Think we need a refresher course and no better way then to look at the numbers.  Remember this report from February of 2012 that detailed the costs per unit of affordable housing developed?  From page 3:

  1. 5 May Street    266,538
  2. 9 May Street   414,539
  3. 15 & 17 LaGrange     200,792
  4. Austin Corridor II   355,553
  5. Hadley     514,679
  6. KGH 1 & 2     331,369
  7. KGH 3A    299,610
  8. KGH 3B  365,999
  9. KGH 4  325,995

Although this report does not have a break-down of the costs.  Take a look at the 1st development, 5 May Street, where some $3,485,000 was raised for this project of which $3,090,000 were public funds (tax-payer monies).     Typically the developer would take a fee of 10% or $348,500 in this example to complete the project, but we have heard that some development fees were as high as 25%!!!

There is big money in these development fees, especially when you charge 25% and is an important revenue source for CDC’s.   This is dated, but in 2009-2010 this was a chart was on the Worcester Common Ground website.     Real estate development fees represented 24% of their revenues.










When this report was first presented, there was alot of outrage at these development costs.   Evidently HUD agreed that these costs were too high when they performed the audit and asked the City of Worcester to return $3,400,000.   We could have:

  1.  asked the underyling entities who received the money that HUD wanted returned to give  it back to the City of Worcester
  2.   let HUD reduce future awards by the $3,400,000 fine

Neither of these options were chosen.  Instead the tax-payers just paid another $3,400,000.   We think $3,400,00o could have been better spent on:

  • extra police
  • infrastructure
  • unfunded liabilities like OPEB and pension

Let HUD reduce next year’s CDBG allocation, thereby penalizing the entities in question.  Instead the tax-payers were penalized and the entities, who just cost the City of Worcester $3,400,000 paid nothing and will be applying for these monies next year when they are returned as CCBG monies.


* Admittedly this is an over-simplification, but it is pretty close to what has transpired.