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Court Square housing development facing $13 million in cost overruns

The six story building in Springfield's Court Square known as 31 Elm Street
The former Court Square Hotel building in downtown Springfield has been vacant for 30 years as redevelopment efforts repeatedly failed. The most recent plan, a $52 million project to building apartments, has hit a serious financial snag.

Developer warns project will die if city, state don't close the budget gap

Skyrocketing construction costs have put a major development project in downtown Springfield, Massachusetts in peril.

The project to turn the historic former Court Square Hotel building into apartments is facing a $13 million shortfall.

Michael O’Brien of Winn Companies, the co-developer of the project, said unless the city and the state each put in $6.5 million to close the gap, construction work that started over the winter and was scheduled to ramp up in the spring will stop.

“We would have no other choice but to walk away from the project because we’ve got to that point that the building is beyond saving if we stop work,” O’Brien said.

Redeveloping the derelict building that sits in the heart of the metro center has been an elusive goal of city administrations for decades.

Winn and co-developer OPAL Real Estate Group of Springfield put together a complicated financing package last year for what was then estimated to be a $52 million project. The plan called for constructing 74 one and two-bedroom apartments in the six-story, block-long building at 13-31 Elm Street with a fine dining restaurant and other commercial space on the ground floor.

There are nine private and public investors including MGM, which pledged $16 million in order to satisfy its casino host community agreement that calls for it to develop housing downtown.

Speaking at a meeting of the City Council’s Finance Committee, O’Brien said all the private funding sources are tapped out, so it is up to the state and the city to close the gap or the project dies.

“We would, unfortunately, not be able to proceed and it would be an absolute crying shame,” O’Brien said.

Tim Sheehan, the city’s chief development officer, said MassHousing, the state’s quasi-public housing finance arm, has agreed to cover half of the shortfall.

“The state’s participation would not be coming forward if the city wasn’t participating as well,” Sheehan said.

For the city’s share, the administration of Mayor Domenic Sarno is asking the City Council to authorize using $6.5 million from the free cash account, said Springfield’s Chief Administration and Finance Officer T.J. Plante.

“We were originally looking at ARPA funding, bond funding, and other things we could do,” Plante said. “The cleanest, easiest way to keep the project moving was free cash.”

During the Finance Committee meeting, Councilors pushed back on the administration’s request. Councilor Trayce Whitfield, the chair of the committee, said it is a “hard ask” especially because the administration last year rejected her pleas to use $5 million in free cash to lower the property tax levy.

“While this project is important and it may cease, I would like to go back to the drawing board with the administration to find out what we can do to give some relief to the taxpayers of the city of Springfield because this free cash is essentially taxpayers’ dollars,” Whitfield said.

Councilor Tim Allen was angry after hearing the city administration had learned of the shortfall in January, but kept Councilors in the dark.

“If you knew when you went to the state, you should have come to us at the same time and given us the respect of knowing what is going on,” Allen said.

The Finance Committee made no recommendation on the administration’s request.

The city has already spent $4 million to remove environmental hazards such as asbestos and lead from the building.

The record-setting tenure of Springfield Mayor Domenic Sarno. The 2011 tornado and its recovery that remade the largest city in Western Massachusetts. The fallout from the deadly COVID outbreak at the Holyoke Soldiers Home. Those are just a few of the thousands and thousands of stories WAMC’s Pioneer Valley Bureau Chief Paul Tuthill has covered for WAMC in his nearly 17 years with the station.