WAMU 88.5 : News

Empty Promises: Developers Often Don't Deliver

Day 3: Deals for Developers, Cash for Campaigns

Play associated audio
The Capper Carrollsburg project's recreation center was demolished six years ago as part of a redevelopment and still hasn’t been replaced. (Photo courtesy of Anu Yadav)
The Capper Carrollsburg project's recreation center was demolished six years ago as part of a redevelopment and still hasn’t been replaced. (Photo courtesy of Anu Yadav)

Donatelli Development won the right to develop public land over two Metro stops after proposing one neighborhood receive a share of the property’s annual rental profit. The other would get 17,000 square feet of shops and restaurants.

Sweetening the deal for D.C.? The developer said no public subsidies were needed.

But years later, the developer scored a 20-year tax break worth millions of dollars. And the other proposed neighborhood benefits weren't delivered.

What was delivered were campaign contributions to D.C. elected officials: more than $69,000 in the past decade, making Donatelli, along with its affiliates, among the top five contributors of 133 groups examined.

Donatelli isn’t alone. A WAMU investigation of 110 D.C. developments that received $1.7 billion in subsidies found:

  • Flaws with benefits pledged for about half
  • A third missed requirements on hiring local businesses, or the city didn’t have paperwork for them
  • Another 15 percent downsized or delayed benefits, costing the city millions in lost revenue and others arguably didn’t need the subsidy in the first place
  • Less than 5 percent of the subsidies approved were for the city’s poorest areas, wards 7 and 8.

“They’re not bringing reinvestment to Anacostia but instead to places like Georgetown, K Street or Chinatown,” said Greg Leroy, executive director of Good Jobs First, an economic subsidies watchdog. “We’ve got to think strategically about where areas really need help. We can’t just think about who is writing the biggest checks."

Developers receiving subsidies are typically required to provide public benefits such as jobs, affordable housing and parks. But the District didn’t track whether many of those benefits materialized. It has been slammed for it in several nationwide studies such as one last year by Pew Charitable Trusts, which found D.C. and 26 states do little or nothing to test the effectiveness of tax incentives to businesses.

“Who is benefiting is the ultimate question,” said Parisa Norouzi, executive director of Empower D.C. “What we’ve seen from a number of these…deals is that the developers are benefiting and the taxpayers certainly are not.”

Columbia Heights deals

As Columbia Heights started transitioning in the late 1990’s, developers saw opportunities.

Two – Donatelli and Grid Properties – became some of the neighborhood’s biggest developers. They’re credited with helping transform 14th St. NW, but few people know how much help the companies received from the city and Council Member Jim Graham, who represents the neighborhood.

At the same time, Graham has benefited from campaign contributions from both companies over the past 10 years. Grid and Donatelli and their families are among his top three contributors of more than 100 developers examined. The companies donated $10,000 and $8,500, respectively.

“Have I been influenced by campaign contributions? Absolutely not and there’s not a shred of evidence that I’m aware of to suggest that I have,” Graham said at an interview in his office last week, adding that many of his contributions are in smaller amounts and from his ward. “I did what I did for sake of the improvement of ward, and look at the product: Go to U Street compared to what it was, go to Columbia Heights, go in fact to Georgia Avenue.”

Tax breaks for Highland Park and Park Place

Twelve years ago, the city had the option of shopping around for a developer to build on public land over the Columbia Heights metro. Graham encouraged the idea of considering an alternate plan by Donatelli, which was called Donatelli & Klein at the time, to build housing.

“D&K are good developers and they have a plan worthy of consideration,” Graham wrote to residents on a community listserv, adding in a follow up message: “This is an effort, one I am very supportive of, to get that discussion going. Otherwise this is dead in the water. We always have the option of a full blown [formal competition], which typically takes 18-24 months to resolve.”

Donatelli won the right to develop the land, but years later had trouble securing financing for the second part of what it called the Highland Park project. Graham was there again to help: He successfully co-sponsored legislation in 2009 granting tax breaks for the two projects over Metro stops. That year, Donatelli donated $4,500 to him — or more than half of what it donated to him over the 10 years examined.

The company “effectively used its political connections to void most community benefits pledged, or got additional city subsidies to pay for any they did provide,” said William Jordan, a neighborhood resident and former Advisory Neighborhood Commission member.

Chris Donatelli, president of Donatelli Development, said he’s never felt pressured to donate to get a deal. “If we’re one of the top contributors, we’re also one of the top developers out there,” he said. “We abide by the rules that were set for us.”

He said the company had paid the city $2.4 million for the Highland Park project and will pay an estimated $1.4 million the next time the property is re-financed or sold.

Donatelli said there wasn’t enough money generated from the Highland Park project for the neighborhood fund but the company voluntarily donated $614,000 to local charities in the past eight years. He said nearly half of the retail space in the other project is filled and the company is working with other potential tenants.

Graham said the projects helped revive the areas, producing jobs and creating new affordable housing units. He said that’s why he supported them. The contributions from Donatelli over the past decade make up less than 2 percent of his total contributions during that time.

A parking lot for D.C. USA mall

Graham said he fought for a subsidy for Grid Properties’ DC USA mall because the proposed anchor, Target, said it couldn’t sign on without a parking lot, which would require help from the city.

But the city’s Chief Financial Officer rejected the idea of a $73 million tax incentive for it.

“It took me the better part of a year to convince the CFO to take a positive attitude on that...proposal,” Graham said.

The hard work paid off: The council passed a measure in 2004, sponsored by Graham, to award the project $42 million in tax increment funding.

DC USA mall
DC USA mall has plenty of big box stores, but lacks the locally owned businesses that were promised. (WAMU Photo by Jared Angle)

The mall is a popular destination, drawing new residents and shoppers to the area. But Grid has only met 10 percent of its goal of leasing 15,000 square feet of the mall’s ground floor to local businesses. The developer also projected up to 1,200 jobs but fell short a year after the mall opened, according city auditor’s report. In 2010, the mall had 725 permanent jobs, mainly D.C. residents, according to Drew Greenwald, president of Grid Properties, the developer.

Greenwald said the parking lot is owned by the city and it has been hard attracting and keeping local businesses, even though Grid offers them discounted rent. He said the company didn’t donate anything when it was competing to develop the property while some of the competing developers donated hefty sums.

“You don’t chase projects by trying to influence people,” Greenwald said. “But after you got a project and you’re building it and it’s going to be a great thing, then people who are helpful to it are certainly people in the future that you want to support their campaigns. I think that makes sense: People have delivered.”

The development had generated $34 million in sales and property taxes as of late last year, Graham said.

Graham said the transformation of Columbia Heights is a testament to the success of financial incentives for developers: “The fact [the new Metro stop] was there was a first huge step, no doubt about it. But without the other financial support occurring, there'd have been no further step, at least not at the pace it happened.”

Local jobs

Jobs are a key benefit of development subsidies, or at least that's the expectation.

“Many of these projects...are sold to taxpayers on the notion that they’ll create lots of jobs for local residents,” said Thomas Cafcas, a senior researcher with Good Jobs First. “We don’t see strong local hiring efforts really taking place.”

The group ranked D.C. last in a study of how well state subsidy programs deliver jobs because unlike many other states, D.C. did not have requirements on how long new jobs should last, what benefits should be provided and how close wages should be to market-rate.

And a 2010 report from the D.C. Auditor’s Office found the city was largely ignoring a rule that subsidized projects hire D.C. residents for 51 percent of its new jobs.

“It’s just been very disheartening because you see all these cranes up in D.C.,” said Kevin Davis. ”You’re not even given a call back to say thanks sir but no thanks.”

Davis is part of a group one of more than 100 D.C. residents who applied for jobs at a city subsidized project more than a year ago. Not one person was contacted.

Davis said he’s been job-hunting again, applying for jobs at 15 construction sites in the past few months, mainly subsidized projects with local hiring requirements. Again, he has heard nothing.

Developers said many D.C. residents aren't qualified or they apply when the companies aren't hiring.

Some D.C. residents said if they are hired, it’s often for just a few weeks – yet it’s still counted toward a developer’s local hiring goal. A law enacted in 2012 aimed to close the loophole, but contractors are suing the city over the law.

Work for local firms
D.C. developments receiving subsidies are also typically required to hire local firms – but it’s another requirement that often doesn’t get enforced.

About 10 percent of 247 public-private developments in the city met or exceeded goals to spend a certain amount – typically 35 percent – of a project’s budget on hiring local firms. That’s according to the D.C. Auditor’s report this year, which also found 68 percent of the projects didn’t even submit the required reports tracking their progress.

Even when developers hire local firms – called certified business enterprises – several newspapers have found problems with them: For instance, in some cases, they’re considered shell companies created by a large developer.

“A lot of these projects, from what they reported, have not met their CBE goal,” said Deputy City Auditor Lawrence Perry, adding his office has been unable to get information about which projects have ended, costing the city millions of dollars in potential penalties.

Officials with the agency responsible for overseeing CBE goals – Department of Small and Local Business Development – said it hasn’t imposed fines, but it plans to beef up its enforcement and compliance staff this year from one to as many as ten.

Affordable Housing

Developers receiving subsidies often promise affordable housing units but the city didn’t start trying to track and verify them until recently, according to housing advocates.

“It is still a challenge,” said Cheryl Cort, policy director of the Coalition for Smarter Growth, a group that advocates for efficient and inclusive land use. She said problems include requirements that varied from one project to the next and “severe understaffing” at the city’s housing department. “There’s just a couple of people doing that, trying to track these” units.

A public records request to the agency, the Department of Housing and Community Development, resulted in information on how many units developers were supposed to provide – not the current, actual units being provided.

In some cases, housing that met goals – and was affordable at the outset – quickly became the opposite.

For instance, at the City Vista project in Mount Vernon Triangle, renters have complained about monthly fees – for water, storage, trash and parking – because they were imposed or raised after the residents moved in.

“Parking went up from $100 to $200. Now for a low-income person, a hundred bucks is a lot of money,” said Empower DC’s Johnny Barnes, who advocated for renters at the City Vista apartments in Mount Vernon Triangle.

"We see few promises actually delivered and when it comes to affordable housing, of course, we always have to ask affordable for who?" said Parisa Norouzi, executive director of Empower DC.

Capper Carrollsburg residents uprooted
Promises at the Arthur Capper and Carrollsburg public housing complex in Southeast D.C. go back more than a decade.

When developers wanted to rebuild the area, they said the complex’s 707 public housing units would be replaced one-for-one, there’d be a state-of the-art recreation center with a daycare, and 50 families would get to actually buy homes with help from federal funds, according to the development’s 2001 application for funding from the Department of Housing and Urban Development.

But after more than 10 years — and $90 million in government subsidies — half of the public housing units have been replaced, and a fifth of the former families are back. There’s no community center to replace the one torn down years ago. And three low-income families purchased homes with federal vouchers, not 50.

What is there now, among other things, are million dollar homes and parking lots for the baseball stadium nearby.

“When they boarded that place up they said you all are the first people to come back here but that’s not true,” said Ronald Jackson one of the 190 people and families on the waiting list to return. “They’re not getting in touch with you. You call them up [and they say] ‘Sorry, you’re on the waiting list.’ That’s what I keep hearing.”

Some residents said the problem is simple: They’ve been priced out. Public housing residents typically pay 30 percent of their income on rent but more than two-thirds of Capper Carrollsburg’s rebuilt public housing units having restrictions on them: they’re either for seniors or there’s a preference for people working and making between 30 percent to 60 percent of the area’s average income.

Former Capper Carrollsburg residents earned a far smaller percentage of the area’s median income, according to the 2001 HUD application.

Kivette Abraham, who lived in the complex all her life, was a contender for one of the low-income for-sale units. She was even showcased in marketing materials and spoke at a 2007 groundbreaking ceremony.

As it turned out, she lost her job and though she landed another one a few months later, she said it was too late. She couldn’t afford to buy.

Abraham said an instructor at the developers’ home buying workshop predicted that: “We were told we would not be able to afford the homes, that we were really being duped…Somewhere along the way, I’m not sure if the facilitators felt a little guilty or didn’t want to dupe people into believing they would qualify. They just simply got honest.”

A D.C. Housing Authority official, which led the redevelopment, said that wasn’t true: Five former Capper Carrollsburg residents qualified but chose not to buy. Abraham now rents in the redeveloped complex.

The project’s private developers — Forest City and Urban Atlantic — noted the tax-related city subsidy paid mainly for public infrastructure such as streets and sewers.

Adrianne Todman, executive director of the Housing Authority, said it has been hard to get all the money needed to build so much affordable housing, especially as the recession hit.

“It is very hard to do and I don’t see anybody else necessarily in our general area in the DC region doing that,” said Todman. She said the developers plan to start construction this year on another building with 39 public housing units and the community center “is going to happen. It’s taken a minute because like all things around here, things take time and money.”

Money apparently wasn’t a problem for the project’s private developers, at least when it came to donating to political campaigns.

For instance, Forest City and its affiliated individuals are the top donor of 133 groups examined.

The company, along with its employees and family members, donated more in 2006 than it has over the past decade. That’s when two of its projects — including Capper Carrollsburg — scored a combined $145 million in subsidies. It’s also the year the company snagged Alex Nyhan — vice president of development – from his former job overseeing similar subsidized deals in the mayor’s office.

Forest City chartForest City chart

Critics say the “revolving door” between government and certain industries can give companies unfair access.

Nyhan said the relationships didn’t help: “I’m not sure I would say it’s really relationships because of course, there’s been a lot of turnover since I was there.”

But in 2006, city development officials he worked closely with months earlier – including someone he attended graduate school with – pushed subsidies for Forest City at city meetings.

Nyhan said his experience at the city gave him an understanding of how private companies can partner with the governments to do mutually beneficial projects. Nyhan said he personally donates because he wants “his voice heard” in local politics. He chalked up the 2006 campaign cash to it being a big election year.

He said the redevelopment achieved its goal of creating a vibrant, a mixed-use community, in place of a downtrodden area. He added that the company didn’t directly benefit from the subsidy since it paid for infrastructure: “It’s literally to build sidewalks so people of all backgrounds can live in new houses together.”

There’s no denying the neighborhood looks better now. There are colorful row houses and serene waterfront vistas.

Olena Oliphant, a former resident who’s back, will tell you that. But it’s the other changes that bother her: There’s no longer a recreation center to hold community events or meetings. No porches to chit chat over coffee. No backyards for children to play in.

“We don’t hear children anymore in our neighborhood, playing and laughing and jumping rope and playing ball,” she said.

The silence – or near-silence – seems to tell the story of the community’s loss.

This post was updated at 1:15 p.m. to reflect the fraction of Council Member Jim Graham's campaign contributions from Donatelli Development.

Audio production assistance provided by Kavitha Cardoza/WAMU and audio of Capper Carrollsburg's children chanting courtesy of Anu Yadav.


Manic And Depressed, 'I Didn't Like Who I Was,' Says Comic Chris Gethard

Gethard tells stories of hitting rock bottom in his new one-man off-Broadway show, which is billed as a comedy about "suicide, depression, alcoholism and all the other funniest parts of life."

2,500 Years Ago, This Brew Was Buried With The Dead; A Brewery Has Revived It

In an ancient burial plot in what is now Germany, scientists uncovered a cauldron with remnants of an alcoholic beverage. They teamed up with a Milwaukee brewery to re-create the recipe.

White House Releases Affordable Care Act Insurance Rates

The White House released information Monday about rates and offerings for the 2017 Affordable Care Act Open Enrollment.

20 Years Later, Humans Still No Match For Computers On The Chessboard

IBM's Deep Blue beat chess great Garry Kasparov in 1997. Humans and computers play the game differently, but have computers taught humans much about the game?

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.