Friday, June 10, 2005
Consultant outlines 40B players, process and pitfalls
"One-stop shopping," was how attorney Daniel C. Hill of Anderson and Kreiger LLP introduced his weighty subject at the 40B Forum sponsored by the Carlisle Board of Selectmen. "The 40B statute allows developers to obtain all local approvals from one source, the Zoning Board of Appeals (BOA), and bypass separate permit applications to other local boards." Anderson and Kreiger LLP is the special counsel retained by the town to assist in all matters related to 40B affordable housing regulations. The young, articulate Hill gave a two-hour Power Point presentation to members of town boards, committees and the general public at a June 2 40B Forum. He was assisted by attorney Arthur Kreiger, who injected comments during the marathon talk, and kept Hill supplied with drinking water.
Hill held the undivided attention of upwards of 40 people in the Clark Room at Town Hall as he explained how the 40B statute is designed to break down barriers to high-density affordable housing and permit developers to bypass restrictive regulations and bylaws. Towns like Carlisle can only deny such a comprehensive permit if at least 10% of the housing stock in town consists of qualified affordable housing or at least 1.5% of the developable land area is consumed by affordable housing. Carlisle currently has 18 units, or less than two percent of its housing stock classified as affordable, and that has not improved in 15 years.
Hill, who is a graduate of the University of Vermont and Northeastern University School of Law and the current co-chairman of the Boston Bar Association's Affordable Housing Committee, identified four players in the 40B scenario:
1. First is the state legislature, which adopted Chapter 40B in the late 1960s through an alliance of liberal and urban legislatures.
2. The Department of Housing and Community Development (DHCD) promulgates regulations under the 40B statute and provides technical assistance to communities.
3. The Housing Appeals Commission (HAC) hears appeals from the aggrieved applicants and issues written decisions interpreting provisions of chapter 40B.
4. Finally, the Carlisle Zoning Board of Appeals (BOA), which has jurisdiction over applications for comprehensive permits.
The 40B rules
"There are three stages in the 40B process," said Hill. "The Project Eligibility Stage, the Application Stage, and the Appeals Stage." In the Project Eligibility Stage, the developer applies for eligibility of a proposed project from a subsidizing agency such as DHCD or MassHousing. The subsidizing agency then forwards the application to Carlisle's Board of Selectmen (BOS) for a 30-day comment period. The BOS solicits comments from town officials and other boards and then the subsidizing agency issues a project eligibility letter. In lieu of a financial subsidy, a developer may approach the BOS for their endorsement of the project and they can make a joint application to DHCD for certification.
The prerequisites for filing a comprehensive permit application are:
• an eligible applicant
• a fundable project (financing subsidy from a federal or state housing program
• the applicant must own a 50% or greater interest in the site or hold an option or contract to purchase the site.
Eligible applicants can be a public agency, a "limited dividend organization" (private applicant who agrees to limit its profit to no more than 20% of development costs), a non-profit organization, or a "for profit" organization that seeks to qualify as a limited dividend organization.
Application to Board of Appeals only
The comprehensive permit application must be made to the BOA in lieu of separate permit applications to the other local boards. Such a permit subsumes all local permits and approvals normally issued by local boards. State and federal laws still apply, however. The Conservation Commission retains jurisdiction under the Wetlands Protection Act and Department of Environmental Protection, the Building Inspector applies the state building code, and the Board of Health enforces Title 5.
Hands began popping up all around the Clark Room as each new detail raised further questions about the complex process. Kreiger expressed second thoughts about accepting questions during the presentation and explained that Hill was less than half way through his talk. "Some of your questions may be answered during the remainder of the presentation," he said. "Otherwise we'll never finish by 10."
After another slug of refreshing bottled water, Hill launched into the Application Stage of the 40B process. The Application Stage consists of pre-hearing activities such as adopting rules before the application is submitted, setting the application fee high enough to cover administration costs, providing for technical "peer review" fees, establishing a process for selecting technical consultants, and setting forth minimum application submission requirements. This is critical because failing to open a public hearing within 30 days of filing an application can result in constructive approval.
Peer review: keeping the developer honest
The public hearing is the most critical part of the whole application process. Here is the chance for the BOA's consultants to analyze existing site conditions, advise the BOA on the capacity of the site to handle the proposed type of development, and to recommend alternative development designs. "This peer review is important because it helps to keep the developer honest," stressed Hill. "The BOA gets the advice of experts on unfamiliar matters. Peer review ensures that appropriate conditions are imposed and it protects local needs." This is where the impact on natural resources comes into play, as well as conformity of the project with local zoning.
Density: "The Big Enchilada"
Hill calls density "The Big Enchilada." Even though the size of the parcel is always constant, the number of units is variable. Density impacts virtually every health, safety and environmental concern — wastewater disposal, stormwater management, wetland contamination, displacement of wildlife, traffic safety and congestion. "The greater the density, the greater the concern," said Hill.
Profit: "fuzzy Math"
Another important component of the public hearing is the project economics analysis. This determines whether conditions imposed and waivers denied would render the project "uneconomic." The burden of proof is on the applicant, who must prove that it is impossible for a "limited dividend organization" to proceed and still realize a reasonable return. Recurring themes in 40B project economics are that site acquisition costs exceed the fair market value of the property, a tendency for the applicant to inflate construction costs in their "pro forma," the legitimacy of "project management fee" and underestimating projected income from sale of market-priced homes. "Overstating costs and underestimating income makes a profitable project look like a marginal project," said Hill. "There's no effective deterrence against 'fuzzy math' — by the time actual costs and income are known, the comprehensive permit has been granted and the project has been built."
An adversarial process
The third part of the public hearing involves the engineering review. The BOA directs its consultants to analyze the consistency of the project with local bylaws and regulations and to examine the feasibility of alternative designs. Sessions of the public hearing may be focused on particular weak spots — impacts on natural resources or wastewater management. Summing up the public hearing process and putting in a pitch for his profession, Hill said, "Chapter 40B is an adversarial process. Towns need able counsel to provide objective advice and balance where the applicant is represented by counsel."
After the public hearing is closed, the BOA must set aside at least two sessions for deliberations within 40 days of the close of hearing. Deliberation produces one of three results — approval, approval with conditions, or denial. If denial, the burden is on the BOA to demonstrate that it is consistent with local needs, meaning that public health and safety and environmental concerns outweigh the regional need for housing. "In the 30-year history of the HAC, only a handful of denials have been upheld on appeal," cautioned Hill. One reasonable denial is that the town has adopted an affordable housing plan approved by the DHCD under which affordable housing units have been increased by at least 3/4 of 1% (12 units) during the previous 12 months. On the opposite side, the BOA is allowed to issue additional permits even though the town has met its requirements.
Approval with conditions
Approval of a comprehensive permit almost always comes with conditions. They cannot be more restrictive than what would otherwise have been imposed if the development were not a 40B, and they cannot render the project uneconomic. "This includes reducing the density of a project merely because a smaller project is still financially feasible," said Hill. "Conditions and waiver denial, including limiting the number of housing units, must be justified by a cognizable health, safety or environmental concern."
Denial and appeal options
In case of BOA denial, the applicant may appeal to the HAC, although the HAC does not have the authority to issue a permit — it may only order the BOA to issue one. The HAC will generally overturn a denial unless there is a compelling health or safety reason for denying the application. Also any aggrieved person (except the applicant) may appeal to the Superior Court or Land Court, but even for abutters, establishing "standing" in court is an uphill battle. Appeals from approvals are often filed to force delay in commencing a project, but the appeal must demonstrate "legal error" in the decision by the BOA or HAC.
The mood in the Clark Room could best be described as "grim" at the completion of the presentation, but attendees did not fault the messengers and gave Hill and Kreiger a hardy round of applause. Specific sites, such as Concord Street and the Flannery parcel, were purposely avoided or the meeting would have gone on until midnight. Chair Tim Hult of the Board of Selectmen thanked all for attending, especially board and committee members girding for contentious 40B issues in the days ahead.
© 2005 The