Fenway: Another hidden cost

The Red Sox will need even more money to build their new park -- if businesses are displaced by eminent domain, they must be reimbursed

by Laura A. Siegel

If the Red Sox' plan to build a new ballpark in the Fenway neighborhood is approved, the team will displace more than 30 businesses -- some of which have been in the same spot for three decades. State law requires anyone who takes land through eminent domain to pay businesses back for moving expenses. It's a cost associated with the new ballpark that hasn't been publicly discussed yet.

And it's another cost that will run into the millions and millions of dollars.

Expenses related to moving just two of the largest businesses that would be displaced could total substantially more than $3 million. The Red Sox claim to have factored these costs into their proposal to build a new park. Robert Walsh, a former head of the Boston Redevelopment Authority (BRA) and now a private real-estate developer who is advising the Red Sox on development issues, says that the team has folded its estimate for the costs of paying moving expenses for displaced businesses into the total the team wants the city to pay to purchase the needed land. He wouldn't say how much of that has been slotted for relocation costs, however. "It's not an appropriate business practice to discuss in detail through the media what your budget is," he says. "The details have to be confidential. It doesn't make a bit of difference whether the public's money is being used or not." The public, he adds, needs to know only that the money is being spent on "reasonable expenses."

Of course, what's reasonable to one person might not be reasonable to another -- especially when tax dollars are involved.

The Sox want the city of Boston to pay the costs associated with taking the land needed for a new park and preparing the site. On May 19 Red Sox CEO John Harrington asked the city to pay $90 million to purchase the land and $50 million to prepare the site. In one conversation, a Red Sox spokesperson said this was a BRA estimate. Walsh, however, said these figures were estimated by a group that included city representatives; they were not, he added, a BRA estimate. Three weeks ago, the Phoenix reported that the land-taking alone would most likely cost between $195 million and $487 million (see "The Sox Can't Afford the Fenway," News and Features, May 26). It now appears that additional expenses related to taking the land -- the relocation costs of businesses displaced by the project -- will add even more millions.

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Although it is difficult to estimate what it would cost if private land were taken to build a new ballpark, at least there is a legal measure: fair market value.

It's far trickier to estimate the costs of moving 30 businesses. Regulations determining what counts as a "moving expense" are complex and sometimes subjective. For instance, do specific new fittings needed at a replacement site count as "purchase of substitute personal property," which would be fully covered under state law Chapter 79A? Or would they count as "re-establishment expenses," which are capped at $10,000? Or be classified as "purchase of capital assets," which wouldn't be covered at all? "Any sort of estimate you'd get at this point would be a total guess," says Steve Mollica, the state's relocation-program coordinator.

Regardless of the total cost, anything covered under the law as a reasonable moving expense will be paid by the entity taking the land -- which could be the city, a stadium authority, or a private redevelopment agency created for the specific purpose of taking land needed for a new park. The costs not deemed reimbursable by the land-taking authority will have to be absorbed by the businesses -- costs that they will likely pass on to consumers. And certainly, if there is significant disagreement, appeals could draw out the process.

It's by no means certain, however, that every business affected by the Sox' proposal would survive a relocation. In this hot real-estate market, comparable spaces for comparable prices may be impossible to find. For instance, the four-year-old US Post Office delivery annex at 1313 Boylston Street is now paying about $13.50 per square foot for its space. A medical-graphics company on Brookline Avenue is paying only around $7.25 per square foot. But many rents in the area for office and retail space now reach from the high $30s to the low $40s per square foot.

Some businesses -- such as a local restaurant, a family-run gas station, and a medical illustrator -- depend almost entirely on local clientele, and moving would probably put them out of business. Although these businesses would be entitled either to what it would have cost them to move or to the value of their personal property, whichever is less, they would receive nothing for their loss of business.

In addition to the post-office delivery annex, other businesses that will have to move if the Sox build a new park on their proposed site include a branch of a tae kwon do school, a local bar called Copperfields, the Il Giardino Café, a medical bookstore, Dunwell's Steak House, several souvenir stores, a Howard Johnson hotel, an Osco drugstore, a family-owned gas station and car wash, offices for Beth Israel and Children's Hospital, a medical-graphics company, a medical-supply store, and the offices of the Boston Phoenix.

The weekly Boston Phoenix is part of the Phoenix Media/ Communications Group (PMCG), which employs 250 people and operates several different companies from its Brookline Avenue headquarters. PMCG owner and chairman Stephen Mindich -- who owns the property housing the Phoenix, a pathology lab, and other businesses -- says, "At this time it is impossible to accurately estimate what our relocation costs would be. But given the complexity of our
infrastructure and our 24/7 national-customer-service requirements, there is little doubt that the figure would run at least into the hundreds of thousands of dollars."

Next door, at 120 Brookline Avenue, Harvard Vanguard's central pathology lab analyzes Pap smears and biopsies for all 14 Harvard Vanguard medical-group locations. In improving its space over the past few years, the lab has put in a lot of new equipment, including a generator, a security system, ventilation, and a chemical-recycling machine. Harvard Vanguard has not yet estimated the cost of a move.

But Clarence Lind, a laboratory-design expert at HDR Architecture, Inc., estimates that it would cost around $150 per square foot to convert a new site into a working pathology lab. That means that, at between 8000 and 9000 square feet, the Harvard Vanguard lab would cost between $1.2 million and $1.35 million to reconstruct at a new location. Again, moving costs not reimbursed by the land-taking authority would be paid by the Harvard Vanguard medical group. Harvard Vanguard accepts insurance from a number of HMOs and health insurers; if Harvard Vanguard's costs rise, the increase will probably be passed on to the HMOs, which could in turn pass them on to their customers.

Taxpayers, meanwhile, have already paid more than $2 million for the post office to turn its present building into a working postal annex and to move in four years ago. The postal service is predicting even higher costs if it has to move again -- and the public would get slammed with any unreimbursed expenses. As a federal agency, the post office isn't legally subject to eminent-domain takings, but a representative told the Phoenix that the agency would probably cooperate with a local land-taking.

The state is likely to enforce the law aggressively. "The purpose of the regulations is to make sure that people aren't made to suffer as a result of being forced to move by a project," Mollica says.

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Massachusetts was one of the first states to adopt a statute dealing with relocation assistance," says Neal Tully, an attorney who is an expert in eminent-domain issues. That statute -- Chapter 79A of the Massachusetts General Laws -- dates from 1965. Explains Tully: "It was really a recognition of the hardship of what happened with the West End project," where in 1960 thousands of people's homes and businesses were taken under eminent domain. The West End is now widely cited as a historic example of how not to do urban renewal.

The bill authorizing the new convention center -- which also required an eminent-domain land-taking -- refers to the current relocation-assistance law. Though some of the prices paid for land are being contested, the reimbursement process is proceeding smoothly, according to Tully, who has represented several of the property owners.

The procedure for relocation assistance is routine, even for unusual projects. Before taking any land, the authority in charge of the procedure must hire or create a "relocation agency," overseen by the Economic Development Relocation Program of the state Department of Housing and Community Development. The relocation agency conducts a survey of each business and home that will be displaced, reporting on the kind of business, the number of employees, the space needed, the equipment, and the estimated price of the move.

By law, the taking authority must pay displaced businesses "for actual reasonable moving expenses, for the actual direct loss of tangible personal property, [and] for actual reasonable expenses in searching for a replacement business." Or it must pay "a fixed sum in . . . equal to the business concern's average annual net earnings" -- although this is capped at $20,000. A business might take this payment if it had little in the way of moving costs, but had higher earnings.

Packing and unpacking property and moving it to the new location make up just the very basic costs. "There are things you're also entitled to that can get more expensive and more difficult to estimate the cost," Tully explains. "For example, you're entitled to be paid the cost of disconnecting and reconnecting the equipment." That kind of work can be the biggest relocation expense for manufacturers and restaurants, Mollica says. For offices, the highest costs often come from moving and reinstalling partitions, computers, and telephones -- or buying new ones, if that's more cost-effective.

Business owners also get paid back for storage of property for up to a year, insurance on the property, any licenses or permits required at the new location, replacement of signs and stationery, loss of property as a result of moving or going out of business, purchase of substitute property, and property lost, stolen, or damaged during moving. The law sets no limits on these expenses, or on packing, moving, or equipment-reinstallation costs. Expenses related to searching for a new location are capped at $1000, and "re-establishment expenses" -- such as improving the new property to bring it up to code, modifying the new property to make it suitable for the new business, and paying increased rents or taxes for the first two years -- are capped at $10,000. But even these caps could, in theory, be raised with the approval of the state.

Moving large labs and post offices is predictably expensive, but relocating smaller businesses can involve surprisingly high costs as well. Michael Ateyat, manager of the Fenway Mobil gas station on Boylston Street -- which has been on the same site for 30 years and employs 10 people -- says that it would cost $150,000 to fit a new gas station with the equipment he recently installed there.

And the Jae H. Kim Tae Kwon Do Institute -- which has been on Brookline Avenue for 26 years and has seven employees -- would cost even more to move. "Just to open the school would be a minimum of $300,000," says Richard Smith, the manager. "We'd have to put down proper flooring, make sure we have showers and lockers and
ceiling fans and ventilation."

Ill-suited new sites that need lots of work can drive up costs for both the taking authority and the business. But with the skyrocketing cost of real estate, it could be very hard to find affordable sites that are similar in suitability to those the businesses are at now. And reimbursements are guaranteed to cover only moves within 50 miles of a business's current location. Many business owners fear they won't find a suitable location they can afford in the area.

"I'm not sure where we'd be able to go," says Amelia Economou, who owns the Fenway Mutual gas station and car wash with her husband. Her parents have owned the land her business is on for 20 years, and she had hoped to pass it on to her own children. "There's only a limited number of gas stations available," she says. "We might never find another of equal quality."

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Even if they find somewhere to move, business owners fear that relocating will cost them dearly in loss of clientele and profits -- and that's not covered under the law. "In Massachusetts, there is no award of damages for loss of goodwill or loss of business as a result of being forced to relocate or put out of business," explains Tully, though there is in many other states.

That lack of damages for loss of business is "the moral sewer of the law of eminent domain," says eminent-domain expert Gideon Kanner, a professor emeritus at Loyola Law School in Los Angeles who helped push through a business-compensation law in California.

Small, one-location retail stores, bars, and restaurants are hit the hardest. In addition to losing inventory that's damaged in moving, losing employees who don't want to commute, and interrupting business as they move, they lose their neighborhood clientele. Il Giardino, a family-owned restaurant has been on Brookline Avenue for 15 years, since the area was considered dangerous. "I'm looking at little guys like Il Giardino who've been there forever, who built a reputation. They are really the nuts and bolts of the neighborhood," says Theodore Wasserman, who owns the building that Il Giardino occupies. "For them to be all of a sudden told they have a home no longer is the end of their livelihood."

"The idea is that they should move to a location that's suitable, somewhere where they won't experience loss," says Mollica. But that may not be possible in this market. Small businesses are often dependent on local trade -- or, in the Fenway, on the huge medical area just blocks away.

"It would be extremely difficult for me to relocate," says Steve Moskowitz, who owns Advanced Medical Graphics on Brookline Avenue. "All of my work depends on being located in this neighborhood. All of my clients are within walking distance." For 12 years, Moskowitz has put up with the noise on game days, the pizza crusts stuffed in his mail slot. But this latest insult -- the prospect of having to move so the Sox can build a new park -- is too much for him. "I have exactly what I need right now," he says. "I don't want to sacrifice it and get something much worse." He fears he'll have to change careers.

"We're going to lose everything," says Ateyat of Fenway Mobil. "This is a great location. We've invested our lives in it. It's going to take us a good two to three years to go back up again to where we're at now." And the tae kwon do school faces special problems. "We have people on long-term programs," explains Smith. "If we have to move far from where we are, we're going to lose a lot of people."

If Advanced Medical Graphics or any of the other businesses fold entirely, the owners will of course be entitled to the amount of money they'd have gotten as reimbursement had they moved or to the value of their personal property on the site, whichever is less. But there's no rational relationship between the value of a business's property and the value of that business, says Kanner, citing the example of a magazine published from a single computer. He calls the law "nonsense."

Another major expense the law doesn't cover is interest on loans taken out for moving expenses. Many businesses might have to take out such loans, if they can even get them, because they have to pay for moving up-front. Reimbursement only comes later -- possibly much later, if there are complications.

Despite the great losses these business owners could face, the Red Sox did not contact them to discuss the situation -- they only called property owners. "We haven't heard anything from the Red Sox. We only read the paper every morning," says Ateyat. That lack of communication is what especially angers Economou, who could be forced to give up the business she planned to pass on to her children. "They're making their plans as if I don't exist," she says. "We're going to fight -- that's for sure."

These business-relocation costs and the enormous potential hardships related to relocating have been overlooked during the seemingly unending discussions of the new Red Sox stadium. They're sure to drive the final price of the stadium even higher, and that burden will fall mainly on the public.

But the hidden cost of lost business will be shouldered by local business owners alone. "I'm not really being hurt -- it's the tenant that's going to be hurt," says Fenway property owner Wasserman, who, unlike other area property owners, doesn't operate a business in the neighborhood. "After coming into the neighborhood when it was really down, now all the people who brought the neighborhood up are being asked to leave."

Laura A. Siegel can be reached at lsiegel[a]phx.com.