Medfield State Hospital: Balancing Costs and Benefits

The following provided by the MSHMPC Communications Committee (Medfield State Hospital Master Planning Committee).

Medfield State Hospital: Balancing Costs and Benefits

When Medfield purchased the State Hospital, we acquired a beautiful property. We also acquired more than thirty historic buildings and infrastructure in various states of decay. The Town’s consultant estimates the costs to renovate these buildings and infrastructure is about $225 million. The cost to demolish the buildings and infrastructure is roughly $25 million.

The Town could forego development altogether and incur the demolition costs. Postponing demolition runs the risk of escalating disposal costs. At a town-wide feedback event in February of 2017, a majority of participants rejected a total demolition option.

The master plan focuses on historic preservation to cover the costs of the Hospital and limit the burden on taxpayers. This approach provides the added benefit for a developer(s) to access historic tax credits – worth up to 40% of the project costs - while preserving the open space and views.

What are the proposed uses within these historic buildings? The plan calls for a combination of commercial, residential, and cultural uses. The trade offs? The proportion of commercial space is limited by a weak local market, while the residential market can absorb a fairly large number of units. The more residential units a developer creates, the more funds they can apply to renovation and infrastructure. However, residential units will increase traffic and school children. Additionally, over-development could negatively impact the historic aesthetic and jeopardize historic tax credits.

If we limit the number of residential units too severely, we may not be able to attract a developer to undertake the project. To make a limited number of units more attractive to a builder, the town could decide to cover some or all of the estimated $25M in infrastructure costs for roads, water, sewer and electricity.

The challenge, therefore, is to find a balanced set of uses that can attract a developer while being acceptable to residents. MSHMPC and the Town’s consultant created a detailed financial model to calculate the impact and long term cash flows for both a developer and the Town, and evaluated many alternative scenarios to arrive at the master plan. The result is a representative “preferred plan” with roughly 71% residential (300 +/- housing units) and 29% commercial (190,000 square feet), mostly within renovated buildings.

The model indicates the Town would receive tax revenue that exceeds school and municipal costs should a developer implement the preferred plan. This revenue surplus would allow the town to fund any gap between initial revenues (development rights and building permits) and the cost of developing hospital infrastructure, without impacting the taxes on existing residents.

In conclusion, the analysis of the preferred plan indicates it is highly likely the Town will get some money back on the project while a hypothetical developer has a somewhat lower chance of making a profit by undertaking the project. Fortunately, subsequent conversations with developers by the MSH Development Committee found that several highly qualified developers are interested in bidding on the project if Medfield indicates it is truly interested by establishing zoning.

The next steps are to approve the zoning, issue a Request for Proposals and then evaluate the options presented. With actual developer proposals, we can predict the costs and benefits to the town with even greater accuracy and evaluate how well each option aligns with the Master Plan vision.