Press Release  OIG's Star Store Report: State Funded Lease Was Wasteful

Boston, MA — A state funded lease, that the Legislature intended to help drive economic growth in a Gateway City and a former inspector general repeatedly warned against, wasted public funds, according to a report issued today by the Office of the Inspector General.

The Star Store 20-Year Lease – A Lack of Shared Vision and Collective Accountability Wastes Millions in Public Dollars details how the Commonwealth came to procure a 20-year lease of an iconic building that once housed a department store in downtown New Bedford and walked away 22 years and $60 million later.

“From its inception, it was a sham procurement,” Inspector General Jeffrey S. Shapiro said. “The request for proposal contained detailed requirements that effectively narrowed down potential respondents to one – the Star Store.”

“Former Inspector General Robert Cerasoli urged then Governor Weld to veto the legislation authorizing the procurement because it unnecessarily exempted it from existing statutory safeguards and was written so narrowly that there was no competition,” IG Shapiro continued. “He correctly observed that the lack of competition would subject the Commonwealth to excess costs and reduce any incentive for the landlord to operate efficiently.”

“Indeed, the resulting lease was flawed and unusually advantageous to the owner. In addition to the base rent, the Commonwealth paid for all operating expenses and property taxes. In short, the owner had virtually no out-of-pocket expenses and made millions in profit over the 22 years of occupancy,” IG Shapiro said.

In February 2000, the Legislature directed the Division of Capital Asset Management and Maintenance (DCAMM) to procure and execute a 20-year lease agreement to rent the Star Store to benefit University of Massachusetts Dartmouth (UMD).  The lease included an option to purchase the building for $1.00 at the end of the 20 years.  When the lease expired in 2021, rather than exercising option to purchase or vacating the building, the parties entered a one year lease followed by a year-long month-to-month tenancy. That ended when the Legislature stopped funding the rent payments and the Commonwealth failed to timely exercise the $1.00 purchase option. This forced UMD’s College of Visual and Performing Arts (CVPA) to hastily vacate the Star Store after over two decades.

The OIG found that there was no shared understanding among the involved parties – the Legislature, UMD, DCAMM and the property owner – as to who was responsible for what.  As a result, funds designated for capital improvements and maintenance were never used and the building was not properly maintained, making the option to purchase less attractive. The parties also collectively failed to communicate and plan for the end of the lease. Consequently, UMD continued its tenancy for an additional two years, wasting nearly $4 million in public funds through the short-term and month-by-month tenancies.

“The collective failure to make a decision either to purchase the building or plan to vacate the building as the end of the lease was approaching was fiscally irresponsible and wasteful,” IG Shapiro said.

The report offers specific recommendations to each party in hopes of preventing similar waste of public funds and assets in the future. “While this was a very unusual project, it is my hope that the recommendations provide useful guidance to all parties going forward,” IG Shapiro said.

The report was prepared pursuant to Section 79 of Chapter 28 of the Acts of 2023 (Section 79), which required the OIG to review the costs associated with the UMass Dartmouth’s use of the Star Store to house its Center for Visual and Performing Arts from September 7, 2021 to August 31, 2023. In light of former IG Cerasoli’s concerns, the OIG expanded its review to include the original 20-year lease and the entire period of UMD’s occupancy.

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