Ten years ago, Boston was enjoying one of the most fertile periods of economic growth in its history.

Unemployment was hovering at around 2%, real estate prices were skyrocketing, and wages were higher than almost anywhere else in the nation.

Today, the recession that has lashed New England for the past four years has also left its marks on Boston. Jobs and workers have permanently left the region, and the city has struggled each year to keep its budget in balance.

Now, as the regional economy slowly begins to improve, rating agency officials say that Boston's willingness to invest during bad economic times may not only have saved the city's credit rating but helped the entire region.

Consider the buzz of activity in Boston today:

* The Central Artery and the Third Harbor Tunnel are under construction, with the tunnel slated to open in 1995 and the artery by 2001.

* Extensive repair work continues in and around the Sumner and Callahan tunnels.

* The Boston Harbor cleanup, which is running about $500 million below the state's original projected cost, is on schedule and will be completed around the year 2000.

* A new federal courthouse is planned as well as a $1.6 billion link between the city's north and south rail stations.

* A new Boston Garden is under construction and a $700 million sports and convention center has been proposed by Gov. William F. Weld.

* Also planned are $240 million worth of improvements to the city's universities and colleges, almost $2 billion worth of improvements to its health-care facilities, and almost $900 million within the next five years for construction of new city-owned facilities and improvements to existing facilities.

Despite the possible travel disruptions, these projects have helped Boston survive the recession, city officials contend.

The projects are providing thousands of construction, engineering, and municipal planning jobs. Restaurants, hotels, and the airports have also benefited.

New York Couldn't Do It

The long-term effects of the projects on the city are uncertain. The construction projects undertaken in New York City in the late 1960s and 1970s did not help the city's finances. in fact, the city's credit rating fell.

Development and government officials in Boston said they are aware that the New York City phenomenon could appear in their city, and they are attempting to assure residents that the capital projects have -- in a sense -- already saved the city.

Whether a community can build its way out of a recession is being tested not only in Boston, but in its suburbs, and in the state of Massachusetts itself. Many other cities around the country are watching.

In Massachusetts there is an authority or an agency for just about everything. Housing, schools, hospitals, water, transportation, and ports all have a representative agency in the authority system.

Although occasionally criticized as the "shadow government that really runs things in the state." the authority system has been one of the largest supporters of the infrastructure and construction projects in the region.

The willingness of authority officials to spend and build during bad economic times was risky, but one they, say is starting to pay dividends.

"We have felt that if a project is going to produce a decent return of the investment, and the community is going to benefit from it, then it's a worthwhile venture," said Daniel O'Connell, executive director of the Massachusetts Industrial Finance Agency. "It's all part of pump-priming the economy of the state. "

Robert Beal, a member of the Boston Chamber of Commerce and the chairman of the MIFA board of directors, said the authorities and local officials are trying to recreate the growth the city experienced in the 1960s and 1970s.

"The city and the region have hit rock bottom and are starting back on the road to recovery," Beal said. "These projects will allow us to have a steadier, more balanced recovery."

To keep the recovery on track, city officials are following a capital plan devised five years ago that staggers construction. The idea is to avoid a repeat of the 1980s, when construction workers benefited from a temporary frenzy of construction projects only to find themselves out of work once the projects were completed.

One of the architects of the city's capital plan was Thomas Menino, the current acting mayor of Boston, who was the city council president and chairman of the Ways and Means Committee when the plan was conceived.

"During this recession, we have made a very conscious effort to put people back to work as quickly as possible," said Menino, one of eight candidates vying for the Democratic mayoral nod in next week's primary election. "At the same time, though, we are interested in keeping these people employed." Menino said that the large projects that have garnered so much attention -- in particular the harbor cleanup and the Central Artery construction -- are not the ones about which he is most concerned.

"Five years ago, we decided that the schools and the hospitals and the community centers in the city were in desperate need of repair," Menino said. "The larger projects take care of themselves, or are heavily subsidized by the state and federal government. These smaller projects demand attention to further improve the quality of life in the city."

Beal, the chairman of MIFA, said that city officials have done a good job in spacing out the projects, but also have been very successful in approving projects that will have longer term benefits for the city's employment picture.

"Through the cleanup and the Central Artery/Tunnel projects. the city has realized about $15 billion in extra revenues over the last five or so years," Beal said. "But the smaller projects will create jobs for the long term."

Although the construction of the Central Artery and the cleanup of the harbor have earned the bulk of the local headlines, the permanent employment picture produced by some of the smaller projects may end up as the biggest story of this recession.

According to the Boston Redevelopment Authority, construction projects partially or fully backed by the city and begun in 1992 through 1994 will create about 17,000 construction jobs and 18,000 permanent positions. Some 8,000 to 10,000 construction workers are on the job now.

The largest benefactors of the city's capital spending appear to be the health-care, medical research, and biotechnology industries.

Projects generated through these sectors will create 13,000 permanent health-care position

The two largest projects will be the new Boston, State Hospital and the Yard's End Biomedical Research Center. Each project is expected to add more than 4.000 jobs.

There will also be more than 700 jobs created in staffing the Beth Israel Hospital's clinical center, 802 new jobs from the South Station Phase One Center, and 605 new jobs from the New England Deaconess Hospital's clinical facility.

Boston's willingness to spend hundreds of millions of dollars on these projects is one reason that rating officials are somewhat bullish on the future of the city's finances.

Currently, Boston gets an A rating from all three major rating agencies.

"The economy of the city is very well-rounded," said Kathy Evers, a vice president at Moody's Investors Service. "Medical and education are two of the biggest draws to the city, and officials have been adamant about keeping those facilities the best."

There has been speculation that the "medical arms race" in Boston over who can get the best equipment has gotten out of hand. But Evers said hospital officials seem aware of the danger and are guarding against it.


While medical and education facilities continue to spring up all over the city, another project with potentially even greater impact has recently moved center stage.

Last month, Gov. Weld proposed a multimillion-dollar convention and entertainment center that some officials say could radically change the landscape in Boston and add tens of thousands of permanent jobs to the city's work force.

The center -- commonly referred to as the Megaplex -- would help bring Boston in line with other major metropolitan areas. Although the city is considered one of the most popular locations in the nation for conducting business, Boston ranks 48th for its ability to handle a major convention, according to Paul Barrett, director of the Boston Redevelopment Authority.

In addition to its potential for hosting conventions, the Megaplex could serve as the new home of the New England Patriots football team.

It has been no secret that the Patriots' owners aren't fond of their current home, Foxboro Stadium. A new facility might just keep them from fleeing to St. Louis or Baltimore, both of which have lost professional football franchises in the last decade.

The convention center is tentatively scheduled to have a fixed seating capacity of about 70,000 and open in the fall of 1998. But development and governmental officials said its construction is not contingent upon the Patriots remaining in the area.

"It is a mistake to think this facility's sole purpose is for the Patriots," Barrett said. "We need the complex to be competitive with other cities."

Barrett said the city ranks below many smaller cities, including Wichita, Kan., in terms of accommodating conventions.

"In a survey of the major groups that sponsor yearly conventions. it was found that San Francisco and Boston are the two cities most mentioned as being very attractive to conventioneers," Barrett said. The city is unable to accommodate many of them, he said.

To entice a group the size of the National Education Association, the American Bar Association, or the American Medical Association, Barrett said, a larger, more modem convention center is needed.

The Megaplex would also give the city a chance. at landing one of the Presidential nominating conventions.

But the effects on the local economy would be even greater. Market surveys undertaken by the redevelopment authority show that the convention project would add between 12,000 and 14,000 jobs immediately, with that figure growing every year.

"It took 10 years for the city to get serious and begin constructing a new Boston Garden." said Beal of the Chamber of Commerce. "I think Weld wants this project to get moving soon."

Legislative sources have said that the governor's suggested financing for the stadium would be shot down in the legislature. Weld called for the center to be largely financed from the proceeds of either general obligation or special tax obligation bond sales.

The bonds would be secured by the revenues earned from several floating casinos, something the legislature may not be willing to support, Barrett said.

Most financial and governmental officials said the center will probably be financed through a series of state-backed bonds, an increase on user fees for rental cars, and an additional $1 surcharge on taxis in Boston.

However it gets done, ratings officials are cautiously optimistic about the effects of the Megaplex on the city's economy.

"This could be a real bonus for the city's finance." said Evers of Moody's. "If the convention center brings up the hotel construction business, then that will also be a big help."

Barrett said the city's redevelopment authority estimates that the convention center would necessitate the building of an additional 3,000 to 5,000 hotel rooms. The average hotel employs about one person for every room, he said.

How the project gets financed, what happens with the Patriots, what conventions can be lured to Boston, and how many hotels will have to be built in Boston to accommodate it center, all are window dressing to the critical needs of the New England region.

Government and rating agents said that without a healthy Boston, the entire region is in trouble. Already, they said, that the careful-financial planning and cash management city officials exhibited through this recession may have saved thousands of jobs in New England.

"Even when our local aid was cut off, we felt that this was the time to do these projects," Menino said. "We still have high unemployment in the area, but the collective psyche of Boston seems a lot better."

Evers said there is no doubt that Boston's commitment to build has positively influenced its northern neighbor, Chelsea.

Chelsea's finances and government were in a shambles until the state stepped in and appointed a receiver.

Now, only three years after the city was unable to pay its bills, Chelsea has begun construction on a building that will house all the records and computers for the Massachusetts Department of Revenue.

The city is also readying its first bond sale in more than 15 years for school improvements.

"If Boston's economy is strong. companies are willing to expand into the outlying cities for satellite or back offices," Evers said. "The city of Medford will soon be home to a branch office of The Boston Company and over 1,400 new jobs. How much more direct linkage is needed."

Boston still has some financial problems and is not completely out of the woods. Three city unions -- teachers, police, and firefighters -- have been without a contract or a raise for three years, although Menino said that he is now working on the police contract.

This time last year, however, there were 10 unions without a contract, Evers said.

Much will be decided about the city's future direction in the coming mayoral race. However, one thing appears certain to all city officials: For Boston to remain strong, it must continue to build and its work force must remain willing to adapt to changing economic times.

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