Shoddy record-keeping and weak management inside the Boston Redevelopment Authority have cost Boston’s powerful development agency millions of dollars in unpaid fees and lease payments, an outside audit of the agency has found.
The audit, commissioned by Mayor Marty Walsh earlier this year and conducted by the firm KPMG, paints a picture of an agency beset by financial woes and miscommunication. In one instance, the audit found, the developer Samuels and Associates missed hundreds of thousands of dollars in affordable housing payments because Boston’s Inspectional Services Department failed to notify the BRA that Samuels had pulled a building permit – an action that should have triggered a hefty affordable housing bill. In another instance, a developer withheld property refinancing fees from the BRA for seven years. Pappas Enterprises, a major landholder in South Boston, has nearly $300,000 in lease payments to the BRA that are more than three months past-due.
“Is it alarming there have been deals where the city hasn’t been paid?” Walsh asked in a City Hall briefing with reporters Wednesday, in advance of the audit’s Thursday release. “Absolutely. If you get a $30 parking ticket, we put a boot on your car. Here, there are multi-million-dollar deals where money is being left on the table.”
Walsh had promised to conduct the BRA audit shortly after taking office in January. The report, which has been months in the making, shows Boston’s new mayor inherited a development agency with financial records in disarray. KPMG’s audit found that the BRA exercises weak oversight over lease payments owed to it; that it collects affordable housing payments from developers, but has no policy governing how or where the affordable housing money is spent, and is unable to track where the money is spent; that it demands deed restrictions from developers, but has no way of knowing whether those deed restrictions are being followed; and that its technology and document storage systems are outdated.
Some of the audit’s findings were not a surprise. The spotty handling of affordable housing funds was the focal point of a lengthy Globe article on the BRA’s woes that ran last December. The Globe noted that the BRA was spending its affordable housing fees at a much slower rate than other city departments. Under Walsh, the BRA will continue to collect affordable housing payments from developers, but will transfer the funds to Boston’s Department of Neighborhood Development, which is taking charge of spending the money. “We have $20 million languishing in accounts,” Walsh said. “We’re going to spend the money and actually build the housing that’s supposed to be built.”
KPMG performed the audit for free, and Walsh said it was never intended to be a full forensic sweep of the BRA’s finances. John Barros, Walsh’s economic development chief, described the report as a road map that had flagged items for the Walsh administration to follow up on. Walsh vowed Wednesday to launch a deeper internal investigation of the BRA’s finances. He also said he would be commissioning a second BRA audit, to be devoted to the agency’s permitting and planning policies. Walsh said the KPMG audit was to have scrubbed BRA permitting as well, but auditors had become consumed by detangling the agency’s finances.
Walsh said that while the BRA audit highlighted uncollected fees and payments, the city still had no idea how much has gone uncollected. And he allowed that sloppy record-keeping and financial oversight may extend beyond the BRA and into other city departments. “It’s disturbing, in the sense that we don’t know how much is on the table,” Walsh said.
At the same time, Walsh placed the blame for unpaid bills on the city, not the developers who had withheld payments. “If you owe money to a credit card company and they don’t send you a notice, you won’t send them a check,” he reasoned. “Agreements were struck, but the city hasn’t followed up on them… If in the past the BRA didn’t follow through, my job now is to go back and clean up that mess.”