Stuart Loosemore on HDIP and the Worcester Regional Chamber of Commerce

Stuart Loosemore, General Counsel for the Worcester Regional Chamber of Commerce, spoke to the Worcester group on February 11 about the Chamber and about HDIP investments.

This is part of the Worcester Rental Real Estate Networking and Training series.

Chamber and HDIP Investments Transcript

[Start 0:00:00]

Stu: As they said, my name is Stu. I’m the general counsel and director of government affairs and public policy for the Worcester Regional Chamber of Commerce, which really means I’m their lawyer and their lobbyist.

Considering the discussion that Doug had a little earlier, kind of interesting that I’m one of the speakers here tonight, and I’m sitting over there and listening and I had a whole bunch of stuff prepared to talk about. I want to talk about myself and the chamber a little bit, a little bit about HDIP, but I’m 10 times better with question and answer stuff than I am just standing up in here talking. As I said, I’m a lawyer by trade and a lobbyist. I can talk a dog off a meat wagon if you let me. I’ll keep my remarks to about 4 hours.

For the Chamber, I do all of the public policy. I am their registered lobbyist. I work with our board and our president and CEO to put together what our policy agenda is, so that we can advocate for our membership – their needs, their wants, their interests. As Sandy pointed out, legislation that’s bad and legislation that’s good. Unfortunately, with 2,500 members, there’s always going to be legislation that may benefit you and harm you, and you kind of have to dance that one.

Listening to the talk earlier, while I am a fulltime paid lobbyist on staff for an organization, there are other options to consider in the meantime. I mean there are lobby firms that for a fee, either an hourly fee or set fee, can monitor certain things for you. It’s certainly an option to think of, but to Sandy’s point, you need someone that knows the system and the process.

A lot of government is alphabet soup because we want to confuse you. We don’t want you to know what it is that we’re doing. I say “we” because prior to coming to the Chamber, I spent 10 years on Beacon Hill as a legislative staffer, writing some of those laws that try and confuse everybody.

Audience: Thank you [laughter].

Stu: It was a lot of fun, and so part of the‑ Yes, sir?

Male Audience 1: How is it that Worcester, which is supposedly the second largest city of Massachusetts ‑

Rich: I think [unintelligible 0:02:44]

Male Audience 1: That is losing a lot of prestige to MetroWest? Why is that happening?

Stu: I guess could you clarify what you mean by prestige? Money and business attraction?

Male Audience 1: It seems that a lot of activities that are centered in MetroWest are going more aggressive than they are in Worcester. For instance, in Worcester I understand there are no facilities for testing blood. That all has to go out to an area in MetroWest and we hear quite a bit of aggressive advertising from MetroWest. Why is Worcester not that number 1?

Stu: Some of it has to do with the cost of operating in the city and some of that, as was mentioned as I was walking, up the tax rate and the cost of that brings to a business trying to move in. Some of it is just were figuring out how to market ourselves better. There are other costs associated with doing business in the city. The water and sewer rates that are different from communities outside of Worcester. Some commercial businesses when they move in, there’s a water-sewer hookup fee. There are all these ancillary costs that other communities don’t have or are significantly lower in other communities than they are in Worcester.

I don’t know that we’re losing prestige. We’re certainly bringing some of those back. This way, we do have some areas where we are and have been gaining ground over the past decade in biotech, and life sciences, and biopharma. It’s the struggle that I think everybody goes through when businesses go to one community and not to yours. You might as well circle the‑

Doug: An overview of the Chamber and HDIP and then [unintelligible 0:04:56].

Stu: Okay. Where was I?

[0:05:00]

Audience: The Chamber.

Stu: So the Chamber is a membership-based business organization, and we’re here to advocate for the interests of our members to kind of as basis I can put it. That’s our focus and our goal. Obviously, there is the greater good of all businesses in the city, but our main focus is our membership and Worcester is a regional chamber, so it’s Worcester and five affiliate chambers, which compose about 36 different communities in Southern Central Mass. It’s Worcester. It’s the Auburn Chamber, the Webster Dudley Oxford Chamber, the Central Mass South Chamber, the Blackstone Valley Chamber, and the Wachusett Area Chamber. My primary focus though is Worcester proper. That’s where I’m based. That’s the chamber I work for primarily as opposed to any of the other affiliate chambers.

Rich: How many members are there in the chambers?

Stu: Two thousand five hundred.

Rich: Two thousand five hundred. What are the top one or two way that would benefit or tie into local property owners?

Stu: Well, a lot of those businesses have employees. One of the things that we look to do is to encourage not only businesses to move here, but to get them to move their employees here, so that you have potential tenants to rent to that are able to provide a steady stream of income for you in consistent rents and stability and jobs. That’s probably the direct tie between us and you guys outside of any of you being directly members of the chamber as well and us advocating again for the needs of our members.

Rich: So by bringing jobs, that’s bringing us renters?

Stu: Yes. Again kind of taking it in the most basic terms, yes.

Rich: I want to know how we’re making money from this so that answers that. Thank you [laughter]. What does HDIP stand for?

Stu: As part of the lobbying and advocacy, we did come across the state program called HDIP. Again, they love alphabet soup ‑ Housing Development Incentive Program. It’s targeted only to gateway cities. Now does everybody understand what I mean when I say gateway cities?

Audience: [unintelligible 0:07:41].

Stu: Okay, so I want to say this dates back to about 2008. There was legislation that defined what a gateway city is and essentially it’s your old manufacturing cities – Lowell, Lawrence, Billerica, Worcester, Fall River, Springfield, New Bedford, Chicopee, Holyoke, Chelsea, Everett, Revere – where a lot of the industry off-shored and left. Now these communities are trying to find a way to bring in new businesses, bring in new industries, and reinvent themselves and keep themselves vibrant and thriving and kind of have an economy.

The more specifics, there’s a set number of population that’s about 35,000 to 250,000 residents. You need a median income that is a percentage compared to the statewide median income. Usually it’s lower. You need an educational attainment of bachelor’s and higher of your residents that’s lower than the state average. I mean it’s kind of those I hate to say it referring to our home city but it’s those depressed areas where commerce and industry left during the ‘80s and now they’re trying to reinvent themselves.

There’s a designation for gateway cities, and there are programs like HDIP that are targeted to gateway cities. The easiest way I can explain HDIP, it applies to market rate housing two units or higher in an HDIP zone. The city about a year or so ago established an HDIP zone. I have a map, but I don’t know that it’s big enough that people at the back of the room would be able to see.

Doug: Online? We have Internet access.

Stu: It might be on the city’s website, but it would be‑

Doug: [unintelligible 0:09:46].

Stu: Ten minutes to find it, but essentially it’s downtown and then a lot of the commercial quarters that go out – Quinsig Village up West Boylston Street, and out Highland towards Park, out Chandler out Pleasant kind of that diaspora. Your building has to be in that zone, and you have to be substantially rehabilitating an already existing building. Again, the idea behind this was you have these depressed former industrial centers. A lot of them have these magnificent, massive beautiful old factories building.

[0:10:37]

How you do something with that? You’re not going to fill it back up with industrial tenants. Is there a way to repurpose and rehabilitate that building into specific market rate houses? So that as you’re attracting those landlords and those young professionals under 35 to some of these new jobs in high tech, as you’re attracting students into the pharmacy school downtown, or Quinsig is moving a portion of their campus downtown, you’re getting a greater population of students, housing for them in the same area, near the rail transit. Kind of capitalizing a lot on some of that development, market rate housing.

The program, it offers a local tax incentive and then there’s a state tax credit. The local tax incentive, everybody knows that a TIF is?

Audience: [unintelligible 0:11:44]

Stu: Some yes’s and some no’s. A TIF is I buy a building. I’m going to renovate it, update it to my manufacturing end. I will for a period of time pay taxes on the base value, but not on the improvements for a set period of time. It can be a percentage of those improvements, but again without trying to pull everybody way into the weeds, a TIF is a tax break on the taxes on the improvements. A person still pays on the base value but not on the improvements. HDIP, the local tax incentive, is essentially a TIF, on the residential, on the market. But again, I keep stress: it’s market rate units and you have to take an existing structure and you have to do substantial rehabilitation, which they’ve used code and law to define as about $30,000 per unit or more in your construction costs.

The city, as they do with everything, it’s a sliding scale on that TIF. How much you get, how long it is, how many units, but essentially if you have a qualifying project in that zone, you could get a local incentive and then there’s the state tax credit on your QSREs, your Qualified Substantial Rehabilitation Expenses. That is up to 10 percent of those expenses and a max of $2 million in credits for a specific project.

From the sound of the intro, I probably lost about half of you right now. Ideally, HDIP is designed to help invest in housing. Since Doug is looking to possibly do a second more in-depth program on this at the Chamber with those that have real interest, I’ll stop boring everybody on HDIP and open it up to questions.

Male Audience 2: Is there a minimum number of units?

Stu: Two, two, two, and there’s no maximum. They removed the cap about a year ago. Sandy?

Sandra: When you have both ‑

Rich: Hold on. Hold on.

Sandra: [unintelligible 0:14:15] When you have both of these tax incentives coming to you, do you also then have to follow some of the other regulations like have them handicapped accessible, sprinklers, and things of that nature? Because over 51 percent renovations, which is what obviously this would incur to do that, get those kinds of taxes and financing, then you’re going to be falling into okay, now you have to have handicapped accessibility. Now you have to have sprinklers. Now you have to have XYZ.

Stu: Yes. None of this supersedes any of that state code of ADA compliance and sprinklers and all that. This wouldn’t supersede any of that. But those costs of doing that would be part of your construction costs and rehabilitating the building, so again it’s a bit of both sides of the coin for it.

[0:15:13]

Rich: [unintelligible 0:15:15].

Stu: I didn’t see whose hand went up first. I’m going to trust you.

Rich: All right, I don’t know if that’s a good idea.

Stu: This gentleman, then ma’am, I did see your hand in the back. Yes, sir.

Male Audience 3: Is there a rule about if there is a fire, you have to do certain things so what percent of the property if you touch it that you have to get what Sandra is talking about?

Stu: You’re talking about kind of coming up to code for ADA compliance? That I believe is 25 percent of the overall value if the cost of the construction is I think 25 percent. Twenty percent to 25 percent is the trigger to have to come under ADA compliance. It’s been a little while since I’ve looked at that one, but for I know handicapped accessible, the architectural acts as board, I believe it’s 20 percent to 25 percent of the overall value of the building. If your costs are more than that, then that triggers a lot of that compliance.

Lisa: You mentioned qualifying. Is there a website for HDIP that we could visit?

Stu: Yes, the state does have one. If you go to mass.gov, and then search HDIP, then you can just punch in the initials. It will bring that up. You can also contact the city because you applied through the city. It would be the economic development office. The gentleman’s name is Jackson Restrepo. He oversees the HDIP Program.

Daniel: There is actually a webpage on the city’s‑

Stu: Does the city have its own?

Daniel: Website that explains HDIP in-depth and it gives all the percentages and tables that you mentioned about. There is also a map there, so you can see what areas are eligible.

Stu: Okay, thank you. There is a gentleman right up here.

Male Audience 4: It is not referring to just factory buildings, right? I mean this can be a three-family building, a two-family building‑

Stu: Anything‑

Male Audience 4: Four, five.

Stu: Anything that would be two units and that’s it. Yeah, it’s two units or more.

Male Audience 4: Great.

Stu: But you have to substantially rehabilitate the building. You can’t throw a coat of paint on the outside or throw up siding. You’d be substantially rehabilitating. Again, the figure that’s in the reg is about $30,000 per unit in your rehabilitation cost. But no! It’s not just factory buildings. It’s any market rate housing. Again new construction, old.

Audience: Family is automatic.

Rich: Do you have time for one more? There’s someone behind me. Here you go, Daniel. Closer.

Daniel: I do believe there is a requirement that the building is being repurposed. You cannot take a six-family and convert it into a six-family.

Stu: I looked through all the regs today and couldn’t find anything about specifically having to repurpose a building. I took a second look through all that today just to make sure. I couldn’t find it. Again, the intent when they did it was to take old factory buildings and repurpose them. Again, I didn’t see anything in the law. I didn’t see anything in the regs that said you had to repurpose a building. It was rehabilitation. Do we have time? There were two other hands.

Rich: All right.

Doug: We have time for two more.

Rich: We have time for two more.

Stu: Two more? There is‑

Rich: Sandra has just asked what the definition of market rate is.

Stu: Hundred and ten percent of the…affordable for a family with 110 percent of the median income, and looking at Worcester’s application, it needs to be affordable for a family on I think $57,010 salary.

Sandra: [background noise 0:19:16]

Stu: Yes.

Female Audience 1: I was just wondering you want all these businesses coming into our area. There’s no activities. There’s no place to go for activities and to hang around for like the college kids, and there’s no incentive for anybody to come and enjoy themselves like you go to Boston. You walk around. Every street that you go is dark. There’s no place really for the kids to hang out safely, and there’s no incentive for businesses to actually come and develop.

Stu: The Canal District actually draws a lot of college students because of the restaurant bar concentration. They go down Shrewsbury Street, and then this past year, we worked with the Worcester Student Government Association and did a poll of about 1,200 college students, getting the information on what do you want downtown. It’s one thing to go trying to go trying to attract the businesses, but if I’m attracting Friendly’s and none of them want to go to Friendly’s, then it makes no sense bringing Friendly’s downtown.

[0:20:30]

We went out and meet with the citywide student government group to get on to their college campuses with their students, so that we figured we’d get better answers if it’s the college student asking the college student as opposed to me. Even if I’m in jeans and T-shirt, I don’t look like a college kid. They’re probably not going to give me the full answer, so we surveyed about 1,200 college students to find what. Are you looking for an Apple store? Are you looking for Hollister? Are you looking for Chipotle? Are you looking for retail? Are you looking for restaurants? Are you looking for…what do you want that will bring you downtown?

A lot of what we’ve heard, they’re looking for places like Chipotle for food, but they’re looking for a café where they can come, they can sit, they can get a cup of coffee. They can use Wi-Fi. They can do schoolwork. It’s relatively quiet. There’s the ability to kind of sit in small groups and work on projects.

The next step is we have an active director of business recruitment who’s now going out and trying to target some of these specific businesses that these college students referenced. What it’s going to take to get you into the city? How can we get you into downtown?

She’s bringing in developers and – I forgot the term for them, but a company would hire like the assessor to go out and look at properties, a property search firm. We’re meeting with them. We’re bringing them around. We’re showing them the properties that we have. We’re introducing them to the landlords, and we’re trying to get those businesses in because then the college students come down, and the other industry, and the other businesses come and then you get that.

Female Audience 2: Are you looking at business interest rates?

Stu: Yes.

Female Audience 1: Has anybody been [unintelligible 0:22:10]? It’s dark. There’s no one there. Everybody is just in the back. There’s nothing else on the outside like vendors, something to make a crowd get there.

Stu: They do try and do vendors in the park, but I know a little bit about that. That’s the Shrewsbury Street merchants that do that, not the Chamber. But their whole idea is to get you to walk down the street, and they love it. They think it’s great because they have people walking from restaurant to restaurant. They don’t serve a full menu. They offer a sampling. They’ve tried for several years to put some vendors in Columbus Park so that there’s something outside of the restaurants to congregate people around, and to just start the movement of people in and around that area.

Rich: I can only imagine how many college students surveys you got back that just said beer with big letters on it [laughter]. It’s an obvious one.

Doug: Yeah. All right. I just wanted to say when I first heard about HDIP Investments, I sent out a survey in the newsletter, asking if people were interested in an investment pool because a lot of these buildings that are good HDIP targets are large and mill-style. There are at least 10 people in this organization who are interested in pooling their funds to renovate something together. We have the skills to actually get an investment group together.

If you’re interested in learning more about HDIP, whether it’s two units or an investment pool, make sure you get your name and HDIP on one of those yellow cards.

Rich: All right. So that wraps up Stu’s segment. All the questions did keep you talking. That was great. Thank you very much for all that great information. Let’s hear it for Stu Loosemore [applause].

Stu: Thank you.

[End 0:24:10]

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