State agencies leaving lease with MBTA at South Station
New landlord, lower rent found in South End
At a time when the MBTA is asking the state for a financial bailout, three state agencies are adding to its financial woes with plans to move out of the T's property at South Station and pay rent to a private developer.
While the developer is charging the agencies less - an estimated $9.5 million over the next decade - the move will cost the cash-strapped MBTA as much as $6.2 million over just the next two and a half years, as it tries to avoid fare increases and service cuts, according to T documents obtained by the Globe.
The decision to move the Division of Banks, the Division of Insurance, and the Department of Telecommunications and Cable to an office building in the South End raises questions about the level of coordination among state agencies - an area that Governor Deval Patrick has pledged to improve - and seems to ignore the special plight of the Massachusetts Bay Transportation Authority.
Patrick has proposed a 19-cent gas tax increase to buoy the state's transportation system; about a third of that would be used to fix the T's troubled finances.
"This is agencies stealing from each other," said Paul Regan, executive director of the independent MBTA Advisory Board, when told the T is losing tenants. "This is a case where having people move and taking money out of the T's pocket doesn't really save money for anybody. The taxpayers are going to end up paying, one way or another."
The T co-manages South Station with a private company, Equity Office Properties, which equally shares rental income with the authority and also stands to lose up to $6.2 million over the next two and a half years.
The three state agencies that will move out of the building are funded by fees from telecommunications firms, banks, and insurance companies, meaning that these corporations would be the primary beneficiaries of the savings.
Still, Patrick administration officials said the move is warranted because of the savings and because South Station lacks the room needed to fulfill the administration's goal of shifting a fourth state agency, the Division of Professional Licensure, to the group.
"At this time, more than any other, it's important to be competitive and to have the lowest lease cost in our space. That's our driver," said David
Patrick's transportation aide, after declining several interview requests last week, issued a statement after the close of business Friday expressing "concerns" with Equity Office's high bid. Transportation Secretary James A. Aloisi Jr. said in the statement that "Equity must make a full accounting to the MBTA for its apparent failure to submit a competitive bid."
Equity Office officials said they based their rates on market analysis and presented the terms to MBTA officials before submitting a bid.
In the absence of a Beacon Hill bailout, real estate, along with leasing advertising space, is one of the few areas in which the T can generate money without placing the burden on commuters.
"Obviously, we were disappointed to learn of the decision to move the agencies out of South Station," said Daniel A. Grabauskas, MBTA general manager, in a written statement last week. "It is another unanticipated revenue loss, which makes balancing next year's T budget that much more difficult."
It is unclear how much communication there was, if any, among Patrick's staff on the recent rental agreements, which are considered tentative at this point because final details of the leases are still being negotiated.
The decision to move the three state agencies came after a public bidding process, overseen by Perini, who reports to a Patrick Cabinet secretary.
In a recent letter, Equity Office said that it had tried to alert former transportation secretary Bernard Cohen, Aloisi's predecessor, to the issue when the bids were due in November, hoping he would intervene on behalf of the transit system.
Aloisi's office would not say yesterday whether Aloisi followed up on that request when he replaced Cohen in January.
Asked about the MBTA's financial problems, Perini said it is his job to focus on "the needs of our clients" - agencies seeking real estate that best suits their operations. But, he said, he will try to find other state agencies to rent from the T.
"I certainly can't guarantee anything," he said.
Citing state law, Equity Office argued in the letter that the bidding process should take not only price into account but also "the Commonwealth's needs" as a whole.
"It is incomprehensible to us," Equity Office director Andrew Maher wrote, "how the Commonwealth of Massachusetts could find it cost effective to move these agencies from a building owned by the MBTA who equally shares in the profits and losses of this magnitude to another building with no state ownership, especially in light of the current financial challenges the MBTA is facing."
A Patrick spokeswoman disputed Equity Office's interpretation of the bid laws, saying the state is only responsible for considering the financial interests of the agencies directly involved.
The three agencies plan to move to a building at 1000 Washington St., owned by Nordic Properties. Officials there were unavailable for comment.
Patrick officials estimate they will save $9.5 million, after $950,000 in moving costs are taken into account. But an MBTA official said that those savings did not have to come at the expense of the T.
In another recent bidding process at South Station, the T and Equity Office agreed to accept less than they had initially bid in order to keep the Department of Public Utilities there. In the bid involving the other three agencies, the state did not give the T and Equity Office the opportunity to negotiate a lower offer, as is allowed under state law.
Perini said it is unusual to go back to losing bidders when the price difference is so large, about 30 percent in this case. Even so, Patrick administration officials were still talking with the MBTA late last week about a way to offset the losses caused by the relocation of the agencies. 