Joint Roundtable: Economic Development/Government Operations Committees
West End Emergency Property Disposition
July 3, 2007
[Start of file - Joint RT ED-GO Part 1]
Kwame Mr. Brown: I will be calling public and government witnesses to provide both committees and the public with [audio glitch] . . . colleague, Councilwoman Carol Schwartz who is very familiar with these processes, and someone that I admire a great deal, and chairs a committee in which I believe two of these areas are district-owned land which has to be moved in the committee, Workforce Development and Government Operations, before it comes to the Committee On Economic Development. And let me also say that she -- we both are co-chairing this hearing, this public roundtable, because we’re able to get stuff on the facts and give stuff on the record right now. I think we both want to move projects and move development in our neighborhoods, but we also want to do it in a very responsible way.
Ms. Schwartz: Well, thank you Mr. Brown and I certainly appreciate your diligence on this matter. And for those of you that may not know how it’s kind of divided up, the Committee on -- it used to be Government Operations but now it’s called Workforce Development and Government Operations -- has the ability to declare D.C. land surplus. The Government Operations Committee has under its purview the Office on Property Management so, therefore, the first step of a process of getting rid of district-owned land is to declare that land surplus. And then the second phase of getting rid of properties that we own is disposing of those properties - deciding how it’s going to be disposed of, what use it’s going to be put to - and that’s where the Committee on Economic Development takes over. And so, rather than giving one committee all of that, the Council in its wisdom years ago, long before Kwame -- Councilmember Brown chaired this committee and long before I chaired this committee, decided to make it a two-step process so there could be more people involved with district-owned land, and I think that certainly does make sense. And so that is why we’re having a joint hearing on this matter.
But I do appreciate Mr. Brown’s, you know, taking the lead on this. I do want to say this doesn’t necessarily speak to these properties specifically because I know one case has certainly been an ongoing one for a long time. But I have long been concerned about the selling and long-term leasing of district’s public property; I -- during the last mayoral administration they had kind of gotten into the habit of selling property first and thinking about the consequences later. We got rid of our driving testing lot; we got rid of our impoundment lot and then we just got into lots of trouble trying to replace them and still haven’t adequately replaced them.
So I think we have to think, okay, before we get rid of our own property, what are our needs? What are our needs first? Are we going to go back and then buy our property back at much higher cost later on? That doesn’t make sense to me so I think we have to -- before we sell or long-term lease our property, I think we have to look at what our needs are and make that decision. I think that’s the responsible way to act.
One of the problems was in the past we didn’t even know what properties we really had. And so I have asked in the few months that I have chaired the Committee on Workforce Development and Government Operations -- have asked OPM to put forward a list of all of our properties so that we can look at them. Then we’re gonna match those up with our needs that we know of and then try to -- before we do anymore or much more of this -- make sure we do it in a reasonable, responsible manner.
And also we know there may be some emergency dispositions on these issues that are contemplated by the executive and so that’s. . . we were anticipating that. So that’s why Mr. Brown scheduled and came and we worked together, saying, “Since we both have purview over this, let’s work together on it.” But I do think it was important to have a real discussion.
I do want to question, though, if we are going to have emergencies that are coming next week, why do we get them so late right before the Council recess? I mean I’m sure these things have been anticipated and known and I don’t like having things come up at the last minute and then we have to rush and go, you know, like sort of nutso to even find dais time. We didn’t find dais time so that’s why we’re here in a non. . . uh,uh. . . a room that doesn’t have TV. . . because it’s impossible to get dais time. And so I think -- that I hope that the executive in the future, they know these things are coming; don’t wait till the last minute and then just try to get them done as emergencies. Give us a heads-up so we can do our due diligence.
But with that I want to thank Mr. Brown and he is going to do most of the lead on this. Maybe occasionally I’ll take some -- you know, do some of the first questions but he is going to take the lead. But thank you all for being here and I look forward to this discussion.
--Mr. Brown then reads a letter into the record from Councilmember Evans regarding the disposition of the air rights above Center Leg Freeway, Interstate 395 a separate piece being discussed at the roundtable.
Mr. Brown: And it was very difficult to get a room. There’s no room but I believe that if we know things are coming, that we have as much public input and debate as possible, that we do not do things and move things in a way in which the public does not have an opportunity -- we noticed this a week ago. We sent it out to everyone to give them an opportunity to come to testify, to hear what they had to say regarding this project. And as Chair of this Committee on Economic Development, I know that Councilmember Schwartz feels the same way: that we want the public to have every bit of an opportunity to voice their opinion and their concerns before we move anything.
I am, you know, really not one to want to move any emergency legislation without any public input. It’s just something that I’m just fundamentally opposed to unless there’s just some circumstance that causes it -- that is beyond our control and would be devastating to the District of Columbia. So with that in mind --
Ms. Schwartz: Mr. Chairman?
Mr. Brown: Ms. Schwartz.
Ms. Schwartz: I did -- I also have a letter from Councilmember Evans which he wanted read into the record about another -- one of the other projects that is before us today and it says: “Dear Chairpersons Brown and Schwartz,’ -- it’s dated July 3rd, 2007. “As a member of the Committee on Economic Development, I am writing this letter in lieu of my participation in today’s Joint Public Roundtable. I’m writing in support of the proposed transaction in the development -- for the development of Square 37 at Eastbanc which would include a redevelopment of the block and the construction of a new state-of-the-art public library and fire station. The proposed Square 37 development project is in Ward 2 and I have been working diligently for the past eight years on the proper redevelopment strategy and the proper team to implement the revitalization of this block.
Eastbanc which owns or controls some of the properties adjacent to the district’s parcels on Squares 37 and which has successfully completed other complex developments in this neighborhood, in cooperation with a very active and engaged community, has demonstrated a keen insight and flexible creativity in its approach to this project. Eastbanc has the experience, the financial wherewithal, and the capabilities to handle this project for the benefit of both the neighborhood and our city. They’ve assembled the right team to handle the project of this magnitude.
The market conditions that currently exist in the district along with the current condition of the public buildings, the library, the police station and the fire station demand that we act expeditiously. All the conditions for a successful development now exist and we should not hesitate to proceed. I strongly support this project and the proposed resolution to dispose of the applicable district-owned parcels and authorize the future development of Square 37 by Eastbanc.
Thank you very much for holding the hearing. I respectfully urge you to support the resolution.”
I just wanted to add to all the other -- and that was signed “Jack Evans, Ward 2 Councilmember.” I just want to say that in addition to all the other things Mr. Brown and I shared with you, we also serve on each other’s committee; I’m on Economic Development and he is on Workforce Development and Government Operations. So we have that in common, as well.
Mr. Brown: Thank you, Ms. Schwartz. First, we’ll call our first panel - Mr. Braunohler, Vice President of Louis Dreyfus Property Group; Mr. Jarvis, the Jarvis Group; Mr. Wilmot, partner in the CS Partner; and Mr. Lanier, President of the Eastbanc, Inc. Mr. Jarvis, the Jarvis Group, Mr. Wilmot, partner in the CS Partner; and Mr. Lanier, President of the Eastbanc, Inc. And I take it this would be the disposition on 24th and L?
Male Voice: No. First is the I-395 air rights.
Mr. Brown: The I-395, okay. I just want to make sure everyone is on --
[I-395 discussion was not transcribed as instructed]
[Roundtable in progress]
Mr. Brown: Next we have Mr. Wilmot. Well, actually would you like Mr. Lanier to go first? Mr. Lanier, welcome.
Anthony Lanier: Thank you very much. Good morning, Council Member Schwartz, Council Member Brown, member of the committee and staff. My name is Anthony Lanier and I’m the President of EastBanc, a District of Columbia-based development company that I founded some 20 years ago. I’m also a 25-year resident of the District of Columbia. Joining me today are my business partners, Mary Mottershead on the sidelines and David Wilmot who has been a long-time LSDB [phonetic] partner of ours, I guess, since over 10, 15 years. Both are also long-time residents of the District.
I’m also here -- I’m here today to present testimony on EastBanc’s proposal to acquire portions of publicly-owned land on Square 37 and Square 50 in order to redevelop these sites with mixed-used properties that include new public facilities in the West End. I’m here to speak towards two issues, namely, why a disposition to EastBanc is appropriate and why now. EastBanc is an active developer in the West End for the past 10 years and has been negotiating for this site for a period in excess of eight years with the continuous support of previous administrations. At no time, however, has there been a confluence of factors such as this one.
Our proposal is to join the city-owned sites on Square 37 and 50 with the EastBanc-controlled sites on Square 37 in order to maximize the value of this underdeveloped land and to turn this value into a new library, a new state-of-the-art fire station and approximately 350 units of mixed-income housing on two sites. This can all be accomplished without using any district capital or general fund dollars. Joining the public and private land will also enable us to produce the most efficient buildings possible.
Why now? First, the fire station Engine Company 1 located on Square 50 on 23rd and M Street Northwest is in such poor condition that the last time we visited, there were pillows stuffed in the broken windows on the second-floor dormitory to keep the wind and cold out. The general condition of the buildings are simply not conducive to a good working environment for our firefighters. The DC Fire and Emergency Medical Services Department is planning imminent repairs of a substantial nature to upgrade the station; repairs, which recently have been put on hold in expectation of the proposed disposition. Second, the MPD’s Special Operations building on Square 37 at 23rd and L Street is also in poor condition and is slated to be closed and relocated to a newer consolidated district facility in 2009.
Third, EastBanc has recently acquired site control of a large adjacent site on Square 37 and controls one of two remaining townhouses on the Square. We also have just been selected by the Tiverton Tenants’ Association, which has a contract to buy their rental building on Square 37 under their TOPA rights, to exclusively negotiate a partnership and redevelopment agreement with them and include their building in our PUD plans. This puts EastBanc in a unique position to manage this complex process and create the highest benefit for the community and the city. Fourth, the West End Library Branch is also tired and in relatively poor condition; however, while it’s not yet slated to be redeveloped because the DC library system is currently focusing on other branch needs, there’s both a need and desire to see this library improved.
Finally, past city attempts to rezone Square 37 have failed to win either community or Zoning Commission support. This time around, with the concept of a comprehensive PUD, the adjacent neighbors seem in general agreement to support a redevelopment and up-zoning as we have proposed to create a better urban environment with new public facilities, retail mixed-income housing and fiscal benefits for the district of these otherwise underutilized sites.
Given the confluence of these needs and the absolute unique opportunity to assemble half a square, it makes sense to proceed now to maximize the district value of the site. We’re the only developer who can combine its land with the district-owned parcels to create a better and more efficient project on behalf of the neighborhood and the city. And with that I’ll stop and follow the procedure previously adopted and have my partner read the second part.
David Wilmot: Well, thank you. Good morning, members of the committee. For the record, my name is David Wilmot and I’m a partner. I’d like to continue our presentation. Why at all? EastBanc contracts, ownerships of sites adjacent to the D.C. site, places us in a unique position of being able to accomplish a number of outcomes that would otherwise be impossible for the District to achieve.
First, during the renovation and redevelopment of the fire station, EastBanc is in a unique position to provide the Fire Station and its equipment an alternative site within the immediate neighborhood at our lot at Square 37 if such should be necessary.
Second, should the community elect to have a supermarket on Square 37, as some have requested, the required footprint could only be achieved through a combination of EastBanc and district-owned sites. This is also the last development site in the West End, north of Pennsylvania Avenue that is large enough to accommodate such a full-size supermarket.
Thirdly, should the community elect to have the library relocated to Square 50 above the fire station, then EastBanc could sequentially phase the development in such a manner as to build a new library first, thus insuring that the community is never without its permanent library. And alternatively, should the community elect to keep the library on Square 37, we could phase the development with a temporary facility on our parking lot so the library would never be out of service.
In an effort to facilitate such transaction, EastBanc has met various times with stakeholders, the surrounding residents, the DCPL, Fire and EMS Department, friends of the West End library and the local ANC in an effort to understand the community needs and desires and to create a project that would have the community’s support. And additionally, EastBanc proposes and has hired a world-class architect, Enrique Norton, who previously won in the competition to design a new Brooklyn library to create a noteworthy design for these mixed-use public buildings and provide the city with great pieces of civic architecture. EastBanc has developed in excess of one million square feet of adjacent sites in the West End neighborhood and is deeply committed to this community and is familiar with its issues.
The last point I want to make is that we’re committed to work with the city to ensure that the maximum public benefit out of this transaction will be achieved at the lowest possible cost to the city. We have agreed to pay the appraised market price for the development rights, to negotiate a fixed price for the public facilities and to apply the same publicly required LSDB equity requirement and contracting thresholds. . . our privately owned land as it applied to the District’s. By joining our properties, we’re also able to design a more efficient building with no deals -- no dead walls - I’m sorry -and fewer cores. This means that more housing -- and therefore, more affordable housing -- will be built than would occur if our respective sites were developed separately.
In conclusion, our proposed development will fulfill the goals of the district’s master plan and will result in a better city facilities, a broader tax base and a more attractive and vibrant neighborhood.
Thank you for this opportunity to testify before you today and I would be happy to answer any questions at this time.
Mr. Brown: Thank you, Mr. Wilmot and thank you -- all of you -- for your testimony. I’m going to start with -- we’ll start with Mr. Lanier. Well, first let me welcome Council Member Marion Barry, Council Member of Ward 8 who is a member of this committee. So if you want to have any opening comments you would like to make. No? Okay, good -- not good but -- you know [cross talking -- laughter]
Marion Barry: I was trying to be nice this morning, unlike yesterday. But first of all I’m delighted that the Chair appointed me to this committee. I’ve been coming to the committee anyway but I just couldn’t vote but now I can. And development is very important to me ‘cause it means jobs; it means consumer opportunities and et cetera. And I’m glad that each of the presenters so far has emphasized the LSDB equity part. This is an area that you have championed very much so and it has become a way of life now. So, again wait to -- I have some specific questions -- but to thank these developers for coming forward in our great city.
Mr. Brown: Thank you, Mr. Barry. We want to start with Mr. Lanier. I just want to -- for the record, we have -- the city-owned property that’s in question would be the DC public library, the firehouse and a police facility. Is that correct?
Mr. Lanier: That is correct.
Mr. Brown: And is it my understanding that the possible proposal -- this possible proposal -- would include rebuilding the library. . . Is that correct?
Mr. Lanier: That is correct.
Mr. Brown: And also rebuilding the firehouse. Is that correct?
Mr. Lanier: That is correct.
Mr. Brown: And would they be built in their existing location?
Mr. Lanier: The fire station definitely would be built in the existing location. As to the library, we’re taking community input and since there are pros and cons to leave them on their existing location or relocating them onto Square 50 above the fire station. It would certainly make a very interesting public building to have a library on top of a fire station. And it would be an interesting challenge to accomplish. But we’re really taking community input on those matters. There are reasons why it would make sense to put them onto the library, namely that you could phase the project and the library never would be closed, so we would have a new library opened before the old one would be demolished. There are reasons why the community might prefer them to be on one floor at the existing location. We’ll take their advice on this.
Mr. Brown: And if that doesn’t happen, then you would just replace where the existing library is currently located?
Mr. Lanier: Correct.
Mr. Brown: It clearly would be a safe library, right on top the firehouse. We don’t have to worry about -- not too far. Now the police --
Mr. Barry: Shouldn’t burn down at least, yeah.
Mr. Brown: The police facility itself will not remain. Is that correct?
Mr. Lanier: The police facility is slated to be relocated, I believe, to DC Village in 2009.
Mr. Brown: Okay. And we’ll ask the administration when they come forward. I know we have representatives from the fire department that are here today but we’ll ask them, just to make sure that the place where they will be locating -- now, is this an independent appraisal? Is that --?
Mr. Lanier: Our transaction presumes that there’s a three-appraisal method so that should any appraiser disagree, then they would select a third appraiser for the final determination of values. So it determines market value in our opinion.
Mr. Brown: I would imagine that the possible proposal disposition will be basically to the terms of LDA [Land Disposition Agreement]. Is that your understanding, Mr. Wilmot?
Mr. Wilmot: That is correct, Mr. Brown.
Mr. Brown: And you’ve been in the city for some time, Mr. Wilmot. How many times have you seen that occasion pop up, where we do terms of LDA without the ERA, then the LDA? How many occasions have you been part of that this has happened on an emergency basis?
Mr. Wilmot: Well, I can’t recall a one where that’s happened but -- where I’ve been involved -- but I know that it’s happened with respect to some dispositions involved in some other sites where the. . . where the, where the city determined there was an emergency. First, there has to be, as you know, an emergency declaration.
Mr. Brown: Mr. Wilmot, can you explain what is the emergency to do it now versus in September?
Mr. Wilmot: Well, it’s a confluence of -- you know, of activities. I mean we have a unique opportunity for -- a parcel of land that’s been sitting there largely not with respect to its highest and best use and you now have everything in place to move it. And to move it at this time in our estimation would result in a $5.5 million gain to the city. That would be lost to the extent that the city doesn’t move this as quickly as it can through an emergency basis. And there’s no way to recapture that $5.5 million.
Mr. Brown: So between now and next September we’ll lose $5 million? Is that what you are saying, Mr. Wilmot?
Mr. Wilmot: For the first year.
Mr. Brown: So we won’t lose it; it would just be -- I mean, it would be three months. It would essentially be July, August and September. In September it could be moved and if it’s moved in September, which is the resolution, then to me -- I don’t think three months is going to -- this may delay a total of about $5 million. We wouldn’t lose $5 million.
Mr. Wilmot: Well, it’s that coupled with the tenants’ association issues. It’s not just that issue. It’s a variety of different issues. So it’s a tenants’ association issue also, which -- they don’t have three months.
Mr. Brown: What is that -- because to me that may be a reason -- what I want to get a sense of is why, if this proposal comes it needs to be moved in emergency, why should this committee -- or why should we support moving on an emergency? What’s gonna happen between July 10th and September that will disrupt what possibly couldn’t happen at. . . that can’t wait ‘til September? I think that’s what I would like to hear.
Mr. Wilmot: One of the things that we have is that we have an agreement right now with the tenants that is in place that we have to exercise within a time frame.
Mr. Brown: What is that time frame?
Mr. Wilmot: That time frame is 60 days, essentially.
Mr. Brown: Sixty days [cross-talking] --
Mr. Wilmot: That is correct.
Mr. Brown: And so when was the due date? When --
Mr. Wilmot: September will be the due date.
Mr. Brown: September the 1st, September the 15th --?
Mr. Wilmot: September 1st would be the due date. It’s really, you know, August 30th.
Mr. Brown: And what happens if that’s not executed?
Mr. Wilmot: If that’s not executed, then they’re free to go elsewhere.
Mr. Brown: Do you anticipate them going elsewhere?
Mr. Wilmot: Well, the volatility of the marketplace suggests that that might happen. You just don’t know. I mean, what we have is that we have a situation where the public aspect of it’s in place. And there’s a need, clearly a need. The private aspect is there as well. So you have a confluence of activities and then you -- it’s also further influenced by the tenants exercising their rights. They’ve just recently engaged a vote to engage us and we’ve got 60 days in which to get this thing completed. If we don’t, we have a very, very different dynamic.
But keep in mind that it took us eight years to get to this point. We didn’t get to this point last week. This is something that we’ve been doing for some time to get to this point. We’re now at this point and I think it is highly timely for us to seize the moment and to exercise it. And I don’t see any downsides with respect to doing it on the basis of emergency. I see all the upsides and the opportunity to get this site - or these sites - developed to meet the needs specifically of the public sector while meeting some of the needs of the residents of the West End.
Mr. Brown: Well, you know, moving legislation. . . . you just mentioned that there’s very few times that this has happened. . . where we’re approving the term -- could possibly be approving the terms -- of the LDA without knowing what the terms are because there still possibly would be more negotiation between parties. But that’s why I think it’s important that we squeezed in. . . in a timely matter. . . this public round table to get, have people come in and give input on the matter because it would be somewhat unconventional to do it in emergency without public input, if it’s just a short period of time that is needed on such a large and a very important project. I’m not saying what you are doing is not important. I’m not saying -- I think it’s good to put on the record that if there’re some issues, that if we don’t approve this -- if it comes to us and we don’t approve it, then what happens? And I think that is what I want to put on record [cross-talking].
Mr. Wilmot: One of the things is that you don’t -- the Council clearly -- and I want this to be very clear on the record: The Council doesn’t lose its control over this. Based on my modest evaluation of it, I think it will come back here at a minimum of four to five times. There’s so many other --
Mr. Brown [interrupts]: Where will it come? Given -- I mean I’ve taken a look at this. You can enlighten me. When will it come back to the Council?
Mr. Wilmot: Well, clearly one would be with respect to appropriations because there are some appropriation decisions that are gonna be have to be made by the Council with respect to this. Keep in mind we’re talking about public property that is involved here. It’s not just private property.
Mr. Brown: But if we approve the LDA and you start to spending money on a project --
Mr. Wilmot: There’s also the course--
Mr. Brown: . . . why would the city not -- then we’re kinda like leaving you out there if we don’t approve the appropriations for something that we have approved the terms to. So I mean that’s not -- there’s no -- what is the -- that’s one. What are the other three?
Mr. Wilmot: Procurement aspect of it. . . there are some procurement aspects to this that has to be. . . reviewed by -- I don’t think you’re going to give up your oversight over this at all.
Mr. Brown: Would you be opposed to -- in this possible resolution language that bases says once the agreement is solidified, then it will come back for a passive approval from the Council? Would you have a problem with that?
Mr. Wilmot: I’ve not discussed it with all of our partners but that is something that we’d take under advisement and get back to you shortly.
Mr. Brown: I just think that we if we’re going to do it in an emergency with, you know, within a short period of time, at least it gives it a passive approval from the Council that the terms that we laid out and the LDA itself is then we know those are the terms. Right? And if anything has changed, then it gives the Council an opportunity to adjust it. But I’m supportive of that; matter of fact, that’s good. . . I feel good about that. I feel real good about that. Ms. Schwartz?
Mr. Wilmot: Part of it’s -- let me just -- I’m sorry, Mrs. Schwartz, please allow me? The concern about public input -- let me tell you something; if you’ve ever done anything in the West End -- and Anthony has been there longer than I have. I’ve been there for a considerable period but nothing gets done in the West End without full and complete resident involvement, comment. So this thing is going to be massaged every which way but Sunday, and it’s going to reflect the needs and at least the desires of that community, you know. And we’ve been meeting with them, you know, through very long protracted sessions to understand exactly what those needs and desires are and it would be folly on our part to ignore them. As a matter of fact, we’ve never done so and that’s why we’ve attained the kind of success that we’ve had in the West End. So to the extent that you’re concerned that there’s not going to be a broad base with respect to public involvement in this -- there will be -- because we just are not going to walk in there and build anything.
Mr. Brown: Well, let me say this. I’m just -- it’s not on what you do; this is setting a precedent. I mean, you’ve been in this city for a long time and I think your testimony had 20-something five, 30 years. And, you know, to not – you’ve been involved in many of these transactions and to have something approved on emergency basis, the LDA -- just the terms – just the terms of LDA approved as a disposition of property, doesn’t happen very often in the city. So it’s not about your project; it’s about -- as Chair of the Committee, I won’t want to set a precedent in which this is the way we operate because I don’t think this is the way we operate. That’s why I would imagine a passive approval -- I would be supportive of that. I think that’s won. . . I think that is great; it just, just, just hit me and --
Mr. Wilmot: Well, I’m not in disagreement with that but there have been unusual circumstances in the past and as I’m sitting here I was trying to -- and Mr. Barry is familiar with some of those because he had to take some unusual measures with respect to certain projects when he wanted to get them moved because he understood the need to get them done. . . Georgetown Park being one of them. One of the unusual things that he did there was to appoint the mayor’s agent in the form of Carol Coles [phonetic] when he encountered difficulty in getting that project off the ground. I think he remembers that.
Mr. Brown: Yeah, but this is not difficult. This is just a disposition.
Mr. Wilmot: Well everything --
[cross-talking].
Mr. Brown: I mean we’re all in agreement with this project. We’re -- I think you are ahead. I think you are ahead. Ms. Schwartz?
Ms. Schwartz: I certainly want to say that I agree with Mr. Brown on this issue. I mean we’re talking about, possibly, emergency legislation, disposing of land in a sole-source way. This wasn’t anything we put out an RFP and there were bids on it; I mean that didn’t happen. We’re talking about disposing of district property land, sole-source contract or contractual arrangement and so -- on an emergency basis. I mean, think about it. I don’t like that. So I would certainly think, at a minimum, passive approval would have to be there, if not active approval. So I do want to -- how much land are we talking about here? I know there are three parcels of land that we have in a document we just got and that is a value of 21 and a half million dollars; that land is valued at 21 and a half million dollars. Now, what other parcels of land are we talking about?
Mr. Wilmot: I’d like to direct your attention, Mrs. Schwartz, to the chart to your right -- my left -- and to have Joe Sternleib walk you through that, if you will. Joe?
Joe Sternleib: [Speaking away from the microphone]
Ms. Schwartz: Why don’t we get a microphone to you so that it could also be part of the record?
Mr. Sternleib: Mrs. Schwartz, there are six parcels of land on the southern half of Square 37, 24th, 23rd and L Street. I’ll start in this corner. There’s a parking lot here that EastBanc controls. This is the Police Special Operations Division just south of that, the DC West End branch library to the west and then two small townhouses, one of which we control and one of which we’re negotiating to purchase, and then the Tiverton, which is a rental building that Mr. Lanier just mentioned contacted us last night. We were selected for a competitive process with the Tenants’ Association to
enter into an exclusive negotiation period with them to purchase the building with the tenants and include that within the PUD on the site. The third – the seventh site altogether and the third District-owned site is the West End Fire Station Engine Company 1. That’s on Square 50 at the corner of 23rd and M Street.
Ms. Schwartz: Right. So we are talking about three District properties and which, according to the documents we received, add up to $21.5 million. What kind of appropriations are you coming back to us for? You mentioned appropriations; there may be the need for you to come back to the Council for appropriations.
Mr. Wilmot: In connection with the library development, possibly.
Ms. Schwartz: Yeah, what about it?
Mr. Wilmot: And the Fire Station.
Ms. Schwartz: You are expecting us to pay for those?
Mr. Wilmot: Well, what it is is that -- [Cross-talking]
Ms. Schwartz: Are you giving us 21 and a half million dollars for our property?
Mr. Wilmot: No, what we’re gonna be doing is that we’re gonna be valuing the land, and we’re gonna to pay for it out of the value of that land, and that would require Council action.
Ms. Schwartz: All right, so we’re gonna use the value of our land, which is about 21 and a half million dollars, and we’re gonna commit -- is what you’re asking of us -- that $21 million property value to build the library -- rebuild the library and the fire station?
Mr. Lanier: First of all, I think the appraisal process will more likely than not revalue your $21 million assumption. . . upwards. And then we are applying –- we are committed to apply -- that value towards rebuilding of a 17,000-square foot library, rebuilding of a brand new fire station and producing the low-income housing component of the project. And we’re committing not to come back to the city for any funds in delivering these assets.
Ms. Schwartz: So in other words you get the property and exchange for the property, you build the library; you pay for that? You build the fire station; rebuild this fire. . . pay for that?
Mr. Lanier: Correct.
Ms. Schwartz: And then do the affordable housing component?
Mr. Lanier: Correct. We’re almost trading these.
Ms. Schwartz: Okay, so the appropriations -- you are not coming back to us for additional money, then?
Mr. Lanier: Absolutely not.
Ms. Schwartz: Okay. Well, it was the question about we will have to come back to you -- the mention that “we’ll have to come back to you for appropriations.” That is what I wanted to --
Mr. Lanier: We felt that once we have determined the values and the cost of each component that that would be the case.
Ms. Schwartz: That you don’t anticipate coming back to us for additional --?
Mr. Lanier: No, we definitely will not come back to you for additional funds, but I think in your process, the mere fact that we’re taking X amount of dollars and applying them to the police station, Y amount of dollars of the disposition proceeds or the theoretical disposition of proceeds would come back for re-appropriation.
Ms. Schwartz: So is this like tax increment financing?
Mr. Lanier: No, no. There’s no tax increment financing involved here.
Ms. Schwartz: Okay. All right. So it would be just this exchange kind of thing?
Mr. Lanier: Correct.
Ms. Schwartz: All right. But you know, I’m going to ask a lot of very explicit questions on this because as I said, I don’t like sole-source contracts; I don’t like these kind of arrangements. I like if we have land we want to redo that we go out there and we put it out and people bid, and we get the best deal for the best price. And this didn’t really work that way.
I also want to weigh in, Mr. Brown, on a fire station that has sirens going off all the time. And I know they’re all in the kind of neighborhood and a library right above, and libraries are usually supposed to be quiet so you can read. I think that configuration -- I know you’re gonna go out there in the community and you’re all gonna talk about that. But that seems like, you know, kind of in diametrically opposed to what -- to each other.
Mr. Lanier: Well, the fire station makes today noise regardless if the library is on top of it or next to it. So the entire neighborhood is affected by the activities of the fire station.
Ms. Schwartz: No, no, I understand that. But I just think on top of could have even greater impact with that siren noise.
Mr. Lanier: We are of the firm belief, having built a variety of, I would say, sound-proof housing units next to freeways, next to air corridors on the Potomac, that we’ve demonstrated that we can build sound-isolated edifices. And that, combined with what we consider to be a 21st century approach to the fire station, should produce a viable outcome. Moreover, we went with the Fire Department to review a project being currently developed in Old Town, Alexandria where housing is being developed above a fire station, and I would think housing to be much more sensitive than a library.
Ms. Schwartz: All right. I wanted to talk a little bit about the tenant. . . You know, I don’t like -- as Mr. Brown doesn’t like -- doing this on emergency.
Mr. Lanier: We understand that.
Ms. Schwartz: And doing it as we head into recess -- and that doesn’t mean that we’re not supportive of the crux of this project. And I’m. . . you’re having a hard time convincing me of the emergency; so there’s been eight years in the planning. So okay, why the emergency when it waited eight years? You mentioned in your thing about the fire station that the problem was that they have pillows stuffed in a broken window on the second floor dormitory to keep the wind and cold out. I do think we could probably replace that window over the summer in order, you know, for that not to be considered the emergency. And then, also, tell me more about the tenant association. I mean, like does this thing not work if the tenant association -- could you not get another 30 days because of the project you’re anticipating? I mean is there any way that we could do this in September and not do it now as an emergency?
Mr. Lanier: I think the fact that we have been negotiating and discussing this project for eight years with the previous administration does not -- shall not lead us to believe that this has been a long-planned effort but it has been a frustrated effort to accomplish something.
Ms. Schwartz: But it just came to the -- it hasn’t even come to this Council yet. You know, in an official way, it has not. We’ve been kind of given a notice that there may be an emergency coming up next Tuesday, but nothing has come over. So I want to know -- I know you have had eight years now but what’s another couple of months? So you’ve gotta convince me that this tenant association thing is absolutely integral.
And number two, why there couldn’t be given a little additional time in order – ‘cause I agree with Mr. Brown. By doing this as an emergency, this sets a precedent that then other developers think they can just walk through that precedent door. And they do it. They’ll say,
“Well, you gave it to them. Why can’t we get it?” And, I don’t think that’s necessarily the way of disposing of District properties, especially -- we’re talking about here very valuable property. We’re not talking in some abandoned area of the city that we want to see revitalized. So you’re gonna have to, I think, convince us of why this valuable land needs to be given away like that.
Mr. Lanier: I come back to my initial, you know, commencing that -- what occurred during those past years. Only recently within the last, I would say, six months of determination to finally relocate Special Ops was concluded. So that really created an opportunity because a piece of land was becoming vacant for the city. The current emergency is derived by the opportunity to find a cooperative agreement with the Tiverton Tenants’ Association. In the past three years, the district has attempted, certainly once if not twice, to rezone these properties in order to provide a higher and better use through the master plan and through direct rezoning efforts. And it’s failed in both occasions because of the active involvement of the Tiverton Tenants’ Association more than any other public and community input.
The Tiverton Tenants' Association became the beneficiary of a proposed transaction by a third unrelated party to us who had offered to buy that building and therefore triggered the TOPA rights of the Tenants’ Association, and those rights expire September 1. And you can be assured that nobody there is interested in extending those by one day. And so only yesterday -- at the risk of a misnomer, it’s like herding cats to have 40 tenants come to an agreement on what to do. And so that really --
Ms. Schwartz: Okay, that extra explanation helped. Thank you.
Mr. Lanier: Thank you.
Mr. Brown: Thank you. We have been joined by Council Member -- Councilwoman Yvette Alexander, who is a member of the committee on -- no, former member -- very brief member of the Committee on Economic Development. We want to welcome you. Did you have any opening statements or you are fine? Okay, good. Mr. Barry?
Mr. Barry: Thank you very much, Mr. Chairman. Let me ask Mr. Lanier and Mr. Wilmot. These two projects, the library and the firehouse, how much do you anticipate that they would cost to construct? In other words, the way the scenario would work -- if the land is valued at, say, $20 million for discussion purposes and the project costs 25 or 30, how’d that work? Is the cost of the project less than what the land value is?
Mr. Wilmot: Well, the thing that we were wondering is whether or not we were going to make any money in this project, period. The library approximately -- and these are just rough approximations, but it would probably cost about $15 to $20 million to do the library and that’s with everything: to equip it, to get the books, to do everything that’s necessary to have the library fully operational. The fire station we just don’t know at this time. Joe, who’s working the numbers -- they were working the numbers [cross-talking]. . .
Mr. Barry: The project is willing to absorb this cost?
Mr. Wilmot: Well, one of the things is that we have a unique opportunity to do a number of things. One is that the District is going to get something that it sorely needs. They need a new fire station. They need a state-of-the-art new library. They’re gonna get that. In exchange, what we get to do is that we get to develop some other aspects of our site in conjunction with the negotiations that are taking place with Tiverton. And hopefully, in the long run, we will make some money in that process. But we keep crunching numbers because we keep saying and scratching our heads is this something that we want to do?
But Anthony is so committed to the West End and he’s convinced all of us because I’ve been his partner now for about 10, 12 years that we can still work some magic if we work real hard and all the things come together and we’ve been successful at that. And we believe that we can achieve some success here as well at the very same time the city achieves what it’s trying to do. The city is not losing anything; it’s gaining something that it wants to have done by the private sector. And I submit to you, Mr. Barry, that it’s gonna get done a lot faster if you allow us to --
Mr. Barry: I’m not -- I’m a 100 percent for this project. And I just want to put it on record. I think it’s admirable that a private entity would agree to build two facilities, even if, it costs more money to do so than you’d get from what the land value would be. I think that’s unique and it’s admirable, Mr. Chairman. Well, and that’s what to me would differentiate this situation from just, as Ms. Schwartz said, developers coming in then let’s do this by emergency. Now I’m going to -- I’ve talked with the chairman a bit about this. If I. . . absent the chairman’s feeling about it. . . I wanna vote right now for the emergency. But, because I’ve committed to work with the chairman –- that’s how we operate – I’d like to ask him how’s this process work in terms of a passive -- would the resolution come in September and then the LDA would come?
Mr. Brown: Well, no, Mr. Barry. What we wanna do is we wanna create an environment in which we want to get projects done in a timely fashion. So I do understand the process. What I would typically like to see would be the fact that we would get a resolution, we would have a public discussion on the resolution, allow people to put their time and input into what they think and then we then pass it. So therefore it’s a process that kind of happens. Not, here is the resolution on an emergency basis and you have six days to, you know, move it and. . .
Mr. Barry: What I’m asking is that. . .
Mr. Brown: . . . when you say passive, if we’re gonna move something on an emergency basis, then to me, understanding not the parties involved, not the importance of the project itself but to say, “Why don’t we move and agree with these terms?” Cause we’re agreeing with the terms of the LDA, Mr. Barry. So what. . . we’re agreeing with the terms and the Mayor’s gonna go and negotiate these terms.
Now, what I like to see as it comes back that there’s a passive approval that everyone has agreed to these terms, so it doesn’t hurt the development community . . .
Mr. Barry [interrupts]: I’m happy Mr. Brown.
Mr. Brown: . . .let me finish. And as it comes. . . then it will come . . . It won’t be coming back until they agree to whatever terms they agree with with the Mayor.” Then it would come back to the Council saying that everyone has agreed to all these terms and it would be a passive approval at that point. So, it might not be September, it would be whenever they come to the agreement that they’re going to come to on what the terms would be. So we say affordable housing, when you say LSDB participation, when you say all the different things that they mentioned that everyone agrees to do. When it’s a signed document and everyone has agreed to it -- because we’re passing this on emergency basis based on A, B, C and D being met and the Mayor just to negotiate A, B, C and D with the developers. So once that is negotiated based on the terms that we have agreed upon, then there should be no problem of a passive approval because of we already agreed to it.
Now what I don’t want to happen is all of a sudden we all agree on emergency basis, which I don’t really like doing, Mr. Barry, at all. But say, we agree because of the necessity of the project to move and the Mayor starts to negotiate and then they decide it’s not going to be 30 percent affordability because something has happened in 60 days; it’s gonna be 10. And it never comes back; then that’s not what we agreed upon. We passed something on the fact that it’d be 30 percent participation. And as long as it comes back and everything that we agreed to was still in play, then it should be a passive approval and we shouldn’t have to come back to the Council. We’d normally go through the normal passive process.
And then if there’s some significant change, then it does allow the Council to then intercept and ask why and get on the record that why we passed something on an emergency basis in terms and conditions on emergency basis, and those terms and conditions have not been met in the final passage and signage between the city and the developer. I think that is the most responsible thing that we could do as legislators.
Ms. Schwartz: Mr. Brown, I don’t think [cross-talking]. Can I just say --
[Cross-talking]
Mr. Barry: No, I have a -- Ms. Schwartz -- [cross-talking] no, let me finish here. I’ve been very patient. Just for the record, Mr. Chairman, I’ve never done this before since I’ve been on the Council. I’ve never had that process. That’s why I’m taking the time to ask how it will work logistically and practically. And let me just think; [unintelligible] what I think you’re saying that -- what resolution had come to the Council? An ERA, or LDA?
Mr. Brown: Now or back?
Mr. Barry: Back -- if we’re going to pass this, what’s before us now by emergency?
Mr. Brown: Well, actually, there’s nothing before us now. There’s a possibility of something being before us that is an emergency resolution.
Mr. Barry: Resolution on what?
Mr. Brown: On the terms of a LDA.
Mr. Barry: LDA, land disposition.
Mr. Brown: Right.
Mr. Barry: Okay, so if we don’t pass this by emergency, in September an LDA would come over, another resolution would come over. A resolution will come over, an LDA resolution. The committee would have hearings on it. And they would pass it through the regular process. . . legislative process?
Mr. Brown: Exactly.
Mr. Barry: Then where does the passive approval come in?
Mr. Brown: It was an emergency. Like, say --
Mr. Barry: No, no, this is a regular process.
Mr. Brown: It wouldn’t. They could, they could. . . [Cross-talking] you know what? You just brought up something. We should probably think about putting it on – you’re right. This is why we have to have a discussion because we have discussion and things come up in discussion. It just makes sense. We probably should put passive on it all.
I think you’re right Mr. Barry. I think that if you look at it doing -- first of all, normally you have an ERA then the LDA. And we’ve already worked with the administration to shorten the amount of time between the ERA and the LDA. That won’t be a year. That could be 90 days, which will move projects.
Mr. Barry: Do we have ERA on this?
Mr. Brown: Mr. Barry, there’s no ERA. There’s no LDA [cross-talking]. No, no, I’m just making my point. There’s no ERA; there’s no LDA. It’s the terms of the LDA.
Mr. Barry: So we then skipped the ERA?
Mr. Brown: That’s [audio skip 44:40-45:27] what will be before us, Mr. Barry.
Mr. Barry: And it’s possible to do that?
Mr. Brown: yeah it’s possible to do it. I mean. . .
Mr. Barry: The LDA could be combined with, technically, the ERA in a sense that the LDA would authorize the disposition of this property to a certain entity, wouldn’t it?
Mr. Brown: And I have asked the administration for that, Mr. Barry.
Mr. Barry: And that way -- in terms of the tenant situation, I know a lot about this. Is there a contract between EastBanc and the Tenants’ Association? What happens, Ms. Schwartz, is that the tenants transfer their rights to the developer; in return the developer signed a contract with the tenants to deliver units at a certain price in a certain time frame. Is there a contract that puts a time frame on when you would become the developer so you can then purchase the land -- I mean, the building from the owner now?
Mr. Lanier: The TOPA rights of the tenants expire September 1. The Tenants Association had a variety of developers propose a variety of let’s call it structures -- joint venture structures with them. They elected yesterday night to do such a joint acquisition with us, yesterday night at 10. So we have in essence, between now and September 1, time to make an agreement with the tenants as to their desires. Do they want to stay? Do they want us to rent? If we continue as a rental, do they want us to upgrade it? Do they want to sell the rental units and then move back into the new building? All these things -- and we have to close by September 1.
Mr. Barry: I see. I see all that now. Why couldn’t that be done anyway without this LDA being approved [cross-talking] understanding that there’s going to be support for that anyway. I’m just wondering why that couldn’t be done anyway. [Cross-talking] Once you get agreement with the tenants, you then get to purchase the property from the owner, don’t you?
Mr. Lanier: That is correct but since there were various people offering to joint venture with the tenants, what made us distinct, different from everybody else that we were contemplating a bigger project around them. So we produce more value to the tenants than anybody else. We have to -- however, it’s a contingent value, not an absolute one.
Mr. Barry: Mr. Lanier, why can’t you have a contingency in the contract?
Mr. Lanier: Because --
Mr. Barry: That’s contingent upon the city agreeing to this LDA that allows you to have a major project
Mr. Lanier: Because another developer is willing to offer them more money in order to joint-venture this asset with them. And they don’t have the ability to reverse a transaction with us if in fact we do not proceed with this project. So they want certainty and so that is one of the aspects of why we’re seeking it under an emergency.
Mr. Barry: Mr. Chairman, it seems to me -- I said I have no problem with the uniqueness of it and I will vote on that but since you want to do it another way, I want to do it, too. But we’ve got to make sure that all the pieces fit together. But I will not want them to lose their rights with the tenants because we’re not acting. That’s why I’ve asked that question. Why couldn’t they come – Mr. Wilmot, you’re a lawyer. Why couldn’t there be a contingency in the contract with the tenants saying that, “We were desirous of doing this. We want to do it but the city has not yet decided.” We think they’re gonna do it but there will be a contingency, contingent upon the city doing it. Why cannot that happen?
Mr. Wilmot: From a legal perspective we could probably structure something, but from a practical perspective it doesn’t work on the certainty with respect to something that -- we’re asking them to come with us on the mere faith that we’re going to be able to succeed with the government. We have to go to them and say that the government is in place; they’ve been in place by virtue of the fact that they’ve undertaken emergency legislation to confer site control because that is what we’re trying to do here - site control coupled with theirs.
They’ve got a window that expires September. If it expired in October, we’d be talking about a different plan of action. But it clearly expires in September and we’ve gotta have certainty. . . and we have premised much of our discussions with them in that it’s contingent on us being able to -- be able to get site control from the public sector. We need this to happen now. If we don’t have it happen now, I’m afraid that we run the risk of them not being able to exercise the rights and terms of what they’re wanting to do. You’re not being able to get the development that you are trying to get. Certainty is very critical at this stage in any real estate. As you know that with respect to the issue, everybody [Indiscernible] “Do you have site control?” No we don’t.
Mr. Barry: Mr. Chairman -- Mr. Wilmot, you know I’m for this project.
Mr. Wilmot: I understand that.
Mr. Barry: I want to vote now. But obviously we want to get the majority of us voting the same way if this is to pass. I’ve known of several deals with tenants and developers where there have been a contingency in the contract between the developer and the situation. Otherwise, if we don’t -- well, we have a dilemma here.
Mr. Wilmot: Mr. Barry, with all due respect, you know, I’m working on six such deals right now and let me just tell you -- and they’re falling apart because there isn’t certainty in the deal. You know, I’ve got first rights on Mt. Zion Baptist Church. I mean, I can go on and list all of the deals in terms of tenant deals where we’re trying to do this. And always it’s that the government is slow to get to where the government needs to get to. And I’m hoping that doesn’t happen here, that we have an opportunity because of the confluence of things that are taking place to get this thing done.
And in terms of your concern about the precedential value, I have been trying to rack my brain as to how somebody is going to come in and say, “Okay we’re going to build you a firehouse. We’re going to build you a library. We’re going to do all these things.” And where that exists currently in the District of Columbia that is analogous to this and that we’re going to provide these public benefits at incredible risk to us as developers and that have sites that they control and will control in a single series of parcels --
Mr. Barry: Mr. Wilmot that is not the issue for me. I have said it’s admirable. It’s great. I said it’s unique. It’s something that I applaud. We all applaud that.
Mr. Brown: Mr. Barry? Mr. Wilmot, it seems to me for an emergency basis, no one could come behind -- even if it expired in September -- who’s going to come behind and all of a sudden get the rights without the certainty of developing that whole parcel?
Mr. Wilmot: Well, it’s the tenants lose their TOPA rights. It’s not that, you know -- we have one leg of it that’s gone.
Mr. Brown: But they can be extended. Is that correct, Mr. Wilmot?
Mr. Wilmot: Well, let me just tell you something. They’ve been extended -- this is not a new issue; they’ve been extended to September. They’re on their last extension, as I understand it.
Mr. Brown: Let me see, can it be extended?
Mr. Wilmot: I don’t know whether it can be extended further. They’ve already been extended. And I don’t know whether it can be extended.
Mr. Brown: I mean you have everyone agreeing on the project.
Mr. Wilmot: Right.
Mr. Brown: Some of us may feel very uncomfortable from an emergency standpoint.
Mr. Wilmot: I understand that very well.
Mr. Brown: And I’m just trying to get a sense if the tenants -- if the TOPA is going to expire, and the tenants understand that the city is fully committed to the project -- the city is fully committed to the firehouse, to the library, to the whole development process; the city is committed to EastBanc to do this with its LSDB equity partners, then what I cannot understand - and I’m trying to be able to understand this - why is it an emergency? Or why would it be an emergency, given the fact that -- I can see there’s uncertainty, right? That means everyone’s uncertain. They don’t know if they want this, they don’t believe in it or don’t -- you know, not prepared to move forward. But you have all three of the committee -- four of the committee members that are supportive and will support it. The problem we have on this side is the process about how we’re looking at it: Is it an emergency? And that is to say, if we do not do it, will the whole deal fall apart? That means will none of this happen?
Mr. Lanier: And I think we’re all focused on a tenants’ association without recognizing that they’re nothing but simply a component, while a very volatile component. And while I would say I’m not the grandfather -- we’re not the grandfather or the father of the emergency legislation, it is certainly something that we want to accomplish expeditiously simply because we have a lot of moving parts. In order to contain these moving parts we have to make ongoing decisions of a complex nature. And we’re competing against other, let’s say, fractional interests, as well as the decisiveness of 39 people and to keep that decision together. And so the mere fact that this only occurred yesterday night doesn’t mean that we have not attempted to try to accomplish this for months and months. And so I’m very anxious that -- you know, to move forward everyday or show a progress everyday, yeah.
Mr. Brown: And the process is if we don’t pass this by an approval, will the whole project fall apart? Just a real simple yes or no.
Mr. Lanier: That would make mean that I would have to make a decision for 39 people who have made a decision based on a certain amount of facts. And I can only say it’s very possible because there are other interests who are willing to offer the developer on an uncontingent basis more than we. Our interest in this is -- in Tiverton is as part of a larger piece and therefore our ability to give them a larger benefit relies simply on that. And some people will say, “Well, if it’s uncertain then I’d rather go with certainty,” as many people do.
Mr. Brown: I don’t know how uncertain it’s when you have members of the committee and members of the Council that’s very supportive of the project. Just not supportive -- could possibly have concerns on an emergency basis. But let me move past that just to -- on your testimony. On page 3 of your testimony you mentioned the LSDB equity ownership and it says you would apply the same publicly required LSDB. What does that mean?
Mr. Wilmot: I’m sorry. I’m sorry.
Mr. Brown: Equity ownership, what does that mean? “The same publicly required LSDB equity ownership in contract thresholds to our own privately owned land as applied to the District’s.” What does that mean?
Mr. Wilmot: Well, one of the things is that as you know there’s a legal requirement for District-based projects with respect to the lands involved in public sector of 20 percent. What we’re doing is that we’re expanding that not just for the publicly -- for the public parcels but also to include private parcels as well. That’s what we have done throughout all of our projects. Many of our projects are private sector projects having nothing to do with any public incentives or having LSDB partners. And so what in effect you’ll achieve with respect to the public sector project is something in the vicinity of about 30 percent to 35 percent, if you extrapolate it.
Mr. Brown: I would imagine are you the sole LSDB partner on this project?
Mr. Wilmot: I’m not the sole LSDB partner. There would be other --
Mr. Brown: Who are the other LSDB equity partners? Possible -- possible LSDB partners?
Mr. Wilmot: The Jarvis Companies are possible LSDB -- well, they’re an LSDB partner -- not possible; they are. Jarvis Company is. . . we have an agreement. I think that agreement was provided to the committee as a separate document to our testimony. The RJB Consulting Group is also under consideration for participation in the LSDB component. Urban Service Systems Corporation is the other and then Spectrum Management is the third. What we’re trying to do is to provide an opportunity for as many LDBE equity participants as can meet our reviews after they’ve had an opportunity to look at the pro formas because part of it’s that we have to show to them what the business model is all about. And once we’ve done that they might elect to participate or they might elect not to. The other component part of that is the subcontracting part that we are committed to, which is at a ground floor of 35 percent.
Mr. Brown: Okay. Well, we’ll be getting some more information from you and your LSDB equity partners.
Mr. Wilmot: We will update the committee as we execute additional agreements with respect to those partners.
Mr. Brown: And clearly, that would be before July 10th -- this matter comes before us. Is that correct?
Mr. Wilmot: If that’s the wish of the committee. . . certainly we’ll endeavor to do that.
Mr. Brown: Ms. Schwartz?
Ms. Schwartz: I do think that -- you got to me with the tenant association component of this and I sort of understand that. So I’m trying to work out a way that we can do this responsibly and not jeopardize that component of it. But, you know, it’s unusual that we don’t have the LDA before us now. So I just wanted to possibly suggest that if we have to do an emergency on Tuesday related to the ERA, that we might then have the LDA come back for -- I don’t like passive approvals when it comes to disposition of land and valuable land. I mean, you know, we get to just sleep at the wheel on a lot of things and it’s not that we’re sleeping down here; it’s just we’re so busy down here. You see these absolutely ongoing, every room filled with these hearings that are going on and we’re just all busy as can be, so things can just kind of get slipped by sometimes. But maybe, Mr. Brown, we need to divide this up into the two components: Get the ERA done at the legislative session on Tuesday but then I don’t like -- because the LDA is really kind of dotting the “I’s” and crossing the “T’s” of actually what is going to happen. And I don’t like not looking at that when that is negotiated.
Mr. Wilmot: What I’d like to propose --
Ms. Schwartz: So what do you think of that as a way of showing to the tenants’ groups and, you know, others that we’re giving the Exclusive Rights Agreement -- I don’t like doing this on emergency and I want to say to every other developer out there, “Don’t start doing this to us.” I mean, I think your tenant association thing, if it is September 1 -- I would like to know, though, Mr. Wilmot, you said you think they’re at their last possible extension. I’d like
to see -- you know Mr. Brown asked that question
–- I would like you to follow up and see if there is a possible extension. And because, you know, the processes down here count and we don’t like disposing of our valuable land -- we have now 21 and a half million dollars of valuable land that we’ll be disposing of and, granted, we’re going to supposedly be getting things in return. But until that LDA is done we got nothing other than a lot of talk in return.
I want to know: Is the library gonna be the same size? Is the firehouse gonna be the same size? I need those “I’s” dotted and those “T’s” crossed so we know what we really got in hand at the end of the day. So I don’t know why -- I want -- I would love you to follow up and see if there could be an extension. If possible, maybe that way -- and then we could do it in September as a package. By then, the LDA would probably be negotiated and -- so I just throw that out as a possibility.
Mr. Wilmot: One of the things that I want to capture -- I’m sorry Mr. Chairman.
Mr. Brown: Ms. Schwartz, we have Dave Jannerone [phonetic] would be also speaking to this from the deputy mayor’s office. So we will be asking him a number of questions that -- we’ll ask him number of questions that I’m pretty sure he will be prepared to answer that’s related to that. Because we have some other questions that I’d like to ask the deputy mayor’s office that’s appropriate for the deputy mayor’s office.
Ms. Schwartz: Yeah – no, I would agree. But in the interim, cause I know the deputy mayor’s office is going to be later in the day, that if we could find out if there’s the potential for an extension with the tenants. . . so we could put that into the mix as well.
Mr. Wilmot: We’ll do that. And one of the things that clearly is subject to our involvement with the executive is that we can see -- I can see an agreement whereby the Council would pass the emergency and the LDA would come back to the Council as you have suggested -- Mr. Brown has suggested -- in September for consideration. That would give us at least some of the certainty that we need in order to move forward during the course of the rest of the summer. It will also accord the Council the opportunity to look at the terms of the LDA and then to approve the LDA in September when the Council comes back from recess. And that would be something that would be acceptable to us.
Mr. Brown: Mr. Wilmot, thank you. We have David Jannerone that is here actually. And, I know if he could come in -- Mr. Johnson [phonetic] if you wouldn’t mind -- because he can speak to this. Therefore, we have everyone kind of together. Then after that we’ll go to -- and we have the Fire Department here also if they -- if he can’t answer the questions, there’s more questions we would love to have you come to articulate it. As a matter of fact, can we have one of the representatives from the Fire Department come on up? Well, you could stay -- both of you could stay here. We probably would need to get Mr. Braunohler (phonetic) -- if you could -- okay. Chief, welcome.
[End of Tape 1- Joint RT ED-GO Part 1]
[Start of Tape 2- Joint RT ED-GO Part 2]
Mr. Brown: We’ll allow you to -- we’ll put your testimony into the record. I think we – you’ve heard a number of the discussions to achievement what David Jannerone who is working in the Deputy Mayor’s office. So I won’t have you read it all.
Mr. Johnson: No.
Mr. Brown: Because some of it is just questions that you kinda see over -- Ms. Schwartz, I was taking some of your time. Did you want to finish? You’ve got about a minute.
Ms. Schwartz: No, I think I really got to state the way I felt about it that I really want to have an active approval on the LDA and I might be willing to do the other on an emergency if we need to. If it’s possible to see if there would be an extension, it would be nice to do them, because I know -- okay, no, I do have a question. What if we do -- then the resolution would have to say, “Dependent upon the approval of the LDA.” Because let me tell you -- how can, if we do an Exclusive Rights Agreement, and then, we cannot agree to the LDA? Then, we’ve then done an Exclusive Rights Agreement and what recourse do we have if there’s no agreement of the LDA? And then, meanwhile, you have the Exclusive Rights Agreement and then you might be able to just hold onto that or you got a value that we’ve given up, maybe for nothing, because no development could go on until we could agree to the content of the LDA. And I don’t wanna put the District. . . become a captive of anybody and so, that is, all of a sudden, a concern of not doing the two together. That’s why I wish we could find out that if we could get that extension that Mr. Brown asked for about the tenants’ association. I mean, you put yourself in our shoes. And this isn’t meant to obstruct anything. I think that having a new firehouse, a new library, affordable housing on that parcel of land, having the tenants’ association be happy about everything -- I think all this sounds good to me.
Mr. Lanier: We will certainly try and identify if there’s an extension, but I want to reemphasize we have 40 people making a vote and why do I want to risk that vote?
Ms. Schwartz: All right, I have another way of doing this maybe, and that is, Mr. Brown putting an expiration date on the ERA. That that would have to be part of the resolution because I’m not going to give an ERA to someone, Exclusive Rights Agreement, to our property and then -- they then -- we would then have to agree to what they want to do because they’ve got the exclusive rights. So if we put an expiration date that probably could take care of that.
Mr. Lanier: Without preempting the administration, I just want to say we have a significant capital commitment on this block as it stands. So it is not simply that we can drag this out from a practical fiscal standpoint. We have tremendous financial pressure on our own side to move.
Ms. Schwartz: I understand that but we also -- you would have exclusive rights to our property and I’m not going to put ourselves in that position, unless there’s an expiration date.
Mr. Brown: Thank you, Ms. Schwartz. Let me just basically kind of make it -- see if we can kind of clear it up a little bit here. I think that what you have is people understanding the importance of this project -- members of the committee who even are willing to move forward. I think where we have some of the complications is that, from an emergency standpoint, you know, one: What is the emergency? And then two, you know, is this the way that this committee is going to move forward when it gets information from the executive? And the answer is, “No, this is not going to be the norm of the process through this committee as we look at moving projects forward.” We are all for being more effective and efficient, moving quickly, but we’re not going to do it at the expense of just breaking every single rule, right?
So, you know, while we’re prepared to look at the LDA, we’re prepared to be supportive of it, but I do think the caveat has to be a very detailed outline on. . . the affordable housing piece has to be clear because what we’re doing is looking at the terms, right? As to all these different terms that are in this agreement and then the Mayor would then go and negotiate these terms based on what the Council has passed and deemed as what it is. . . should only be able to negotiate on this. Is that correct, Mr. Jannerone?
David Jannerone: Yes.
Mr. Brown: Now, it seems to me once these terms are agreed upon, then I do believe they should come back to the Council for passive approval, which basically says all the terms and conditions that have been outlined and approved by the Council are clearly in the signed document of the LDA itself.
So to me, would the administration have -- I’m prepared to move forward under those conditions because we’re putting conditions in an un-normal circumstance to this committee normally would have. Would the administration have any difficulties or problems with that?
Mr. Jannerone: Well, I would say that it would be our preference that Council, in the resolution, list what terms you all would like us to negotiate. And then give us the authority to negotiate the details of those terms, which would mean that the LDA wouldn’t go back to Council, but you will put the specific details in the resolution that would give us the authority to negotiate those points. For example, how big is the library? Well, that detail can be put in the resolution and you will give us the authority to negotiate a 20,000 square foot library.
Mr. Brown: We don’t have a problem with that, you know, because we’re laying out what the details. . . What we don’t want is -- if we want a 10,000 square foot library and you’re able to negotiate that and you come back at a 9,500 square foot library because during negotiations that still makes sense but that’s what you’ve changed based on whatever you change.
Mr. Jannerone: Well, I don’t think we’d have the authority to negotiate that because the resolution that you would approve specifically says that we would only be able to negotiate a 20,000 square foot library.
Mr. Brown: I don’t think so. I mean, that’s why we have -- Mr. Wilmot, you’re shaking your head, I mean -- because we need to -- this needs to be clear.
Mr. Jannerone: Yes, absolutely.
Mr. Brown: And if this is not clear, then thas’s very problematic.
Mr. Wilmot: My only concern is that, having negotiated so many LDAs that to put that kind of stricture on it makes it somewhat untenable because there are so many moving parts including the whole financing structure of it. And so, you know, there are some broad outlines that we’ll have but a short timeframe because time is of the essence. I don’t want to sit around and negotiate something for the next year. I’d like to negotiate it within the next 15 to 20 days, to be quite honest, so that we can move this project along as quickly as possible.
Mr. Brown: Yeah, but my point is that, if in fact – then that’s why I have the passive approval back to the Council because there are things that could come up that make sense for it not to be the way the terms that were laid out. And this is all an emergency, for crying out loud. This is not like we went through some whole process and we all went back and forth. This is an emergency. So it seems to me -- I would like for the administration to take another look; to put a passive approval coming back to the Council because then it’s more aired out in terms of things that may need to be changed for financial reasons or something could come up. And it could change one of the terms of the agreement.
How’s that handled? Who would just make that decision? Would it just be the Mayor -- the Mayor that just makes that decision? The Deputy Mayor that would make that decision? That’s very problematic, so -- and it could be for the benefit of the developer itself who says, “Hey we want to do X but the terms lock us out where we can’t make the changes.” So I would hope that you would hear that from the committee.
Mr. Jannerone: Yes, absolutely.
Mr. Brown: -- the terms of passive approval coming back. Mr. Barry.
Mr. Barry: Mr. Chairman, why couldn’t we, between now and Monday, let them negotiate very specific terms of an LDA. We pass the LDA on emergency -- [cross-talking/interruptions] -- the administration and the developers couldn’t negotiate a very specific termed LDA after listening to our dialogue about it and come back on Monday with a very specific list of terms that you can look at and say, “Well, I don’t think the committee’s gonna go for this, this way.” So when they submit their resolution Monday afternoon, it’d be what we want it to be and we pass on emergency -- why can’t we do that?
Mr. Brown: Well, I think there’s a number of different things. One, we’re trying to get there. That’s why we have this public round table before the LDA came out to know what the committee’s concerns are. So when they come back to us, everything inside that emergency resolution will be addressed. Now the question is, can you do -- can the administration do that within this short period of time?
Mr. Wilmot: I’m sorry, Mr. Jannerone. We’ve been given a copy of the resolution. We have been, for your information, in negotiations. The resolution to be presented to the Council is very specific with respect to those elements. Now, do you have a copy of it? You do.
Mr. Brown: How specific is it, Mr. Wilmot?
Mr. Wilmot: Well it’s specific with respect to those parameters.
Mr. Brown: I think what we’re trying to do here for the best interest of time is that you know -- the committee is trying to work with you. We’re trying to get there. We understand the importance of it. We need the administration to kind of work with us just a little bit. We have some -- some you know, this is something that I would normally -- and Mr. Jannerone would tell you basically -- was opposed to. I’m opposed to any emergency resolutions on land dispositions, sole-sourced, if it goes anywhere without public input. I mean, that is something that’s fundamentally. . . I disagree with.
Now, if there are some circumstances that warrant taking a serious look at it, which the administration has came and articulated to me, Mr. Jannerone, then I’m prepared to have a public hearing, to do all the things necessary to move it forward. But what we can’t have is, you know, setting a precedent, “This is how we do business,” because we don’t.
Mr. Jannerone: I’d like to answer your questions about negotiating the LDA. For the I-395 project, we’ve been in negotiations to come up with the terms that are in the resolution. We’ve been in that discussion now for about six months, meeting weekly to negotiate these terms because it is such a complicated and complex deal. For this project, 24th and L, I’d say it’s been three or four months, where we’ve been meeting and discussing the terms that will be in the resolution weekly to come up with those terms and negotiate on the business points of the deal. The details -- I don’t believe it’s physically possible to have that by Monday. You have to ride on OEG and their time and the details of that will take some time. We believe 90 days from now will be an aggressive timeline to take it from the point where we have agreed on business terms to a full-blown LDA.
Mr. Brown: Now, given that, Mr. Jannerone, the testimony is that there would be no money needed from the District of Columbia except the land value. Is that correct?
Mr. Jannerone: Yes.
Mr. Brown: Is that all hard-soft -- everything will be paid by the developer coming out of the land cost?
Mr. Jannerone: Yes.
Mr. Brown: Okay. And affordable housing will be -- I guess, some of that land cost will subsidize the affordable housing?
Mr. Jannerone: Yes.
Mr. Brown: Do we know if that number will -- if you haven’t done the financials, how do you know that the 20 percent affordable housing will be met and there’s enough cost in the land value to offset not only building both the firehouse and the library but also subsidizing 20 percent of affordable units on the whole site? How have we made that calculation, Mr. Wilmot?
Mr. Wilmot: Well, we’ve got our very sharp pencils and our financial folks. I can have Joe walk you through it, Joe Sternleib that is, walk you through it, but we have run some of that analysis.
Mr. Brown: Well, you want -- let’s have Mr. Sternleib come on up.
Mr. Barry: Mr. Chairman, before that, I’m reading this resolution -- I don’t understand from Mr. Jannerone why -- I’ll give you an example. If there’s 20 percent affordable housing, it doesn’t take long to figure out what you’re talking about: 60 percent AMI, 30 percent AMI?
Mr. Brown: Well, that’s why we’re asking those questions now.
Mr. Barry: [Cross-talking]. See if the administration wants this project done by emergency, I’ll be willing to sit night and day to fine-tune these numbers here.
Mr. Brown: Well, Mr. Sternleib’s here, so we’re going to ask him. He’s crunched all the affordable housing numbers, so Mr. Sternleib, if you could say your name for the record, you are always welcome. I know that you’re. . . know this building well and clerked the committee on economic development. So you do understand --
Mr. Sternleib: Some time ago, that is correct.
Mr. Brown: So you do understand some of the concerns that were raised.
Mr. Sternleib: I do.
Mr. Barry: Who do you work for, now?
Mr. Brown: He will tell you exactly who he works for now. But if you can articulate some of the calculations on the 20 percent affordable housing and how many units would that possibly be, as well as what percentage of AMI does it fall under, that will be very helpful for members of the committee.
Mr. Sternleib: Thank you, Council Members, Chairman Brown. My name is Joe Sternleib, for the record. I’m with EastBanc. We’ve been looking at these numbers for -- the company -- for years before I got there and for the last 10 months while I’ve been with the company. The way the resolution is written reflects what we believe is a reasonable way to approach this transaction at this time because there’re a couple of things that are unknown. One of which is the appraised value, how much is the land actually worth, which will be
determined in the future.
What the resolution says is, that from the appraised value, first, the District will receive a new library and the cost will be deducted from that value. Then a new fire station, the cost will be deducted from that value. And then 30 percent of the residential space in the building, because this is mostly one or two residential projects, will be reserved for affordable and workforce housing. It wasn’t 20 percent, it was 30 percent. What we believe we can do is achieve that by negotiating after we get to the point where we know what the land value will be, what the proper AMIs are to achieve that so that there’s a mix of incomes in the building, but for instance - let me take one step back - what we said is, all of the residual land value, after we pay for the library and the fire station, will go towards the affordable and workforce housing.
So that number could exceed 30 percent or it would be 30 percent with a higher AMI distribution or most of those units towards, you know, the workforce and the middle income of affordable and fewer at the low income affordable. Or if there’s a larger amount of money left over, you could have more units at the lower end of the affordable, at the 30. . . the 50 percent of AMI, for instance. So that’s where the flexibility comes in that allows us to make the numbers work.
Mr. Brown: There was a -- you mentioned there was 30 percent, is that correct?
Mr. Sternleib: I believe that that’s what the resolution says.
Mr. Brown: And it kind of says, “on the property.” Now if the property where the firehouse, right. . . if we’re gonna take the firehouse and the library and we’re gonna build and replace the firehouse and the library. Is that correct?
Mr. Sternleib: Correct.
Mr. Brown: So I would imagine there are no affordable units on those -- wherever those two are located. Is that correct?
Mr. Sternleib: No, there are affordable units throughout the development.
Mr. Brown: On top of the firehouse?
Mr. Sternleib: Yes, that is a --
Mr. Brown: On top of the library?
Mr. Sternleib: As we mentioned we made a trip out to Alexandria with the DC Fire Emergency Services Department to look at their new state-of-the-art plans for affordable and workforce housing on top of the new Potomac Yard Station, and we’re modeling the proposal off of that.
Mr. Brown: How many units do you propose that can go on top of the firehouse?
Mr. Sternleib: It depends. There are -- it depends on what other uses go above. If the library were above, we could get approximately six storeys of housing, 48 to 60 units. If there were no library, we could get eight storeys, which is a larger number.
Mr. Brown: What is being negotiated then, Mr. Jannerone? Is it gonna be a library there, or is it gonna be a firehouse and a library? That’s a question for you. And the next question will be for the Chief here -- to ask him, you know, what is the Fire Department’s position on a library on top of the firehouse? I mean. . . and the reason why this is important because, you know, on the possibly proposed resolution, is constructed on the property and I would imagine the property, Mr. Barry, is the government property. So I’m just curious what does that mean?
Mr. Barry: I think they mean the entire property.
Mr. Brown: Is it the entire property?
Mr. Jannerone: The entire property, that’s right. And in a perfect world, if we can make this work, we would like the library and the fire station to be built on the same site, so we can keep library where it is and open until the new facility is built. Now, as far as the actual percentages of AMI and actual value, part of that’s going to be determined by the PUD process. So we don’t want to negotiate final points on that now, when we could possibly get more after the PUD is approved. So there’s going to be a range there, and we’re going to negotiate the best deal possible for the city based on the value.
Mr. Brown: We really don’t know as of yet then.
Mr. Jannerone: Right.
Mr. Brown: Would that be fair to say that we --
Mr. Jannerone: We have a general idea based on what we believe is going to be the value based on approved PUD.
Mr. Brown: That is -- I mean that is fine. I don’t want to walk away thinking we know the answer because we really don’t.
Mr. Jannerone: We have a general idea, right.
Mr. Brown: We have set a ballpark idea, right?
Mr. Sternleib: We have a ballpark idea and I want to say that it’s in -- in a sense, we’re partners with the District in this because we’re building public facilities. We both have an interest in maximizing the value of the site in order to get the best public facilities and the most affordable housing. And we’re going to do everything we can to scrub the numbers to make that work. If it gets to a point where – we’ve agreed -- we’re trying not to lock ourselves into anything that then becomes unaffordable, where we simply can’t move forward because we can’t afford to do it because that’s not in the District’s interest or in the developers’ interest.
Mr. Brown: But, I guess, my point is that we don’t know. We’ll have some -- since we have a ballpark figure on what that would mean or what that would look like because we really don’t know because we don’t really have a cost of what it’s going to cost to construct a fire department. Or we don’t have actual costs and what is going to cost to construct a library.
Mr. Sternleib: We have preliminary estimates but we don’t have the final numbers -- that is correct.
Mr. Brown: And is the community supportive of the firehouse? First of all, I ask the Fire Department’s position but is the community supportive of a library on top of a Fire Department?
Mr. Johnson: Thank you, Council Member Brown. That I won’t answer for the community but what I can say is that we’re supportive of the concept of this project. In fact, they’re right. We did go out to Alexandria, Virginia and look. As the language stands, there are a couple of things, of course, that we would be advising that we put in the language that would better protect the citizens and the city and this is in conjunction with the Mayor’s office. And one of them, and I agree, when you all start to dig down to the cost on page 2 the b-ii talks about fixed cost. We have to be careful that we would like to see replacement cost and that would take care of the latitude of just how much it really costs to reconstruct the fire station. And that’s because there are so many things that are fungible at the moment, we don’t have an exact cost. So I’d be careful of the language that said fixed cost. Other than that, I do think that the air rights over the fire station are something that we definitely need some say in.
With that being said, the developers and the Mayor’s office looking at a library above the fire station is a novel approach. We don’t pretend to be the experts in the noise reduction and the insulation of that particular project. That’s a novel approach and we’re very open to it. We’re very open to this project in its entirety. We believe with working together that we do believe that we can get the public safety aspect taken care of, out of that, so I want to be clear about that. And we would be only asking that there are a couple changes that we need to look at.
The final thing in the cost estimation – we were over here talking about it -- one of the drivers in that would be also the parking situation. That would be something that -- as the mayor’s office and the developers worked out the parking situation before we’d be ready to chime in and say that, “Yes these are the costs that we believe that it would cost to restructure the fire station.”
Mr. Brown: Has anyone spoken to you about reconstructing the fire station? Like the costs associated – you’ve been in preliminary conversation with them?
Mr. Jannerone: We know some of the costs that it took -- to look at the model in Alexandria, for example -- and we do have some of the ongoing cost industry standards for constructing of a fire station depending upon square footage, depending upon usage, depending upon in a high-value location such as this. So yes, we could come up with a estimate, but it’s very fungible at this point, as we’ve been saying. And a lot of that has to do with, for example, is there going to be and how much space would be utilized to -- that we talk about when we turn around our apparatus? How much parking space would be utilized and how much of a minimum of amount of parking space could we get away with, would that parking space be above ground or below ground? So all these things we’d have to take a look at and, lastly, what standards we’d have to meet, of course, in constructing the fire station according to things like ADA and the facilities that we’d need to house the units that are in there. So we have an estimate only, and I would be remiss if I really tried to pin it down anymore than that now.
I think I’ve given you what we think would be some protections that would needed to be in place. . . i.e., I don’t know if we’d be supportive of a fixed cost at the moment. We’d be more supportive of language that said replacement cost.
Mr. Brown: OK and I highlighted that in your testimony, but the reason why we’re going through all this is because this is not something you just do on emergency and hope it all works out, right? You pass it and you hope all this stuff that people say actually works out. And that’s why I believe that it’s important, if we don’t get the terms as solidly as possible, which we might not be able to do within a short period of time. Then, it needs to come back for a passive approval on what actually is the -- so it gives people an opportunity to spend money, makes the commitment that we’re there, we’re committed to do it. But we’re just not going to, you know, say, “Here, you go on emergency basis to do an LDA,” with really no specifics hardly. To me that’s very problematic but I want to be supportive.
But I think that last caveat has to be there but let me thank Chief, you and your team for coming and thank you for all the work that you’re. . . that you’re doing to protect us every single day. . . big supporter of the fire department. Ms. Schwartz?
Ms. Schwartz: Several points. When you say you’re subtracting out the library, you’re subtracting out the fire station from the cost of the land, I could envision your coming back to us and say we subtracted out and there’s no money left over for affordable housing. I mean I could see that day as clear as I can see my Pepsi bottle here -- can here. And so how are we assured that if you’re doing -- I mean I thought with this Exclusive Right Agreement, we were getting a fire station, a library and affordable housing.
Mr. Sternleib: That’s correct.
Ms. Schwartz: But then, the way you described it, Mr. Sternleib, you know, that we’re going to subtract out this and we’re -- and then, with what is left over, we’ll do the affordable housing. And then, based on how much is left over, we’ll decide on which level of affordable housing we will do. But when you did. . . started doing that subtracting thing, it then, made me think that we possibly might not get any affordable housing at any level the way you were doing your subtracting thing. Can you bring me back to a comfort zone that I’m not in?
Mr. Sternleib: I don’t anticipate that that’s going to be the case, Council Member. The preliminary numbers show that it’s perfectly possible to do a library and a fire station and a significant amount of affordable housing. And we’ve run those numbers and, you know, many different times in many different ways and we believe it is achievable.
Now, if you’re asking me to guarantee that construction costs will not double and this won’t happen and that won’t happen. . . I think it’s very unlikely what you’re suggesting that we’ll come back at some later date and say there’s no money there, um, to do it. And I think that what we’ve done is actually built in a flexible language in the proposal and say we’re going to maximize so that we wouldn’t stop at 30 percent if we can create enough value.
But having said that, the city has X amount of dollars to spend. It’s just not dollars in cash. It’s dollars in land value. And what we intend to do is maximize those dollars in land value and then apply all of it to public facilities that otherwise the District would have to write a check for. So at the end of the day, I think there’s an enormous amount of value to be captured -- [cross-talking]
Ms. Schwartz: And that value will keep escalating. That value will keep escalating because with the land improvements, it will escalate and then, that land is escalating all the time, anyway. So that value will also -- the equity you will have related to that value will continue to escalate as well. Don’t forget that.
Mr. Sternleib: I think if you’re making the general point, Council Member, that there’s inflation in the real estate market, that is true but we’ve also, as you and I both know, lived through deflationary periods. Right now, in the paper yesterday, there’s been a 5 percent deflation in land values in the District in the last few months, so we don’t know exactly where --
Ms. Schwartz: I don’t think on the West End there’s a deflation of -- [cross-talking]
Mr. Sternleib: I don’t know where specifically they were saying but the point is the library and the fire station themselves are public assets that don’t actually appreciate and there’s a fixed value that we can charge for the affordable housing. This is a perpetual affordable housing. It’s not, you know, for the first tenant to move in, but the proffers that the city requires are that the housing be made affordable in perpetuity.
Ms. Schwartz: I know. I know.
Mr. Sternleib: So that there is actually no escalation other than with the cost of living.
Ms. Schwartz: No. On that component. . . that component -- [cross-talking].
Mr. Sternleib: Right. And then the other components -- if it’s a condominium building, if that’s the direction that this moves in for the other sales, we simply sell out of the project and then, it’s the individual owners. But of course, the District is the ultimate beneficiary because every time a . . . one flips --
Ms. Schwartz: All right. I just -- I want to have this discussion because when you started doing the subtracting, it looked like that we may not end up with affordable housing and. . .
Mr. Sternleib [interrupts]: We don’t believe that will be the case.
Ms. Schwartz: And then, that’s not what we would be buying into in an Exclusive Rights Agreement. I also -- what kind of parking do you have there now?
Mr. Johnson: We have parking in queue right now. We do have a few designated spaces and we have parking in queue, which allows the various shifts to come in, maneuver around --
Ms. Schwartz: How many spaces?
Mr. Johnson: -- pull out and park behind one another. Chief Deaton [phonetic], do you have an exact number of spaces?
Chief Deaton: Seventeen.
Mr. Jannerone: Seventeen.
Ms. Schwartz: Okay.
Mr. Sternleib: We’ve met, I think, three or four times now with the Fire Department. They told us a minimum of 20 so we pro-forma’ed 20 spaces in the new fire station.
Ms. Schwartz: Okay, all right. And then the other issue I wanted to raise to Mr. Brown and that is I hope -- I know that you, Mr. Brown, are an activist Chair and I’ve seen that, certainly as you’ve had this committee. And, before. But I just -- I hope that we won’t just do a passive approval because I think now, we have a passive disapproval for these types of things, and I hate to weaken that by doing a passive approval. I would rather do a passive disapproval, which then would require us to act or an active approval, either a passive disapproval or an active approval.
Mr. Brown: Thank you, Ms. Schwartz, and we’ll definitely take that into consideration. I think that’s important. Mr. Barry.
Mr. Barry: Chairman, let me ask -- whoever’ll answer this question -- the numbers have been thrown around about 21 million. In the final analysis, just some guesstimate, what do you think is going to be the appraised value of this property?
Mr. Sternleib: Right now, we’re looking at a range about 27 to 35 million.
Mr. Barry: Mr. Chairman, Ms. Schwartz, we know now that the library and the fire station would probably cost that much and more, is that correct?
Mr. Sternleib: No.
Mr. Barry: How much is it going to cost, then?
Mr. Sternleib: If -- there are two ways with the library.
Mr. Barry: Lemme ask the chief, what’s been -- I can’t remember when we built a new library but -- I mean a new fire station. I think 33 was the last one. What do you think the estimated cost of this fire station going to be?
Mr. Johnson: I would hate to pin you down -- pin myself down to an exact number but --
Mr. Barry: Give a ballpark.
Mr. Johnson: Ballpark, I’d say 11 to 13 million. That’s dependent upon parking. If the city negotiates a different parking structure than underground parking, then that’s going to lessen the overall cost to building a fire station.
Mr. Barry: But conservatively, 9 to 13 million dollars, is that right?
Mr. Johnson: Yes. I’d say conservatively, I’d say 9 to 12.
Mr. Barry: 9 to 12 -- library, Mr. Wilmot?
Mr. Sternleib: Hard and soft cost in the 11 to 14 million dollar range.
Mr. Barry: The average cost of the library’s been about 17 million. We’re replacing -- we’re renovating and replacing four libraries already. I happen to know -- I’m close to that situation -- by 17 million. So even if -- suppose it’s just 15, suppose it’s 12. At $27 million already, then we’re going to need deep subsidies if we’re going to have a 60 percent and, Ms. Schwartz, you are exactly right. I suspect there’s not going to be much left but the question is: How do we resolve this issue?
Ms. Schwartz: I don’t know where you get that $26 million, Mr. Barry. If our property value is appraised -- and we have the documents here, our three parcels at $21 and a half million -- how is the rest of that -- what you were just showing me -- only worth 5 or 6 million? I don’t understand that.
Mr. Jannerone: Well, I think the FAR value for land in that neighborhood is close to $100 an FAR foot. The potential development of both sites is about 400,000 square feet, so I think the $35 million is around a safe number. It might be worth a little bit more than that. Just on back of the envelope, what land -- [cross-talking]
Ms. Schwartz: But 35 not 26. Because he had asked what’s the value of the whole property?
Mr. Jannerone: An appraisal will tell us, but I think that’s a good average but it’s not -- definitely not the $21 million. It’s worth much more than that.
Mr. Barry: Mr. Chairman, you know there are several ways to deal with this. Several developers have taken the market rate values, add a little bit to it to compensate for the subsidy for the affordable housing. Maybe this has to be the case. Here’s my problem: if they’re so sure about this, why doesn’t the LDA, when they come back to us for passive approval, specifies X number of units at average 60 percent of AMI and let them figure out if they’re going to do it. . . if they want to do the project.
Mr. Brown: Well, I think that the Deputy Mayor’s office is here, they’re hearing the concerns and I think they’ll be sending us something that addresses the concerns of what the committee is articulating and I’ve been – I’ve worked with David Jannerone for a number of years before he was a part of this administration as an ANC. So I know that he’s going to bring something to the committee that works. And we’re going to work with you. But we have to ask these tough questions --
Mr. Jannerone: Sure and we’ll work it out.
Mr. Brown: -- in an emergency basis of the terms of a LDA, which, you know, just hasn’t been done in a very, very, very long time in the District of Columbia. So that’s why you’re here and that’s why we have a public roundtable to discuss this, to get this out in the open. Mr. Barry, did you have any more questions?
Mr. Barry: Again, let me just sort of wrap this up. I understand that what we want to do is by emergency pass this LDA, is that correct?
Mr. Brown: Well, what is possibly proposed --
Mr. Barry: Or proposed then.
Mr. Brown: -- is to have an LDA that may come to the council for an emergency -- to pass on emergency with the terms of the LDA. Is that correct, Mr. Jannerone?
Mr. Jannerone: It’s a resolution that is basically a term sheet, that is, business terms that you are allowing us to negotiate into an LDA.
Mr. Brown: And I think for Ms. Schwartz -- I think one of the things we want to do, Ms. Schwartz, is as the administration is now in negotiation or if they were to start negotiation -- negotiating the LDA -- we wanted the development community to know that the city is not here to switch up and change its mind at the last minute. There has to be some basic fundamentals that we agree to, no matter what. And if, right, so we say, “Here are the terms. Anything outside of this is something that would very problematic.” But I would imagine that no developer’s gonna start spending money until they’re clear that they have some sort of an agreement with the city. And I think we’re trying to figure out how do we get there and what is the best avenue to make that happen.
So, while I want to be as cautious as possible, especially on emergency -- on emergency, I think, we shouldn’t put anything in there. . . The next time they won’t bring it as emergency. . . you get here earlier. But moving in the future, where we have public discussion, public round tables, the more people from the community able to testify, then I’m more open to walk down that road, Mr. Jannerone. But --
Mr. Jannerone: Yes, sir. We’re on the same page with that.
Ms. Schwartz: But, Mr. Brown, if we’re talking about doing on an emergency basis on Tuesday, a resolution that encompasses both the LDA and the ERA, I would not be comfortable with that. Because I don’t think you’re gonna have crossed all those “T’s” and dotted all those “I’s” by -- so it’s gonna be too vague. And I’m not doing vague here in any exclusive, sole-sourced ERA. I’m not going to do that. And then have you then couple the LDA on that that’s vague, vague, vague and anything then you all just can negotiate from there.
I would be far more comfortable doing the ERA as an emergency on Tuesday. . . with an expiration date associated with the ERA that would take in some of the concerns I have about giving people the right to our property for endless amounts of time. And then, have that 90-day -- I think Mr. Wilmot or somebody says like or you said that it was going to take 90 days, probably, to negotiate the terms of the LDA and then that would then come back to the Council for a either passive disapproval or an active approval.
Mr. Jannerone: And I think what we’re proposing is that an ERA, in our opinion, in this circumstance, is an unnecessary step. As long as you give us the authority to negotiate the points that you agree with to make sure that we’re not giving land away and having somebody sit on it. We have recourse that you are allowing us to negotiate.
Ms. Schwartz: So in other words, saying the things that you brought to us, the 30 percent affordable housing, the library, and the da-da, and that it has to fall within that parameter --
Mr. Jannerone: Correct.
Ms. Schwartz: -- but then we’re not defining what the affordable housing is at all. That’s awfully vague.
Mr. Jannerone: It is vague and that’ll be based on the value, which we won’t really know until the appraisals are done and the PUD is approved, which is gonna be some time from now. So -- [cross-talking]
Ms. Schwartz: And if the LDA does not come about within those parameters -- let’s say, instead of 30 percent affordable housing, that 20 percent affordable and then 10 percent workforce housing has been listed in your resolution, if it be 28 percent combined housing, affordable housing -- then it would have to come back to us?
Mr. Jannerone: Absolutely.
Ms. Schwartz: Well, I think that then gives us some protections.
Mr. Brown: Thank you. One last question and that is: What is the recourse, if in fact, everything is passed and the final product has no -- the percentage of affordability has no real equity LSDB participation, what is the recourse then?
Mr. Jannerone: Well, we would never negotiate a deal like that and our --
Mr. Brown: I know, what is -- what is the recourse for the city?
Mr. Jannerone: -- well, we would never negotiate those terms.
Mr. Brown: I understand that. What would be the recourse if that has not met? Do we know? I mean, we may not know.
Mr. Jannerone: You mean if we didn’t negotiate it into the -- based on the resolution that you passed?
Mr. Brown: Yes, say that they did not follow it.
Mr. Jannerone: Well, I would think we wouldn’t do business together ever again. I mean, if we would negotiate a deal like that -- [cross-talking/laughter]
Mr. Wilmot: Let me just say that -- let me try to clear that up for everyone. It’s, in fact, the law and the law carries with it sanctions and simply, you just follow what you pass.
Mr. Brown: Right, but what is the sanctions, Mr. Wilmot?
Mr. Wilmot: Well, if we don’t bring our 20 percent, we can’t play. It’s just – it, it, it is, it is, it is not equivocal. It is unequivocal. It’s gotta be 20 percent.
Mr. Jannerone: Well, Council Member, we can build protections into the LDA -- that include liquidated damages, rider recapture -- we’re negotiating these things in other deals and we would definitely protect the city as far as our rights -- if the obligations of the LDA are not complied.
Mr. Brown: I would put on the record that somebody emailed me that this morning. So the reason why I’m asking these questions is you have people that can’t make it because they work and it’s during the day and they can’t make it in the time that we have this roundtable. So I think it’s important to ask questions in which the public and the community has articulated, in their absence, that they cannot ask. And that was one of the questions. Whatever happens with any of this stuff -- if 10 years from now no one meets any of the -- somehow it didn’t happen? Then what happens? So you’ve articulated and answered that.
Let me thank all of you for your testimony. Mr. Jannerone, you may want to continue to stay as we bring up the air rights for I-395. Bring Mr. Jarvis and Mr. Braunohler back up to the stand -- back up to the table here. Thank you [cross-talking].
David Wilmot: Thank you very much.
Mr. Brown: We look forward to getting that information there -- [cross-talking]
Mr. Wilmot: Everybody has a safe Fourth.
Mr. Brown: Oh yeah, you too.
Mr. Wilmot: Thank you.
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