Westwood takes look at I-Cubed risk

Selectman Philip Shapiro assured the Finance Commission last night that the town would protect itself before signing on to a state program that could eventually provide $50 million in infrastructure funding for Westwood Station.

"If the contingent liability cannot be mitigated, then we're not going to go forward with this, and we're not going to ask you to go forward with this," Shapiro said.

The Infrastructure Investment Incentive, or I-Cubed, provides developers with state funding for public infrastructure, such as roads, in exchange for guaranteed economic benefits such as jobs and new taxes. Such infrastructure work would be financed with bonds issued by the Massachusetts Development Finance Agency.

Three projects in the state have applied to the new program, including Westwood Station, whose developer is Cabot, Cabot & Forbes.

But the program, as currently written, dictates that if the new state tax revenues collected each year from a given project are less than the debt service on the bonds that year, the connected municipality is responsible for the shortfall. The state could essentially claim that money by reducing Westwood's local aid accordingly.

Overall, if things were to go badly with Westwood Station, I-Cubed "would potentially more than double" the town's debt, which now stands at less than $50 million, Shapiro said. He added that he did not think that would happen.

Shapiro addressed the Finance Commission and residents last night at the FinCom's first public hearing on the articles for Town Meeting in May.

The I-Cubed article requires two-thirds approval from both the Board of Selectmen and Town Meeting. While the I-Cubed article will likely be delayed until a fall Town Meeting, Shapiro's presentation fleshed out the risks to Westwood posed by the program.

I-Cubed requires that at least 1.5 times the annual debt service payment be generated in new tax revenue each year. The program also requires that the developer place two years of debt service payments in escrow beforehand, and that the municipality make a "special assessment" during construction.

Shapiro noted last night that the town could also make additional requirements of the developer, including the option of setting up a special assessment that would be a "first lien on the property." If tax revenues fell short and the developer did not pay the debt service owed, Westwood could then essentially take over the project, Shapiro said.

For the I-Cubed funding to proceed, there must be an agreement between the state, developer and town. Shapiro said the town would look to include agreement protections "for the town to ensure that we're not holding the bag as far as debt service is concerned."

Shapiro noted that currently the state does not count sales or income taxes paid during construction in its I-Cubed revenues. If the state could be convinced to include those, those taxes would total "almost $19 million upfront," or the first five years of debt service, he said.

If the 2-year escrow payment and special assessments were added, about the first 10 years of debt service would be covered in a 20-year bond, he said.

Still, those attending the meeting worried about I-Cubed's financial risks for Westwood.

"When we could potentially have liability of some unknown amount...why would we even step up for some risk?" said Finance Commissioner John Grogan.

"I don't see how you can possibly get any sort of ironclad guarantee that we won't be on the hook for it," said resident John Harding.

Shapiro emphasized that Cabot, Cabot & Forbes needs to line up construction financing before I-Cubed funding would proceed. The developer said earlier this month that it has stopped on-site work for the winter as it continues to seek a construction loan for its planned 4.5-million-square-foot project on University Avenue.

But down the road, if Westwood Station secured construction financing, I-Cubed would be important to help get the project vertical, Shapiro said.

Daily News staff writer Edward B. Colby can be reached at 781-433-8336 or ecolby@cnc.com.