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A historic mansion in Georgetown, a downtown office building flipped for a record profit and luxury apartments with a car elevator, a block from the White House.
These are among the developments in D.C. receiving tax breaks and discounted public land.
A WAMU investigation found the city awarded $1.7 billion in subsidies to 133 groups in the past decade — and more than a third of the subsidies went to ten developers that donated the most campaign cash over that time. Meanwhile, a fraction of the subsidies went to the city’s poorest neighborhoods.
See the projects, developers and public officials involved.
“By a lot of metrics the District is … the hottest real estate market” in the country, said Tommy Cafcas of Good Jobs First, an economic subsidies watchdog. “So why does the city need to be giving out all of these tax breaks to these major developers?”
On paper, the District has low campaign finance limits: From $500 for most council races to $2,000 for mayoral campaigns. In practice, developers can “bundle” donations through employees, family members and by writing multiple checks to a single candidate through limited liabilities and other affiliates.
Some of the developers said they donate to be civically engaged — not to win favors.
Likewise, city officials said they approve projects not to boost their campaign coffers but because developers pledge affordable housing, jobs and other benefits for taxpayers. But the promises often aren’t enforced, or the subsidies simply weren’t needed.
And what began as a targeted economic development tool, now looks to some like government handouts run amok.
WAMU’s investigation involved examining thousands of pages of city documents on 110 developments receiving city subsidies in the past decade, 133 groups benefiting from the subsidies and campaign contributions for council, mayoral and other local races over that time. It found:
“This is, of course, pay to play politics in gory detail,” Bruce Cain, a political science professor at Stanford University, said after reviewing WAMU’s findings. “I doubt that anyone was so stupid as to be explicit about what was being traded...More likely [the trading] is done with quiet understanding about what is expected of people who want a subsidy.”
Cain added that most D.C. residents “lack both the means and the motive” to donate hefty sums of campaign cash: “This is about a system that forces elected officials to raise private money and the people with the most motivation to give are the people who get direct benefits from the system such as subsidies.”
Developers interviewed denied making contributions to influence politicians or win subsidies and many said they would support campaign finance reform, saying they don’t want to feel obligated to fork over campaign cash.
“It’s been the standard throughout D.C...that these candidates need to have their war chests so they can actually do their politics...I can’t personally say someone said, ‘You don’t contribute,’ but you know they can’t run their campaigns without it and the larger contributions are from businesses,” said Roy Ellis, of Ellis Development. “It would be a great day when candidates didn’t need a whole lot of money.”
Several developers who didn’t want to be identified for fear of being sidelined for their next proposal before the city said a few council members in recent years have implied that it would behoove the companies to donate.
Some developers, frustrated by the system, have reined in their own contributions. Bethesda-based EYA created an internal policy about two years ago to cap its contributions to a single candidate by half of the maximum allowed or $1,000 – whichever is lower.
“We were getting so many requests… for contributions from treasurers or campaign committees,” said A.J. Jackson, a senior vice president of the company. “We said we’ve got to just have a policy so that we’re not creating the impression that we’re trying to influence a particular decision by giving money to a candidate.”
Subsidies are needed on massive projects or those that require major environmental clean-up, said Jim Abdo, of Abdo Development. But he said there are examples "out there where [you think,] 'Wow, you got how much subsidy for that? And you're right at a metro stop and did you really need it?' 'Well, it was available to me so I took it.' Can you demonize someone for doing that when it's out there and sitting on the table?"
Abdo has done projects all over town without subsidies: "It was just a decision that I made at the very beginning that look, I wanna try to show that you can go in and turn around areas of the city, you can do it in a responsible way that's inclusive of communities and you can do it without asking other people to help pay for it."
Developers and council members alike said subsidies jumpstart development and generate long-term tax revenue for the city. For instance, the city approved a $74 million tax increment financing deal for Gallery Place in Chinatown 11 years ago and it has become a city hotspot, bustling with shops, restaurants and new residents. Several officials said the development wouldn't have happened were it not for a subsidy.
“Often, it is a lynchpin at the beginning of a project that helps the project get started. It’s the match,” said Vicki Davis, president of Urban Atlantic.
One of the biggest cheerleaders for subsidies on the council is Jack Evans: "Give me an example of where...somehow the neighborhood didn't improve by doing one of these projects."
But the city does a poor job of measuring outcomes and has been slammed for it in several national studies in recent years including one by Pew Charitable Trusts. What's more, the city rarely evaluated whether subsidies were needed in the first place — until recently when it beefed up requirements.
A detailed financial analysis done by the city since the new requirements took effect found the $11 million proposed tax break wasn't needed for the Howard Town Center, a project being developed by Cohen Companies and others.
But that didn’t stop most council members. “I just don’t understand all this controversy,” Councilman Vincent Orange said. “Let’s just go around the city: $45 million…for the Mandarin, $14 million for Costco.”
“All over this city, we have given money...But here we are arguing over a measly $11 million,” he added.
Council Member Mary Cheh disagreed: “That is a formula for throwing money out the window...We exercise no discipline.”
The council approved the tax break by an 8 to 4 vote. Cohen Companies declined to comment. A city report said that the developer indicated the tax break was needed to secure financing for the project.
Watchdog groups call it the “LLC Loophole.”
“What this loophole means is that a corporation has the same power as ten or twenty people when it comes to giving money to campaigns,” said James Browning of Common Cause, a public interest group.”They can own elections, they can own candidates...If a single individual tried to vote ten times on Election Day, they would probably be prosecuted and put in jail.”
It’s particularly easy for developers to donate through affiliates because they often create a new subsidiary each time they purchase or develop a property.
For instance, Cohen Companies and 17 affiliated companies donated more than $15,000 in campaign contributions to former Councilman Kwame Brown from 2008 to 2010, when he led the city committee that gets a key vote on most proposed development subsidies.
The number of affiliated companies raised a "red flag," said Renee Coleman, with D.C.'s Office of Campaign Finance. But the city investigated and "found that these were all individual entities," she said, adding: "I can't say that's what I believe."
The affiliates have the same address and suite number as Cohen Companies, according to campaign finance data, and Ronald J. Cohen, president of Cohen, provided his signature as an executive for several entities, according to court documents.
Cohen Companies declined to comment. Brown also declined to comment.
The loopholes violate the spirit if not the letter of the law, said Dennis Thompson, director of Harvard University’s Edmond J. Safra Center for Ethics. “Whether you can get a legal opinion that says it’s OK isn’t really the…point,” he said. “Clearly, the purpose of the law was to limit contributions that come from anybody who’s closely interested in the project...It may be there is a gray area in the law then if so, it shouldn’t be exploited, and if it is, it should be changed.”
D.C. Attorney General Irv Nathan is trying to do just that. He has pushed a ban on contributions from multiple LLC’s, as well as contributions from various sources that are delivered together by a lobbyist. “Effective limits are meaningless if one can contribute through an unlimited number of LLCs,” he wrote in testimony on proposed legislation.
Not all developers use affiliated companies.
“To go out and create sort of multiple layers of LLCs just to be able to pad politicians' pockets, that's basically just – it's not playing above board from where I come from,” said Jim Abdo, a local developer. “I'm not gonna get creative and try to figure out ways to circumvent or to get cute with an election system.”
A dozen developers donated the most campaign cash the year a subsidy was approved for them, according to an analysis of ten years of campaign finance data.
In some cases, several separate companies that are developing a project together donated to a single candidate on the same day.
For instance, three of the developers of the convention center hotel donated $9,500 on the same day – Jan. 26, 2006 – for then-Council Chair Linda Cropp’s mayoral campaign. A month later, she proposed a tax increment financing deal for the project worth up to $187 million.
Cropp could not be reached for comment. RLJ, one of the developers, declined to comment. And the others could not be reached.
Other developers interviewed about the timing of contributions attributed it to coincidence or the fact that the year they donated most was an election year.
Critics said there may be more to the story. "We've certainly seen an influx of money happen when certain legislation comes to the council for vote. We know that it's certainly possible to sway an elected official with a campaign contribution or a special favor," said Cafcas, of Good Jobs First.
The proximity of contributions is a critical part of bribery investigations, according to Thompson, but the timing of contributions can also point to more subtle effects of campaign contributions on policy-making.
"Donors might say, 'This is a campaign year...and we really want to show we're here and get the attention of council members so we'll contribute more. The councilman may say, 'I'm running and I'll send out a general notice'...and some may say 'Yeah, we've got a big project coming up. We better not fall behind the others [contributing]. In fact, wouldn't it look good if we did better than them?" he said. "In a subtler way, it's part of the general system where you can have a kind of corruption but it's not directly like bribery."
One of the developers that donated the most campaign cash the year its subsidy was approved is CoStar Group. The company and its affiliates gave $19,500 in 2010 – nearly five times what it donated the next highest year.
The year the subsidy was awarded, a lobbyist for CoStar — and many other companies that won tax breaks with his help — wrote Council Member Yvette Alexander's chief of staff flagging another contribution: Money from CoStar for her constituent services fund, according to an email obtained by WAMU.
A year later, the company sold the property for $101 million — more than double what it paid — in what the Washington Post described as "the most profitable flip" of D.C. real estate since the recession.
It's "proof that when we're talking about downtown D.C...for office development in particular, there's no reason to be providing tax breaks," said Ed Lazere, executive director of the D.C. Fiscal Policy Institute, a watchdog group.
Alexander said if the company was trying to impress her, it didn't work: "I think maybe that’s what they think they are doing...They are not currying favors with me."
CoStar officials didn't address the contributions in a statement but said it has generated hundreds of jobs and $4 million in other tax revenue for the city since moving here in 2010: "We are very proud of CoStar’s contribution to the D.C. economy."
Like CoStar, Roadside Development donated the most the year it was awarded a $39 million tax-related subsidy. Three days after Councilman Jack Evans sponsored the legislation, Roadside's founders, Armond Spikell and Richard Lake, and Lake's wife each contributed $500 to Evan's campaign.
"We find people we believe in and we support them," Lake said, adding the company similarly donates to a number of charitable and non-profit groups. "I get approached all the time by different campaigns to contribute and I choose...who is going to do best for the city."
Evans said the subsidy was in the works for five years "so I don't know that there's a connection" with contributions. There is no way someone contributing to a campaign would get any more favorable or any less favorable treatment than if they didn't," he added.
Monument and its affiliates donated $27,500 — or 95 percent of its campaign contributions in the past decade — to D.C. races in 2006, the year the city sold the former Randall school property to a non-profit that had selected Monument as the developer at that point. The property was sold for less than half its value.
Plans for the redevelopment of the former Randall school in Southwest D.C. started with controversy because the city closed a homeless shelter and artists' studios on the property two years earlier to make way for redevelopment.
"One of the most striking things is to see a public building, like a school, go from being used to house the homeless to condos [or apartments] for the rich...It's the most striking juxtaposition," said Parisa Norouzi, with Empower D.C.
Monument said in a statement that the terms of the property deal were worked out more than a year before the company came into the picture, and even at that point, the contract was between the city and the non-profit. "Monument's interest in the 2007 mayoral race was a simple reflection of its increased focus on development in the District of Columbia," the company wrote. "Monument provided campaign contributions to the candidates it believed would keep the District headed in the right direction."
Several developers that haven't received subsidies said they don't object to them — unless they're going to cronies.
"There are a lot of instances where some high level donors, especially in past administrations, received very favorable treatment in the development process as related to receiving tax breaks," said said Anthony Balestriei, principal of Balestieri Real Estate Group.
Abdo, of Abdo Development, said he doesn't like the idea of backroom deals "particularly when you're talking about taxpayer dollars." He added: "I think it would be hard to look somebody in the eye anywhere if you knew that you were pulling off a deal at your neighbor's expense or at your community's expense."