Six Years in the Making, New Ch. 91 Flexibility Washes Ashore

Last month, MassDEP and the Massachusetts Office of Coastal Zone Management released long-awaited revisions to the regulations governing waterfront development in Massachusetts (the Chapter 91 regulations, the Designated Port Area regulations, and the Municipal Harbor Plan regulations).  The changes have been in the works since 2010, when MassDEP and CZM first convened working groups to review whether the regulations could be revised to provide greater flexibility to accommodate a variety of uses along the waterfront.  We summarized the draft regulations last spring.

MassDEP’s regulatory changes offer enhanced flexibility by allowing waterfront developers to meet their Ch. 91 obligations to provide public access to the waterfront through a new category of uses, called Facilities of Limited Accommodation.  These “FLAs” include uses that are open to the public by appointment or enrollment, such as photography studios and childcare centers.   These uses may are now permitted in up to 50% of the ground floor of a project within jurisdiction, if a demonstration can be made that a market does not exist for a traditional Facility of Public Accommodation (such as a restaurant or hotel) at the project site.  In exchange for this flexibility, developers must devote 20% of the net operating income of the FLA to fund specific construction or activities in geographic proximity to the project site that enhance public waterfront access.

Developers of smaller projects (less than 75′ in height) are given more flexibility in that they can license FLAs for fifteen-year terms before they must re-evaluate the feasibility of siting FPAs.  Developers of larger projects are limited to 10-year terms, and must, in the first instance, demonstrate that they have attempted to market the site for FPA use for at least 1 year without success, including offering rents at 50% below market rate to non-profits.

These changes are an innovative response to long-acknowledged difficulties with the Chapter 91 licensing process, in which space on the ground floor of waterfront buildings in less-trafficked areas set aside for public accommodation would remain vacant for lack of ability to attract an appropriate tenant. A report prepared for the former Boston Redevelopment Authority back in 2005 noted,

“no provisions currently exist in the regulations encouraging developer concessions such as below market rent, free utilities or a build-out of the raw space. Without such concessions, waterfront sites lie beyond the reach of most cultural uses, generally non-profit in nature.”

In response to comments received after the publication of draft regulations last spring, MassDEP made minor revisions (see MassDEP’s summary here and the final redline here).  MassDEP clarified certain provisions, including the division between smaller and larger projects and the method by which net operating income is to be established for an owner-occupied building.  Some in the regulated community were hoping for additional changes that would allow Chapter 91 applications, public notices and hearings to proceed while the applicant is undergoing MEPA review.   MassDEP declined to adopt these proposed changes, leaving in place the current requirement that Chapter 91 review cannot begin until the Secretary issues a Certificate on a Final EIR.

As part of the same set of regulatory revisions designed to introduce more flexibility into waterfront licensing, MassDEP finalized its Designated Port Area regulations (see summary and redline), and CZM modified its corresponding regulations.

Our takeaway?  It will be interesting to see how quickly licensees adopt the flexibility provided by these new provisions, particularly in hot market areas like the downtown Boston waterfront.  But civic and cultural non-profits should be on the lookout for 50%-below-market rates in large new waterfront buildings, and other providers of waterfront-activation uses should seek opportunities to partner with FLA licensees to receive the 20% net operating income bonus.

 

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