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State wants postal land

A push to save rail expansion; funds for deal in question

By Casey Ross and Noah Bierman
Globe Staff / January 8, 2010

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Massachusetts will try to buy the entire 16-acre US Postal Service mail-sorting facility near South Station in Boston, and use the property to significantly expand commuter rail service for the region, state officials said yesterday.

The plan comes after the collapse last month of a land deal, negotiated with a private developer, that would have given the state just a portion of the massive tract.

Massachusetts transportation officials said owning all of the Postal Service property would allow the state to build as many as 11 track lines - up from the previously planned five - and thus position it to increase passenger service on both the commuter rail and Amtrak networks.

“This is a 100-year transportation decision,’’ said Peter O’Connor, head of real estate for the Massachusetts Department of Transportation. “If we decide we need eight more sets of tracks, then that’s what we’re going to try to build. We’re not going to try to squeeze them into a development.’’

South Station now has 13 sets of tracks, all of which are in use during rush hour. Without additional land from the Postal Service, there is no room for new tracks, or platforms to relieve the current congestion that leaves some rush-hour trains waiting for a berth. Nor can transit officials expand commuter rail services to Worcester and the Fall River and New Bedford area.

Rail operators also need new tracks to expand service for Amtrak and on the Fairmount Line, a Massachusetts Bay Transportation Authority commuter rail branch that officials are planning to convert to rapid-transit.

The ambitious expansion, however, has to overcome a major hurdle: financing. No purchase price has been set for the Postal Annex, but the cost is expected to run in the tens of millions for what is prime downtown property.

Massachusetts’ transportation agencies are more than $10 billion in debt, and already struggle with budget deficits operating the transit networks. State officials acknowledge they do not yet know how to pay for the Postal Annex acquisition.

“We’re not there yet,’’ said Transportation Secretary Jeffrey B. Mullan. “We’ve not figured out a finance plan. It’s too preliminary to make a comment on that.’’

Already MassDOT struggles to choose which of its many priorities to fund: Hundreds of bridges are in deficient condition, for example, and transit systems need safety and efficiency upgrades.

While the MBTA was able to avert a fare increase last year when the Legislature raised the sales tax to help fund the agency, its financial situation is projected to get more difficult. Its annual debt service, $342 million last year, will balloon to $525 million in three years.

“The debt picture we laid out is very clear and the answer is not to add more debt,’’ said David D’Alessandro, former chairman of John Hancock Insurance Co. who completed an outside review of the MBTA’s finances in November. The review pointed to critical maintenance projects that were not done because of a lack of money.

“I would think that there would be a great credibility problem if they would just add to their debt,’’ D’Alessandro said.

If, as transportation officials assert, buying the Postal Annex is a once-in-a-lifetime opportunity, then D’Alessandro said the MBTA could pay for it by either selling other properties or trying to refinance debt. “If this is critically important to them, they do have some assets that they could consider selling,’’ he said.

Postal Service officials declined to be interviewed yesterday, but issued a statement with Massachusetts officials pledging to reach an agreement that will accommodate expansion plans for South Station.

The mail agency is planning to build a new facility about a mile away in South Boston. It had retained a development team to rebuild the Postal Annex into a large mixed-used complex, while selling a portion of the property to the state for rail service expansion. But that deal unraveled last month when the development team abruptly pulled out for financial reasons.

Massachusetts officials said they could not estimate how much the entire Postal Annex site would cost. Part of the state’s investment could be offset by selling rights to build on the rest of the property to a private firm. That’s how the Postal Service had initially planned to finance its own relocation, and as the agency’s experience shows, a private development deal is exposed to twists and turns of the real estate market.

The Postal Service still wants to build a new facility on a 25-acre site on Summer Street, part of which is owned by the Massachusetts Port Authority and part by the US Department of Defense.

But Postal Service officials have told state officials they will not move unless several conditions are met. One is that the Postal Service incur no cost in moving and building the new mail-sorting facility; another is that the state must pay fair market value for the land.

Casey Ross can be reached at cross@globe.com; Noah Bierman can be reached at nbierman@globe.com.