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“I find her response to be perplexing.”

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

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.”

  • Concerned Citizen

    Do you mean to tell me that when you rent an apartment you don’t also pay for the building of that apartment unit?!?! I’ve been getting robbed!

    • Something Crooked

      I urge everyone to write to Attorney General Karl Racine to ask for a full investigation into the marketing and signing of these lease agreements. Between the outrageous cost to the city and the fact that the landowners have all turned out to be major political donors, this just doesn’t smell right.

  • JS

    I have a question about the District’s debt limit: who authorized the cap? Congress or the DC Council? If it’s the latter, couldn’t they just…vote to raise the cap in order to buy the sites outright?

    • bedroomosh

      it’s probably a little more complicated than that. the city’s debt limit is probably what ratings agencies said would have to be their max to maintain their current bond rating, and if their debt-to-assets/revenue/etc ratio changes for the bad, the city’s bond rating would be downgraded and borrowing would get more expensive for the city. it probably can issue more debt, it’d just be more expensive to pay the debt service because the ratings agencies wouldn’t like it.

      apparently the city’s current bond rating is pretty good, no mayor or council member wants to be in charge if it gets downgraded.

    • jcm

      The debt cap was created by the Council, and they could lift it if they wanted. However, it would hurt the city’s bond rating. People who set a borrowing limit and are unable to live within tend to be poor credit risks.
      It’s a shame so much of the city’s debt capacity has been chewed up financing ballparks for billionaires.

      • dc res

        They also financed the convention center hotel, pushing the city up to the limit – what a joke in a city that is booming with privately financed construction.

      • Concerned Citizen

        Is the Council’s thinking that the credit rating agencies will prefer ridiculous current spending to an upfront purchase that will save a lot of money over the years and probably be an appreciating asset? If so, they are mistaken.

  • Fred

    The DC Council meeting that addressed the homeless shelter demonstrated how poorly this plan was conceived and executed by Mayor Bowser’s administration. The Mayor’s development team, particularly Rashad Young the City Administrator, were rude and dismissive of questions from the council. They lacked the ability to justify their decisions and negotiations with developers. Mr Young, who is paid $295,000 by the city, was unable to answer basic questions and was very rude. The Mayor’s team in their testimony combatted every tough financial question with the response that expediency was needed to close DC General at all costs. A noble argument for sure, but would they not serve the city better by focusing on efficiency and cost savings, as opposed to ramming an unfavorable and expensive 8 Ward Policy down the throats of citizens.

  • Show the math

    I also received this letter. Two observations:
    1. It’s light on math and heavy on promises of a great world ahead.
    2. Nadeau has an implicit message for us to not try to do the math on this project. Instead we should leave that up to the politicians.

    DC Council and the Mayor should clearly show how these figures are coming together so the public can determine for itself if this is a justified budget and plan.

  • A

    Best of luck! I’ve tried to engage several times, but it falls on deaf ears. She literally only cares about affordable housing,… Meanwhile, her constituents are living in the middle of a battle zone dodging bullets, watching open air drug markets operate unimpeded and weekly robberies. The election cannot get here soon enough.

    • D

      And then what will happen? After this election? Where are these open air drug markets where you’re dodging bullets?

      • Park RD

        Park Road between 14th and 16th. Come by and see the scales the dealers bring out. Walked through three exchanges happening simultaneously by the bus shelter on 14th at Park. MPD said there is a known drug den on the street. They also said they expect “gun play” by the end of summer. With 24-hour patrols they also said they can’t do anything more and that neighbors have to reclaim their block by spending time where the dealers are to make it “uncomfortable” for the dealers to stand there.

        • Anonymous

          Nadeua is either ignorant of what is happening in Columbia Heights or simply doesn’t care. Her leadership skills are nonexistent and she is severely weak on public safety issues. #anybodybutNadeua

    • DCresident99

      Nadeau is a joke. She is completely worthless as a CM.

  • logan

    She also doesn’t understand how eminent domain works. The city gets the property right away. It’s determining fair market value that can potentially take years in court. See most recently, the DC United stadium.

    So either she’s not been paying attention for the last year, or she’s deliberately misstating the truth.

    • Concerned Citizen

      Agreed. And my understanding is that the Supreme Court has ruled that eminent domain can be used for any purpose related to “economic development,” which is just about anything. I’m not saying that eminent domain or even the sale of the properties between two willing market participants is the right move, but at a minimum the city needs to renegotiate the leases in a way that at least pretends to give a damn about the value of tax dollars.

    • jcm

      She has zero idea of how financing and development work. This is why developers fleece the city every single time. They’re good at it, and the people charged with the oversight aren’t. Somebody pointed out to her that the rate for the ground lease is less than a 3BR apartment, and she thought that was a compelling argument in favor of the deal.
      I complained to her about her support for the Bruce Monroe/Park Morton thing, and she wrote back that it shouldn’t be surprising that she supports the plan, because she supports affordable housing. But there is no plan yet. They won’t even release the number and type of units they’re building, or any of the financing details. Apparently, all you have to do is say “affordable housing” and she’s on board, no questions asked.

      • Anonymous

        If only there was a politician who was a great negotiator and could get this city a GREAT DEAL…

  • zandunga

    My neighbor’s daughter lives in DC General now. She lived in PG before moving there. She said that many of the residents there are from PG and Montgomery Counties.

    • Irving

      ^This!!! It makes me laugh every time I hear the mayor or nadeau mention ending homelessness. DC will be known as the city to move to if you are homeless.

      • Angry Parakeet

        That’s the way it worked in social services-rich Madison WI. Chicago poor flocked.

  • Charlie

    Wow. Is she stupid ?

    The point of a lease is so you can find it out of operating budgets. Not debt.

    The reason for a 30 year groundlease is that the developer doesn’t have to pay tax on the land as it deened an exempted use

    We are using 45 million in debt to build a building and turn it over to sorg in 30 years.

  • Anonymous

    Nadeau’s long-ass letter pretty much covers all of the questions the two complainers have raised. So what’s the problem? Other than the standard “no more affordable housing” refrain.

    • DCresident99

      Her numbers are complete BS. She completely ignores that DC taxpayers will foot the bill for building the shelters and then turn them over. I particularly love: “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.” That worked great with Wal-Mart. You need that kind of thing in writing before you agree to be lease. It’s like council members couldn’t do anything other than become a government employee. Does no one have any business sense?

    • Concerned Citizen

      The problem is that I pay taxes and it bothers the hell out of me when my elected officials don’t care enough to be responsible stewards of those resources.

  • Sean

    Worth pointing out that the owner/developer of this site is Sorg Architect’s Suman Sorg, who has donated plenty of money to Bowser’s official campaign and FreshPAC. Not surprising Sorg is being paid back with this and the Grimke School project down the street.

    • 10thSt

      …and that the city pays to contruct the building which is then GIVEN to sorg at the end of the lease. A free building! Plus rent during the lease! If I donate enough to the mayor’s next campaign, can I get this sweetheart of a deal, too?

      • Timebomb

        I sorta doubt the building is going to be of much use as is after 30 years of use as a multi-family shelter. 30 years is a lot of years of wear even on a modest single-family home.

  • Anonymous

    I support this plan, but this statement is plainly not true: “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.” At the end of a ground lease, per the terms of most standard ground leases, ownership of the improvements reverts to the fee owner (here, to Sorg).

  • BowserAndNadeauInCrookedDC

    This is all about RFK Stadium, can’t anyone see that?
    The stadium property and DC General are right next to one another. They are connected.

    They developers need to boot the homeless out of that area. Why do you think they announced the closing of DC General first, and then immediately announced afterward new plans for a the gleaming stadium — literally, a glass-enclosed palace surrounded by a moat. No room for the homeless in that plan.

    And then what happens to that huge piece of land where DC General sits, hmmm? Could it all go to these developers who contributed to Bowser’s FreshPAC?

    This is not about helping the homeless. Every aspect of this situation that has come forth into the light has proven to be crooked. Bowser and her cronies don’t answer questions. They say we have have no choice. They say there is no room to object. And they lie through their lipstick.

    Now, Brianne Nadeau just nods like a bobblehead. She’s so useless. Hey, Nadeau — what are you doing for us?What do we get in return? Nothing. Nothing at all but a huge reduction in our worth, and new neighbors whom you and Bowser and other officials have said attract “dangerous criminal activity, violence, exploitation, illness, hoplessness and decay.” Oh, joy. Thanks so much for robbing us, and dumping your government-run debacles on our families.

    How will any of this be magically transformed into a self-enclosed oasis in such a tiny plot of land? It won’t. Oh, it’ll have free internet, and a playpen. Whoopie doo doo.

    Nadeau, you and Bowser are acting like scoundrels — forcing this crooked plan upon the people, some of which actually voted for you. Well, it’s a “No confidence” from me unless you stand up and start rejecting this crap deal. Do something to help us, instead of defending it and patting yourself on the back. There is no merit in this plan. It only benefits the wealthy few, so they can have a new playground and build new accommodations for the uber rich. It doesn’t help the homeless. And it definitely doesn’t help the people who are being forced to deal with this despicable situation created by Bowser.

  • CD

    It does have the appearance of conflict with Sorg which should cause Nadeau to call for an independent analysis of both the procurement/selection process and the granting to Sorg the right to Include their their own office building at 918 U Str, NW into the design and zoning variance of the Grimke School Project. Sorg is given a variance to add several additional floors to the building they own and use as offices currently, at the entrance to 9-1/2 St, NW, which is the only parcel not part of the Grimke School land holdings. Sorg has already cashed in by selling her firm to a larger company and V St and Grimke sure looks like them cashing out. Almost guaranteed they’ll be gone from the neighborhood as soon as they collect on the special terms of both these deals.

    Added to the Grimke Deal irregularities is the questionable taxpayer financed giveaway to former Council Member Frank Smith through his scheme under the guise of the AfAm civil War Memorial Museum, which has never followed even minimally acceptable financial practices of a legitimate non-profit. Sadly Nadeau has linked her ethical reputation to the smarmiest corrupt practices of the Barry legacy. Quite a shame she’s sold out so quickly. What is strange is that she doesn’t do it more quietly or subtly. If this is her start, it will be interesting to she how long she lasts and what her reputation will be after a few terms.

  • Fed Up

    It is unfortunate that Ms. Nadeau either doesn’t understand the “All 8 Ward Strategy” or is being deliberately misleading. The sites in Ward 1 and Ward 2 do not count for purposes of closing DC General. City Administrator Rashad Young testified to this point during the March 17 hearing. Her implication otherwise is either wrong or deliberate misdirection. Also, the projected annual costs by Laura Zeilinger for delivering services through the new model is $22 million (not 13 which I am not sure where she got that) and is $5 million MORE than what it currently costs at DC General. Expect that number to go up. Why is she suggesting that residents not do the math? Very strange. Her comment that the district will own the building but not the land at the end of the lease would be laughable if it wasn’t so wrong. And her tone of materialism/paternalism is offensive. Unreal that she and others are unwilling to critically evaluate these deals and protect their constituents.

  • anon

    At least you got a response. I wrote expressing my concerns about the Mayor’s plan to Councilmember Todd. No response at all. I’m not too surprised as he is essentially her puppet. Still disappointing. At least have a form letter response explaining how my concerns are misplaced.

    This is a total giveaway to developers and is rife with cronyism. City Government at its worst.

  • So anonymous

    It’s an appalling notion, but one that might be effective in the short term for at least stopping Bower’s shady juggernaut, providing breathing room for an independent investigation: write to the republican congress members from Utah, NC, SC, Georgia (you see where I’m going with this) to shut this down. They hate DC and love to meddle in our politics…they stick it to us all the time on other crap. Why not marshall their ire deliberately for this?


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