Bishop: Fane Needs [To Give Us] a Better Deal

Thursday, October 25, 2018

 

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Tower doesn’t need a redesign, it needs a pencil as sharp as its profile

For some four hours on Monday, the titanic battle over the Fane Tower was waged in the Providence City Council Chambers as hundreds took their 2 minutes to extol the virtues or vices of this proposed phallic addition to the city’s skyline.

I have little sympathy for any of the factions in evidence.

The building’s proponents were almost entirely union members who would be in favor of a public campaign of window breaking if the glazers were unionized. As per usual, not in evidence were any concessions on the unions’ parts that would mitigate the tax breaks Providence is required to pony up for virtually any project.  Instead, we hear the constant refrain: it costs the same to build in Providence as in Boston but the rents are lower. Anyone with the least common sense would understand that the most immediate solution is to lower building costs which are, in no small part a question of union labor. We’re not arguing about whether they get $15 an hour. - try twice, three four times that depending on the skill niche.

At the margins, the state can give back the sales tax on construction materials and government can streamline permitting but if that effectively cuts costs 10%, where are the project labor agreements giving back 10% more of the cost from labor? That would be much more convincing to me than hearing from folks about temporary ‘good jobs’ that will have to be replaced as soon as the building is built. And no doubt, when that happens, we will face the same urgent demands for millions of dollars of state and city money. How about we hear what the unions are willing to sacrifice because they believe this development is good for everyone?

Subsidies for Fane not that big, but still deserve scrutiny

To be fair, the state put on this project from the Commerce Commission is a paltry $15 million, on the order of half what the Pawsox asked for a project one third the scope, and not a tenth of what the state put up for the Mall. So the subsidy is not the main argument against the project, but there is a more subtle question of why the state is so quick to the line up with giveaways for luxury housing while affordable housing languishes. This bugbear has west side progressives joining the anti-progress crowd from the east side, who don’t like this building because it stands out. If I was going to spend a quarter billion dollars on a building, I would hope it would stand out!

Indeed, who doesn’t think the Superman building stood out when it was built. I’m sure there was criticism from doubters although the attitude of optimism of the times and the sense that it retained Providence’s and Rhode Island’s place on the map pervades in a historic paean delivered at its opening. Of course, folks who think the Fane tower nothing more than a sore thumb forget that standing out may be nothing short of outstanding! To me, the building says Boston.

Brutalist or simply modern?

Now, this makes all the history Nazis don their brown shirts for every hearing. Isn’t the Providence ‘advantage’, they clamor, that we were supplanted by Boston which promptly tore down many of its historic buildings in its embrace of brutalist architecture. But Providence wasn’t ‘saved’ by our rejection of brutalism but by being sidelined as an economic point of the New England compass. And saying that now we can cure our years in the wilderness by not following Boston’s example fails on two fronts. First, Fane isn’t proposing to tear down anything. And secondly, the Tower is hardly brutalist, a style that Boston helped usher into obscurity. Rather the present design is part of the more evocative path that modernist architecture has taken since then.

That is not to say that what any architect thinks of the building matters, or that it must be liked because it is similar to, or perhaps supercedes, the celebrated Aqua Tower in Chicago. Rather, the obvious concession to be made is that the Fane Tower is modern; and there are simply some people who think we should have no truck with anything modern. The more subtle versions of that view were also on display Monday night by folks who said it was the location to which they objected and not the design.

In the end, there appeared to be virtually no one from the east side who was not mortally offended by the building. That is the best recommendation from my point of view for building it.

Affordable Housing or Luxury Housing? Mutally exclusive?

But those on the west side exhibited an uneasy alliance with the snobby attitudes demanding we chain ourselves with zoning and classic aesthetics. This was epitomized by State Senator in waiting Sam Bell’s testimony that questioned the priorities that could lead to state investment in this kind of project for luxury apartments when affordable housing is it’s capital city’s crisis.

Bell is uniquely positioned to make this point as the Rhode Island Senate is the nexus of political pressure pushing for this project. As per usual, the labor-loving Senate President’s view is: damn the torpedos and full speed ahead, without compromise. That is the kind of reasoning that doomed the Pawsox – with much more taxpayer subsidy on the line so it didn’t bother me that he couldn’t negotiate out of his own way. But the 64 million . . . eer $250 million private investment question on the Fane Tower is whether the Senate hierarchy will be satisfied with marginalizing Bell or might accommodate concerns about priorities in Providence to create a grand bargain.

While my politics are divergent from Sam Bell’s -- I’m a trickle-down capitalist and he’s a Keynesian government social investment guy -- I have worked shoulder to shoulder with Sam Bell to object to trickle down corporatism, to the raining of subsidy on private developers under the theory that the average guy will eventually benefit. It is time for such plans to wear those benefits on their sleeves. And the needed capital should come from the players pushing this project, the state, and the trade unions.

The simplest roadmap is that labor should be putting a pound of flesh on the table enabling more of the state subsidy to be used to address affordable housing. The state should find those concessions a step towards its own duty to fulfill it’s commitments to help Providence with the immense subsidies the state has coerced from the city. The tax stabilization agreement for the Fane project will far exceed the state contribution and yet the state actually gets income and sales tax first from construction workers and then from those who will reside in the tower. The city which provides the actual services to those residents will get next to nothing for a decade! The paltry reimbursement the state has parsimoniously meted out as payment in low of takes makes a bad joke of the promise that the I-195 land would rebuild Providence’s tax base from the way it has been diminished by universities and hospitals that serve the state and the nation.

It’s absolutely fair to say that Providence’s governance over the last decades under the leadership of mayor’s of Irish, Italian and Hispanic heritage has been laden with patronage and waste and placed far too much reliance on commercial property taxes and this has hurt the city and the state.

It’s absolutely fair to say that Providence’s governance over the last decades under the leadership of mayor’s of Irish, Italian and Hispanic heritage has been laden with patronage and waste and placed far too much reliance on commercial property taxes and this has hurt the city and the state (and no doubt the anglo patricians who preceded the modern era were no strangers to the institution of patronage).   

But even accepting that commercial property taxes are twice what they ought to be in Providence, where is the state commitment to make up the difference during the first decade of these tax stabilization agreements where the developer would not even pay 50% of their taxes?

Hypocrites on Parade

Which brings us to perhaps the most nauseatingly two-faced opponents of the Fane Tower, the rump of existing developers in Providence who have already gotten their tax giveaways from the city, some of which make the proposed Fane tax breaks look downright pedestrian by comparison. One after another, they took to the microphone to dissimulate upon their adoration for investment in Providence but their revulsion at this particular investment (which just happens to be 400 competing units, a fact they were much less focused on than its 400 additional feet in height, as if that really hurts anybody).

Those who pretend to a certain economic sophistication suggest that this is just part of too many upscale units being built in Providence. Really, if that is the case why did the subsidy mill just churn out a break for Edge College Hill? Why wasn’t that a bridge too far? As an owner or apartment units that would compete with the Fane Tower I have certainly been sensitive to this argument and have opposed giveaways of the sort the Council made last week. Like the Gilbane project at 257 Thayer serving a college professional and student audience, Edge College Hill should have been denied such a generous subsidy.

Iconic or Iconic Failure?

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But the Fane tower is something on a different scale. It has the prospect to be an iconic addition to Providence, a beacon that all the subsidized redevelopment of mediocre former offices and mills promised to provide but has not – the evidence for which is that every new project claims to need a subsidy. Supposedly all of these chi-chi renovations were going to put us on the map, and we are constantly harangued with the notion that we have a very low vacancy rate. But if that were really the case, these run of the mill projects would not need subsidies. Lik e it or hate it, the Fane Building is a statement -- like a lighthouse shining towards Boston, and surely visible from the Blue Hills.

But what if it is an iconic failure? What if the game of musical chairs is up and we hit the next recession. Of course, it won’t be one building alone that is empty. It’s quite clear folks are willing to live downtown at high market rates and they are minting more urbanites than suburbanites latley. Unlike the Carnegie Tower in Portsmouth that put great density in the middle of nowhere and has vacancies to prove it, the Fane Tower is in the middle of somewhere and hardly likely to sit empty.

The risk of this project is that rents and sales prices might have to be lowered, but that is on Fane and the Investors. Unlike the highly subsidized stadium proposal, the financing would not be by taxpayers.

Dare to Start

And the real answer to those who think they have run the numbers on the tower and it doesn’t work is not to oppose the project being started, but to oppose it being stopped.  As Churchill is said to have quipped of Eden’s nadir in the Suez: “I am not sure I should have dared to start; but I am sure that I should not have dared to stop.”

At the top of the list of what is needed from the developer is a completion bond. If the tower is completed and sells for lower than expected prices that is not a failure for Providence. But if the tower gets half built and Fane says: “I said I needed 50 million from the state, not 15 million. . . ”, that is a failure.

Meanwhile, the state should, in tandem with enabling the Fane Tower, create an investment pool equivalent to its Build RI subsidy for loan to those who will buy, renovate and occupy vacant housing in Providence, renting additional units at affordable thresholds with loans in the range of $100,000 per unit. When the city undertakes these projects they spend $250,000 or more per unit. That is absurd and anybody remotely familiar with real estate investing understands that at standard multiples that implies monthly rent of $2000, hardly affordable. But with sweat equity, moonlighting and perhaps the help of institutions like the cooperative extension and RISE, enterprising owner occupants can improve their own lot and provide affordable housing.

Perhaps this could be accomplished by the state ponying up to the city the payment in lieu of taxes it should for the Fane Tower and placing that as a revolving loan fund within the Providence Pension, meaning the public employees and their unions would see an increase in the funding ratio but would have a personal stake in insuring that these renovations were completed and loans repaid so this is not simply the creation of another patronage-laden piggy bank like the Providence Economic Development Partnership where loans were made not to be paid back.

The bottom line is: many see the building as profane but I am decidedly Pro Fane – provided we get the deal right.

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Brian Bishop is on the board of OSTPA and has spent 20 years of activism protecting property rights, over-regulation and perverse incentives in tax policy.

 

Related Slideshow: Fane Unveils New Design for Tower

 
 

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