Each and every MassDevelopment employee puts the highest priority on increasing employment in Massachusetts. Improving the coordination and the efficiency of economic development efforts are goals worthy of the highest praise and the strongest support.

Precisely because of the importance of these goals, I will respectfully share some suggestions today regarding changes to these helpful bills that would produce even more growth in the Commonwealth.

By way of background, in 1998 you merged the Massachusetts Industrial Finance Agency and the Government Land Bank to create MassDevelopment. By your action, you recognized the value of leveraging MIFA’s financing powers to support the Land Bank’s economic development mandate. The MIFA and Land Bank boards had agreed previously to a successful affiliation, which paved the way for the merger. Thus Chapter 23G of the Massachusetts General Laws gave MassDevelopment the power to issue bonds; make loans and guarantees; redevelop property; and eliminate blight throughout the Commonwealth. 

Since that time, we have used the revenues we earn to invest in the Commonwealth’s businesses and communities, creating both jobs and housing and supporting business expansion. Over the past three fiscal years, MassDevelopment has financed or managed more than 700 projects representing an investment of more than $6 billion in the Commonwealth. Together these activities are supporting the creation of more than 29,000 jobs and 6,700 housing units.

In addition to facilitating capital investment with bonds, loans, and loan guarantees to businesses, nonprofits, and governmental entities, we also have provided technical assistance to cities and towns and worked to redevelop surplus federal and state properties — 100 Cambridge Street, Devens, the old Kerr Mill site in Fall River, the former Northampton state hospital site, and, most recently, the former GSA building in Springfield — representing an investment of more than $55 million made possible by our retained earnings. We also have contributed $18 million from these same retained earnings to underwrite several recent state initiatives including the 43D program, bring Evergreen Solar to Devens, and pay for ongoing maintenance of the Rose Kennedy Greenway.

While we manage eight specialized loan and grant funds on behalf of the Commonwealth and the federal government, more than half of our loans and all of our services to cities and towns are made from retained earnings. As a self-supporting agency, we depend greatly on the fees we earn from our bond business and the interest from our loan portfolio.

As a lender, in the past three years we made 183 loans and loan guarantees to small businesses and nonprofits totaling more than $120 million, of which more than $32 million was for small nonprofits. In the first six months of FY10, we made $22 million in loans to Massachusetts businesses, both for-profit and not-for-profit. At a time when banks had tightened credit, we have continued to make loans. As Gary Markoff, a partner at Sherin and Lodgen LLP in Boston, said in a January 29 article in The Boston Business Journal, “MassDevelopment provides another layer of capital for companies. They were doing it before the recession, and they’re still making loans.”

This year, we also invested $2.5 million to buy 1550 Main Street — the former federal court house — in Springfield, secured commitments for leases, and are spending another $3.6 million in building renovations. This project — made possible by our retained earnings — will bring 125 Bay State Medical Center and several hundred Springfield School Department workers to the area and revitalize a key downtown corridor in this great city.

Please note that MassDevelopment carries out all of these activities under hiring and wage freezes that went into effect in October 2008 and remain in place today. In fact, over the past five years we have greatly expanded our scope of services to businesses and cities and towns while keeping our headcount relatively flat.

I will now turn to the two bills before this Committee today. I will comment on the Senate bill first since it was filed first, recognizing that you, in your deliberative wisdom, may choose to combine both bills before you today or introduce alterations present in neither bill at this time.

As drafted, Senate Bill 2270 will profoundly affect MassDevelopment and our ability to continue to create jobs and stimulate economic development throughout the Commonwealth. The bill eliminates most of our authority to issue bonds on behalf of nonprofit organizations, from colleges to boys and girls clubs.

During the last three fiscal years, we issued 269 bonds worth $5.2 billion while HEFA issued 122 worth more than $8 billion with three universities representing nearly $3 billion of the HEFA issues. Of the MassDevelopment bonds, 180 worth more than $4.5 billion were for nonprofits across the state. In addition to eliminating a source of low-cost financing for these groups, this bill would slash up to $2.3 million in annual recurring revenues for MassDevelopment, almost half of our projected annual bond fee income, or one-quarter of our combined bond and loan income. This income allows us not only to provide bond financing but also supports the types of lending and real-estate projects listed on the fact sheets that we have provided to each of you.

Removing this revenue will immediately require us to cut back on lending; shrink services to cities and towns; and slow or eliminate redevelopment of surplus state and federal properties. I would submit to the members of this Committee that these are the exact types of actions that we need to do more rather than less of in these tough times.

For these reasons, I respectfully ask that first you do no harm to the ability of MassDevelopment to promote economic activity in Massachusetts by leaving intact our bonding powers; and second, that you consider merging MassDevelopment with HEFA to centralize economic development finance and development services in one strong, multifaceted, comprehensive agency that reinvests its retained earnings in local economies by making loans to local businesses and reclaiming blighted neighborhoods.

In 1998, you and your legislative predecessors recognized the wisdom from a public-policy perspective of joining the bond financing powers of the Massachusetts Industrial Finance Agency with the job-creating tools of the Massachusetts Government Land Bank. Today, given the precedent set in 1998, I ask that you similarly streamline economic development financing in the Commonwealth by combining two powerful quasi-public agencies: MassDevelopment and HEFA.

The 1998 merger represents the more important precedent for you to consider, rather than defaulting to which agency carried out which function first. For people, places, and institutions, oldest is not always best; governmental entities, especially those that must deal with ever-evolving economic complexities, must change over time to serve constituents most effectively. MassDevelopment’s ability to meet the state’s economic emerging needs — from administering the Brownfields Redevelopment and Cultural Facilities funds to launching a new loan program for small farms just this month — strongly suggests that this agency is most likely to continue to do so in the future. The federal government gave states a powerful tool when it bestowed the power to issue tax-exempt bonds to spur economic development. Leveraging that power through reinvesting the revenues generated makes good sense, especially now.

Accordingly, when you consider House Bill 4490, MassDevelopment again supports all efforts to create jobs and expand businesses in Massachusetts. Rather than creating a new quasi-governmental authority in the Massachusetts Growth Capital Corporation, however, we respectfully suggest that you subsume the Massachusetts Community Development Finance Corporation, the Economic Stabilization Trust, and the Massachusetts Technology Development Corporation into a new fund at MassDevelopment rather than create a new quasi-governmental authority.

If MassDevelopment and HEFA were to merge, the resulting agency could accomplish the mission of the proposed Massachusetts Growth Capital Corporation with far fewer funds than the $25 million envisioned in House Bill 4490. Indeed, if the Legislature sought fit to reprogram some of the existing restricted funds that MassDevelopment currently administers and retained earnings from HEFA were available, we could carry out this effort using no new state monies whatsoever.

Let me close by expressing my hope that I have left you with three main thoughts to consider. First, I hope that you understand the fullness of the support that MassDevelopment has for the goals that these bills set out to accomplish. Second, I hope that you have a better sense of the impact MassDevelopment has had as a single point of service for companies and communities across the Commonwealth. Third, I hope you are intrigued by the notion that enhancing the authority of MassDevelopment can help lead to even greater economic development and job growth than these bills would accomplish without the amendments that I have suggested.

Robert L. Culver is president and CEO of MassDevelopment.

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