on Jun 06, 2022
Applying the Massachusetts Tideland Development Calculator
This article is the second in a series of articles on the Massachusetts Tideland Calculator. See Part One HERE. This series is a companion to an article published by The Conservation Law Foundation, available HERE.
The Conservation Law Foundation and HR&A Advisors developed the Massachusetts Tideland Development Calculator. Grounded in a solid understanding of real estate finance and market realities, the tool suggests a helpful framework for evaluating public and private use of public lands in many contexts.
“Chapter 91” of Massachusetts General Laws preserves public access to the waterfront by establishing requirements on land uses, building heights, and the siting of public open space in waterfront areas called tidelands. However, a project can obtain exceptions and build bigger or higher than what Chapter 91 rules allow on tidelands. In these cases, the project owner often has to compensate the public for the loss of waterfront open space by making a “mitigation payment.” Unfortunately, there has been no consistent framework for sizing these payments. To help fill this gap, the Conservation Law Foundation worked with HR&A Advisors to design the Massachusetts Tideland Development Calculator. The Calculator models the land value premium that a real estate development project gains by relaxing Chapter 91 rules.
The calculator in action—a theoretical case
For example, a real estate developer files plans to build a residential high-rise located on private tidelands in Boston’s Charlestown neighborhood. In addition to imposing strict height limits on the building onsite, Chapter 91 also requires that 50 percent of the site consist of open space. However, the proposal exceeds these height limits and only preserves 34% of the site area as open space.
The Calculator estimates that the proposed project includes about 210,000 square feet of gross floor area, 60,000 square feet more than what would be legally possible under Chapter 91. This increased gross floor area results in a residual land value premium of at least $4.6 million.
Project details: The site is 35,000 square feet in area, and it is located on private tidelands in Boston’s Charlestown neighborhood. The proposed tower includes 80 rental apartments, 60 condominiums, and 20,000 square feet of retail on top of 190 units of underground parking. In addition to imposing strict height limits on the building onsite, Chapter 91 also requires that 50 percent of the site consist of open space. However, the proposal exceeds the height limits and only delivers 12,000 square feet of open space.
Because the project delivers less than the minimum required open space onsite, the project owner has to compensate the public for the loss. A portion of the residual land value premium could serve as a source of this payment. And reaching out to the surrounding community would be a key step to envision the types of benefits that payment could create for everyone along the waterfront.
For more information on the methodology for calculating project value—referred to as residual land valuation—take a look at the calculator methodology.
Public and private benefits can align under Chapter 91
Although the narrative above suggests inherent conflict between public and private interests, this is not always the case. The developer’s returns and the public’s rights can often align. For example, delivering high-quality open space and public-facing amenities such as retail and community space can also significantly boost the private value of a project.
Photo by Tim Pierce
Boston Properties’ Atlantic Wharf project in Downtown Boston exhibits the potential for alignment. The project’s waterfront amenities include a public plaza facing the water, interior public spaces and exhibition rooms, ground-floor dining, and docks for water taxis and public boating use—all of which arguably boost the value of residential and office space onsite.
A new approach to evaluating private use of public lands
When it comes to waterfront development regulations, Massachusetts’s Chapter 91 is uniquely bold and specific. However, federal agencies, states, and local governments across the country engage in similar negotiations and deals to secure public benefits from private interests that develop on or use public land and water.
In California, the California Coastal Commission—and local agencies in specific cities like San Francisco—regulate development activities along the state’s coastline to ensure that the public enjoys uninterrupted access to the beach and ocean. On rare occasions when shoreline real estate developments cannot meet coastal development guidelines, the projects contribute a payment in lieu of compliance to a trust fund administered by the California Coastal Conservancy. The Trust Fund, in turn, distributes funding to projects that improve public access, natural resources, working lands, and climate resiliency projects along California’s coast.
Around national parks across the country, the Land and Water Conservation Fund (LWCF) acquires lands and waters to expand or protect federally owned areas, or extend public access to those areas. To make purchases, the LWCF relies on earnings from offshore oil drilling and natural gas leasing on said federal lands. In doing so, the LWCF effectively monetizes private energy-related imposition on public lands in order to further expand public resources.
Monetizing private interests in public lands in order to exact payments for public goods is nothing new. But in this broader context, the Calculator represents a new approach—one grounded in a solid understanding of real estate finance and market realities—to unlocking tangible public benefits from private actors that access land and water that belongs to the public. The Calculator makes it easier to have a conversation about the scale of public benefit that is appropriate, leaving public stakeholders and community groups to weigh in on how the money is used.