Report: Star Store closure was ‘collective failure,’ wasted millions in public dollars
By Jusolyn Flower,
2024-09-17
NEW BEDFORD, Mass. (WPRI) — The Massachusetts Inspector General’s Office (OIG) has released an extensive report detailing the alleged mismanagement and financial mishandling of the Star Store in downtown New Bedford.
Last fall, the University of Massachusetts (UMass) Dartmouth vacated the Star Store, ending its decades-long use of the facility for arts education.
The university cited a “lack of available funding” for the decision, raising concerns from local officials and prompting calls for intervention by Gov. Maura Healey.
The Star Store’s history and UMass lease agreement
The Star Store, built in 1844, was once a bustling department store with more than 150,000 square feet of space.
After a series of ownership changes, the city acquired the building in 1995 due to unpaid taxes and sold it to a developer the following year for $1.
In 2001, UMass Dartmouth’s College of Visual and Performing Arts (CVPA) began leasing the four-story building as a satellite campus under a 20-year agreement.
By 2016, a study identified major issues with the building’s HVAC system, leading the state legislature to approve $8 million in bonds for upgrades. However, those funds were neither appropriated nor spent, according to the report.
Although the original lease expired in 2021, the Commonwealth did not exercise its $1 purchase option for the building. Instead, the state extended the lease for a year and then transitioned to month-by-month payments, incurring more than $60 million in rent and other costs over the lease’s duration.
Report findings
Inspector General Jeffrey Shapiro’s 138-page report revealed that the leasing process was neither open nor competitive, which it says drove up costs and yielded less favorable terms for the state. Former Inspector General Robert Cersoli had also criticized the building’s operating costs and real estate taxes as a financial strain for the Commonwealth from the start.
“I strongly recommend that you veto Senate No. 2271, which is currently before you for your approbation … This state-funded lease, which calls for extensive construction work, would be exempt from all statutory safeguards that normally apply to the state’s real property leases, design contracts, and construction contracts,” Cerasoli wrote in a Jan. 3, 1997, letter to Gov. William F. Weld. “Although Senate No. 2271 would require DCPO to conduct a competitive developer selection process, it is this Office’s understanding that the City of New Bedford has already designated the developer for the only eligible project site within the Commercial Area Revitalization Central Business District … Under these circumstances, there can be no competition.”
The report further revealed that UMass Dartmouth and the state did not make the necessary capital improvements during the lease, which could have made purchasing the building a more viable option. Additionally, the report pointed to a “lack of shared goals” between the university and the legislature, as well as unclear communication on whether UMass Dartmouth intended to stay at the building after the lease expired.
“UMass Dartmouth seemed uncommitted to maintaining a presence in downtown New Bedford upon the lease’s expiration and gave mixed signals on its interest in the purchase option,” the report stated.
In addition, the report said the Division of Capital Asset Management and Maintenance’s (DCAMM) director of leasing had privately acknowledged they had “waited too long to start the process of thinking about the future and had therefore locked itself into an untenable position.”
During the investigation, the OIG reportedly found “no evidence that DCAMM raised concerns about the leasing arrangement or objected to its inability to negotiate favorable terms.” It also revealed that UMass did not “effectively manage the lease or adhere to its terms.”
Shapiro’s investigation concluded that there was a “collective failure” between UMass Dartmouth, DCAMM, and the legislature to plan and communicate effectively by the July 2021 deadline, resulting in wasted taxpayer dollars, including over $4 million lost through expensive short-term tenancies.
“A lack of consensus among all government entities involved led to the 20-year lease ending without the Commonwealth purchasing the property, vacating the premises, or signing a successor lease,” the report read.
Moving forward
To date, the Star Store remains vacant, and despite New Bedford Mayor Jon Mitchell’s efforts to “find a way forward” after the college’s departure, the developer still owns the property.
UMass Dartmouth’s CVPA has temporarily relocated to a warehouse in Dartmouth, with some courses held in newly constructed spaces on the university’s main campus. According to the report, the university has no plans to return to the Star Store and is instead focusing on developing its Dartmouth campus.
In a statement, a spokesperson for UMass Dartmouth said, “The Inspector General’s report brings to light the complex and troubled origins of the Star Store project. From the outset, the flawed procurement process and unfavorable lease terms severely undermined the long-term viability of the university’s stay in the building.”
The report stated the developer, in an interview with Shapiro, said he is actively seeking a buyer or donor-recipient for the building.
The OIG’s report outlines several recommendations to prevent similar outcomes in the future.
It advised UMass, the state and the city to develop a clear vision for the Star Store and ensure financial resources are secured before entering any new agreements.
Furthermore, it calls on DCAMM and UMass Dartmouth to take a more proactive role in property management, as both entities’ failures contributed to the university’s decision to vacate.
Given the structure of the original lease, Shapiro recommended rejecting similar agreements in the future and stressed the importance of communication and decisiveness when managing future leases, saying “The Commonwealth can and must do a better job of protecting public dollars.”
The report urged that any future acquisition of the Star Store by the state or city should be carefully evaluated, with necessary capital investments planned to avoid another costly arrangement.
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