a series of obligations and terms that
must be completed before each closing.)
A substantial amount of work is to
be done by both parties, and this
will need to be monitored.
8.02 (d) Transfer Following Completion of a Building.
Prior to the occurrence of the foregoing events, the
Redeveloper may not sell the fee interest or its ground
lessor's interest in all or any portion of a City Parcel,
except to the City.
The redeveloper may not sell an
incomplete building to anyone but
the City. As a result, the City is
assured that it will be able to take
action if any of the buildings are not
completed per the Development
Plan and schedule.
13.05 City’s Option to Pay Mortgage Debt or Purchase Property.
…the City shall (and every mortgage instrument made
prior to completion of the Redevelopment Project with
respect to the Redevelopment Properties by the
Redeveloper or successor in interest shall so provide or
acknowledge) have the option of:
The City is establishing its rights to
assume the redeveloper’s
construction loan or force the
acquisition of the property from
someone who bought it out of
foreclosure.
15.09 Provisions Not Merged With Deed.
None of the provisions of this Agreement are intended to
or shall be merged by reason of any instrument.
This agreement supersedes future
deeds and leases if there is a
conflict.
15.09 Provisions Not Merged With Deed (continued).
transferring or subleasing title to the City Parcels from the
City to the Redeveloper or any successor in interest, and
any such instrument shall not be deemed to affect or
impair the covenants of this Agreement.
This agreement supersedes future
deeds and leases if there is a
conflict.
15.14 Entire Agreement.
This Agreement integrates all of the terms and conditions
mentioned herein or incidental hereto, and supersedes all
negotiations or previous agreements between the parties
The section states that this
document is the only agreement,
and that previous offers or
representations are void.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 55
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
with respect to all or any part of the subject matter
hereof, …
15.18 Community Benefits.
(a) Construction and Employment.
Under this section:
1) The Redeveloper is required to
pay prevailing wages for all
public and private
improvements.
2) The Redeveloper and City
acknowledge that union and
non-union companies will be
submitting bids.
3) The Redeveloper agrees to a
goal of 80% union participation,
provided that the unions agree
to meet community and
minority workforce goals,
including a goal of 25% Quincy
residents.
4) The Redeveloper agrees to a
goal of 25% of all goods and
services purchased from Quincy
businesses
15.18 Community Benefits.
(b) Other Employment Opportunities for Quincy Residents.
The Redeveloper and tenants over
15,000 square feet will hold job
fairs to identify prospective
candidates for jobs with
development tenants.
15.18 Community Benefits.
(c) Affordable Housing.
The Redeveloper will make a
payment to the City’s Affordable
Housing Trust Fund for the
construction of Affordable Housing,
including all Inclusionary Units
which are to be built outside of the
project area.
15.18 Community Benefits.
(d) Community Benefits Account.
The Redeveloper will make a
payment of $10 million to create a
Community Benefits Account for the
Mayor to use on public
infrastructure/space projects
outside the redevelopment area.
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Edward J. Collins Jr., Center for Public Management Page 56
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Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
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Assembly Row illustrative graphic, Somerville, MA
Development Agreement Synopsis: Assembly Row, Somerville, MA
Signatories
Mayor
Developer
Legislative Approvals
None
Year Executed
2006
In 2006, four parties executed an amended
and restated agreement for the development
of Assembly Square in Somerville: Federal
Realty Investment Trust (FRIT), IKEA Property Inc., the City of Somerville, and the
Somerville Redevelopment Authority (SRA). At the time, FRIT, IKEA, and the
Redevelopment Authority each owned property in the Assembly Square Urban
Renewal District. The agreement was intended to facilitate the relocation of a
permitted, but not constructed, IKEA store from the Mystic River waterfront to an
inland site via the issuance of new zoning permits and a land swap. This would allow
the waterfront and the balance of the site to be used for the FRIT Assembly Square
mixed use project. If successful, this agreement would supersede an earlier
agreement for the IKEA waterfront site, but if it is not successfully implemented, the
parties retain the right to go back to the original arrangement.
At the time of the signing of this agreement, FRIT owned and operated a 370,000 square foot retail
center, the Assembly Square Mall, housed within the former Ford Motor Company assembly plant on a
26 acre parcel. The Somerville Planning Board issued a Special Permit with Site Plan Review to allow for
the repositioning of the mall in December 2007. FRIT also owned or controlled, through a Land
Disposition Agreement with the SRA, 25 acres known as the Inland Site, on which it proposed to build a
mixed use project. IKEA owned a 17 acre site adjacent to the Mystic River on which it has received a
Special Permit with Site Plan Review to construct at 340,000 square foot retail store with surface
parking.
Both the IKEA and FRIT Assembly Square Mall permits had been challenged in court by the Mystic View
Task Force, a local community group. The City helped negotiate a settlement between the developers
and the Task Force, which contributed to this Development Agreement (as well as a separate settlement
agreement between the parties to the litigation). The Development Agreement called for FRIT and IKEA
to swap the Inland and Riverfront sites, thereby allowing IKEA to build its 340,000 square foot retail
store on the Inland site and FRIT to build its mixed use development on the Riverfront. At the
community’s request, FRIT increased the density of its mixed use development to include 1.75 million
square feet of office/R&D space, 450,000 square feet of retail and restaurant space, a 62,000 square
foot cinema, a 200 room hotel, and 2,100 residential units. The Agreement also established improved
mitigation and significant community benefits, including a financial contribution to a new MBTA Orange
Line station.
To download
development
agreement for
Assembly Row,
Somerville, MA
(2006)
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 58
In the agreement, the City committed to working cooperatively with the developers to seek federal,
state, and local funding (in the form of District Improvement Financing) to pay for mitigation and other
infrastructure improvements. (It should be noted that after many of the actions committed to in the
agreement had been completed, including the referenced land swap and issuance of permits for an
inland IKEA site, IKEA decided not to move forward with construction of its store.)
Interesting and Unique Provisions:
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 59
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
Background.
As successor in interest to Assembly Square Limited
Partnership, FRA owns the approximately
26.18 acre parcel of land, with improvements thereon,
located at 133 Middlesex Avenue,
Somerville, MA (the "Mall Parcel")…
The background section of the
Agreement identifies the four
parties to the Agreement, which
properties they own or control,
what permits have already been
issued, and the basic “deal” and its
end results.
Article I – Prior Agreements and Entitlements.
Section I. Status of this Agreement and the Old Agreements.
This Agreement shall be in full force and effect as of the
Effective Date. Unless and until either (a) this Agreement
supersedes and renders null and void the Old Agreements,
the MOU, and the Roadway Easements (under Article I,
Section 2), or (b) this Agreement is terminated (under
Article IX, Section 9), or (c) this Agreement is rendered null
and void (under Article I, Section 3), the Parties shall
forbear from enforcing their rights or the other parties'
obligations or exercising their privileges under the Old
Agreements…
While the parties all agree to
pursue the “New and Improved”
development, they do not want to
abandon their duties and
obligations established in previous
agreements, or their rights under
the permits that have been issued
previously by the Somerville
Planning Board. However, in order
to move forward with the new plan,
all agree not to exercise their earlier
rights or enforce others to comply
with their prior obligations.
Section 2. Effect of Swap Closing.
If and when the transactions contemplated by the Swap
are consummated (as evidenced by the recordation of a
deed to FRIT or its designee of the Riverfront Parcel), this
Agreement shall supersede and render null and void …
After the land swap takes place,
this Agreement will be in full effect
and the old Agreements will be
rendered null and void.
Article II – Permitting Process.
Section 2. Permits for the Assembly Square Mall – 2.1 Prior
Permitting.
The City and FRIT acknowledge that certain pending
litigation has called into question the validity of certain
entitlements [granted by a Special Permit from the
Somerville Planning Board pursuant to an approved Plan
Unit Development] for continued use and occupancy of
the Mall. FRIT covenants that it will use best efforts to
have the litigation dismissed or withdrawn … if … a court
of competent jurisdiction issues a final order that
invalidates any of those entitlements, then the City will
actively support a stay of that order until all necessary
entitlements, including without limitation, a Special
Permit with Site Review, for continued use and occupancy
of the Mall have been issued without appeal.
The City pledges to actively support
a stay of a court order while the
Somerville Planning Board hears an
application for a new Special Permit
that conforms with a new
Preliminary Master Plan.
Section 3. Permits for the New IKEA – 3.1 Prior Permitting.
… The City covenants that, at IKEA's request, the City will
support granting of an extension of the Old IKEA Permits,
The City pledges to protect IKEA’s
right to a riverfront development
granted under Special Permit until
Section 3. Permits for the New IKEA – 3.1 Prior Permitting
the Somerville Planning Board hears
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 60
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
(continued.)
or a new Special Permit with Site Plan Review or similar
entitlement with terms and conditions substantially the
same as those under the Old IKEA Permits for these
improvements.
an application for a new Special
Permit that conforms with the new
mixed use development plan.
Article III – Financial Payments.
Section I. Previously Made Payments.
The City and the SRA hereby acknowledge and agree that
FRIT (or its predecessors) have made these payments (as
well as a deposit and certain extension payments under
the Yard 21 LOA) under the Old Agreements before and as
of the date hereof…
Section 2. After this Agreement and the Master LDA.
FRIT covenants that, upon execution and delivery by all
Parties of this Agreement and a Master Land Disposition
Agreement for Yard 21 and the Disposition Parcels, all of
which the Parties presently expect to occur on or about
December 14, 2006, then FRIT will reasonably promptly
thereafter pay $1,000,000.00 to the City or its assignee for
design or construction of Trum Field reconstruction
project, Hodgkins-Curtin Park…
This section acknowledges a series
of mitigation and/or community
benefit payments made by FRIT or
its predecessors under the Land
Disposition Agreement and old
agreements. Sections 2 through 10
identify a series of additional
mitigation and/or community
payments to be made by FRIT and
their corresponding schedule.
Article IV – Transportation Improvements and Mitigation.
Section 2. Roadway Mitigation Measures.
FRIT covenants that, if and as required under the PUD
Approval or any Special Permits with Site Plan Approval
for development of the Streetworks Master Plan and the
New IKEA and continued use and occupancy of the Mall,
then FRIT will implement the following traffic mitigation
measures: …
FRIT agrees to construct a number
of “off-site” infrastructure
improvements that will serve the
development site.
Section 3. Roadways and Infrastructure – 3.1 Construction.
FRIT covenants that it will construct all roadways and
infrastructure serving the Streetworks Master Plan and
the New IKEA (except as located within the Inland Site)….
This infrastructure, includes, without limitation, water,
sewer, stromwater, gas, electricity, telecommunications,
fire detection and suppression, and cable television,
serving the Streetworks Master Plan.
FRIT agrees to construct all “on-
site” infrastructure.
Section 4. I
3
, DIF, or Other Public Financial Support.
The Parties covenant and agree that, while recognizing the
importance of increasing tax revenues for, and agreeing
not to place any new obligations on, the City's general
fund, they will cooperate in good faith to seek all
necessary approvals, authorizations or appropriations
from any federal, state or local governmental or other
non-governmental authority for funding under the
The City and the Developers agree
to work cooperatively to secure
federal, state, or local funding to
offset the developer’s construction
costs. This could include the
Commonwealth’s I-cubed program,
a local DIF district, or other funding.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 61
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
Infrastructure Investment Incentive (2006 Mass. Acts ch.
293) ("I
3
"), the District Improvement Financing (G.L. ch.
40Q) ("DIF"), or other governmental program reasonably
sufficient to pay for infrastructure …
Article V – Open Space and Public Art.
Section 2. Riverfront Arts and Music Festival
FRIT covenants that FRIT and its successors and assigns
will make reasonable accommodations for: (a) an annual
fireworks display event… and (b) an annual Riverfront Arts
and Music Festival…
The City is establishing minimum
requirements for the activation of
public space.
Article VI – Pedestrian Access.
FRIT and IKEA agree to include provision for pedestrian
walkways throughout the Streetworks Master Plan and on
the Inland Site in connection with the New IKEA in all
locations and as and when reasonable and convenient for
the use and operation of proposed residential and
commercial uses and as necessary and convenient to
accommodate existing and new traffic and mitigate traffic
impacts.
The City intends to integrate the
IKEA project into the whole
redevelopment so that it does not
become its own development
island.
Article VII – Energy Co-Generation.
FRIT will investigate and employ, to the extent
commercially reasonable, combined heat and power,
district heating, and cogeneration, using commercially
available technologies that allow buildings to generate
their own electricity in clean, cost effective, and efficient
ways, including the production of usable heat which can
be deployed onsite for both heating and cooling loads;
centralized heating systems that can heat (and cool) entire
neighborhoods with significant environmental and climatic
benefits.
The City hopes to encourage
environmental sustainability
without setting strict requirements.
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 62
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Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
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City Square illustrative graphic, Worcester, MA
Development Agreement Synopsis: City Square, Worcester, MA
Signatories
City Manager
Developer
Legislative Approvals
None
Year Executed
2006
This agreement calls for a private developer to
demolish an existing shopping mall and
portions of a parking tower to construct
approximately 1.5 million square feet of new
office, retail, hotel, and residential space, and
re-skin and reposition approximately 133,000 square feet of existing retail space,
above a new 480,000 square foot underground parking garage. Directly adjacent to
the site were two existing office buildings consisting of 290,000 and 197,000 square
feet of office and ground floor retail space that were owned by separate but related
entities of the developer. The entire site consisted of approximately 20 acres.
The project was divided into three major components, or elements: Private Project
Elements; Delegated Public Project Elements; and Direct Public Project Elements.
The majority of the development agreement dealt with the construction and
payment for the Delegated Public Project Elements, which are publicly-owned, publicly-financed
improvements to be constructed by the developer because they will be structurally connected or form
the foundation to future Private Project Elements. As part of the agreement, the City committed to
requesting state funding and allocating local funding, including revenues from a District Improvement
Financing (DIF) District, to fund the construction of the Direct Public Project Elements and Delegated
Public Project Elements. The City authorized the use of Tax Increment Financing (TIF) to assist in the
construction one office tower in Phase I and one office tower and a hotel in Phase 2 and 3.
At the time of execution, the developer had secured a Notice of Intent from a major credit tenant for a
195,000 square foot office building. This NOI is not referred to in the Development Agreement and, at
the time of execution of the Development Agreement, it was uncertain whether the tenant would or
would not proceed with the project. At the time of writing of this report, the tenant has committed to
moving forward and, as a result, tax increment will become available to help pay principal and interest
on the General Obligation bonds issued in the DIF.
To download
development
agreement for
City Square,
Worcester, MA
(2006)
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 64
Unique and Interesting Provisions:
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
2.2 Private Project Elements (page 5):
The developer will construct (or cause to be constructed)
phases 1, 2 and 3. However, if the cost to construct Phase
1 equal or exceed a total development cost of $470
million, then the developer is no longer bound to
construct Phases 2 & 3. If at any time during the
construction of Phases 2 & 3 the total development cost
exceeds $470 million, the developer is not obligated to
complete Phases 2 & 3.
This clause limits the Developer’s
financial exposure, but it puts some
risk on the City if the project needs
the incremental tax revenue from
Phase 2 or 3 to adequately cover
debt service. Plus, the site could
remain partially undeveloped
according to this provision.
2.4 Direct Public Project Elements (page 7):
The City shall, at its sole cost and expense, provide
and/or Construct the Direct Public Project Elements,
including the modification and/or narrowing of Worcester
Center Boulevard..
Notwithstanding the foregoing, if there is an Event of
Default by the Developer and such Event of Default is not
cured or resolved as provided in Sections 8.1 and 8.3, then
the City shall be excused from any further obligation to
Construct the Direct Public Project Elements …
No timeline exists relating to the
completion the Direct Public Project
Elements, and Phases 1 and 2 of the
Private Project Elements do not
appear to be dependent upon their
completion. Therefore, the City
could schedule these physical
improvements to commence after
completion of the Delegated Public
Project Elements, including the new
underground parking garage, but
before the completion of the Phase
1 Private Project Elements so as to
not disturb and inconvenience new
tenants and owners.
2.5 Schedule for Construction of Delegated Public Project
Elements & Private Project Elements (page 8):
The estimated schedule for the Construction of the
Delegated Public Project Elements and the Private Project
Elements is set forth in the Development Program. The
Construction of the Trigger Buildings shall Commence as
soon as practical…
…The timing of the development and Construction of
buildings or improvements will be based on market forces
and the Developer’s ability to obtain leasing and financing
commitments for various components of the Project
which are acceptable to the Developer in its sole
discretion…
According to this provision, the
Developer would not be eligible for
payment of tasks associated with
the Enabling Work (primarily the
demolition of the mall and portions
of the existing parking structure)
until the Developer has written
commitments for the lease and
financing of two key Private Project
Elements called the Trigger
Buildings. This is important to note
since either: (a) the Developer will
demolish the structure and hold the
cost on its books until a lease and
financing are secured because that
is a condition of the agreement; or
(b) the Developer will not
commence demolition until a lease
and financing are secured, which
could delay the delivery of the
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 65
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
completed buildings/components
and negatively impact the City’s
ability to generate tax increment
within the DIF District.
2.7. Design Guidelines.
The Developer and Worcester Renaissance C&D agree that
the design of the Delegated Public Project Elements and
those Private Project Elements included in Phase 1, plus
Building J, shall be subject to review by the City pursuant
to the Design Guidelines to be prepared by Sasaki
Associates…
This provision requires that:
a. The design guidelines must be
mutually approved in writing.
b. The guidelines apply only to the
first building constructed during
Phase I and are no longer in
effect after a Certificate of
Occupancy for the core and
shell of the building, which may
affect custom facades and
signage for ground level retail
tenants.
c. The guidelines to not apply to
Phase 2 or 3 of the Project.
d. The guidelines do not run with
the land.
e. Neither party shall record the
Design Guidelines with the
Registry. If they are, they
terminate immediately.
4.6 Disbursements for Construction of the Delegated Public
Project Elements Section (page 50).
4.6(a) First Disbursement – to pay for all Documented
Costs up to $10 million incurred in the construction of the
Delegated Public Project Elements prior to the first
Application for Payment.
The Developer could receive
reimbursement for predevelopment
activities before private project
investment construction begins.
Given 2.5 above, the City could be
at risk for revenue shortfalls in the
DIF if the Developer does not
commence construction of Private
Project Elements shortly after this
First Disbursement is made.
4.6(c) Second Disbursement – periodic disbursements from the
balance, if any, of the $10 million referred to in section 4.6(a)…
This is another financial obligation
to be paid by the DIF.
4.6(d)(vii) All issues with regard to TIF’s for either of the Trigger
Buildings being resolved through negotiation between the
Developer and the City and such TIF’s being approved by the City
Council;
If the City Council approves a
reduction in property taxes via a
TIF, the revenues of the DIF District
will be adversely impacted. This
section indicates the City Council
did approve the tax abatement .
Joinder.
Worcester Renaissance Towers LLC and Worcester Renaissance
C&D LLC hereby execute this Agreement for the limited purpose of
agreeing to be bound, severally, but not jointly, by the applicable
Worcester Renaissance Tower LLC
and Worcester Renaissance C&D
LLC each own real estate adjacent
to the project which is owned by
Understanding & Crafting Development Agreements in Massachusetts May 21, 2013
Edward J. Collins Jr., Center for Public Management Page 66
SECTION OF DEVELOPMENT AGREEMENT
COMMENTS
provisions of:
Worcester Renaissance LLC. All
three LLCs are affiliates of Berkeley
Investments, Inc. and Starwood
Capital Group LLC, but they are
separate legal entities. The
Development Agreement is
between the City and Worcester
Renaissance LLC only. However,
both Worcester Renaissance Tower
LLC and Worcester Renaissance
have obligations under the
agreement. The Joinder is the
means by which each entity agrees
to be bound by specific provisions in
the Development Agreement.
