<DOC>
[107th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:84599.wais]
ECONOMIC DEVELOPMENT IN THE DISTRICT OF COLUMBIA: THE ROLE OF THE
NATIONAL CAPITAL REVITALIZATION CORP.
=======================================================================
HEARING
before the
SUBCOMMITTEE ON THE DISTRICT OF COLUMBIA
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
MARCH 8, 2002
__________
Serial No. 107-154
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
_______
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COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California PATSY T. MINK, Hawaii
JOHN L. MICA, Florida CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania THOMAS H. ALLEN, Maine
DAVE WELDON, Florida JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia ------
JOHN J. DUNCAN, Jr., Tennessee BERNARD SANDERS, Vermont
------ ------ (Independent)
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Chief Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on the District of Columbia
CONSTANCE A. MORELLA, Maryland, Chairman
TODD RUSSELL PLATTS, Pennsylvania ELEANOR HOLMES NORTON, Washington,
THOMAS M. DAVIS, Virginia, DC
------ ------ DIANE E. WATSON, California
STEPHEN F. LYNCH, Massachusetts
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Russell Smith, Staff Director
Howie Denis, Professional Staff Member
Matthew Batt, Clerk
Jon Bouker, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on March 8, 2002.................................... 1
Statement of:
Heller, Rod, chairman, Board of the National Capital
Revitalization Corp.; Elinor Bacon, National Capital
Revitalization Corp.; Eric Price, deputy mayor for economic
development, District of Columbia government; Donald Carey
Williams, regional administrator, the National Capital
Region; Shabbir Safdar, chair of D.C. Public Affairs
Committee of the Greater Washington Board of Trade; Nelson
Bregon, Deputy Assistant Secretary for Grant Programs,
Office of Community Planning and Development, U.S.
Department of Housing and Urban Development; Ronald J.
Herbert, Director, Community Planning and Development
Division, HUD; and Richard J. Kennedy, Director, Office of
Block Grant Assistance at HUD.............................. 8
Letters, statements, etc., submitted for the record by:
Bacon, Elinor, National Capital Revitalization Corp.,
prepared statement of...................................... 16
Bregon, Nelson, Deputy Assistant Secretary for Grant
Programs, Office of Community Planning and Development,
U.S. Department of Housing and Urban Development, prepared
statement of............................................... 60
Heller, Rod, chairman, Board of the National Capital
Revitalization Corp., prepared statement of................ 11
Norton, Hon. Eleanor Holmes, a Delegate in Congress from the
District of Columbia, prepared statement of................ 5
Price, Eric, deputy mayor for economic development, District
of Columbia government, prepared statement of.............. 28
Safdar, Shabbir, chair of D.C. Public Affairs Committee of
the Greater Washington Board of Trade, prepared statement
of......................................................... 50
Williams, Donald Carey, regional administrator, the National
Capital Region, prepared statement of...................... 36
ECONOMIC DEVELOPMENT IN THE DISTRICT OF COLUMBIA: THE ROLE OF THE
NATIONAL CAPITAL REVITALIZATION CORP.
----------
FRIDAY, MARCH 8, 2002
House of Representatives,
Subcommittee on the District of Columbia,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:06 a.m., in
room 2154, Rayburn House Office Building, Hon. Constance A.
Morella (chairwoman of the subcommittee) presiding.
Present: Representatives Morella and Norton.
Staff present: Russell Smith, staff director; Heea
Vazirani-Fales, counsel; Robert White, communications director;
Matthew Batt, clerk/legislative assistant; Howie Denis,
professional staff member (Davis); Jon Bouker, minority
counsel; and Jean Gosa, minority assistant clerk.
Ms. Morella. Good morning. I'm going to call this
Subcommittee of the District of Columbia to order for the
purpose of convening a hearing on economic development in the
District of Columbia, the role of the National Capital
Revitalization Corp.
It is a pleasure to welcome all of you here today. I
certainly want to make mention of our witnesses, all who have
impeccable credentials and are dedicated to improving the
economic vitality of our Nation.
You know it has been 4 years since the District of Columbia
established the National Capital Revitalization Corp., and at
the time of the NCRC's creation the District was mired in
financial chaos. Redeveloping vacant or rundown properties was
seen as one way to help the District rebound and stand on solid
economic footing for the long term.
Well, the District has certainly emerged, and now NCRC is
poised to begin the transformation of some key properties and
projects in the District. The Federal Government, of course,
gave the NCRC $25 million in seed money, a welcome sign that
the Federal Government was willing to make a substantial
contribution to the betterment of the Nation's Capital. Today
we are going to examine what is being done and what is planned
with that money.
There has been a good deal of excitement about the newly
released plan for the Southwest waterfront, and I'm sure we
will be talking about that proposal in depth as well as plans
for the St. Elizabeth's campus, Georgia Avenue gateway and
other projects.
Revitalization is certainly critical for the District, and
as I've said many times since taking over as chair of the
subcommittee, the District must have three things in order to
ensure its long term economic stability. It must have strong
schools, low crime, and vibrant, affordable neighborhoods. I
think a lot of times we overlook the housing and neighborhood
aspect of bringing the city back. Without affordable places to
live, the District will not be able to grow its middle class.
And we've seen from the recent tax assessments how quickly
popular areas of the city can go from affordable to expensive
for young families.
Commercial redevelopment is equally important. One of the
great success stories of the past few years in the District has
been the use of tax credits, and other incentives to spur
development enterprise zones.
As we talk about reauthorizing this legislation in the very
near future, I believe we should strongly consider extending
the enterprise zone designation to the entire District of
Columbia. I see no reason why this program shouldn't be used to
benefit the entire city.
Finally, the second part of today's hearing will examine
the Federal and District Governments' roles in overseeing money
spent by nonprofit community development corporations in the
city. A recent series in the Washington Post that I know you
have read and have reacted to went into great detail about
wasteful spending and lack of meaningful progress toward
completing projects on behalf of some, not all, but some of
these groups. I know I was shocked to read it. About $100
million of Federal and local money has been allocated in recent
years to these CDCs and it is clear that not enough oversight
has been done in making sure these groups are using the money
wisely. It is very frustrating for those of us in Congress to
repeatedly learn of wasted opportunities and squandered
resources in the District, particularly at a time when city
leaders are trying to make the case that the District of
Columbia needs more Federal assistance to remain economically
viable.
So I thank you all for being here, and I would now
recognize the distinguished ranking member, Congresswoman
Eleanor Holmes Norton.
Ms. Norton. Thank you, Mrs. Morella. I want to thank our
chair, Congresswoman Morella, for this hearing that focuses on
the National Capital Revitalization Corp. as part of our D.C.
Revitalization Act passed by Congress in 1997. However, we had
to put in considerable further effort to get a provision
through Congress, and finally in fiscal year 2000, Congress
appropriated $25 million in startup capital for the NCRC as
passed by the City Council. In addition, Fannie Mae pledged $75
million in debt and equity financing for housing.
At the press conference introducing the initial four
members appointed by the mayor and three appointed by the
President, I remember cautioning that considering the long-
standing systemic problems the District had had in mounting
successful economic development projects, what mattered was for
the NCRC to show that it could produce tangible results. Nearly
2 years later, it is fair to ask what has been accomplished
thus far. Now that the NCRC has passed its startup phase, we
also will be interested in what the corporation can
realistically be expected to achieve in both the short and long
term.
Many residents who celebrated the coming of the NCRC are
confused and concerned about recent reports of deep troubles in
parallel neighborhood development organizations, the Community
Development Corp. [CDCs]. Of course, the CDCs are not a part of
the NCRC.
However, the point of establishing a professionalized
development corporation was to bring cohesion to economic
development activities in the city. We need to learn how the
city means to achieve cohesive and effective economic
development with a set of very different institutions,
apparently held to different standards. How did the city come
to have a $100 million economic development problem today and
what is it doing about it, and how it will keep it from
happening again if those institutions remain as they are?
Because Department of Housing and Urban Development, or
HUD, money is involved, another subcommittee of the House has
already asked for a briefing. This is entirely appropriate.
However, the D.C. Subcommittee has direct jurisdiction and will
be asking the appropriate questions today and following through
until satisfied that the CDC problems are under control. I hope
that other committees that do not have direct jurisdiction will
first allow us to perform our oversight with respect to the
Federal funds, and, out of respect for home rule, allow the
D.C. City Council to perform its own oversight of the
District's economic development apparatus and to take the
anticipated corrective action.
It should be noted that the problems in the CDCs were
uncovered in the District by the city's own inspector general
and that he had done an extensive investigation and prepared a
report and had done so before press reports of the problem
appeared.
Further, Mayor Williams has indicated that he intends to
take back properties from the CDCs if he does not see immediate
tangible results, and the City Council will hold a series of
hearings beginning on March 14th. This unapologetic response
from the city is a departure from old patterns, is typical of
the Williams administration and the City Council today, and is
exactly what for years the Congress has admonished the District
to do. I hope that Congress reinforces the District and home
rule when the city takes effective and aggressive action to
come to grips with its own problems.
I spend a great deal of my own time on economic development
for the District and, whenever appropriate, seek to marry the
advantages of the Federal presence as an engine for economic
development to the needs of the District. As a member of the
subcommittee of basic jurisdiction, the Subcommittee on
Economic Development, Public Buildings, and Energy Management,
I have had to fight to keep Federal agencies and jobs in the
District, such as the Security and Exchange Commission and the
Bureau of Alcohol, Tobacco and Firearms, both buildings now
going up, and both spurring economic development in blighted
areas of the city. The most important of these efforts has been
my legislation, Public Law 106-407, the Southeast Federal
Center Public-Private Development Act, which will bring private
sector development to 55 acres of very valuable Federal land
that had been allowed to go to waste by the Federal Government
and spur blight for 30 years. The request for proposals to
develop this entire 55-acre site near the Anacostia River with
a mixture of uses will go out this month.
Moreover, recently the General Services Administration
announced that the new Department of Transportation
headquarters, the largest single Federal construction project
in the District since the massive Ronald Reagan Building, will
be built at the Southeast Federal Center.
With the development of the DOT at the Southeast Federal
Center will come jobs for D.C. residents and the synergy of
private development in mixed use housing, amenities, and
amusements.
I particularly appreciate how the majority has worked with
me to get valuable economic development tax incentives for
economic development in the District. With my allies in the
Senate, including Senator Trent Lott, Senator Joe Lieberman and
former Senator Connie Mack, we achieved several D.C.-only
Federal tax breaks passed in 1997, including a $3,000 wage
credit for every D.C. resident employed, zero capital gains
taxation, $15 million in tax-exempt bonds and increased
business property expensing. Although the Congress limited the
use of these benefits to neighborhoods in certain zones, these
credits are liberally available in every ward of the city and
downtown, and have been responsible for much of the
construction boom in the District.
In another D.C.-only tax benefit, the $5,000 home buyer
credit has been so popular that, when passed, it immediately
made D.C. first in home sales growth in the Nation. Since then
it has been a major factor in reversing the flight of D.C.
residents from the city. As a result, for the first time in
decades, the District's population is in equilibrium, the first
city in the United States to stop the flight of residents to
the suburbs.
I particularly appreciate how Speaker Dennis Hastert has
worked with me to extend both the business tax benefits and the
home buyer credit. The Speaker and I have agreed orally and in
writing that he will help me extend the credits when they are
due to expire at the end of 2003. I am also seeking to extend
the D.C. tax credit enterprise zone citywide, as the Chair has
just remarked. The zone approach, as she indicates, in a city
of this limited size, is inappropriate. It has had irrational
results favoring businesses in some neighborhoods over similar
businesses in similar neighborhoods.
The District must achieve more benefits and more revenue
from more vigorous and targeted economic development. We must
all work together to ensure that all the District's economic
development machinery is effective. Residents and local
businesses have a right to expect substantial benefits not only
from the NCRC, but if the District chooses to have a similar
neighborhood structure such as CDCs, they must be held to the
same high standards.
I welcome today's witnesses and look forward to their
testimony. Thank you, Madam Chair.
[The prepared statement of Hon. Eleanor Holmes Norton
follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mrs. Morella. Thank you, Congresswoman Norton, and thanks
for the work you have consistently done through the years and
continue to do for our Nation's Capital.
I am now very pleased to have before us our very
distinguished panel of witnesses: Rod Heller, Chairman of the
Board of the National Capital Revitalization Corp., accompanied
by Elinor Bacon of the National Capital Revitalization Corp.,
and Eric Price, Deputy Mayor for Economic Development, District
of Columbia Government, Donald Carey Williams, Regional
Administrator, the National Capital Region, Shabbir Safdar,
chair of the D.C. Public Affairs Committee of the Greater
Washington Board of Trade, and Nelson Bregon, Deputy Assistant
Secretary for Grant Programs, the Office of Community Planning
and Development of the U.S. Department of Housing and Urban
Development.
I am going to ask you as it is the policy of this
subcommittee and all committees, if you would stand to be sworn
in. I would ask, joining you to stand for the oath, Stan
Jackson and Michael Hodge, if they are here. Great. So if you
would raise your right hands. I'm going to add a few more to
this list. I'm going to add Ronald J. Herbert, who is the
Director of Community Planning and Development Division of HUD,
and Richard J. Kennedy, Director of the Office of Block Grant
Assistance at HUD. So if you would raise your right hand.
[Witnesses sworn.]
Mrs. Morella. Thank you. The record will demonstrate an
affirmative response by all of you.
So I am very pleased to have you here, as I've said, and
we'll get started. What we traditionally try to do is to ask
each of you to not expand the 5-minute limit, remembering that
your entire testimony will be in the record in its entirety,
and therefore we'll have a chance to ask questions of you. So
we'll start off then, Mr. Rod Heller, as I mentioned, who
chairs the board of the National Capital Revitalization Corp.
Thank you, Mr. Heller.
STATEMENTS OF ROD HELLER, CHAIRMAN, BOARD OF THE NATIONAL
CAPITAL REVITALIZATION CORP., ACCOMPANIED BY ELINOR BACON,
NATIONAL CAPITAL REVITALIZATION CORP.; ERIC PRICE, DEPUTY MAYOR
FOR ECONOMIC DEVELOPMENT, DISTRICT OF COLUMBIA GOVERNMENT;
DONALD CAREY WILLIAMS, REGIONAL ADMINISTRATOR, THE NATIONAL
CAPITAL REGION; SHABBIR SAFDAR, CHAIR OF D.C. PUBLIC AFFAIRS
COMMITTEE OF THE GREATER WASHINGTON BOARD OF TRADE; NELSON
BREGON, DEPUTY ASSISTANT SECRETARY FOR GRANT PROGRAMS, OFFICE
OF COMMUNITY PLANNING AND DEVELOPMENT, U.S. DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT; RONALD J. HERBERT, DIRECTOR,
COMMUNITY PLANNING AND DEVELOPMENT DIVISION, HUD; AND RICHARD
J. KENNEDY, DIRECTOR, OFFICE OF BLOCK GRANT ASSISTANCE AT HUD
Mr. Heller. Good morning, Chairperson Morella, Ranking
Member Norton. We are delighted to be here. My name is Roderick
Heller. I am chairman of NCRC. We have submitted a prepared
statement, but I would like to emphasize four points for the
benefit of the committee.
First, as the ranking member indicated, our board was sworn
in on July 15, 2000. Thus we have been in place approximately
18 months. I think it is fair to say that the status of NCRC is
now of an entity already established and moving forward.
Indeed, as Congressperson--Chairperson stated, poised to move
forward aggressively.
We received on January 15th of this year the RLA portfolio
of 88 properties with an assessed value of approximately $600
million, to add to the approximate $80 million of capital to
which the ranking member referred. Thus I think at the present
time we have a capital base which enables us to balance the
business development and related objectives of NCRC with the
real estate objectives of the RLA portfolio.
Second, our goal--and indeed I remember well the ranking
member's reference when we were sworn in several years ago that
we would be judged by action. Our goal is not to engage in
studies or comprehensive planning but to implement programs
quickly and efficiently and to try to bring private sector
objectives. As an example of what we're trying to do, I would
like to refer you to the first award our board has made under
the RLA program, that is the designation of a group led by
Horning Brothers for the wax museum site at 5th and K. We
imposed--and I believe this is the first time certainly in the
District and one of the first times nationally--a series of
conditions on the developer which included not only completion
of the project within a certain time and letter of credit
guaranty of project completion, but also a participation
sharing such that NCRC and the District generally will benefit
if the developer over a certain time achieves returns in excess
of 12, 15 and 20 percent. And we expect to follow that kind of
program to ensure that District land is always used not only to
the benefit of the developer, but to the District as well.
Third, I would like to emphasize again a statement that the
ranking member made. In talking with many people who have been
long observers of the District economic development scene,
constant reference is made to the dissipation and fragmentation
of the economic development approach. We have too many entities
engaged in too many fragmented initiatives. What NCRC hopes to
achieve is to become a center of excellence to which people
will turn as economic questions arise and to become a group
that will be able to move quickly and effectively. We recognize
that this is not going to be handed to us on a platter. We have
to earn the reputation as a center of excellence. We must
demonstrate in our programs and our actions that we are an
entity that can get things done and achieve the economic
development goals of the city.
Last, I would like to refer to the tax incentives that were
passed in 1997 to which the ranking member referred. My
background personally is that of a lawyer and a participant in
business turn-arounds for the last 20 years. I have been long
enthusiastic about several of the components in that tax
program, and particularly, the waiver of capital gains taxes
for enterprises established which conduct most of their
businesses within certain areas of the District. That program
has not been used to its fullest, but it offers enormous
potential, I believe, for attracting the kind of business
activity that we need in this city. And we look forward at NCRC
to working with members of this House in carrying that forward.
With that background, I now turn to Elinor Bacon, the chief
executive officer of NCRC, who will describe what we have been
doing and what we hope to achieve.
[The prepared statement of Mr. Heller follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Bacon. Thank you, Mr. Heller. Good morning, Chairman
Morella and Ranking Member Norton. My name is Elinor Bacon. I
am the president and chief executive officer of the National
Capital Revitalization Corp. I would like to thank you for this
opportunity to present testimony this morning. This is the
first time the NCRC has appeared before your committee since
its establishment, and we thank you for this honor and this
opportunity to discuss NCRC's role in the economic development
of the District of Columbia.
In my testimony today I would like to summarize four areas:
Our mission; what we have accomplished to date; our plans for
the foreseeable future; and how our work strengthens and
complements the work of my esteemed colleagues here today.
NCRC was established by an act of the council of the
District of Columbia in 1998. It is an independent corporate
instrumentality. We are charged with a specific mission, that
of spurring economic development throughout the District and
creating jobs for District residents through real estate
development, business development and finance, and jobs
creation.
We focus our resources on the District's neighborhoods and
in particular those areas that have been underserved, such as
the areas east of the Anacostia River and across and along the
Georgia Avenue corridor. Our map up here shows our priority
areas, which include Columbia Heights, Georgia Avenue, the
Howard-Shaw area, NoMa, H Street, Southeast Washington, east of
the river, Buzzards Point and the Southwest waterfront.
In all our development activity, we work in close
connection with Deputy Mayor Eric Price and his staff,
including Andrew Altman, who heads the exemplary Office of
Planning. The planners plan, we implement. We work closely
together so the plans they develop are plans that we can move
forward.
In addition to our cooperative relationship with the
District's planners, we also work closely with the National
Capital Planning Commission.
Partnerships with other District and Federal agencies and
local and regional organizations, including those represented
here today, are critical to ensure that our collective efforts
to promote job training, economic development and real estate
development throughout the District are well coordinated.
With regard to our Federal partners, we are in discussion
about our mutual goals and possible cooperative efforts with
the General Services Administration. Currently we are engaged
in complementary development efforts in the Southeast, such as
the Southeast Federal Center as Capper Carlsburg redevelopment.
And as NCRC establishes a track record and its expertise
increases, we look forward to continuing our dialog about other
opportunities.
With regard to our funding, as you mentioned, we received a
$25 million appropriation. We do not receive operating funds.
To help us become self-sustaining, NCRC was given the power of
eminent domain with council approval and the authority to raise
capital through the sale of bonds. We can also receive
contributions of funds, property and other assets, and we
intend to earn fees from financing development management and
service programs.
We also received a commitment of $75 million from Fannie
Mae, as mentioned. We are thrilled by the Federal commitment
which demonstrates the strength of this unique Federal city
partnership to improve the economic health of the District, and
by the Fannie Mae commitment, the only one of its size and
scope in the Nation.
Let me take a moment to thank you, Chairman Morella, for
your leadership and your keen interest in economic development
in the District and your support for NCRC's efforts. We
tremendously appreciate your support. And we also want to thank
Ranking Member Norton for all of her help, and she has been a
staunch advocate in the District in so many aspects of economic
development.
As you are aware, NCRC's priority areas include the
enterprise zones and the range of benefits which you mentioned
included in the Taxpayer Relief Act are key to the success of
our efforts. For example, several of the developers who are
competing for our site at 5th and K Streets included enterprise
zone tax bonds--or tax enterprise zone bonds in their financing
packages. We would hope that this act would be continued and
extended districtwide since it is a vital tool in our economic
development tool box.
We greatly appreciate our partnership with all the branches
of the Federal Government. The Federal Government is critical
to our mission of building our capital city. In NCRC's first
year, we have accomplished a great deal. First, we completed,
secured approval of our organizational documents and policies.
We got the organization up and running by securing space,
professional staff and support, and putting systems into place.
And finally we actually launched our economic development
activities.
Some of our programmatic accomplishments include the
following: First, in connection with the proposed redevelopment
of the Southwest Waterfront, NCRC acquired the leasehold
interest in the Gangplank Marina with half of the funding
provided by the District. As you will recall, Congresswoman
Morella and Delegate Norton, you participated in the exciting
event last spring when Mayor Williams announced the Anacostia
waterfront initiative at a meeting of more than 500 people in
Southwest Washington,a comprehensive effort to plan for the
redevelopment of our beautiful but underutilized waterfront.
The primary purpose of our acquiring the leasehold interest
was to have a seat at the table in moving the redevelopment
forward. We have wonderful assets in the Southwest such as the
fish market, as you well know, a Federal lease. We want to
build these assets to make a waterfront which is a wonderful
neighborhood and destination for District residents and
visitors. Here is the fish market and our initial plan for what
we hope we will be able to do there. And also an artist's
rendering of what our concept is of what it could be.
We also have been working diligently with the Hillcrest
community east of the Anacostia River. The rendering of what
the artist sees that the Southwest could look like. We have
been working diligently with the Hillcrest community east of
the river in support of Mayor Williams and council member
Chavous on the community's effort to transform an
underdeveloped shopping center called Skyland of potentially 16
acres to a vibrant retail center that would reflect the
demographics of the area.
With regard to business development, we hired a long time
District leader in the field of business development, Mr. Kwasi
Holman, and he is working to develop a program which should be
done--a plan for which will be done in the next couple of
months.
In January, we announced an agreement with the three
District-based community banks to put money into the three
banks, which include Adams National Bank, City First Bank of
D.C., and Independence Federal Savings Bank. These deposits
will allow these banks to spur economic development in
underserved neighborhoods.
We also assumed, as Mr. Heller mentioned, the powers and
the responsibilities of the board of the Redevelopment Land
Authority transferred to NCRC as well as its assets. And the
first development that we are working on is the transformation
of the wax museum site at 5th and K. And here you can see a
before picture of what it looks like now, and an artist's
rendering of what is planned to go there.
We are very pleased with our progress, but we fully
recognize there is much more to accomplish. We are tackling our
challenges day by day and moving forward with deliberate speed.
We have launched into a strategic planning process that we
intend to complete within the next few months which includes
developing a plan for self-sufficiency and long range
programmatic plans for the next 3 to 5 years.
During our first year, we believe we established an
excellent working relationship with our many partners and our
stakeholders. We genuinely value these relationships as
critical to our success and we appreciate the support and
cooperation we have received. We know that our partners and
stakeholders have high expectations and the NCRC and our LARC
board and staff are fully committed to meeting and exceeding
these expectations.
Mr. Heller and I will welcome your questions. Thank you.
[The prepared statement of Ms. Bacon follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mrs. Morella. Thank you very much, Ms. Bacon, for that very
extensive testimony. I note that you have more even in the
written testimony that you have submitted.
I am pleased to recognize Eric Price, the Deputy Mayor for
Economic Development for the District of Columbia.
Mr. Price. Good morning, Chairwoman Morella, Ranking Member
Norton. My name is Eric Price and I am the Deputy Mayor for
Planning and Economic Development in the District of Columbia.
I also serve as the representative for Mayor Anthony Williams
on the board of directors of the National Capital
Revitalization Corp.
One of my primary tasks upon being appointed by Mayor
Williams in October 1999 was to make the NCRC operational. I am
pleased to come before you today to report on those efforts and
how NCRC fits into the mayor's overall economic development
strategy for Washington, DC.
Because the subcommittee's hearing notice also requested
information about the District's current enterprise zone laws,
I am accompanied today by Michael Hodge, the director of the
Industrial Revenue Bond program. Mr. Hodge is the point person
in my office with respect to economic development incentives
that were included in the District of Columbia Revitalization
Act and Taxpayer Relief Act of 1997. We believe that these
incentives, including the enterprise zone benefits and the home
buyer tax credit, have been very successful and I want to thank
Ms. Norton in particular, as well as other Members of Congress,
for enacting these important economic development initiatives.
On behalf of Mayor Williams, I ask Congress to extend these
incentives which are set to expire at the end of 2003 and make
enterprise zone citywide. Mr. Hodge will address these matters
in more detail on questions.
Because Mr. Heller and Ms. Bacon talked about NCRC
operational matters, I will skip that part of my testimony. I
will talk about where they are operationally, and I am going to
go straight to NCRC in the context of the District's economic
development structure.
As we know, the vision was for the entity that would
operate more like a private sector with fewer of the many
constraints of government but still consistent with economic
development and policies and planning developed with
significant local government and community input. It is
important to note that when the council first passed the NCRC
Act in 1998, the economic fortunes of the District were very
different than they are today. The District was in the third
year of the control board. Years of budgetary retrenchment have
weakened or decimated the District's government, planning,
business, regulatory, and economic development apparatus. There
was a real and perceived reduction of executive branch
leadership on economic development issues. And in such an
environment it is understandable that the District government
would seek to create an expansive new entity to focus on
economic revitalization. Then, as now, economic revitalization
remains critical to all our hopes and aspirations for the
District. A strong tax base, with all that means for enhanced
home rule and real self-determination, schools with the
resources to prepare our students for an ever more competitive
world, neighborhoods that are reborn with new and rehabilitated
housing, and commercial activity offering opportunity to long
time residents and newcomers as well.
The environment in which NCRC operates today, however, is
much different, although the need for it remains the same.
Working with the council, Mayor Williams is reinvigorating the
operations of the District government. We have significantly
rebuilt the Office of Planning and improved the delivery of
services to businesses and residents. The mayor and the
executive branch are fully engaged and working hard to attract
new businesses from technology companies to retailers and to
provide opportunities for existing businesses to expand and
prosper.
The business community is responding by investing over $12
billion in development capital in the District of Columbia.
Forbes, Fortune and Black Enterprise magazines have all touted
the economic renaissance now under way. Yet the long term
economic future of the District is uncertain and much work
remains. As the mayor, chief financial officer, Nat Gandhi, and
Representative Norton have all said, constraints imposed upon
the District's ability to benefit fully from the economic
activity generated within our borders places the District one
financial emergency away from physical calamity. I hope that
sooner rather than later Congress will review and direct these
structural impediments to the District's long term financial
health.
In the meantime, I believe that NCRC will play an important
role in helping us to accomplish the work that still must be
done. I meet with Elinor Bacon on average at least once a week
and she or a member of my staff attends my regular interagency
meetings on housing and business development. NCRC is present
at the table when the mayor convenes his monthly meetings with
the entire economic development cluster. NCRC is a full and
important component of that cluster, which includes the Office
of Planning, the Department of Housing and Community
Development, the Department of Employment Services, and the
Department of Consumer Regulatory Affairs, as well as several
others. Because its charter is so broad and demand is so great,
NCRC runs the risk of becoming involved in everything and
accomplishing very little. The mayor and board have expressed a
desire for NCRC to achieve tangible results as quickly as
possible, to work closely with but not duplicate the work that
other District agencies--the work of other District agencies,
and for the corporation's business plan to complement the
District's economic development initiatives and objectives as
established by the mayor and council.
Mayor Williams believes that NCRC can be most hopeful and
effective by serving as a focused entrepreneurial real estate
company that works with the District government to implement
significant real estate projects that strengthen the District's
economic base.
The corporation should also stand ready to provide other
agencies such as the Department of Housing and Community
Development with high quality transactional and asset
management services for parcels owned, leased, or financed by
the District. For its part, the District has transferred to
NCRC the portfolio of the former Redevelopment Land Agency, and
already NCRC has moved to expedite the disposition of long-held
District parcels such as the old wax museum site, as referred
to by Elinor Bacon.
In closing, I hope that you will agree that NCRC is now
poised to make a real impact on the future development of the
District. NCRC has the support of the mayor and council. The
support of Congress and the President will also be required as
the corporation matures and takes on new tasks. We appreciate
the important partnership that has been established between the
Federal and District governments in creating NCRC and look
forward to the many things we can do together to build the
Nation's capital.
I want to thank you, Chairwoman Morella and Congresswoman
Norton, for your interest in and support of the District's
economic development efforts. Thank you.
[The prepared statement of Mr. Price follows:]
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Mrs. Morella. Thank you, Mr. Price. I am now pleased to
turn the microphone over to Donald Carey Williams, regional
administrator for the National Capital Region. Thanks, Mr.
Williams.
Mr. Williams. Thank you, Chairwoman Morella, Ranking Member
Norton. My name is Donald C. Williams, the regional
administrator for the General Services Administration's
National Capital Region. I have a pretty bad cold, but I am
pleased to be with you today and have the opportunity to
discuss the impact that GSA, through the work of the National
Capital Region, has on the economic development of the District
of Columbia.
As the largest real estate management organization in the
Washington metropolitan area, NCR manages over 49 million
square feet office and other space used in the District of
Columbia, of which one-third of that space is leased directly
from the commercial marketplace.
The economic impact of NCR's real property activity is far-
reaching. Currently new construction activities total over $213
million in the District of Columbia alone. One project provides
a signature building as well as a gateway to the District on
New York Avenue in the Bureau of Alcohol, Tobacco and Firearms
headquarters that Congresswoman Norton spoke of earlier.
The region's leasing activity has a significant impact on
the local office market as about 10 percent of lease space
expires each year. Additionally, NCR typically spends about $1
billion annually on lease payments.
NCR's proudest heritage is our historic inventory of
buildings in Washington, DC. Many of these buildings are well
over 50 years old and now only being renovated for the first
time since built. Currently GSA is spending $1.6 billion in the
District, including renovations of the Department of Justice
and Eisenhower Executive Office buildings. We take our
stewardship of these historic structures very seriously.
NCR has over 15 years of experience in working with
alternative approaches to major redevelopment projects such as
the completion of the Pennsylvania Avenue Development Corp.
work here in the District of Columbia. Therefore we recognize
the potential of working with the National Capital
Revitalization Corp. and some of the projects here in the
District that may interact with GSA.
In our more traditional role as Federal real estate
manager, NCR's work is also an important catalyst to the area's
economy. For instance, the Ronald Reagan Building and
International Trade Center includes over 3 million square feet
of government and private sector space, demonstrating our
ability to combine governmental and private sector functions.
In the Penn quarter section I am especially proud of the
efforts of the Tariff Building. GSA employed the National
Historic Preservation Act to assist in the redevelopment of
this historic building. When completed, this renovation and
conversion project will have injected $32 million into this
historic project and the District's economy.
One of our most impressive examples of the use of
development, innovative development tools is NCR's ongoing
redevelopment of the Southeast Federal Center. The most
important milestone for the redevelopment of this area was the
passage of the Southeast Federal Center Public/Private
Development Act of 2000. Congresswoman Norton's leadership was
instrumental in this legislation which gives GSA exceptional
flexibility in developing this important site.
NCR has worked closely with the District to ensure the
anticipated mixed use development will provide far-reaching
benefits to all parties.
GSA also manages the disposition of surplus real property.
The disposal activities in Washington, DC, were formerly
managed out of GSA's Atlanta office, but due to the unique
needs of this region, and particularly the real estate market
in Washington, DC, Administrator Perry recently established a
property disposal office here in the National Capital Region.
There are disposal projects that will have an important
impact on the local marketplace such as the west campus of St.
Elizabeth's Hospital. St. Elizabeth's Hospital opened for
business in the 1850's, and its last patient left there in--
left its west campus in the 1960's. Under the jurisdiction of
the Department of Health and Human Services, the west campus
site comprises about 186 acres with some 50 buildings. Many of
the buildings are in such decline now that they cannot be used.
The District's Department of Mental Health is in the process of
consolidating its operations to the east campus which it
already controls. The St. Elizabeth's property provides a
significant opportunity for both GSA and the District of
Columbia. As NCR looks to the future of the west campus, there
needs to be a close coordination with the District on planning
of the overall site.
In closing, I would like to reiterate that we recognize our
impact on the local economy and continue to make decisions that
reflect a sensitivity to it. We are committed to working with
the District of Columbia whenever possible, attempting to
ensure that all parties receive benefits from the Federal
presence here in Washington, DC. In particular, NCR looks
forward to identifying opportunities to work with the National
Capital Revitalization Corp. on behalf of the District on
certain projects of mutual interest.
NCR is committed to working closely with our customer
agencies, the marketplace that provides us with services and
space, the District of Columbia, and you, as we face challenges
of our unique mission. I want to thank you, Chairwoman and
Ranking Member Norton, for your interest and support for our
work in the Nation's capital and am prepared to answer
questions if you have any. Thank you very much.
[The prepared statement of Mr. Williams follows:]
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Mrs. Morella. Thank you, Mr. Williams. I am now pleased to
recognize Mr. Shabbir Safdar, representing the Greater
Washington Board of Trade.
Mr. Safdar. Good morning, Chairwoman Morella, Ranking
Member Norton. My name is Shabbir Safdar, chairman of the D.C.
Public Affairs Committee of the Greater Washington Board of
Trade. The Greater Washington Board of Trade is a regional
chamber of commerce representing business members from D.C.,
Maryland, and Virginia. I am also the co-founder of a local
Internet political campaign firm of 21 employees headquartered
here in the District of Columbia.
Thank you very much for giving me this opportunity to speak
with you about economic development in the District. Many
things go into making a city attractive to business. Setting
the policies to achieve the perfect mix is a delicate balancing
act. The District must send a positive message of cooperation
and partnership with businesses, it must stabilize its
regulatory processes and, most importantly, it must demonstrate
a consistent, predictable performance in providing services. I
want to touch on each of these today. More information is found
in my prepared testimony.
The first issue I'd like to address is the great hope we
have for the National Capital Revitalization Corp. As with any
urban core of the region, the District has unique assets and
opportunities for economic development. The readapting of
existing land resources is critical in an environment where
real estate is scarce. We have an especially unique opportunity
to enhance our competitive situation through initiatives such
as Brownfields redevelopment, the development of Washington's
waterfront, the redevelopment of the crown jewel of the
District real estate, the old convention center site. To
maximize these initiatives and deal with the scale and
complexity of these projects, the city government created the
National Capital Revitalization Corp. and the $25 million in
initial Federal funding.
The board of trade hopes that the NCRC will be fully
supported in its pursuit of those economic development projects
consistent with its mission.
On the topic of incentives, there's a number of excellent
incentives and initiatives either in the works or being
proposed that we hope you will support. Last year Mayor
Williams signed into law the new Economy Transformation Act
which creates meaningful incentives to assist technology firms
to grow in the District of Columbia.
As I know from your previous statements, Madam Chair, this
is a topic that is high on your list of priorities for the
District. The results from this legislation are not yet
available, but I look forward to reporting on their success to
you later this year.
These tech incentives go hand in hand with the benefits
available to the District through the Federal enterprise zone
legislation. Continuing the enterprise zone benefits for the
District through 2009, as was originally granted to other
states, is essential to our success in recruiting and retaining
business.
Additionally, we have supported the expansion of enterprise
zone status to the entire District as an opportunity to create
fertile ground for economic growth. We hope that members of the
committee will support Mrs. Norton's Omnibus District of
Columbia Tax Incentive Act calling for the expansion of the
enterprise zone status throughout the city or, at the very
least, to rationalize the qualifications of a certain area so
that current anomalies are eliminated.
Additionally, the citywide first time home buyer tax credit
has proved enormously successful. Ongoing proof of that is in
the statistics which show the District's population flight has
finally reversed itself. Anecdotally, we have information, as
was seen in yesterday's Washington Post, where companies
building new housing all over the District talk about how they
are receiving requests from potential buyers outside the
District even before the projects begin their March marketing
phase.
The board of trade supports Mrs. Norton's proposal to make
permanent the $5,000 home buyer credit to further reduce the
flight of resident homeowners from the District and give
homeownership opportunities to current residents. Of course,
incentives are designed to attract and retain businesses. When
it comes to growing a business, the governing factor is
regulation. Every regulation is an opportunity or a pitfall. It
is an opportunity to clearly guide a business in how they will
have to deal with the government and the community as they
grow. Yet, if poorly written, these same regulations provide
uncertainty and ambiguity, distorting the market's level
playing field.
As the District negotiates the daily tension between
regulatory and quality of life issues, its economic development
strategy must take into account the sensitivity of market
forces that are profoundly and immediately affected by the
daily decisions of the District government. When regulatory
processes are upended, when construction permits are rescinded,
or when rules are changed in the middle of the game, the
marketplace takes notice and the loss of commercial and retail
opportunities is immeasurable.
Much progress has been made, but yet much remains. We urge
this committee's support of the mayor's efforts to continue the
regulatory reforms that began with the council's Omnibus
Business Regulatory Reform Act of 1998.
Finally, the District does not exist in a void but rather
operates the community of communities that profoundly affect
each other's fortunes. Regional response to emergencies such as
September 11th--the September 11th attack on the Pentagon
requires resources, manpower, equipment and expertise. These
resources are at the local government level. Such a response
also requires a shared or an assumed indemnification, a
commitment of an unknown level of resources and revenues by
responding jurisdictions, some of which cannot now engage in
that commitment without violating state or local law.
The Metropolitan Washington Council of Governments has
asked Congress to support legislation entitled The Washington
Metropolitan Region Public Safety Cooperation Act. This
legislation would facilitate an intergovernmental response to
civil emergencies or disasters on a regional, mutual assistance
basis. We ask that the committee lend its support to this very
important legislative proposal.
Another wisdom of emergency response was among the early
conclusions of Mayor Williams post-September 11th task force on
transportation. They concluded that the Federal Government must
cease its practice of unilaterally closing streets and
eliminating curbside parking. They must reach a reasonable
balance between the security needs and the movement of traffic
throughout the city consistent with the potential level of
threat. We ask your support in ensuring that the decisions
regarding the security around the prerimeter of Federal and
congressional buildings are balanced against their relative
impact on the local economy.
Finally, the availability of insurance coverage for losses
due to the acts of terrorism could put the District of Columbia
and, indeed, the entire region at a critical competitive
disadvantage when it tries to market itself to employers from
outside the region. Without affordable insurance coverage for
terrorism, the tremendous recovery the District has experienced
over the past 4 years will stall. Of course, the liability
created by the Federal presence in the District should be
addressed separate from the District budget.
Thank you very much. Your support of the District is much
appreciated. I'll be happy to answer any questions.
[The prepared statement of Mr. Safdar follows:]
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Mrs. Morella. Thank you, Mr. Safdar. Now I am pleased to
recognize our final panelist, Nelson Bregon, Deputy Assistant
Secretary of the Grant Programs of the Office of Community
Planning and Development of HUD. Thank you, sir.
Mr. Bregon. Good morning, Chairwoman Morella and Ranking
Member Norton. My name is Nelson Raphael Bregon, and I am the
Deputy Assistant Secretary for Grant Programs, the Office of
Community Planning and Development with the U.S. Department of
Housing and Urban Development. Thank you for the opportunity to
be here this morning as part of the subcommittee's examination
of the District of Columbia's community and economic
development activities. I am here at your request to discuss
one of HUD's most important tools in community and economic
development, the Community Development Block Grant Program, and
our review of the city's use of the CDBG funds to assist
community development corporations in the District.
Secretary Martinez, Assistant Secretary Bernardi and I are
as concerned as you are regarding the District of Columbia's
CDCs, HUD's recent monitoring findings and the reports
published by the Washington Post. For this reason, my
colleagues and I would like to provide you with the information
that we have on this matter.
Before I begin, I would like to introduce Mr. Richard
Kennedy, the Director of the Office of Block Grant Assistance
in our headquarters office. Mr. Kennedy reports to me and is
responsible for assisting me in developing policies and
procedures related to the CDBG program.
Also with me is Mr. Ron Herbert, who is the director of the
Office of Community Planning and Development in our HUD
District of Columbia field office. Mr. Herbert is responsible
for assisting and working directly with our program grantees
such as the District of Columbia in undertaking the activities
that are funded with community development block grant funds.
The community development block grant program is a $4.4 billion
program that assists communities in undertaking community and
economic development.
One of the things that we pride ourselves on about the CDBG
program is the flexibility that this program brings to the
communities to undertake those activities that they deem
necessary and appropriate to assist neighborhoods which are
primarily resided in by low and moderate income residents of
the community.
The activities that are undertaken under the CDBG program
must not only be eligible under the regulations that regulate
the program but also must meet one of the three national
objectives of the statute, those are benefit to low or moderate
income residents, aiding prevention or elimination of slum or
blight, or to meet an urgent community need that the community
is unable to finance on its own.
The responsibility for ensuring that the local community
development block grant programs meet Federal requirements
rests with the executive authority of each CDBG grantee. In the
case of the District of Columbia, it would be the mayor who is
responsible for ensuring that the local CDBG program meets
these Federal requirements.
As in the case of the District of Columbia, many executive
authorities delegate CDBG program administration to local
community development corporations. In addition, these local
community development corporations have the prerogative to
provide assistance to non-profit organizations to undertake
CDBG-funded activities.
In fact, it has been determined that about 17 percent of
all CDBG funds are passed through nonprofit organizations.
Thus, nonprofit organizations are a very important conduit for
neighborhood program delivery. It is important to note that
nonprofit organizations such as CDCs are often asked to
undertake projects that are inherently risky because of factors
such as locations, high crime, poverty and disinvestment.
Cities like to utilize CDCs because they have skills and
neighborhood acceptance in many instances.
It is important to note, however, that the responsibility
for ensuring that CDBG funds are used to revitalize low and
moderate income neighborhoods belong to the CDBG grantee, and
that is applicable to the District of Columbia as well. The
District of Columbia provides approximately $4 million a year
in CDBG funds to assist the District Neighborhood Development
Assistance Program. It is our understanding that the goal of
the Neighborhood Development Assistance Program in the District
of Columbia is to assist CDCs by providing funds for financial
support and capacity building as part of a CDC's efforts to
implement community development activities and, as a result,
revitalize low and moderate income neighborhoods in the city,
such as Anacostia and Columbia Heights just to mention a few.
The District grant agreements with the CDCs, which is a
requirement of the Federal regulations, indicate that CDCs will
undertake administrative and technical activities to pursue,
for example, joint ventures with developers, secure project
financing, and apply for grants or loans from other sources.
After reviewing the District's annual performance report,
which is a requirement of the CDBG program, and based on HUD's
risk management approach to monitoring, the HUD D.C. Office
conducted a monitoring review of the city's Neighborhood
Development Assistance Program in August 2001. During the
monitoring HUD reviewed several project files for CDCs and
conducted site visits to several CDCs. The HUD D.C. Office
staff found that the city provided funds to CDCs to carry out
eligible activities.
However, the District grant agreements with CDCs and
program files were found to lack sufficient budget details to
link this allocation of the CDC grants award to specific
projects and activities cited in the grant agreements. In
addition, it did not appear that the city conducted any cost
analysis for the items purchased with CDBG funds. Moreover, CDC
grant agreements failed to specify measurable outcomes for each
project or activity to be assisted by the CDCs.
The HUD District of Columbia field office found that CDC
grant awards were reviewed for a second year without
competition or evaluation of performance in the prior year. The
HUD field office was particularly concerned about the
inefficient and ineffective use of Federal resources and the
possibility of questionable costs.
Tracking CDBG activities were further complicated by the
fact that this organization often leveraged other financial
resources from private, public, city, and other Federal
sources, making it difficult to isolate activities that were
funded with CDBG funds.
Finally, HUD's monitoring review concluded that the current
design of the NDAP program lacked detailed policies and
internal management controls for governing the use of CDBG
funds. As part of the monitoring findings, HUD advised the city
to discontinue funding under the existing Neighborhood
Development Assistance Program and especially for all core
funding awards to CDCs for projects that were not directly
related to carrying out eligible CDBG activities.
HUD also advised the District to revise the Neighborhood
Development Assistance Program application funding process to
include a review and analysis of all proposed costs to ensure
that each project was eligible, met a national objective, and
that the costs were reasonable and appropriate.
In response to HUD's monitoring letter, the District of
Columbia indicated that effective with the city's 2002 fiscal
year, the city would discontinue disbursement to CDCs for core
funding using CDBG funds and that the District would use CDBG
funds to pay for costs that are directly related to project
delivery cost. These monitoring findings and advisories are in
addition to the ongoing technical assistance and guidance that
the D.C. Office provides to the District of Columbia.
In June 2000, HUD advised the city to incorporate outcomes
measures and performance indicators to ensure that CDCs
carrying out community development activities produce tangible
results that impact low and moderate income neighborhoods. In
July 2001 HUD again advised the city to review the Neighborhood
Development Assistance Program procedures to ensure that CDBG
assistance to CDCs were for eligible activities and that the
program incorporated performance measures and tangible
outcomes.
HUD is perturbed by the District's use of CDBG funds to
assist CDCs that cannot clearly and directly be linked to
activities that achieve tangible neighborhood development in
the low and moderate income communities. HUD continues to
advise the District to either discontinue funding Community
Development Corp. or provide these organizations with funding
that must be used for a specific community and development
activities.
HUD is currently awaiting further information from the
District of Columbia to demonstrate that review guidelines and
procedures are in place that will correct the program
deficiencies that have been identified, not only by the city's
IG office but also by HUD's Office of Community Planning and
Development. If the city's response is not satisfactory, HUD
will be forced to take further actions, including possible
grant reductions.
The CDBG program statute and regulations require that
grantees identify eligible activities that will provide
benefits to communities, especially low and moderate income
communities. It is important to note, however, that the
flexibility of the CDBG program allows grantees to implement
community development activities based on local decisions.
Communities may choose to provide assistance to nonprofit
organizations for neighborhood development initiatives as they
deem necessary.
Although the CDCs can be viable partners in undertaking
community and economic development activities, the success of
any community development initiative must include
accountability, and the District of Columbia is responsible for
ensuring that CDBG funds are used to create tangible results in
its neighborhoods.
Thank you very much, and we are willing and able to answer
any questions that you may have.
[The prepared statement of Mr. Bregon follows:]
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Mrs. Morella. I know we will have some questions for you,
Mr. Bregon. The ranking member and I have decided since there
are two of us here, we will allocate 10 minutes apiece for
questioning back and forth. So I will start off then with NCRC
since that was originally the intent of this hearing, was to
look at the role of the National Capital Revitalization Corp.
I would ask you, Mr. Heller and Ms. Bacon, how has NCRC
used the $25 million that the Federal Government contributed as
the startup of NCRC? I would further ask have the funds been
used to acquire property or have they been used to leverage
other funds? And then what other funds are available to NCRC?
Although you have received a commitment that was mentioned
in the testimony of $75 million from Fannie Mae, what is the
time line, when are you slated to receive the actual funds, and
do you have an intended use for the funds? What other moneys
come into NCRC?
Mr. Heller. Our objective is to use the funds sparingly and
with the greatest degree of leverage possible. We have I think
tried to achieve that. Ms. Bacon will give the details. Both of
us will be available for questions.
Ms. Bacon. Yes. I would like to elaborate----
Mrs. Morella. That was a very good political answer.
Mr. Heller. Yes, thank you.
Ms. Bacon. First of all, this is our first year of
operation, as you know, and we have had to use some of the
funds for our startup costs for staff, etc., while we get our
program going. We also this year, as I mentioned, acquired the
leasehold interest of the Gangplank Marina in the Southwest
Washington area. We did use part of our Federal funds for that
acquisition and half of the funds were provided by the
District.
However, in addition to having this important aspect of
being, as I mentioned, at the table with regard to the
redevelopment, it also was a significantly important financial
investment for us, and our return on the money that we did
invest is substantial. We are--we have not yet called upon the
Fannie Mae funds because we don't have projects.
As you know, when you're doing real estate development, it
takes a long lead time to get into projects. The whole due
diligence and then predevelopment phase is quite extensive. We
have been in very close touch with Fannie Mae, however, and
they have been prepared to allow us to move ahead using their
funds, but this is for debt or equity. It is obviously not a
grant. It's very different from the funds appropriated by
Congress, and so we will be able to use it for debt and equity
in projects which do include a housing component.
We certainly do intend to leverage the funds that you so
generously have appropriated to us and we are just now
launching into a strategic planning process headed by Mr.
Heller where we are focusing on how are we going to make
ourselves self-sufficient.
We receive no operating funds from other sources, as you
know, and so we must figure out how to both cover our operating
expenses and obviously make money in addition. We do receive
funds from the disposition of the RLA properties. Mr. Heller
mentioned that we do have a portfolio of approximately $500
million, of which approximately $300 million is actual land
assets, and so we will be receiving funds in the disposition of
those properties.
However, I just want to add that the property--the funds
that we do receive are subject to the requirements of the CDBG
rules and regulations; so all use of those funds must be
consistent with the CDBG rules and regulations.
Mrs. Morella. Do you have a competitive process?
Mr. Heller. I would like first to just amplify Ms. Bacon's
comments. We are expending funds somewhat in excess of $2
million a year operating costs to build the staff, for both the
business development and real estate programs. We regard $25
million as a splendid start, but obviously given the magnitude
of the task that we're addressing, it doesn't go very far
meeting operating costs.
So at some point we have to through our operations ensure a
sustaining flow of capital so we can both use our funds for
investment but also to meet operations. We have thus far had a
competitive process operational with respect to the RLA
portfolio. With respect to the NCRC funds, we do have a process
under which people can submit suggestions to us, but frankly,
given the development activities that we're initiating, much of
it is left to us. For example, both the Southwest waterfront
and the Skyland, two of the most important projects we are
pursuing, are carrying those forward at NCRC's initiative
because of the long-term developmental benefits for the city as
well--obviously the potential return as well.
Mrs. Morella. So it's a decision that you all make in terms
of whether it will be a competitive bid.
Mr. Heller. In the RLA certainly we envision that all
proposals will be submitted to us on a competitive basis,
although there may be some circumstances otherwise considering
the speed and leverage with which we hope to operate. With
respect to the broader developmental aspects, this is, as I
think the committee recognizes, not an easy process. If
economic development had been easily carried forward, it would
have been--there would have been a lot of projects presented
particularly the east of the river in the past and they haven't
been. Thus we see our role is to try to initiate projects that
we think make sense. Certainly if projects are presented to us,
we will be evaluating those competitively.
Mrs. Morella. Do you have accountability built in? You can
complete that answer Ms. Bacon.
Ms. Bacon. Yes. Thank you. I could perhaps use Skyland, the
Skyland shopping center redevelopment as an example of the NCRC
side of our business. This is a shopping center which is east
of the river which does not reflect the middle income and upper
middle income demographics of the area. It is a shopping center
which is deteriorated at this point and the Skyland Shopping
Center Task Force and the Hillside--Hillcrest community has
been pushing for many, many years to get this redeveloped.
We are working very closely with Eric Price's office on
this. We have--we're going to be assembling the land and we
have put out a request for expressions of interest by
developers. So we do need to find a developer that would be
compatible with us in terms of moving it ahead, but certainly
price and experience, expertise, and what the developer would
bring to the table will all be--will be brought to bear. So in
fact it would be a competitive process.
I also do want to mention too the board is absolutely
fundamentally committed to transparency and full public process
in everything we do. All of our board members are committed to
this, all of our board meetings are in the public in the
communities, and we discuss the projects as we proceed.
Mrs. Morella. I'm glad you mentioned that point because we
have heard from some people, that there have been some concerns
about the operation, whether it is in public forum, whether
people are invited or allowed to attend and whether the records
are open to the press and to interested citizens. Could you
amplify that?
Ms. Bacon. Yes. There clearly are informal discussions that
are had, but our public board meetings are all open to the
public, to the press. We have had issues about our Web site
which we are now fixing, and perhaps we haven't had a Web site
which is user friendly sufficiently to make sure everybody
knows what we do. We also are required to have notices into the
paper about when the meetings will be held. Minutes are
available. Where we do have confidential negotiations with
developers, those matters are of course kept private until we
are able to release that information.
Mrs. Morella. Do you follow the open rule?
Ms. Bacon. Yes.
Mrs. Morella. And you say your hearings, the minutes and
all, are available for perusal by citizens and the press?
Mr. Heller. Yes. I can certainly amplify Ms. Bacon's
comment, the board is committed to the openness to which she's
referred, a transparent process. I would only note one possible
source of concern we have not thus far released publicly the
exclusive rights agreement that we executed in mid-February
with respect to the development of the Wax Museum site. That,
as I mentioned earlier in my testimony, included references to
sharing relationships under which we and the developers will
participate depending on the success of the project. We will be
carrying that agreement from an exclusive rights agreement to a
full development agreement, and pending the completion of those
negotiations our counsel has felt it appropriate to keep that
document private because of the sensitive nature of the ongoing
discussions.
Mrs. Morella. I've asked about the criteria that you use
for selecting projects. What specific performance criteria does
the NCRC use to evaluate the effectiveness of your projects in
promoting economic development in neighborhoods?
Ms. Bacon. We have developed a draft policy and procedures
manual for how we will be making selections of real estate
development projects that would come to us both from the
outside and how we would make decisions internally as to how to
proceed. That is--the draft is completed and we are now going
to be going out for public input to that.
We'll be meeting with an organization which represents
local community organizations to take a look at it. We have to
balance obviously our mission and our return when we look at
each project. Since we are charged with being self-sufficient
we need to be sure that for the most part our projects are in
fact giving us a return.
We also are not going to be duplicating the work of the
CDCs or the smaller community-based organizations. Our projects
are supposed to be very large and spur neighborhood
redevelopment rather than, for instance, facade treatments of
commercial corridors, things like that. Our projects are
supposed to be large and spur development throughout the
neighborhood.
Mrs. Morella. I want to ask the Board of Trade, what do you
think should be part of that performance evaluation?
Mr. Safdar. Well, of course the board is interested in all
revitalization of the District and every opportunity we believe
should be handled as efficiently as possible for the greatest
gain. Accountability is crucial both as business people, we
have to experience accountability or we are not in business
anymore, and we hold public projects to the same standards.
Mrs. Morella. How about Mr. Price?
Mr. Price. I think NCRC already has taken a number of steps
to ensure the accountability. In fact, on the Wax Museum site
for the first time before the day we entered into the ERA, the
board actually went through a negotiation process and that set
up those milestones and was very clear to the other bidders
that if the developer that was chosen could not make them, then
we would choose one of the other bidders for that particular
site, and I don't think that has been done in--at least not in
the 3 years that I've been here. So I think that process is
beginning now.
Mrs. Morella. I wanted to get to Mr. Bregon. It seems you
have painted a picture, picking up on what the Washington Post
articles have demonstrated, that there has not been a response.
There have been some, it seems to me, evaluations with regard
to CDCs but no remediation, kind of ignored. And you have
indicated some actions that HUD will be taking in that area.
Have you stopped funding the CDCs at this point and when did
you--I know you became aware of this earlier, but was it
motivated by the press accounts to really clamp down at this
point or say stop, we have got to take a better look at it?
Mr. Bregon. Well, Chairwoman, we don't have the authority
to stop funding CDCs. We can advise the city when we see a
problem with one of their programs and we can advise them
whether to revise the program to comply with the applicable
rules and regulations or we can advise them to stop funding
those subgrantees, if you will, if for some reason they cannot
bring the program into compliance, and that's what we have been
telling the city up to now, that there are some major flaws in
design of the program that must be corrected and in the
meantime, while this is being done, we recommended that they
cease funding the CDCs, and the city agreed with that
recommendation and they have indicated to us that they have
corrected the problems that the city's IG identified, that--the
problems and concerns that HUD outlined as a result of their
monitoring visits, and that they have refunded again those CDCs
but that those financial checks and balances, if you will, are
in place.
They have indicated to us. We requested a copy of the new
policies and procedures. We have also requested a copy of the
new application process by which the neighborhood CDCs get
funded, and we are waiting for that information so we can
review it and then provide the city with feedback as to whether
the revised program does comply now with the program rules and
regulations.
Mrs. Morella. My time has expired but when I get my turn
back, I will also ask the Deputy Mayor. Thank you.
Congresswoman Norton.
Ms. Norton. Thank you very much, Mrs. Morella. Before I get
into the testimony, all of which I found to be very helpful and
illuminating, I'd like to raise the question of jobs. Having
worked continually on economic development since coming to
Congress, I became very concerned about the time we got through
the Convention Center project that essentially what we were
doing was funding jobs for the region, that there was very
little being done in this city to make sure that the economic
development that occurred in this city had a benefit for those
who live in the city and if that's the way the city wants to
build, that was one thing. I didn't think that was the way how
to be bringing Federal projects into the city. At the time of
the Convention Center, I called in the builders, as it turns
out that was a union built matter, called them in, called in
the Convention Authority and everyone agreed to use a certified
apprenticeship program.
A certified apprenticeship program is the following: It
means that there are a few extra points given in competition in
exchange for an agreement on the part of the developer to train
some people on the job in the crafts. The reason that this is
essential is if you do what the District has done for years,
which is allow developers to set up their own apprenticeship
program, a terrible thing happens to young men, and most of
them are young men in this city, they then go to the next job
and say I was on the XYZ program and of course then they say,
OK, what did you do as an apprentice? They have nothing to show
about the progress we made.
It's as if saying to you and me go and study and then go
try to get a job. I don't think you should be building anything
in the city--I don't know what you're building them for if you
cannot show you are providing jobs for the people who live
here.
I want to thank the GSA because the GSA has agreed to use
certified apprenticeship programs on all of my stuff that I
bring into the city. I would hope the city for its own stuff
would be the first to want to require that and monitor that.
There have been some terrible things that came out about people
getting industrial bonds and paying no attention to the rules
and regulations of the District with respect to hiring--not
hiring, simply putting people in an apprenticeship program so
they can learn the crafts.
So first I want to ask whether or not Mr. Heller and Ms.
Bacon are willing to give us a commitment that they will build
nothing and support nothing in the District of Columbia which
does not have a certified apprenticeship program. I did not say
apprenticeship program. Those are frauds on the young people
who get them because they cannot use them to build on. I'm
asking you if you will commit here today to use certified
apprenticeship programs on all of the support you are engaged
in in the city.
Ms. Bacon. You make an excellent point about jobs that are
created that are not sustainable that they'll become a career
path for jobs which are here today and gone tomorrow, and
that's absolutely not what we want to do. We're absolutely
committed that jobs that are created through projects that we
do will be career path jobs to the extent possible.
I don't--I would like to learn more about the certification
process before we absolutely commit to you, but we will
definitely take that under advisement and look at it
immediately.
Mr. Heller. Just to amplify the chairperson's questions
about standards, we have developed and, as Ms. Bacon said, it
will be going out, a two-part standard for evaluation of
projects. First, one that sets forth a series of objectives on
economic development bases, including job creation. We have
already recognized that as a critical component of what we're
doing. And the second relates to return parameters, depending
on the type of project being pursued in order to achieve self-
sufficiency.
The certification program seems like a very powerful
program, and I--while we know obviously not as much about it as
the ranking member, it seems like something perhaps we should
now insist on, but that is something we will seriously evaluate
and get back to you promptly.
Ms. Norton. I very much appreciate it. I'd like you to
arrange for a meeting with me. The Convention Center used to
certify an apprenticeship program. These are people who have
been trained to be electricians, to do sheet metal work, to do
the high paying jobs that you don't have to have a Ph.D. or any
of the kind of degrees you all have and they are bringing the
Convention Center in ahead of schedule. This can be done and
we'll talk about how to do it. There's a document setting forth
how to do it.
Now, as I understand it, Mr. Price, there is no requirement
to use certified apprenticeship program. When you are given
industrial bonds, no one says here's a certified apprenticeship
program, go do it. There have been picket lines by the
Washington Interfaith Network and others complaining to the
District, to which the District I am told says, well, these
folks we don't control, they're not city projects, so that
there's been a lot of head butting without the District taking
responsibility for its own guidelines.
Mr. Price. Actually that's not true. We do have a
requirement on every industrial revenue bond program that they
use a certified apprenticeship program. The problem with the
legislation as it's now enacted is that there's no teeth if
they don't follow through. So in other words, Miller and Long
and GW didn't want to do it. The only teeth we have is we can
deny them any future project that they might want to use to
get----
Ms. Norton. I don't agree and I'm not sure that your
guidelines say you have to use a certified apprenticeship
program. I----
Mr. Price. Our first source agreement--our first source
agreement does say that.
Ms. Norton. I don't agree that there's no way to get it,
and I'd like you to set up an appointment to come see me so
that we can talk about ways to----
Mr. Price. That's fine.
Ms. Norton. I know that's what you want to do----
Mr. Price. Let's do that.
Ms. Norton [continuing]. But there ought to be a way to
proceed without waiting for picket lines to develop.
Now, Mr. Bregon, I appreciate your testimony, very much
appreciate it, because it was straightforward, it laid out what
it seems to me was a road map for what the District could do to
straighten out the CDC problem, and I know that the District
heard Mr. Bregon, if the city's response is not satisfactory,
HUD will be forced to take further sanctions, including
possible grant reductions.
I spent a good deal of time in the Congress fending off
Members of Congress and saying let the District do it,
especially now that the District is doing it and defending home
rule. But I have to tell you I think that in the handling of
the CDCs, you have both invited interference with home rule and
threatened your own Federal funds, both of which get the
Congress deep into your business. It's very hard--and I will
not defend the District against Federal involvement.
When the District gets the kind of warnings that Mr. Bregon
apparently has been giving it and then expects me to say
everybody in Congress step back, let them do it because don't
you see they're doing it. So let me just say how disappointed I
am as the chief defender of home rule up here spending a lot of
time, a lot of energy that I don't intend to be put in the
position where then the city is shown not to be doing it.
Look at what we're talking about in the CDCs. These were
not enterprises set up by this administration, but this
administration is 4 years old now. There is supposed to be--I
mean, I'm reminded of St. Elizabeth's Hospital, where the
administration was there and the Control Board was there and
all of a sudden it comes out that these folks have been
overspending. This is nowhere near at that level of problem,
but it's very disappointing to me as a defender of the city.
I never defend the indefensible, and I think what's
happened with the CDC is indefensible and I still have heard no
explanation for why you have what looks like a good news/bad
news story. You've got the NCRC. Of course it's in startup, but
it looks like it's professionalized--because we had a lot to do
with that, because this thing was set up from up here. The
whole idea was initiated from up here and from the last
administration.
On the other hand, the CDCs go back a long time. While this
administration can't be held responsible for setting them up,
what I can't understand is the Mayor has to put the money in
his budget every year because there is D.C. money involved. The
Council, which has been much better at oversight than any
oversight I've seen since I've been in the country, has to have
hearings and yet I was just embarrassed as a Washingtonian to
hear that there's anybody running around, you know, in some
leased luxury cars or self-dealing, especially when I'm the one
that says to the Congress, hey, they have oversight, they're
doing oversight. I'm very disappointed and I still haven't
understood, especially given Mr. Bregon's testimony, how I am
to defend the District of Columbia against interference by the
Congress.
I still do not understand that given the testimony we have
had here today, and so I want to ask--I want to first ask Mr.
Price, Deputy Mayor Price, the Mayor said he would take back
properties if they don't produce. That's pretty vague. They
haven't produced. There are a lot of mad people, just to say
angry people in the communities. It's all in the newspapers
about these boarded up houses. What does it mean take back
properties? When? What's the timetable? Mr. Bregon has
testified that the 2002 budget, as I understand it will fund
only the core costs, not all these personnel costs.
Mr. Price. Directly related to the project, costs directly
related to the project.
Ms. Norton. What are you going to be funding? Two
questions. What will you be funding--because, look, most of
this money comes from HUD. What will you be funding that you
weren't funding last year? That's the first thing I want to
know. And then what does it mean we're going to take back these
properties? What can I say to the subcommittee who's made an
inquiry you are not to hold a hearing, please? The District of
Columbia already has control of this. Mrs. Morella was quick to
call a hearing. What can I say about precisely what the
administration is going to do about funding in the budget that
the Mayor will be putting before the Council now, and what can
I say to them about the properties that have been lying out
there all this time without being implemented for development?
Mr. Price. There are a couple things. First, let me say
that the article covers 10 years in the District of Columbia
and I can really only speak to the last 3\1/2\ years and our
direct involvement in it. There are a number of things that
have been done since this Mayor came in, and I think you stated
it earlier in your opening comments, Congresswoman Norton. The
District actually has taken action without the direction of HUD
and without the direction of the Washington Post. There are
things that have actually occurred that we've been doing----
Ms. Norton. So why don't you discuss that----
Mr. Price. That's what I thought I would do.
Ms. Norton. OK.
Mr. Price. Beginning in 1999, we first looked at this
problem of the CDCs and projects going forward. The actual
requests to the IG to look at the CDCs came from the District
government. We asked them to look at it because we had some
concerns. We also at that time looked at the nonprofits and how
they were doing on their ERAs at the time.
The District several years ago when they did exclusive
rights agreements trying to be spur economic development in
neighborhoods, did these ERAs that didn't have a lot of
performance milestones or they were very easy to meet and they
did them in a fashion that didn't have deadlines on them. We
were appalled to find they didn't have deadlines on them
because it made it difficult for us to go back and then take
these properties back. They also, along the way, while the
nonprofit had the ERAs, in many instances they provided
additional funding for other things, you know, further
investing in the project that was not going forward.
So what we did is we looked at that, we tried to find those
projects that we would bring the developers in, and we did. And
on many of those projects we did get them to go forward during
that period of time because we indicated that we would come and
try to take those properties back from them.
The other thing that we've done over the time, we actually
have suspended--we suspended one CDC that was in the article
for failure to perform. I think that's the first time it's
probably been done in a decade. That was--that happened in
2000. We also eliminated in 2000 the homestead program. The
District had a very popular homestead program where you held a
lottery and the lottery was held, and individuals came in and
they paid $250 and then they were given the homes to develop.
We did our own internal audit and found out that this was not
moving, these projects weren't moving quick enough. We stopped
the program----
Ms. Norton. Who used to do it before you all?
Mr. Price. It was being done by DHCD. We have now stopped
that program.
Ms. Norton. DHCD stands for Department of Housing----
Mr. Price. And Community Development.
Ms. Norton. And now who did it to make it happen?
Mr. Price. Well, what we did is we stopped the program. We
now have a new program that is run out of my office that is
much more competitive. It has for profit and nonprofit
developers, and we are actually taking control of the
development process from the Mayor's office. The other thing
that we had to focus on, and I think you can tell your Members,
is when we came in the District had $80, $90, $100 million in
unspent CDBG, I mean not committed, not obligated. They had
only----
Ms. Norton. Why was that? Why was that?
Mr. Price. The transactional capacity within the agency was
part of the problem, not having a lot of producers in the
District and then just overall----
Ms. Norton. Like the CDCs.
Mr. Price. Like the CDCs. And the overall condition of the
economy at that time too also had something to do with that.
One of our first things was how do we begin--we knew there
was a need for affordable housing in these neighborhoods. How
do we get these dollars out to the people who need them? In
1998, the District financed about 600 units of affordable
housing. 1999, we did about 1,300. In 2000, we did about 1,600.
In 2001, we financed 3,700 housing units in the District of
Columbia for low and moderate income housing. So we began to
get that problem under control.
We knew there was still a monitoring program--problem, had
been working with HUD. We had a number of discussions with HUD.
We had received letters from them, but there have been numerous
meetings. In fact, we held one meeting with members of HUD and
some of the members from the CDC who seemed to disagree with
how the law was being interpreted and we brought HUD in
themselves and said now, look, we're telling you this, we want
HUD to be at this meeting as well to tell you this, and we held
that meeting.
There have been changes made. The article did not talk
about the changes to the NDAP program which was referred to
that has more accountability. In fact as a result of those
changes that we made to the NDAP program our new director, Stan
Jackson, there was actually CDBG--I mean CDC opposition to him
being nominated. The hearing had to be postponed because of the
changes that he was bringing into that agency and he's brought
in since August and he's here today to talk about the other
things that he's done in terms of training, in terms of how the
moneys are spent.
One problem with the NDAP program is the dollars were spent
for brick and mortar projects and they are also spent for
things like technical assistance, job training, predevelopment
money for brick and mortar projects. The Department of Housing
and Community Development has another pot of money, if you
will, for development finance, and that's just brick and mortar
projects.
One of the things that Stan found is that there was some
confusion where CDCs might come in for a project, you know, in
1999 for predevelopment money out of the NDAP funding and then
when they come back in through the development finance, there's
a potential to be funding that again. We've stopped that. We
separated the two. Brick and mortar financing only comes out of
development finance. The technical assistance, job training
comes out of the NDAP. And these were recommendations that did
come from HUD but the other changes, to achieve more training,
to bring in new underwriters, to look at our tax credit
program, these are a number of things that we've been doing in
addition to getting money out the door and financing housing
for low income residents in the District.
Ms. Norton. Thank you, Madam Chair. Madam Chair, if I could
say, this explanation I think is important to have on the
record. This was among the many programs in the District of
Columbia that were broken, and I think your response does show
some progress by this administration. And Madam Chair, the
timeliness of these hearings plus the Council hearings it does
seem to me indicate that the District is moving to get ahold of
this on its own. I appreciate what you've testified to.
Mr. Price. Thank you.
Mrs. Morella. I agree it's important to have it on the
record. Mr. Price, I don't think I heard you say that you are
going to be able to retrieve those properties that have been
misused by CDC.
Mr. Price. We're looking at the legal ramifications of that
now. You know, it could be a combination of trying to outright
retrieve the properties and go through whatever lawsuit process
we have to go through to get them back. It could be a process
of making sure that another development entity comes in and
actually finishes up the project in different cases.
The Washington Post article, you have to understand some of
the properties that they talk about, some of the projects were
not--where CDCs were partners even with for-profit entities and
they were projects that actually were anticipated taking 3 or 4
years to complete. So we're just going to have to look at it on
a case-by-case basis and make the decision at the appropriate
time.
Mrs. Morella. It may mean some kind of restructuring of the
rules and regulations that you utilize in the future. Also, is
there any chance that any of those properties would then be
transferred to the NCRC?
Mr. Price. Some of those properties are already transferred
to NCRC. The properties that they were referring to in Columbia
Heights, the Grid property and the Tivoli property are, and
those projects are moving forward. So they have already been
transferred. The other properties that I think were referred to
were single family housing stock and we would either look to
put those properties in our program, our home-away program that
we've rolled out this year, or we will try to get those
developed through NCRC or some other means.
Mrs. Morella. And in response to the statement that was
made by Mr. Bregon, the District of Columbia is going to be
responding with the transparency and with the accountability
that HUD would require. I have always been curious about the
fact that the Inspector General came out with a report which
said we should follow through and that there should be
oversight. I always wonder about Inspector Generals' reports,
whether they're just done, hidden away, and now agencies
respond to it.
So I hope that this hearing and the fact that it has been
aired, that you will come back to us and we will see a
smoothness in the entire process. Because the concept is a
terrific one it's got to be done. In addition, it's the people
that are so critically important.
I'm going to jump on another topic now and ask about what
is the District's plans for the St. Elizabeth site, and I think
this is something that a number of you may be interested in. I
know GSA will probably want to comment on that and Mr. Price
will and we may have the NCRC also. So would you like to start
off, Mr. Price?
Mr. Price. Well, I was just going to say in regards to the
East Campus, which is part of the whole mental health program,
the city is committed to a master plan and the start date for
that is going to be in May. We anticipate that will take about
12 months to complete. In regards to the West Campus we are
working with GSA and NCRC to establish a vision for the entire
campus, and we also hope that process will also begin in May
this year.
Mr. Williams. Yes, ma'am. Madam chairwoman, as Mr. Price
said, we are participating with the city as they look at a
framework study for the whole site, not just the East Campus
but also the West Campus. Currently the West Campus is under
the jurisdiction, as I mentioned earlier, of the Department of
Health and Human Services and they have transferred--there's a
transfer of money going on so that we can proceed with some
different surveys that need to be done on the site.
Environmental, historical, and archeological type of tests will
be done in the ensuing months as well and they've also had some
money appropriated, it's my understanding, to maintain the
current status of the West Campus. We're most interested,
though, in the future and working with this visioning, as Mr.
Price said, for what the whole property can be. It really is a
tremendous site and one that has untold development
possibilities.
Mrs. Morella. Ms. Bacon, did you want to comment on that at
all?
Ms. Bacon. Thank you. As I mentioned earlier, we have
excellent planners in the District and we are the implementers
and so we are part of the planning process so that we're sure
that both we understand what is going on and we would be able
to implement them, but as Mr. Heller said, we are trying to
develop a center of excellence in terms of real estate
development implementation and we stand ready to assist in any
way that we can, both in the Federal and city governments, in
implementing the plans, and we are at the table in helping to
develop the vision that would be carried out.
Mrs. Morella. That also reminds me, since you are
commenting about other projects, what projects NCRC are working
with the CDCs jointly.
Ms. Bacon. The only projects where CDCs are involved where
we are, are the ones that we inherited from the RLA, as Mr.
Price suggested, the Grid property and the Tivoli property.
There are applications that are pending and I will go back and
confirm if there's anything else, but the only thing that I'm
aware of is there are several applications that are pending for
projects in the Columbia Heights area. We had an RFP that was
put out previous to NCRC's being--taking over the assets, and
we're currently evaluating proposals from developers for seven
parcels in Columbia Heights and there certainly is a CDC that's
involved in at least one of those proposals.
Mrs. Morella. I wonder what it would be like if NCRC were
in charge of the CDCs, if they all went through NCRC.
Mr. Price. They can have that responsibility if they----
Mrs. Morella. You responded much too quickly to that one,
Mr. Price.
Mr. Price. No, no. Actually I would like to followup on
that with a quick comment. There have been--you know, there are
other funders to these projects. There's Liske, there's
Enterprise, there's Fannie Mae. They've also been funding these
CDCs for the last decade and we have actually sat down with
Liske and Enterprise and talked to them actually about forming
a partnership to have oversight of the NDAP program working
with the District because they have a collaborative where they
have banks and other institutions that invest in CDCs, and so
those discussions are underway and one thing we've been talking
about is they would take over the administration of that
program beginning in probably October or November of this year.
Mrs. Morella. Very good. I'm not going to let Mr. Safdar
off the hook completely. We also said we are going to talk
about enterprise zones and I wondered about the Board of
Trade's point of view, and then maybe Mr. Price or Ms. Bacon
would like to comment. Tell me about what you see is the
effectiveness of the enterprise zone concept and why you think
it should be expanded, and then I will ask Mr. Price if are
there measurements you have about how effective it has been?
Mr. Safdar.
Mr. Safdar. Well, I think that the--well, the exact numbers
I don't have here and I'd be happy to get you in writing, the
ability to do economic development in the District and the
turnaround we've seen in the last 4 years, particularly giving
credit to the Williams administration. It has been tremendous
and the only real issue I think we look at when we see the
enterprise zone is the inequity. As with all things, the map is
not the terrain, and when you try and use statistics to model
particular neighborhoods, you end up with some surprisingly
unexpected results.
Georgetown is one good example where the student
population, which tends to be very low on the economic scale
tends, to make Georgetown look a little more impoverished than
it necessarily is. I think as we look around the city and I
think as Ranking Member Norton pointed out very effectively and
you agree with, the area is too small for a rezone approach to
where you cut the city up into particular pieces. The District
as an economic center is I think extremely efficient and very
small, at the same time very powerful, and the only way to
apply these benefits judiciously and even-handedly to a level
market playing field is to do it throughout the entire District
because the other answer of removing those benefits for people
who already have investments in the District is certainly
unacceptable to the market.
Mrs. Morella. Mr. Price, would you like to comment?
Mr. Price. Yes. Just a couple of comments. I also brought
Michael Hodge with me to--maybe he can go into a little bit
more detail on how effective it's been.
Mrs. Morella. Why don't we have Michael Hodge? Did I swear
him in?
Mr. Price. Yes, you did.
Mrs. Morella. OK, great. Thank you, Mr. Hodge.
Mr. Hodge. Thank you. Good morning. I'm very pleased to
give you some indication of just how extraordinarily beneficial
the enterprise zone designation has been. We have some direct
information and of course some anecdotal information, anecdotal
because the Internal Revenue Service, as you know, does not
track this information. These are purely tax expenditures but
we do have information based on our sample.
Concurrent with the creation of the enterprise zone, there
was--thanks to Ms. Norton and to this committee, there were
also amendments to the Home Rule Act that were beneficial and
that play into the enterprise zone, and those involved the
ability to expedite our revenue bond approval process and also
the ability to issue tax exempt securities on behalf of
elementary and secondary schools, which we were not able to do.
That culminated in, since enactment of that legislation and the
enterprise zone, the issuance of more than $2.7 billion in
securities, basically investment in our city. Among that--those
bond issues, we have issued in excess of $100 million of
enterprise zone facility bonds. These bonds are issued on
behalf of private businesses and they involved offices and
restaurants. In 1999----
Mrs. Morella. What was that figure again?
Mr. Hodge. Approximately $100 million securities. And the
program has grown exponentially. We did one transaction in 1999
at $11 million, three transactions at $17 million the following
year. Last year we issued bonds on behalf of seven businesses
with an aggregate value of $70 million. So it's clearly grown.
So the CVS drugstore at Columbia Heights is an example of a
transaction we've recently completed. The K-Mart project, which
is part of the Brentwood Shopping Center, we issued $15 million
on behalf of that business. We have--we will be funding the
Penn Quarter parking facility near the Shakespeare and the
Wooly Mammoth.
The employment tax credit again is something that is filed
with the employer's tax return and so we don't have direct
access to that, but we did surveys on 41 businesses who in
combination claimed some $7.7 million of enterprise zone
credits.
Again, that's merely a snapshot of 41 businesses. It
includes hotels, restaurants and other retailers. There's one
large sports facility operator who claimed in 1999 on behalf of
56 District residents some $225,000 in credits. That doubled in
2001, prompting them to claim some 113--some $615,000 on behalf
of twice as many workers, 113 District residents.
Again, because of the expanded authority under the bond
program, we have been able to finance 11 elementary and
secondary schools with bonds valued at $115 million, and among
these are two public charter schools, the first charter school
financings that we've done, and we now have four additional
charters schools in our pipeline now that they understand that
this can work. Despite all--yes.
Mrs. Morella. Excuse me, sir. The charter schools, are they
special education charter schools?
Mr. Hodge. Yes. The Washington Very Special School for the
Arts, that's a school on 16th Street that provides services to
children that have developmental disabilities, and they use the
arts as a vehicle for--as a pedantical device.
The Seed, a public charter school, also provides services
to special needs children, and the other elementary and
secondary schools that we've financed also involve residential
and day treatment for special ed and some regular school
program children as well. The enterprise zone incentives were
scored at 2.--at $1.2 billion and that was quite aggressive,
and despite the success we have had in using this program, we
doubt that we have exceeded the score.
I bring that up to point out that I think the enhancements
we'll be asking for will be at no additional cost to the
Federal Treasury. We have not reached that point. And what are
those amendments we would seek? Of course extension of the
enterprise zone designation until 2009. That would correspond
to the duration of the empowerment zones enjoyed in the various
States. Also the renewal communities expire in 2009. The
District of Columbia in fact is the only congressionally
designated area that expires--that only had a 5-year life
originally and that will expire in 2003. So we're looking for a
conformity there.
We would seek to expand the enterprise zone to the entire
city because of the inequities that have been pointed out. The
renewal communities also are able to issue enterprise zone
facility bonds; however, those issuances fall outside the
annual private activity bond volume limit. The District's EZ
bonds are subject to the annual cap, and so our housing
programs and our commercial development bond programs are in
this untenable competition, and we would seek again to have the
District treated in a similar fashion as the renewal
communities.
The zero capital gains tax treatment that was spoken of
earlier today, we have received a ruling from the Internal
Revenue Service; that is to say, they issued a private letter
ruling expressly excluding providers of digital technology and
information technologies from access to that benefit. This is
unfortunate. Because it's a private letter ruling we think that
a legislative fix is the only way of curing that and we would
like to be able to be part of that future of our economy and so
we would seek to have that corrected legislatively.
And of course we would seek to have the first-time home
buyer tax credit made permanent. The District still has an
extraordinarily low rate of homeownership, and the first-time
home buyer tax credit is targeted. It is targeted toward low
and moderate income households. There is a cap there.
Finally, something that we had not discussed with this
committee previously is something that we think is very
powerful and again is at no additional cost to the Federal
Treasury, and that would be a grant to the District of Columbia
of triple tax exemption. Of course people buy tax exempt
securities because they are exempt. They do not have to pay
interest on the Federal taxes on the interest earnings.
The States and localities may or may not honor the
exemption that attaches to a particular state issuance, and
indeed that is often the case with the District of Columbia
with some of our neighboring jurisdictions. Because the
District doesn't have a State or county government, we really
are the only jurisdictions that operate without an--outside of
an intergovernmental fiscal system. We don't have a county
partner or State partner to contribute tax revenue or handle
programs. This triple tax exemption would be a way for the
Federal Government to participate with the city by providing
that our securities would be issued--would be exempt from all
State and local Federal taxes.
There is precedent for this for other jurisdictions that
have a special relationship with the Federal Government. So
this benefit is enjoyed by Puerto Rico, the Virgin Islands and
American Samoa. We think it certainly is justified in the case
of the District of Columbia, would enhance our fiscal capacity,
again, at no cost to the Federal Treasury.
Ms. Morella. Well, thank you, Mr. Hodge. You did a great
job. Thank you very much. My questioning is pretty much
completed. I now recognize the ranking member for her
questions.
Ms. Norton. Thank you very much, Mrs. Morella. I do also
have some questions of the NCRC. I thought I had to find out as
much as I could about the CDCs. I do want to say I appreciate
how Mr. Hodges made information about the tax credits
available, freely available to businesses and how the city is
handling that. On the intangibles, one of the reasons why
capital gain isn't used fully, as Mr. Heller indicated, one of
the reasons is that intangibles are not included. By the way,
they are never included. I do have intangibles in my citywide
enterprise zone bill. I do want to indicate here for the record
that the capital gains limitations--and here I had lots of
allies on the capital gains limitations--because all of this,
all of our capacity has not been used as you just testified, I
am going to be arguing very strenuously for expansion of the
capital gains authority. For example, for the capital gains
authority, unlike the other authorities, it can be used only in
10 percent poverty zones, and 80 percent of the business must
be involved. My bill erases, of course, the zones and make it
city wide and lowers the 80 percent to 50 percent and does
allow intangible property.
I do have a last question on the CDCs. First, are they
audited along with the rest of the D.C. government?
Mr. Price. DC does audit the CDCs, yes.
Ms. Norton. No, are they audited like agencies of the D.C.
government by an independent auditor.
Mr. Price. I don't believe so.
Ms. Norton. I wish you would report back. I mean, that may
be part of the problem. You are here talking to the Enron
Congress. Even when there is an outside auditor, as you can
imagine, there develops a relationship so there may be a
problem. So I want to know--let me ask you to do two things: I
want you to report back to this committee within 60 days of how
the auditing takes place and how the city intends to make sure
that auditing is done on an independent basis without any
agency or anybody else who is involved.
In other words, I do not believe it is right that agencies
of the D.C. government have to submit themselves to an
independent auditor. But if you happen to have a contract from
HUD involving D.C. money, you don't have an independent auditor
look. I don't think that independent auditor should be chosen
by each CDC. Again, you're talking to the Enron Congress. I
think that--that somehow there should be some level playing
field involved.
So I ask that you report back in 60 days on that. I ask you
to report back on the status of the properties that were
underdeveloped. Let me just say, I know the city doesn't like
for us to say report back. This is legitimate oversight of the
D.C. subcommittee. And while we have complaints from the city,
particularly when I have asked for reports back, let me just
say, and just carry this back to the city, better to report
back to me than to have other committees of the Congress
intervene into your business, as one subcommittee has already
attempted to do. I am trying to say to that subcommittee, back
off.
You will do it. One of the ways we're going to do that is
that you're going to report back to this subcommittee on what
you're doing. I ask that those things be done within 60 days.
The city has not always honored the time limit. I don't want my
staff to have to call and say by the way it's past the time
period. So I would appreciate that.
Let me ask, finally, has any evaluation of outcomes--I
congratulate the Mayor and the city for the kind of performance
reviews, evaluation of agency outcomes that you're doing,
everybody has been very impressed with that. Is any such
evaluation of outcomes or performance reviews done with the
CDCs?
Mr. Price. That's one of the things that Mr. Jackson is
doing right now. I mentioned several different outside groups
that he was bringing in like Apt Associates like working with
Fannie Mae and working with Lisk, that's the process that
they're going through currently.
Ms. Norton. If you would simply report back in 60 days on
that, I think that would take care of that.
Could I ask Ms. Bacon, does the D.C. independent--does the
D.C. IG audit the outcomes of the NCRC? If he wanted to, could
he come in and audit the outcomes of the NCRC the way he does
throughout the government, the Mayor's office, the way he can
do anywhere else?
Ms. Bacon. I'm afraid that I really don't know the answer
to that, but I would be happy to report back to you on that.
Ms. Norton. Do you know the answer to that?
Mr. Price. You know I don't. I'm also on the board of the
Housing authority. I know he has requested and the Housing
authority thought he didn't have that ability. But I think at
the end of the day, they agreed that he did. So I don't know if
NCRC, if the law is similar to the Housing authority.
Ms. Norton. Of course, that's a Federal agency. Well, it's
an agency funded wholly by the Federal Government. So if the
D.C. audit can go into the Housing authority, I would like you
to report back on that. Let me give you my honest-to-goodness
opinion, it is the money--the NCRC has funds from the Congress
of the United States. Now, if you would like us to have the
Congress of the United States do the audit, then we would be
glad to do it. Other than that, I would like, within 60 days,
to know whether you believe the IG has the authority, and if he
does, not whether you will be submitting--whether you will be
submitting legislation to give him that authority. We are very
impressed with what they've done so far, but we believe that
anybody who gets money from the Federal Government or from the
District of Columbia should be treated any differently from
other agencies.
Let me ask Ms. Bacon, how did you choose the areas? There
must have been a lot of competition to be chosen. What is it,
six areas?
Ms. Bacon. For the priority areas?
Ms. Norton. Yes.
Ms. Bacon. In fact, the number of areas that are listed in
our revitalization plan as priority areas are greater than
that. These are areas which were established during the whole
process of developing the revitalization plan, and include
enterprise areas, etc., that were determined to be underserved.
And we are trying to focus on specific projects within those
areas so that we are trying to address the unmet needs and the
economic development potential, both east of the river and on
the another side of the river in the main part of the District.
So these are really areas that coincide with enterprise
zones and other priority areas of the District, and also
projects that we have decided we should focus on for the
immediate time within those areas.
Ms. Norton. How do you do procurement? Do you do your own
procurement?
Ms. Bacon. Yes, we have our own procurement rules, which I
would be happy to submit to you. They were submitted last year
to the Council for review as well. We don't have to carry out
the same kind of procurement processes as the District does,
but we certainly do enter into the spirit and also the
requirements of competitive procurements. We can do sole-source
procurements under certain conditions as well.
Ms. Norton. One thing I would ask you to look into, I
believe you may be eligible to use the GSA schedule. If so, it
would save you some money if you could use the GSA schedule.
And I'd ask you to look into that and see if you are eligible.
I don't have any doubt about your rules for competitiveness
but, of course, that's taken care of in the GSA schedule.
For paying off bonds, what's the source of revenue for
paying off bonds? First of all, are your--is your authority
backed by D.C.? I mean, do you work through D.C.-backed bonds
the way agencies do?
Ms. Bacon. We are subject to the D.C. Cap. And we have not
actually gotten to the situation where we would be issuing
bonds. So I don't have the details about the bond issue.
Ms. Norton. But go through the same process that a city
agency does because you're subject to the cap.
Ms. Bacon. We are subject to the cap. Again, I would like
to be able to report back to you on the details.
Ms. Norton. Yes. I understand you're in startup. Tell me
about your ideas for self-sufficiency? What is the process
you're undertaking to arrive at a self-sufficiency plan?
Ms. Bacon. What we are doing currently is checking, first
of all, with other similar, or not so similar, agencies around
the country, agencies with development authorities and others
who have been charged with doing economic development in their
particular areas. Some of them have operational support, some
of them don't. Some of them have other powers than we do. And
so we're looking at all the other similar organizations around
the country.
And then we're looking at what would be the potential
revenues and also the staff costs for different kinds of
things. First, we feel that we're ready to serve as development
manager for major projects. That would be a revenue-generating
source. We are as I mentioned, receiving revenues from the
Gangplank Marina. That is owning property and generating
revenues. We will be generating revenues from doing
developments in joint venture with private developers or with
nonprofit developers.
And so the board has asked us to do a paper that is due in
several weeks that will outline different options for self-
sufficiency, and then the board will look at that and we're
going to have a retreat actually on the 22nd of March where
they will be looking at these different proposals we've made
and make some preliminary decision as to how we do believe we
can become self-sufficient.
Ms. Norton. Mr. Safdar, could I ask you, are you in an
enterprise zone that can take advantage of our D.C.-only tax
credits?
Mr. Safdar. You mean the New Economy Transformation Act?
Ms. Norton. No, I mean our tax credits, the Federal tax
credits. Which allows you, for example, for every D.C. employee
on your payroll, you got $3,000 off the first $15,000.
Mr. Safdar. No, ma'am, I am not. We are constantly looking
for new real estate.
Ms. Norton. Did you get here on your own or because the
District helped you--you mean--I mean we're so glad to have
you. Here is a technology company, a small one here.
Mr. Safdar. And profitable. I know I'm kind of rare.
Ms. Norton. Didn't move to Maryland where they all move to
or Virginia. So you're kind of rare. Because you are rare I
expected you to say that you were lured by some kind of
incentive or you're--were you lured by the D.C. incentive?
Mr. Safdar. I must confess that because my business is in
the world of politics, I moved here from New York, moved into
the district relocated my residence and moved my family and we
have never looked back. The business has grown very well. And
one of the things that's going to keep us here is, in fact, the
New Economy Transformation Act, because it allows you to earn
various credits as a tech company and then build them up and
keep them for future years. Every company that takes advantage
of these incentives actually has an incentive never to leave,
because once you leave the District, you lose those built up
benefits.
Ms. Norton. I like that part of it, you have to pay back.
Mr. Safdar. There's a lot of other intangible reasons you
would like to stay in the District. The quality of life is
simply superior. I think on your issue of intangibles and
Federal enterprise zones, I think that is really an important
topic for a business like my own where what we produce is
either software which has no tangible component if it is
delivered over the Internet as ours is, or consulting advice,
there is no incentive necessarily to move to the enterprise
zone that is as strong as if we produced mops, for example.
Ms. Norton. There's a lot of incentive. For example, where
are you located?
Mr. Safdar. Near the corner of Vermont and K.
Ms. Norton. This is an example because if you're near
Vermont and K, which is near 5th and K, this is an example of
why it makes no sense for us not to have a citywide enterprise
zone. I don't think you should move. By the way. I really am
not encouraging that. But I would like to say that the fact
that you can get $3,000 off the first 15,000 you pay any D.C.
employee helps us and would help the employer, so there is an
advantage although we're glad to have you where you are.
Mr. Safdar. I stand corrected. I would like to point out
that the prohibitation currently on intangibles means that
those information industry businesses which can provide a
career path and improvement path for individuals in an
enterprise zone is not as well incentivized as it could be. I
think you're proposal is very important, and whatever we can do
to help, I want to make that offer.
Ms. Norton. Appreciate it. Madam Chair, I would like to ask
GSA a few questions.
First the Chair has raised the very important question of
St. Elizabeth's. If ever there has been a plot of land that
people talk about and do nothing about--and this is not, by any
means, a District of Columbia problem. District of Columbia, of
course, has the east side, doesn't have the west side. When I
first came to Congress, let me tell you the Congress wanted to
give you all of it, then you would be in real trouble. In fact,
it was about to come over. I stopped it because it was coming
over with all of that baggage that would have made it--which
would mean you would clean up all that the Federal Government
had done to it.
I do want to make sure that what the Chair has done in
opening up this conversation once again about St. Elizabeth
leads to some concrete action. I know that the Mayor has tried
his best to try to do something there and always is stymied in
no small part by the Federal Government's role here.
I wonder with GSA at the table, with Mr. Price--and that's
not often the case, whether or not two of you--I mean, for a
hearing. It is certainly often the case with respect to
economic development in the city. And I appreciate the way the
GSA cooperates with the city. But I wonder if you, Mr.
Williams, and you Mr. Price, could indeed sit down to determine
if you need legislation to develop the St. Elizabeth's site and
report back to this committee, if you don't need legislation,
then we need to know what you need. If you need legislation,
for example, it could be legislation taking off from the
Southeast Federal Center site.
If that's what you need to kind of move us off the dime,
then I'd be willing to ask the chair if she would move with me
to try to move in that direction.
If there is something you need the Federal Government to
do, if there is some way in which GSA cannot move any further
or faster than it is doing we need to have that--we need to
have that spelled out so that St. Elizabeth's becomes more than
a topic of conversation.
Now, could I ask you, Mr. Price, all of us here have been a
part of the Anacostia Waterfront Initiative, and I'd like to
know what the status is of the initiative. You had a big
celebration on a big ship out there a while ago. Does this
project need legislation to proceed? Many Federal agencies are
involved who own or occupy a part of the waterfront. The
District has been working very hard on the waterfront. But I'm
not quite sure what the comprehensive Anacostia waterfront,
that is to say, that part that is out there on the water,
whether it is going and what it would take to make it really
happen in less than 50 years.
Mr. Price. Right. Well, the planning process for the
Anacostia waterfront is well underway. As you said, I think
there are 16 or 18 Federal agencies that have been involved in
that process. And Elinor might want to comment on a little bit
more, because NCRC is heavily involved in that. So there are, I
have seen from the director of planning and Elinor several
plans for that. But you raise a good point, really, in regard
to both St. E's and the waterfront. Because really, it's the
infrastructure cost and the funding for that is critical here.
We have been talking about St. Elizabeth's for a long period of
time. We've been talking about a waterfront. But there are some
significant infrastructure costs that need to be covered there.
And there are some creative ways we think that we could go
about funding those.
We do--and I welcome coming back with GSA and coming back
to you and talking about some those creative ways both from the
District standpoint and from the Federal Government standpoint
of how we can fund those infrastructure costs to get that kind
of private development, the kind of development that your
legislation is helping at Southeast Federal Center. In terms of
some specifics, don't know if Elinor wants to comment a little
bit.
Ms. Bacon. Thank you, Mr. Price. One of the things I think
is very exciting, we have the overall planning effort that is
being undertaken by the office of planning. And then we have
the example right now of the first--well, of course, there is
the Southeast Federal Center, which is part of this whole
effort, but you have NCRC and the Office of Planning and the
Office of the Deputy Mayor working together to develop an
actual development plan for the southwest, which I showed you
earlier.
And in this regard, we're working very closely with John
Parsons and others in the Federal Government to be looking at
how we could partner with them, because that would be a
critical element. The infrastructure costs, in the southwest
alone, we project at between 30 and $40 million. This is for
the infrastructure costs for the underground utilities, for the
extending the Promenade, for closing the street, etc. And so we
certainly would like to come back and talk with you further
about that particular project.
Ms. Norton. Staff informs me, and now I remember that we
actually got $8 million in the last omnibus, the last year of
the Clinton administration, for downpayment on St. E's cleanup,
and that was dropped in a final bill. It may be that we can
revisit that. I have only a few more questions if I could find
about the Southeast Federal Center status of that. I haven't
been able to ask questions of the GSA. I will do it quickly at
your urging, Madam chair.
I'd like to know what's the status of the RFP for the
entire southeast--I was told the RFP would go out in March.
Well, you know we're approaching March 15th. Is it going to go
out this month?
Mr. Williams. Will, Congresswoman Norton, yes, ma'am,
actually it's the RFQ that is going out.
Ms. Norton. RFQ, I'm sorry.
Mr. Williams. We do have--as when I met with you late last
year I told you that I was going to try to move it closer to
the date to which we met. We have finished the framework of the
documentation. The work on the RFQ is done. What we've done
recently, and it really bespeaks the relationship that we're
building with the District of Columbia, we met Joe Moravec, the
Commissioner of Public Buildings, and I met with the Mayor and
some of his staff and our staffs to discuss the Southeast
Federal Center, where to go. And we wanted the District to make
sure that we all had the right shared vision for that site as
part of that RFQ process. The RFQ is going to go out on the
street this month.
It's important, though, that as a part of that RFQ, there's
an explanation of what the vision for that 55-acre site is so
that we'll get the best ideas from the marketplace. Because
that's--we want people to play. We want people involved in that
project. We're going to have the best ideas in the private
sector. So we want to give them as much information as we can.
And as soon as--and we're developing our final work with
the city now. We expect to have that out. We will have that out
in March.
Ms. Norton. Please come here and brief the staff on what it
is you're talking about because I don't know what you're
talking about. Please come and brief the staff and what you are
talking about this vision notion, because we have not been
briefed on that either.
Mr. Williams. Yes, ma'am. Before you develop a large
parcel----
Ms. Norton. The Chair wants me to finish. I need a
briefing, not an explanation.
Mr. Price. The city is actually meeting with you Monday,
and that is going to be the topic of that meeting.
Ms. Norton. Thank you. Could I have a status report on the
construction of the DOT building at the Southeast Federal
Center?
Mr. Williams. Yes, ma'am. We signed the lease the first of
February. We're finishing the requirements and the occupancy
agreement with Transportation dealing with their security
issues. And some need possibly for some additional space in
that area as well. So we're proceeding on that.
Ms. Norton. There are two other buildings that we worked
hard on up here. And you mentioned one in your testimony, the
Tariff Building, but we haven't seen anything happen here; then
there's the Old Post Office building. I would like to know the
status on both of those.
Mr. Williams. Yes, ma'am. The Tariff Building, there is
work ongoing.
Ms. Norton. There is work. I'm sorry. I've seen--you're
doing some kind of gutting or something inside.
Mr. Williams. Yes, ma'am. The contractor representing
Kempton Group is developing that site into a hotel. They're
doing the interior work.
Ms. Norton. Do they have any date for completion there?
Mr. Williams. I don't have that, but I'll get it to you for
the record.
Ms. Norton. This is really a major thing they've done.
Because here, the GSA is developing a site that it owned into a
hotel, but it was a historically preserved site. So you had to
have very special rules for how it is developed. No private
developer without the Federal Government being involved could
ever have done it. What about the Old Post Office site? This is
a big waste right here, what is it, 12th and Pennsylvania
Avenue, a prime tourist spot that has always been underused
ever since it no longer was a post office.
Mr. Williams. Yes, ma'am. I would agree Congresswoman
Norton that we haven't done very well in the past with the Old
Post Office. The plan that was launched in the 1970's just
didn't work. And in June 2001, both the House and Senate
authorized us to implement a new plan for that building, which
includes the award of a new lease for the entire building
without restriction on how the uses are going to be apportioned
within the building. We're working on that now. We're going to
be releasing a request for proposals this summer on the re--
it's going to be a lot of renovation work but it's also going
to be a complete recasting of that project.
Ms. Norton. Don't let the building season pass you by.
Madam Chair, I am through. I do want to indicate to the GSA,
this is a building that was largest--the largest structure ever
built by the Federal Government is the Ronald Reagan Building.
There have been many complaints from the Federal tenants about
this most expensive Federal structure ever built. We pressed it
very hard because it's an international building and therefore
there is an effect for the entire region and the city, an
economic effect.
They asked me to come and personally tour the Ronald Reagan
Building. I did so 2 weeks ago. I was concerned about the level
of maintenance of the building. Here are people paying top
dollar for being on Pennsylvania Avenue, very near the White
House, and they wanted me to see for myself what we found and
we toured, it was the EPA part of the building, turned on the
water, it says hot water, no hot water. Stains. I'm sorry,
USAID. Stains on the carpets all up and down the halls, walls
that needed painting.
Now, the problem is with this is this is the prime space in
the District. It's the most expensive space in the District of
Columbia. What the Federal Government has done is to say
because we wanted an international trade building, we will
insist that Federal agencies that have to do with trade be in
that building. Of course, they thought they were getting prime
space there. And very crowded space. Constant complaints to the
GSA. Some of the space unrented.
My inclination is to ask my committee of primary
jurisdiction to hold a hearing. But I want you to know I have
seen it for myself, and I want to ask you what you suggest
should be the next step. This is my last question, Madam Chair,
having seen the problems in the most expensive rent, building
with the most expensive rent in the District of Columbia.
Mr. Williams. Yes, ma'am. Congresswoman Norton, I would
agree that we have some obvious disconnects there. I've been
trying to schedule a meeting with the head of the USAID for the
last week or two myself, and for some reason, have not been
able to get on his calendar. I am very concerned about the--
about the reports of conditions there. I've met with one of the
tenants in the building in the last couple of weeks and talked
with them about the same issues. There are also some people
have security concerns in the building as well. Clearly
something that we need to deal with. And I'll be more than
willing to report back to you in the next--within the next
month about the progress that we've made.
Ms. Norton. I appreciate your doing that. Mr. Williams, I
want you to know that the head of the--the head of the USAID
put out an RFP to actually move out of the building. If they
moved out of the building, you would have a massive hole and
you would I have a hard time getting someone to move into that
building, especially because the Congress has said it has to be
an international agency. So I would ask that you do set up that
meeting within the next week, and I will ask that my staff be
invited to the meeting.
Mr. Williams. Yes, ma'am.
Ms. Norton. Thank you very much Madam Chair, for your
indulgence.
Ms. Morella. I found it to be very informative and very
helpful. I think we can move ahead. I wanted to ask NCRC, since
you talked about Southwest and Gangplank. What about Arena
Stage, do you have any plans for that expansion?
Ms. Bacon. The arena stage itself has plans that they're
developing, and our plan is going to be very synergistic with
its plans, so that we are all part of the same redevelopment
effort. But they are doing their plans and ours will be in
coordination with theirs.
Mr. Price. We're actually working with Arena Stage. They
have made a request to the city for some $25 million. When I
talked to you about some of the creative financing that we can
do, and perhaps the Federal Government, it's also related to
the Arena Stage development.
Ms. Morella. Very good. Mr. Williams, you may need for St.
Elizabeth's some legislation with regard to the disposal of the
site. Is that something you've thought of?
Mr. Williams. We would like to take a look at that as well.
I think Congresswoman Norton makes a very good comment about--
case about the whole issue of how we will redevelop. And it
starts with disposal as well. We're going to take a look with
the District and also would like to talk to you all about where
we could find ways to maybe use some of those newer tools that
we've been able to employ in Southeast Federal Center. That's
one of the things that we'll look at.
Ms. Morella. We'd be glad to help you, as was mentioned,
with any mechanism that you may need legislatively or that can
come from the Federal Government.
I'm very pleased, Mr. Safdar, that you're doing so well in
the District of Columbia. If you're doing so well, you could
you have a little branch in Montgomery County, Maryland.
And certainly, Mr. Bregon, I'm glad that you came and
appreciate you coming and offering your insight. I think all of
us have learned the need for accountability for auditing, for
transparency and cooperation to work together. Of course the
ranking member is critical to all of this. We can help
legislatively and we can help to move things forward, but
you're going to have to show internally. As was stated in your
testimony, Mr. Bregon, that I think you said something like the
successes can only be realized when communities learn lessons
from their mistakes and incorporate those lessons into program
design revelation.
So I thank you all for being with us. I found it to be a
very important hearing, because of all of you and the work that
you are doing and will continue to do. So before I adjourn the
meeting, I just must recognize the staff because they help put
everything together. The majority side, Russell Smith; my staff
director, Matthew Batt, Shalley Kim, Rob White, Heea Vazirani-
Fales. On the minority side, Jon Bouker and Jean Gosa. So the
meeting is adjourned.
[Whereupon, at 12:35 p.m., the subcommittee was adjourned.]
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