One Beacon Street’s 40-year-old tax agreement with the city of Boston expires today, paving the way for the office building to be taxed on its assessed value in the coming fiscal year, which starts next June.
You may recall that at the first Boston mayoral debate candidate Kevin McCrea accused Mayor Thomas Menino of giving a tax break to the owners of One Beacon that saved them an estimated $3 million to $5 million a year, or about $40 million over the last decade. It was a charge that was dismissed by Menino.
Initially, city officials told CWunbound that the tax agreement, called a 121A for the section of state law it falls under, was signed by former Mayor Kevin White in 1969 and was irrevocable. The agreement designated the area around One Beacon as blighted and called for the developer to pay 23 percent of his gross income to the city each year rather than pay taxes based on the building’s assessed value.
Boston Redevelopment Authority records reviewed by CWunbound indicate the building was sold to new owners in 2000, 2004, and 2006. Each time BRA officials agreed to transfer the 121A agreement to the new owners, determining that there was “no fundamental change” in the relationship. Each time the new owners agreed to make separate, voluntary, one-time payments to the BRA for affordable housing and improvements in the area. The new owners paid a total of $1 million in 2000, $1.1 million in 2004, and $1 million in 2006. The payment amounts represented about $1 per square foot.
McCrea, noting the area around One Beacon could no longer be considered blighted, said the city should have dissolved the 121A agreement when the building changed hands and taxed the building at its market value. He says Menino’s decision to continue the tax arrangement with the new owners cost the city dearly.
Larry DiCara, a real estate lawyer in Boston with Nixon Peabody LLP, said it has been the BRA’s interpretation of the 121A law that the tax agreement must transfer to a new owner if the new owner is not seeking to alter the building or make significant changes in the agreement.
DiCara said the 121A agreements were fairly common in the 1960s. He said they gained currency because developers didn’t trust City Hall to produce tax assessments that were accurate and fair. The developers instead preferred the certainty of paying a percentage of their gross income, a payment that would rise in good economic times and decline in bad times.
A BRA spokeswoman said approximately 100 buildings signed 121A agreements, most of them subsidized affordable housing projects. Other buildings with 121A agreements were the Prudential Center, TD Bank Garden, Marriott Long Wharf, and the Greenhouse residential development on Huntington Avenue, the spokeswoman said.
“Nobody really believed they could trust the assessors,” DiCara said. “For about 15 years, no one would put up a building in Boston.”
Beacon Capital Partners, the building’s current owner, pays about $7 million a year to the city, according to BRA officials. The officials declined to estimate what the tax payment for One Beacon will be once it is assessed based on its value in fiscal 2011. A Beacon Capital spokesman declined comment.
