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This Week in Massachusetts – March 28

Posted on March 28, 2023

Remote Work Hits Office Rents

Axios Boston-area office rents have survived the work-from-home revolution so far, at least compared to other cities, Axios’ Matt Phillips writes.

Markets like Raleigh, Boston and Minneapolis — which have a higher concentration of health services, biotech and life science employment — seem to be faring well. (It’s hard to do laboratory research from your home office.)

  • On the other hand, major markets like San Francisco and Manhattan — where long commute times seem to be driving the durability of the WFH lifestyle — have been hit the hardest, per the data.

Whether the issues in the office market worsen due to balance-sheet stress at regional banks.

Small and mid-sized banks (those not among the top 25) currently hold 67.2% of all outstanding commercial real estate loans, Axios recently reported.

Legislature Sends $1.1 Billion Proposal To Healey

State House News – The House and Senate worked together Thursday to place on Gov. Maura Healey’s desk a bill featuring $388 million in spending directed at what the Senate’s budget chief called “time-sensitive, urgent” needs along with $740 million in borrowing plans.

Explaining the 49-page bill, Senate Ways and Means Chairman Michael Rodrigues highlighted $85 million for emergency family shelters, $130 million to provide enhanced nutrition assistance benefits for three months, $65 million to cover school breakfast programs through the rest of the fiscal year, and $2 million “to reimburse victims of the so-called SNAP benefit theft that many of our constituents have been victims of” that feature in the legislation.

The bill contains $740 million in borrowing authorizations, including $400 million to recapitalize the MassWorks infrastructure grant program, $104 million for the Clean Water Trust Fund, and $125 million “to ensure that the state has matching funds for us to compete with federal grants that have been recently passed by Congress,” Rodrigues said.

As it emerged from informal House-Senate negotiations Thursday, the bill — which could become the first major measure Healey signs into law — contained a one-year extension of the pandemic-era policy allowing restaurants to serve to-go cocktails, something the Senate had left out of its initial version.

Rodrigues said lawmakers also pulled in some language from Healey’s newest supplemental budget bill, which was just filed last Friday, dealing with policy areas affected by the upcoming sunset of the COVID-19 public health emergency like ambulance staffing and dialysis treatment staffing.

The legislation landed on Healey’s desk nine weeks after she filed a $987 million “immediate needs” bond bill (H 51) and nearly seven weeks after she filed a $282 million spending bill (H 47) aimed at school meals, emergency shelter and Supplemental Nutrition Assistance Program (SNAP) benefits.

Legislative leaders did not convene a public hearing to vet or solicit feedback on either bill, and they wound up combining pieces of each — plus the governor’s newest spending proposal — into a single vehicle as it moved through the process.

Eng Pledges “New Way Of Doing Business” At MBTA

State House News – Phillip Eng, a longtime engineer and former president of the Long Island Rail Road, will become the next top leader at the MBTA as Gov. Maura Healey’s administration sets out to put the ailing transit agency on firmer footing.

Healey’s office announced Monday morning that it settled on Eng, who retired from the LIRR in February 2022 after four years at its helm in which the commuter rail system reported its best-ever on-time performance. The state will pay up for his services, as Eng could earn more than $500,000 per year.

His appointment ends a months-long search process that began before Healey took the oath of office.

“Phil Eng is the proven leader the MBTA needs to improve safety and reliability across the system and restore the public’s trust,” Healey said in a statement. “He understands that a functioning transportation system is essential to a functioning economy, and he has a track record of taking the reins of struggling public transit systems and dramatically improving service. He also takes a collaborative approach to his work and maintains open lines of communication with customers, workers, businesses, local officials and communities.”

He is scheduled to start at the MBTA on April 10, taking over an agency at a time when service continues to deteriorate, post-pandemic ridership is languishing, budget gaps loom on the horizon, and hiring efforts to address staff shortages have stumbled.

Eng will also be in charge of steering the MBTA through its ongoing response to last year’s Federal Transit Administration investigation, which flagged a range of safety risks including a massive deferred- maintenance backlog.

In a statement provided by Healey’s office, Eng declared, “It’s time for a new way of doing business at the MBTA.”

Urgency Over Housing Secretary Up Against Beacon Hill Time

State House News – Tim Scalona woke up on a June morning in 2012 ready to play video games and go outside with his neighbors. Instead, he watched his family home in Wilmington packed up into cardboard boxes, beginning their decade of homelessness.

Scalona is now a second-year law student at Suffolk University, where he is hoping to pull himself out of poverty, though his family still lives on the precipice of homelessness more than 10 years after their house was foreclosed on.

“We were forced into the state-run shelter system, which under the prior administration moved us and operated our family multiple times across the state, disrupting our ability to attend school,” said Scalona, who was in 8th grade when his family first became homeless. “The stress of homelessness caused my stepfather to lose his job on multiple occasions and with little income we could never find housing that was sufficient for our family size. When we did, we were routinely denied by landlords. We spent years on public housing waiting lists with no avail.”

For his family and the estimated 18,000 people in Massachusetts who are homeless, Scalona said he supports Gov. Maura Healey’s plan to create a stand-alone housing secretary close to her ear in a Cabinet-level position. But he implored lawmakers on Monday to ensure that the office is staffed with people who have had lived experiences in poverty or worked with those who don’t always know what the next roof over their head will look like.

The law student said Healey’s proposal to create a new Executive Office of Housing and Liveable Communities is the first step in “more effectively addressing the housing and homelessness crisis.”

Scalona was joined in his support for the proposal by representatives from the Massachusetts Law Reform Institute, Massachusetts Association for the Homeless, the Greater Boston Interfaith Organization and the Metropolitan Area Planning Council during a State Administration and Regulatory Oversight Committee hearing on Monday.

Committee members were also vocally supportive of the governor’s proposal, which she promised on the campaign trail and has often pointed to as an example of her commitment on addressing housing.

Revisions Put Massachusetts behind Pre-Pandemic Employment

State House News – Massachusetts still remains a bit below pre-pandemic levels of employment following a Friday announcement that revised previously announced data.

Bay State employers added a fairly modest 3,000 jobs in February, and labor officials now estimate that businesses added 8,900 jobs in January, not 19,600 as they originally estimated. Accounting for those updates, the Executive Office of Labor and Workforce Development said Friday that total statewide employment stands at 3,735,800, nearly 8,000 positions shy of the level reported in February 2020 before the COVID-19 crisis prompted enormous cuts across the economy.

The biggest month-over-month gains occurred in the professional, scientific and business services sector, which added 2,600 jobs, and the education and health services sector, which added 2,500 jobs. Leisure and hospitality employers shed 2,100 jobs over the month, “other services” cut 600 positions, and government dropped 300 workers.

The statewide unemployment rate ticked up a bit in February, rising from a revised 3.5 percent in January to 3.7 percent. That stands one-tenth of a point above the 3.6 percent national unemployment rate in February.

Silicon Valley Bank Sold to First Citizens in Government-Backed Deal

New York Times – First Citizens BancShares, a family-run bank in North Carolina that traces its history to the late 1800s, said on Sunday that it would acquire Silicon Valley Bank, the California lender founded in the 1980s at the center of the technology industry, whose rapid growth and sudden collapse this month sent shock waves across the financial sector.

The Federal Deposit Insurance Corporation seized control of Silicon Valley Bank on March 10, after a run on deposits left it insolvent, making it the country’s largest bank failure since the 2008 financial crisis. The F.D.I.C. has since been looking for a buyer for the bank, which was the country’s 16th-largest when it collapsed.

The deal for the bank, renamed Silicon Valley Bridge Bank after the F.D.I.C. seized it, included the purchase of about $72 billion in loans, at a discount of $16.5 billion, and the transfer of all the bank’s deposits, worth $56 billion. Roughly $90 billion in Silicon Valley Bank’s securities and other assets were not included in the sale, and remained in the F.D.I.C.’s control.

The discount applied to the loans could help set a benchmark for other banks seeking investment, said Mark Jeffrey Flannery, a professor of finance at the University of Florida. “Now they have an idea,” he said. “Yes, it’s bad, but it’s not a complete train wreck. It’s just very bad.”

Landlords Rarely Hike Rent 10 Percent. So Why Do They Hate Mayor Wu’s Cap Proposal?

Boston Globe – Allen Hebert takes pride in being a good landlord.

He owns several small apartment buildings in the Boston area, and keeps his rents low, below market rate. He raises them only occasionally to account for his own rising costs.

Even in a year like this one, when fuel and maintenance costs are putting pressure on his bottom line, Hebert said he can’t imagine hiking his tenants’ rent more than 3 or 4 percent. If he can, he’d like to avoid increases altogether.

“I have good relationships with my tenants,” said Hebert. “I know their financial situations, and that money is tight. There’s no reason for me to raise rents and harm those relationships. It doesn’t do anyone any good.”

But there’s only one way he knows how to describe Mayor Michelle Wu’s rent control proposal: “A disaster.”

That’s not because of the proposal itself, which would allow landlords like Hebert to raise rents by as much as 10 percent a year, depending on inflation. But rather, it’s what Hebert fears — knows, he said — will follow: the kind of blunt force rent control regime that squeezed landlords in Boston and neighboring cities decades ago.

Hebert is among many landlords who remember those days — in the early 1990s he owned buildings in Cambridge, where a powerful rent control board set rent caps and determined allowable renovations — and worries they would inevitably return. Any form of rent control, he and his peers argue, is a “slippery slope” to something worse. And that fear is fueling a visceral revolt in the real estate industry, which has poured hundreds of thousands of dollars into a campaign to defeat Wu’s proposal on Beacon Hill.

Health Care

Hospitals Spent $1.52 Billion in Temporary Labor in 2022

Boston Business Journal: Massachusetts hospitals spent $1.52 billion on temporary labor in fiscal 2022, according to a new report from the Massachusetts Health and Hospital Association.

Bay State hospitals, like others around the country, have struggled to maintain staffing levels since the start of the Covid-19 pandemic. Thousands of nurses have left patient- care roles, leading hospitals to turn to temporary staffing to meet their needs.

But these temporary positions cost double, or sometimes even triple, the salaries of full-time nurses, according to MHA. Salaries have typically made up about 70% of a hospital’s operating cost, but as the proportion of temporary workers increases, so does the cost of salaries.

The recent MHA report found that in fiscal 2019, hospitals spent $204 million on temporary staff, while in fiscal 2022, they spent $1.52 billion—a 610% increase.

According to the report, 77% of the money went specifically to hiring temporary nurses.

Hospitals are also paying more for their permanent workforce. According to another MHA survey from late 2022, hospitals have increased hourly wages for those on staff by 13-20%, likely to keep their employees from leaving.

This financial stress has left major health systems in the red in 2022. Mass General Brigham reported a loss in operations of $432 million, while Beth Israel Lahey Health lost $201 million in operations in fiscal 2022.

 Massachusetts Pharmacies Must Stock and Dispense Abortion Pills

Boston Business Journal – Massachusetts officials are warning pharmacies to keep abortion medication in stock or face state investigation.

The Massachusetts Board of Registration in Pharmacy (BORP) issued guidance directing pharmacies to stock, and when prescribed, dispense all reproductive health medications, including Mifepristone, an FDA approved abortion pill.

Pharmacies that fail to do so will be in violation of state regulations and practice standards, the board warned, and “any such violations will be investigated fully by BORP.”

The state’s warning comes after Walgreens, the second-largest pharmacy chain in the United States, said that it would stop dispensing abortion medication in 21 states after a group of Republican attorneys general wrote them a letter urging them to do so.

In the guidance, the Board of Registration in Pharmacy wrote that it is “concerned about the stance being taken by some pharmacies across the country regarding access to reproductive health medications,” specifically noting abortion pills, emergency contraception, and contraceptive prescriptions.

Abortion pills are the most common form of healthcare to end a pregnancy.

“Here in Massachusetts, we will always protect access to reproductive care, including abortion,” Gov. Maura Healey said in a press release. “At a time when states are rushing to ban medication abortion and some pharmacies are irresponsibly restricting access to it, we are reminding Massachusetts pharmacies that they have an obligation to provide critical reproductive health medications, including Mifepristone. It’s safe, effective, and legal.”

Budget and Taxation

With New Interest Rate Hike, the Fed Signals Health of the US Financial System

Boston Globe – Assessing the recent string of bank failures, the Federal Reserve said that the US financial system is “strong and resilient” — healthy enough to absorb further increases in borrowing costs as it labors to bring down inflation.

After raising its benchmark federal funds rate by one-quarter of a percentage point, the central bank hinted that the turmoil triggered by the collapse of Silicon Valley Bank of California and New York’s Signature Bank could actually help in its anti-inflation fight.

“Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation,” the Fed said in a statement after wrapping up a two-day meeting in Washington.

In other words, banks will probably try to conserve capital by making fewer loans, leading to a squeeze that could slow consumer spending and cool off the overheated job market.

Just how hard the economy will be hit “is uncertain,” the Fed said.

The central bank’s widely anticipated quarter-point rate hike, its ninth consecutive increase, is an attempt to continue efforts to rein in inflation without putting too much pressure on the economy with a larger increase.

Diversity, Equity and Inclusion

Rep. Katherine Clark says U.S. “way behind” helping families with child care

CBS News – Rep. Katherine Clark, the second ranking Democrat in the U.S. House, spoke to WBZ-TV political analyst Jon Keller for his Sunday show to discuss the legislative logjam in D.C., and why the United States remains “way behind” in helping families with child care.

In 2021, Clark introduced the Child Care is Infrastructure Act, which she said would make key investments in child care facilities and the early education workforce. There has been no movement since the bill was introduced.

“I don’t understand why we don’t have Republican support. This isn’t a Democrat issue. This is an issue that families around the Commonwealth, around Massachusetts are facing, small businesses and large are facing. It is a rural issue, a suburban issue, and an urban issue,” Clark told Keller. “So why is it that we are continuing to have Republicans who are approaching this issue as it’s some sort of accessory and not the vital economic infrastructure?”

Clark also described the general challenges facing the U.S. House and the lack of bipartisanship.

Massachusetts May See Flood of New Drivers, Fees

State House News – If all 200,000 newly eligible undocumented immigrants apply for a driver’s license next fiscal year, their applications would far exceed the number of first-time license applications the Registry of Motor Vehicles issues every year.

On average, about 120,000 people in Massachusetts get a driver’s license for the first time each year, according to the Department of Transportation.

Under the new law the state passed last year, which upheld by voters who shot down a repeal effort at the ballot box, Massachusetts residents without legal status will be eligible to apply for a license for the first time on July 1.

With a few months until this new group of people will become eligible all at once, the RMV is preparing for an influx of applicants.

The Registry anticipates hiring approximately 140 new workers and has already started that hiring process and planning for July, according to the RMV.

For some agencies, such as the MBTA, that are facing worker shortages and hiring struggles, the state is offering sign-on bonuses for new workers. But the RMV said it is currently not considering this tactic to fill the extra 140 positions.

The fiscal year 2023 state budget included about $9 million for initial start-up costs for the Registry and Gov. Maura Healey is recommending that $28 million be spent in fiscal year 2024 to implement the law.

The Healey administration has repeatedly said that standard RMV fees will offset the investment to bolster the Registry’s capacity.

Sustainability and Climate

Boston asks Developers How They Will Incorporate Climate Goals

Boston Globe – A survey of 250-plus builders asks how projects will incorporate city’s housing and climate goals

As the Wu administration contemplates incentives for real estate projects that emphasize affordability, equity, and climate resiliency, they’re starting by asking developers to put on paper what they’re already doing along those lines.

The Boston Planning and Development Agency last week sent questionnaires to 189 development firms and 67 community organizations asking for specifics on how their real estate projects would contribute to the city’s planning goals. The 256 developers and community groups either have projects currently undergoing development review or have had projects recently approved by the BPDA board, and their responses will be used to develop a scorecard that the Wu administration hopes will streamline development review in the future.

“This challenge is the first step in a comprehensive process to ensure that development in Boston prioritizes resilience, affordability, and equity from start to finish,” said BPDA Director Arthur Jemison in a statement. “We look forward to working with the development and advocacy communities on this to ensure our city’s built environment is meeting the needs of Bostonians.”

The move comes as the Wu administration has begun taking steps to draw the BPDA into City Hall, with the City Council earlier this month passing a home-rule petition that would formally dissolve the legal structures behind the agency and draw down urban renewal powers. A steering committee is also examining the BPDA’s Article 80 process, which guides BPDA and community review of most large development projects.