Developers working on life science projects in Watertown say the proposed linkage fees, being considered by the City Council, could put the City at a disadvantage compared to communities not charging the fees, and it comes at a bad time. They propose some changes to how they pay the $11.12 per square foot, which has been earmarked to create affordable housing.
At the City Council meeting on Tuesday, April 11, Councilors will discuss and are scheduled to vote on the linkage fee rules. The meeting begins at 7 p.m. Watertown has already received approval from the State Legislature and Gov. Charlie Baker to charge up to $18 in linkage fees. The Planning Board considered the proposal to charge $11.12, which would be adjusted annually for inflation.
The fees would be charged on any commercial, non-residential project of 30,000 sq. ft. or more approved after January 2023. This would impact the project at 99 Water Street, being built by Boston Development Group. The firm also has a project under construction next door at 66 Galen St. but will not be subject to the linkage fee.
Both projects are planned to house life science companies. Bob Doherty, Vice President of Development and Leasing at Boston Development Group, said much has changed since the two projects, which are two phases of a redevelopment of properties south of the Charles River which include the former Colonial Buick Pontiac GMC auto dealership and a Valvoline oil change.
“Our thing is the timing of this. The linkage fee itself isn’t so exorbitant that you say, Oh my God, that is insanity,” Doherty said. “It is a reasonable number that comes on the heels of the market turning terrible.”
The project first came forward in 2019, and since then interest rates have gone from 3 to 6 percent, construction costs have risen 20-30 percent, and there are supply chain issues. In addition, Doherty said, the second phase has to comply with the new Specialized Stretch Energy Code approved by the City Council in January, which he estimates will add $50 to $65 per square foot in construction costs.
The life science sector has softened recently, with venture capital firms less likely to fund start up firms, which tend to be the ones moving to Watertown, said Andrew Copelotti, a Principal with Boylston Properties, the developer of Arsenal Yards and Linx, both of which have life science tenants.
Catering to this type of firms also means that the buildings will not be occupied right after completion, Copelotti said. That, however, is when the linkage fee payment would be due under the proposal in front of the Council. On a building the size of 66 Galen Street, he said, the payment would be more than $2.2 million. The developers, along with the Charles River Chamber, have pushed to change the way the linkage fees are paid off, Copelotti said.
“We propose a delay of implementation of a year, phase it in over a period of time — two or three years — and most importantly, everyone has got to remember, every single square foot of life science in Watertown is done on speck because of the life science tenants we are seeing want 20,000 to 50,000, 60,000 square feet, and they are looking looking for space 6 and 12 months ahead of when the need it,” he said.
Both Doherty and Copelotti said they want to see more affordable housing created, but said they said the linkage fees may have unintended consequences. Copelotti noted that the linkage fee is a one-time payment, while the tax revenue from a new development is paid year after year.
“First and foremost we believe in the concept of more affordable housing. We are not going to argue we don’t need more affordable housing,” Copelotti said. “I think the way the City is about to go about it, given a whole bunch of issues — given a drop off of life science demand, interest increases, increase of construction costs, the supply chain — this could be the straw that breaks the camel’s back.”
Watertown would be one of the few communities to charge a linkage fee. Boston and Cambridge have them, and Doherty noted that Boston delayed implementation of the fees for a year.
Adding the linkage fees may put Watertown at a disadvantage with other communities that life science companies, and the developers of R&D lab buildings, are looking at when considering where to set up shop.
“Watertown’s immediate peer group is not the Seaport and not Kendall Square in Cambridge,” Doherty said. “It is more comparable to Lexington, to Waltham, to Bedford.”
Right now Watertown has an advantage, Doherty said.
“My opinion is (Watertown) is somewhat more premium over say going to Waltham or Hartwell Avenue in Lexington,” Doherty said. “With purpose built buildings, being able to walk to amenities, more transportation, and a growing ecosystem of 40 to 50 life science companies and they like that — birds of feather like to flock together.
Other communities are seeking to attract life science companies. Places like Worcester and Lowell have received huge investments of public-private dollars from the Massachusetts Life Sciences Center to enable those cities to support and attract life science companies, according to a report on Bisnow.com. Other communities closer to town also have their eyes on creating their own cluster, Copelotti said.
“We have a site under agreement in Newton. We went in about a year ago to see the mayor (Ruthanne Fuller) and we got to chatting about Arsenal Yards. She was very complimentary, and she leaned forward and said, How do we get life science to come to Newton? What did Watertown do?” Copelotti said. “There is a city that is looking to provide or create life science space. I think she sees the benefits — the (property) tax benefit, high paying jobs — things that Watertown has been benefiting from.”
The biolab boom, the latter-day tulip mania, has softened, and Boston Development Group’s Bob Doherty wants the City Council to give his company relief for their inaccurate projections. It’s not Watertown’s fault that Boston Development Group and others operate on spec. It’s not Watertown’s fault interest rates have increased along with construction costs. Doherty’s company assumed business risks and assumed wrong. Delaying linkage fees for a year and then phasing payments thereafter is not a good deal for Watertown, math wise.
The lab boom has created problems by crowding out critically needed housing construction, particularly affordable housing. The top economic development problem in Watertown and the metro region is the lack of affordable housing, which the city’s linkage fee program is targeted to address. The trade association MassBio told The Boston Globe’s Renée Loth recently that at least 40,000 net new jobs will be created from life-science projects currently under development. So, where are these people going to live? The Metropolitan Area Planning Council calculated back in 2015 that Eastern Massachusetts needs more than 400,000 new housing units by 2040 to keep up with growth, and according to the group’s director, Marc Draisen, we are far behind.
At the very least, lab developers should pair their projects with affordable housing. It should have come to Bob Doherty’s and his developer colleagues’ notice that many Watertown residents are fed up with life sciences projects to the extent that there is serious talk of a moratorium initiative petition. Doherty signals he does not want to go to Waltham, Lexington, Worcester. At this time, many Watertown residents are ready to wave goodbye to labs and likely will not be favorably disposed to Doherty whining about Watertown’s linkage requirement being ill-timed.
Newton’s Mayor Fuller may be ready to throw open the city’s door to life science development. Why not? Newton voters just handed her an override defeat. If Watertown officials want the city to be ground zero for lab building, against the growing opposition of residents, the city should strengthen its linkage requirement and place a separate assessment on labs.
How about a compromise? We give them their delay but raise the linkage fee to the more reasonable $15 per square foot that Councilor Palomba has supported.
We shouldn’t be giving the town away at bargain prices. $11.12 would put us at the low end of linkage.
Isn’t it interesting that even the developers of these labs/life science buildings are now admitting what some of us have been saying of late with the 60 plus current facilities here in Watertown and more proposed, that with the shaky economy and interest rates rising that we may be finding vacant life science buildings in the future. They say “The life science sector has softened recently, with venture capital firms less likely to fund start up firms, which tend to be the ones moving to Watertown”.
The biolab/life science building on the corner of Acton St., Rosedale, and Pleasant St. has ballooned to over 200,000 sq. ft. from a starting proposal of 83,000 sq. ft with an increase of levels from four to five. Maybe these fees will encourage them to change the size of their project.
They are going to have a tremendous impact on the neighborhood and any linkage fees paid may help with city funding for a while, but they will be using our infrastructure for a long time to come.
With the increased congestion all of these labs will be creating in the west end and other areas of the city, even if the economy cooperates and investors support their business models, will their employees stay working in these buildings if they have opportunities to move elsewhere, like Worcester and Lowell where they have more space, lower housing costs and less traffic to go and come from work and other amenities? The link to Bisnow Boston in this article is very interesting reading.
Gov. Healey stated in her inaugural address that she wants to see these types of businesses expand west and make MA a hub of life science businesses. If we here in Watertown and other cities concentrate mainly on this type of business to the detriment of other types of businesses and they are overdeveloped, there could be a lot of empty buildings everywhere that are built to different specs that aren’t necessary in other types of businesses. Maybe we should look to invite a diversity of businesses that provide a lot of different jobs that may be more appropriate to hire local people with different skills and provide more stability in the future.
The linkage fees would be a one-time fee that may help cover some of the expenses in our city, but these companies will be using our infrastructure for a long time to come. The timing of these fees may not be beneficial to these businesses right now, but that is how business plans go with unpredictable expenses. These companies should be willing to kick in their fair share now. If successful in their business models, they will be making a lot of money potentially in the future.
Linkage fees for new development going to the city? And then we have an additional tax burden on the taxpayers when “new development” is added to the tax levy. Sounds like a “cash cow” for the City and an unfair practice for taxpayers.
Before weighing their claims of hardship I would want to know what have been the profits of Boston Development Group over the last several years?
You are absolutely right Bill. Developers always cry poverty.
$11.12 is at the low-end of $18. If payment in full amount up front puts developer in a cash bind – consider paying in installments but don’t delay implementation of the amendment.
And, does anyone know if the City has moved to codify in their zoning code no biosafety 3 labs in Watertown, instead of just attaching it as an afterthought to special permits?
And is the Watertown Board of Health moving to change their regulations to limit companies to biosafety level 2?
It’s only a matter of time before these guys cry poor and say it’s necessary for their business survival to rent space to biosafety level 3 labs in Watertown.
Just last week, a level 3 lab has been reported to be entering Waltham. They’re getting closer. But Waltham has something Watertown doesn’t have…more land not near residential neighborhoods.
I am supporting an immediate an enactment of the linkage fee between 15 and 18 per sqft, which is lower than that of Boston and Cambridge’s. The comparison to Lexington, Bedford and Newton is woefully wrong. Their zoning laws are far stricter which still makes Watertown a very viable opportunity.
I find all the economic prognostication to be lacking. These impending situations are often mentioned in good times and in bad, in certain times and uncertain – no knows what the next 12 months will bring. Is it a hot job market or a recessionary one? Is it input cost causing the inflation or corporate greed? Show us some numbers with actual significant correlation. Put up a regression analysis.
One thing that is true is that Watertown needs more affordable housing of all kinds. Watertown’s future is dependent upon it. We are not a western suburb that is subsidized by the state; we’re the one doing the subsidizing. We need population and economic diversity to remain vibrant.
If this matters to the developers, then surely there are a set of line items in the P/L statement that can be used to offset a linkage fee without reducing benefit to Watertown. Even at the bottom line profit is good, but profit beyond a certain point is greed that further creates destabilization, and reduces the number of choices for all in the end.
So now that the life sciences industry is softening and interest rates have increased, the developers are banding together to try to negotiate with the city to help them by deferring and lowering linkage fees? That’s laughable. If the Vice President of Boston Development thinks the fees are reasonable at 11.12%, I ask why the city isn’t asking for more. Or why the city is not demanding the full 18%, unless the developer commits to building affordable housing. Consider it the cost of doing business in Watertown or find another town to pillage.
I can tell you where the $11.12 comes from. I’m not defending it or attacking it, just hoping that knowing where that number comes from (if you aren’t already aware) will give you very knowledgeable “numbers people” a source to check out. Here’s the Watertown News story on this:
Maybe Charlie can get a link to a copy of that Nexus report. that was submitted to the City last May, with the justification of that number. I’m not having any luck attaching it for you.
Here is a link to the Nexus Linkage Fee study report https://civicclerk.blob.core.windows.net/stream/WATERTOWNMA/f9d09d72-f101-4c8c-ad90-0578f421ef98.pdf?sv=2021-10-04&st=2023-04-10T12%3A28%3A05Z&se=2024-04-10T12%3A33%3A05Z&sr=b&sp=r&sig=cH9gXMFtHTnzHaY%2B1CWNMjFO86VUsLSIODXSKsvLI%2Fs%3D
People need to show up at the Council Meeting on Tuesday, April 11, at 7 p.m. to express your concerns directly to the Councilors. They may or may not read these comments if they don’t go back in to view these posts a few days after the article is presented. There is power in numbers!