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Massachusetts General Laws Chapter 121A and Massachusetts Regulations 760 CMR 25.00 authorize the creation of single-purpose, project-specific, private Urban Redevelopment Corporations for undertaking residential, commercial, civic, recreational, historic or industrial projects in areas which are considered to be decadent, substandard or blighted open space. The statute and regulations authorize the exemption of 121A developments from real and personal property taxes, betterments and special assessments. They set forth procedures for negotiating an alternative tax payment on these developments and allow private developers to exercise the power of eminent domain to assemble development sites under certain circumstances.
By allowing tax exemptions, 121A Agreements are used to encourage development in areas with high property tax rates or in areas that are minimally marketable as locations for private investments. The ability of a municipality to offer what is essentially a tax break, and accept a substitute reduced tax, provides the municipality with at least some tax revenue on property that would otherwise have been undeveloped. At the same time, 121A agreements provide certainty to developers in the amount of taxes they will pay for the duration of the agreement.
A 121A Agreement must serve a public purpose. Although, the most frequent application of c.121A has been in the construction of housing for low and moderate income families, the opportunity exists to use this tool for economic development.
M.G.L. Chapter 121A
M.G.L. Chapter 121A Implementation Regulations
M.G.L. Chapter 121A Preparation Guide
Urban Redevelopment Corporations are private limited dividend entities that are formed to develop 121A projects. The corporation may not undertake more than one project nor engage in any other type of activity. Under c.121A, a private entity bears the responsibility for planning and implementing the project and owns the project throughout its existence.
Non-profit corporations, for-profit corporations, joint ventures or public/private partnerships may enter into 121A Agreements. Insurance companies and banks also qualify under special statutory provisions of the law.
Urban Redevelopment Corporations are exempt from real and personal property taxes, betterments and special assessments. Instead, these 121A entities must make three types of substitute payments.
Property that is under a 121A Agreement does not have its value counted in assessments of municipal land.
DHCD is responsible for the administration of the 121A program for all cities and towns in the Commonwealth, with the exception of Boston where it is administered by the Boston Redevelopment Authority (BRA). The application for designation as a 121A entity must be approved by both the municipality in which the proposed project is to be located and DHCD.
The statute and regulations assign specific responsibilities to a number of different local officials. The local Chief Executive Officer (CEO), the City Council, the Board of Assessors, and the Planning Board all have legally defined roles in the c.121A approval process. Generally, the Board of Assessors has played the dominate role in negotiating the level of payments to be made under Section 6A of c.121A.
There are several important distinctions between cities and towns in the local approval process. In a city, the City Council acts as the local governing body and the Mayor or City Manager acts as the CEO. In a town, the Planning Board plays the role of the local governing body and the Board of Selectmen act as the CEO.
A 121A entity is required to sign two agreements, one with the municipality and one with DHCD. The agreement signed with the municipality is known as a 6A Agreement because it is described in Section 6A of c.121A. The agreement signed with DHCD is known as the 18C Regulatory Agreement because it is described in Section 18C of c.121A.
After DHCD has reviewed and approved the application, the 18C Regulatory Agreement is executed, the letter of approval is issued and the Secretary of State approves the formation of the Urban Redevelopment Corporation.