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“I find her response to be perplexing.”

by Prince Of Petworth March 24, 2016 at 3:00 pm 34 Comments

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10th and V St, NW

“Dear PoPville,

I wanted to pass along the response that I received from CM Nadeau to a letter that I wrote to her about what I feel are the egregious lease terms on the proposed homeless shelters. I find her response to be perplexing. She fails to include the cost of the $14 million build out in calculating the monthly costs of these units. Just dividing the $14 million over 30 years adds approximately $1350 to the monthly cost of each unit. And that doesn’t include the cost of financing, etc. Why are we paying $3600 for each of these units?”

Another reader writes:

“I received this from my council member, Brianne Nadeau, in response to an email I sent asking the council to reject the mayor’s homeless shelter plan. My rejection request was based on a number of reasons, including, among other things: 1) the obvious political cronyism with the mayor and her land owner donors; 2) the failure to create apartments that include the necessary amenities for the families (e.g. private bathrooms); 3) the unethical push by the mayor to subvert procurement and zoning rules; 4) the lack of transparency when choosing the sites; and 5) the failure to involve constituents in the process of selecting the sites. Ms. Nadeau ignored many of the concerns that have been raised in her response below, which is not a surprise considering her unwillingness to consider the comments of the citizens she supports. I would love for anyone with the knowledge to address her leasing versus buying justification and any other insight your readers may have. Thanks.”

Following is the very long letter in full:

“Recently I’ve received correspondence expressing concerns about the HomewardDC plan. Residents have asked about various aspects of the proposal, and presented questions about the specifics of the deal, and the nature of my support for the project. I want to respond to all of the questions that have been asked, and so would like to share with you my current thinking on the mayor’s plan to put temporary housing for families in transition at 10th & V Streets, NW in Ward 1.

Anyone who’s been to D.C. General knows it’s a terrible place for families experiencing homelessness, which is why I voted in support of the plan to shut it down. I support the Mayor’s plan for Ward 1, which calls for 29 units of apartment-style housing for families in transition, where they will get services to find permanent housing and get back on their feet as soon as possible.

The new building proposed for Ward 1 will be a safe and secure place where parents and children can live in dignified conditions while they work to find permanent housing. This housing is a critical piece of the plan to end homelessness in the District and shut down D.C. General once and for all.

Make no mistake, ending homelessness is expensive by any measure. This plan moves us from the status quo, in which we are spending tens of millions of dollars on a failing system, and moves us to a system that is about dignity, safety and opportunities for our families experiencing homelessness.

Ground Lease

The proposal for this site, as well as several others, is a 30-year ground lease. The reason for a ground lease rather than a purchase is that our legally mandated debt cap prohibits us from borrowing more than a certain amount of money at any given time. Even with our excellent credit rating, our borrowing for schools, transportation projects and Metro infrastructure have put us very near this cap and thus additional borrowing beyond what the Council has already allocated is not an option for the DC general replacement plan.

The ground lease payments are funded by bond revenue, and the expenses for the cost of actual building are from the capital budget, via a separate appropriation. The lease, by definition, is paid over time. The physical development of the building will be paid for once, based on this appropriation, and is estimated at $14M.

At the proposed $770,000 per year laid out in the legislation in the form of a letter of intent (LOI), the rent for the ground would equal an estimated $2200/month, which is below market for a 2BD or a 3BD in the neighborhood. There is a 2% annual increase and periodic resets that are proposed as part of an un-negotiated LOI and do not yet represent the final costs or agreed upon payment for the final project. This is part of what I’ll be examining, and pushing the administration on, before the Council vote on the current legislation. It is my understanding that the final contracts will come before the Council for approval as well, as a letter of intent represents just that – the intent to further negotiate contracts and leases. It’s important that we have a better understanding of what the total cost of the lease will be over the 30-year period, taking into account the increases and resets. As of yet, we do not know that amount. Some in the community have offered their own calculations, and surmised that the cost is too high. I would recommend against using back-of-the-envelope calculations to form an opinion on this proposal as the details are not yet final.

A ground lease, like any lease, can be established for as short or as long one wants. The length of this lease is guided by the finance mechanism and goals of the project. In this case, we’re looking at a 30 year ground lease in order to accommodate the bond revenue that is being accessed to pay for it. The lease has been proposed at 30 years to accommodate the 25-year bond financing.

The current terms of the un-negotiated LOI state the end of the lease, but not the terms. The end of a lease results in a new negotiation, but by the very nature of a lease, the property owner will retain ownership of the land, and the District will retain ownership of the building.

One role I’m playing as your Councilmember is to push for clarity about what will happen at the end of the 30-year lease. It’s important to me that we have a plan of action that takes into account future possibilities, and that we are fiscally responsible. Any future re-negotiation of the lease deal should take into account the totality of cash expenditure over the years, and the improvement and asset that the 29-unit building will be. Essentially, I want to know what we’ll have to show for our investment at the end of 30 years. Some have asked why we would not do a longer-term lease. The primary reason in my mind is that we don’t want to be saddled with a lease for any longer than we need it. And if we need it longer, we should have the option to renegotiate the terms.

It is true that the assessed value of the land is $2M. This reflects the value of just the land, not any proposed property, and as most homeowners know, assessment value is less than the actual fair market value (think about the property assessment you receive each year, which is much lower than what you’d list it for on the market). Although there are not any existing improvements on the land at this time, the price tag on the land at 10th & V includes a design, with setbacks and approvals that add significant value to the site, and would typically cost the District several million dollars to generate anew. These are called “pre-development costs.”

As I mentioned earlier, the District doesn’t have the room within its debt cap to make land purchases across the city in addition to the rest of the borrowing portfolio we have. Some have also suggested using eminent domain to acquire parcels that are not currently for sale. Taking property by eminent domain does not mean that the District simply takes property from land owners, rather it’s a tool used when a government is trying to assemble several parcels of land in one area for a public use, such as highway, redevelopment area or public facility. The government can’t force a sale in the sense that has been suggested by some constituents. It requires paying the land owner a fair market price and being prepared to go to court for a lengthy period of time, certainly much longer than would be feasible to execute this project in a way that would allow us to close DC General by 2018.

Program & Maintenance

The Department of General Services (DGS) would operate and maintain the facilities, with a maintenance budget and plan that is a separately appropriated pot of money. The wraparound services will be paid for from the Department of Human Services budget.

The plan for these sites is to provide 24-hour access for the staff working with the families, and allow space for the families to exist comfortably and safely. In addition to communal spaces, there will also be programmatic space on the ground floor, and an interior courtyard play space for children. There will be onsite parking to facilitate staff access, and there will be 24 hour security, as well.

The property owner’s most recent plan for the site was to build 40 studio and 1 bedroom condos. They would have been much smaller dwelling units and were not intended for families or the wrap around services the shelter would provide. Although the interior plan for the building is not feasible, the exterior plan is. The District’s plan for the site is to build 29 units of 2 or 3 bedroom apartments, with services onsite and space for communal gathering. DGS evaluated several sites before negotiating to build on this one. The Department of Human Services (DHS) has carefully thought out the program, based on national best practices, and will issue an RFP for service providers.

The Administration has indicated that its proposal will need to be approved by the Board of Zoning Adjustment (BZA) for a special exception. This means that the ANC will have an added opportunity to weigh in on the design for the building and monitor the progress of its development.

The church building is historic and its façade will be maintained. The plans for it will be reviewed by both Historic Preservation Review Board and the BZA; the two-year time line for development takes this into account. The vacant lot will be covered by a brand new building which is not historic.

Nature of the Units Proposed Across the District

Last year the Council debated the remedies for some of the more serious issues at DC General. One of the big discussions was about the number and type or bathrooms in each shelter, and what the living style would be in the non-apartment style buildings proposed for other wards. With the understanding that living would be largely communal, but with further understanding for the need for privacy, the Council debated the bathroom issue for a long while. In the end, an agreement was reached about the need for bathroom access on each floor, but gave DHS leeway in designing the total number and type. Per the conversations in community, DHS seems to be planning to include a variety of bathroom types for families, with the “dormitory style” meaning that each family will have their own rooms and beds within which to sleep, safe, clean bathrooms on each floor, and communal style eating facilities.

By contrast, the plans for the 10th & V building include 2 & 3 bedroom apartments, with individualized living and cooking space. There are also plans for an interior courtyard play space, with the understanding that there are parks relatively close-by, as well (Banneker Recreation Center comes to mind, with several other play spaces that are walkable as well). There are plans for communal space at 10th& V, both in the new building and the renovation planned for the church building.

Some people have urged the Council to examine best practices used in other jurisdictions. The truth is that we have done so, and the city is already a leader on programs such as housing first and rapid rehousing. We have been using the Housing Production Trust Fund to build and fund supportive housing, transitional housing and affordable housing and plan to keep doing so into the future because it all fits into a plan of providing the next opportunity for families and people in crisis. We must use all of the tools we have at our disposal to fix what is, at its very core, a tremendous need for affordability in our city.

Developer Connections, Transparency & Process

Some have raised questions about the fact that many of the land owners have contributed to political campaigns. It follows that the people who own large real estate parcels throughout the city would have contributed to campaigns, and taken an active interest in the leadership of the city. This is precisely why I have and will continue to work for change to the campaign finance laws that allow these donations. After the initial announcement in Ward 1, residents also raised questions about which other sites were considered, and by what process they were eliminated. The Administration has released those sites and listed them on a publicly accessible website with brief commentary about why sites were eliminated. Additionally, in my oversight role, I was walked through the elimination process, and am comfortable with the site selected as the best choice for the Ward.

Additionally, some constituents raised the issue of the current landowner’s tax bill and the property’s classification and tax status. As part of my oversight role, I raised this issue, and demanded that the appropriate tax status apply, and the landowner pay the bill. The Administration has produced a clean hands certificate for the owner and is committed to ensuring that the tax bill has been resolved.

Examples of Other Shelters and Supportive Housing

La Casa supportive housing facility is located on Irving Street in Columbia Heights, and is an example of a community facility that fits into the neighborhood and looks like all of the other new construction nearby. Similarly, the shelter for 10th & V will fit in, using the exterior design plans that have already been completed and approved. It should be noted that La Casa’s construction and maintenance cannot be used as a price comparison, as its development began from scratch, included the need for pre-development, and has several other features that are structurally different from this 10th and V site. It has been offered by the Administration as an example of another site that serves a similar population, whose impact on the community has been positive rather than negative. Similar to La Casa, this site has both a plan in place for DHS to provide the services and programming to residents, and a plan in place with DGS to actually run and maintain the physical plant of the building.

The current cost of running DC General is $17M/year. The cost for all 8 sites will be $13M/year. The fact is, DC General has surpassed its useful life and requires extensive maintenance that is incredibly costly. The tens of millions of taxpayer dollars that have gone to DC General since 2012 – on the watch and approval of many members of this Council – represent sunk costs that we will not get back, and have resulted only in a startlingly poor return on the people’s investment.

This project replaces one that was similar on Spring Road. That housing existed in community for many years without incident or complaint. There are other similar facilities throughout the ward, which function well and are unknown to their neighbors as shelters.

It is important to the Council and the Mayor for all 8 wards to receive a shelter. All of our communities will equally share the challenge to end homelessness.”

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