Fiscal and Management Control Board. Executive session

Transcription

1 Fiscal and Management Control Board Executive session July 30, 2015 MassDOT Boardroom, 3rd Floor Ten Park Plaza Boston, MA The Board convened in executive Session after a roll call vote to discuss personnel, real estate and potential litigation matters. On roll call vote: Chair Aiello: Director Poftak: Director Calise: Director Lang: VOTED: to go into Executive Session. Also present were Secretary Pollack, Frank DePaola, Brian Shortsleeve, John Englander, Mark Boyle, William Tuttle, Marie Breen, Laura Brelsford, Ed Hunter, Joe Cheever, Owen Kane and Paula Fallon. The meeting began at 1:40pm. The first item was a presentation on the South Station lease presented by Mark Boyle, Assistant Secretary for Real Estate. Mr. Boyle began with a brief history of South Station. The lease for South Station is just for the main Massachusetts Bay Transportation Authority Ten Park Plaza, Suite 3910, Boston, MA

2 concourse of the building. Director Poftak asked if Tufts and Hynes still have air rights over the building. They still do but it doesn t involve any of Equity s lease hold property. Equity approached the MBTA and asked to redo the lease. There is new revenue and new cost avoidance. The Secretary asked Mr. Boyle to explain why Equity would want to give a lump sum payment of $12 million when they have 30 years left on the lease with no payments. Mr. Boyle answered that the Boston real estate market is hot right now making it a more valuable asset to the market. They fully expect they want to flip this asset. Director Calise asked how they came to $1 million per year. During negotiations there were different scenarios they went through. They discussed with budget and it was decided that the MBTA was getting both with this deal with an upfront payment and an annual payment. Director Calise asked to see some of the scenarios so they can see how it is being valued. The Chair asked for a pro forma for the building and asked to get an assessment of the building. Mr. Boyle stated that they will get them the material. The Chair asked for a precise definition of the rights the BRA has and their developer in terms of space and footprint and how it relates with the interface. He would also like information on the South Station Post Office possible sale and the possible air rights over that area. Is there a single developer or two possible developers. This option in 2024, how does it work, do parties have to agree. Mr. Boyle answered we have to consent to anything they do and we can take it back but there are significant financial obligations we have to pay Equity. The Secretary noted the deal is complex and has three moving

3 parts, the equity lease, the Hynes air rights deal and the draft environmental impact report for the expansion of tracks at South Station. The Authority would like to use the air rights to pay for the track improvements. The Board asked what effect this lease would have with an air rights deal or a possible public private partnership in the future. The Chair would also like to know the urgency for the decision making of this project. Mr. Boyle noted there is no hard deadlines just a market deadline. It is more to capture the market while the market is hot. It won t be a problem to come back in a month to give the Board more time to review the information. Director Calise left at 1:30pm. Director Poftak expressed concern that the MBTA is selling control of this property cheap with very little value to the MBTA. He asked why we should give up this asset for this amount for that amount of time. He asked about the rental escalator clause, and if it was standard? Mr. Boyle noted that it is the market traditional point which is the current market rate which is relatively fare. The Secretary added that one of the drivers of how the real estate office is trying to partner with groups that will take on capital maintenance improvements. Mr. Boyle noted that in North Station, Delaware North paid for the major expansion for the concourse at no expense to the MBTA and they maintain it. The Chair asked for the current life cycle obligations in the current lease and any proposed

4 changes in the lease. He asked Mr. Boyle to come to the next meeting with the information they have requested. Secretary Pollack presented personnel changes to the Board. Secretary Pollack asked Mr. DePaola to stay on as General Manager until June Effective today Brian Shortsleeve began serving as the first ever MBTA Chief Administrator. Mr. Shortsleeve will lead the fiscal and managerial side of the MBTA. Lastly, she announced that Jeff Gonneville has agreed to serve as the MBTA s Chief Operating Officer on a permanent basis. The Chair noted that the idea of co-ceo s is a great integration and will be critical. Future planning will require coordination and multiple skill sets. Next the Board discussed the Keolis contract. The Board asked if Keolis walked away what the MBTA would do. Could the MBTA get retention? They discussed the financials and the contract. It was decided to defer the discussion to the next meeting. The final item on agenda was discussion on the Parcel 13/Hynes project presented by William Tuttle. He went through a quick introduction, project description, financial overview, risk and benefits and action items. The revenue is given up front instead of long term so they can put it into the station. Chair asked about overruns beyond contingencies. The MBTA is held harmless but MassDOT has to pick up the overrun costs. Director Lang asked him to explain the takings. They will be taking 360 Newbury and some temporary takings for construction. Director Lang asked if they expect any backlash from the takings. Mr. Tuttle

5 thought there might be some issues with 360 Newbury, currently they are condominiums. What obligations does the developer have for common structures and the MBTA facilities and life cycle liabilities? The station will be the MBTA s responsibility. They are also giving the first floor space in their building in a shell condition for free as part of their commitment. The station will be done to MBTA specifications, which will be sitting on top of the deck. The Chair asked who was responsible for the deck. Mr. Tuttle answered that the developer is responsible for the deck although MassDOT will maintain the life safety systems like lights. Director Poftak asked about the Bond Counsel letter. Mr. Tuttle noted that is in the package that was sent out. Chair Aiello asked about the exposure level on design. He wants to know who pays for the overage on the risk numbers. MassDOT would pay for the overage. The biggest risk is that they will put $5 million in and come out with a design. The Chair asked about the timing of the taking and the developer completing its financing. Do we take the property before the developer gets the financing? Mr. Tuttle answered no we will have a financing contingency in all the takings. The Secretary noted that this item will go to the MassDOT Board too. She asked if they felt comfortable putting this on as an action item at the next meeting. Director Lang asked if they considered a revenue bearing lease as a way of upping the money. Mr. Tuttle noted they did consider it and they pressed them to put the money all up front so they could put the money into the station. Director Lang suggested having it as a discussion item because two Board members were not present for the discussion today.

6 On motion duly made and seconded, it was On roll call vote: Chair Aiello: Director Poftak: Director Calise: Director Lang: VOTED: to Adjourn. Documents relied on: Powerpoint on South Station Powerpoint on Hynes Memo on Staff Changes