Wednesday, September 17, 2008

Tax-Exempt Bonds and the Purchase of Land from the Archdiocese

Boston College completed the final portion of the purchase of the St. John's Seminary lands and buildings (except for St. John's Hall) from the Archdiocese of Boston in August 2007 for $65 million.

Where did the actual cash for that transaction come from?

At Tuesday night's meeting of the BC Task Force, while discussing a broader issue of the credit crunch and how it might apply to the 10-year construction plan BC has proposed, I made a statement that BC was given authority in August 2007 to issue $177 million in tax-exempt bonds, some of which was to go to the purchase of that property from the Archdiocese. I didn't think it was a controversial statement.

BC's Director of Public Affairs, Jack Dunn, strongly disagreed, saying that "the notion that BC used public money to purchase the archdiocese land is inaccurate."

In so doing, Dunn made a statement in direct contradiction with one from the Massachusetts Development Finance Agency ("MassDevelopment").

The press release put out by MassDevelopment on August 13, 2007, announcing that the agency was granting approval for BC to issue $176,980,000 in tax-exempt bonds, was clear in stating that BC would be using the money to purchase the remaining portion of the archdiocese land:
The school will use proceeds from a tax-exempt bond to finance several construction projects and purchase 18 acres of land and buildings from the Roman Catholic Archdiocese’s former Brighton headquarters. Projects include the construction of three new academic buildings, a recreation complex and student center on the school’s Chestnut Hill campus.
Sounds rather declarative to me.

What's more, the press release, issued on MassDevelopment letterhead, listed two contacts for further information: Alicia Tildsley of MassDevelopment; and Jack Dunn of BC. Dunn's name was right on the top of the release.

The difference between Dunn's statement and the MassDevelopment press release raises the question: Did BC actually spend the money from the bonds in the way that MassDevelopment last year thought they would spend it?

Image of tax-exempt bonds by Paul Levy at the Running a Hospital blog.


Adam said...

Mr. Pahre:

My name is Adam Bickelman, and I am the director of communications at MassDevelopment. I am writing in response to your September 17, 2008 posting to clarify a misconception about tax-exempt bond financing. Jack Dunn’s statement that no public funds were used to purchase the St. John’s Seminary property is correct. Here’s how this kind of bond financing works.

The federal tax code allows states to issue tax-exempt bonds on behalf of eligible borrower to provide low-cost financing for projects that create economic activity in their communities. These projects must be capital investments like real estate and equipment. Eligible borrowers include nonprofit 501(c)(3) institutions like Boston College. Private investors buy the bonds. In other words, private investors provide the financing, not the government.

MassDevelopment is authorized and directed under Massachusetts law to issue these “conduit” bonds. The bonds are backed by the full faith and credit of the borrower and are recourse only to the borrower or private credit enhancement obtained by the borrower. Neither MassDevelopment nor the Commonwealth is responsible for debt service payments. No public funds are pledged.


JohnT said...

Mr. Pahre,
Somebody owes BC an apology. You should check facts before posting.
John Thompson

Michael Pahre said...


As you can see from Adam Bickelman's comment above, Dunn's use (not mine) on Tuesday night of the term "public money" was off-topic in the discussion of the bonds.

Note that I never used the term "public money"; instead, I wrote, "BC was given authority in August 2007 to issue $177 million in tax-exempt bonds." I still believe that to be a correct statement. (Bickelman's comment additionally clarifies that MassDevelopment acted as the "conduit" for the bonds.)

While Dunn's statement that "the notion that BC used public money to purchase the archdiocese land is inaccurate" appears to be an accurate statement (according to Adam's comment above), Dunn was responding to what I had said (at Tuesday night's meeting) that some money from the bonds appears to have been used to purchase some of the St. John's land. The information backing my statement came from MassDevelopment's press release (linked in the post above); if you think MassDevelopment is in error, please contact them.

Nothing Dunn said contradicted my assertion, based on the press release, related to the use of that bond money. Quite to the contrary, by parsing his language carefully using the term "public funds" (instead of "tax-exempt bonds"), Dunn left open the possibility that BC actually used some of the money from the bonds to purchase some of the St. John's land.

And the question I posed is still left unanswered: "Did BC actually spend the money from the bonds in the way that MassDevelopment last year thought they would spend it?"