This was originally posted to the Adams Morgan Listserv on February 4, 2019, as message #50499, groups.yahoo.com/neo/groups/AdamsMorgan/conversations/messages/50499
The Mayor, the Council and the smart growth contingent claim DC’s housing affordability crisis is primarily a result of zoning regulation restricting housing supply. We know now this is more myth than reality. As the Newseum debacle highlights, our so-called crisis is more a result of 20 years of a growing Privilege & Boondoggle Economy coming home to roust, than zoning regulations.
As the Business Journal article below highlights, DC’s Boondoggle elite represented by Mayor William and CM Evans invested close to $300M in DC resources in an obviously nonsensical Newseum business plan and con because of their elite inferiority complex.
“Anything coming from Virginia to the District was music to my ears, because no one was coming from Virginia to the District,” Evans said.
Supposedly, the Newseum con artist offered the District $100M for land valued at $50M. What a steal for the District, they said. No, the District gave the Newseum a PILOT tax subsidy which pays yearly close to $5M on a loan worth about $80M, the city gave to the Newseum. In other words the District loaned the Newseum $80M so the Newsweum could pay the District $100M. Effectively the Newseum paid the District $20M for land worth about $50M.
The Newseum then built 135 luxury apartments on Pennsylvania Ave. on formerly District owned land. The District then authorized over $200M in revenue bonds to pay for a museum which charges entry fees next to the Smithsonian complex of free museums. It was a dumb plan then as it remains.
So besides an inferiority complex why would William and Evans has the District do this? It was one of the first shell game models for using District subsidy to build luxury housing, while driving up the cost of land and housing. Then using the paper rise in land values to loan the difference back to their developer friends from Virginia and Maryland. 20 years of this is what is driving the affordability crisis.
Ironically to fix this problem, the Mayor, Council and smart growth community is pushing us to do more of these deals, by making them easier. Claiming expanding the “Privilege & Boondoggle Economy” will lead to more affordable housing and racial equity. If you buy this… you will buy that the governor of Virginia was not dressed in black face or as a Klansman on his personal year book page.
The high cost of housing is being driven by public subsidies to luxury developers and the expense of equitable development. In the case of Newseum the public helped to finance a $400M boondoggle so Williams and Evan’s friends could build 135 luxury condos. Similarly Nats, DC United Stadiums, Street Car and Wharf would follow to name a few. Next thing you know they are going to tell us that building a Sports Arena will lead to racially equitable economic development in Ward 8.
William
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End of an era: How the Newseum came to open on America’s Main Street
By Rebecca Cooper <www.bizjournals.com/washington/bio/15671/Rebecca+Cooper> – Senior Staff Reporter, Washington Business Journal
Jan 31, 2019, 12:21pm EST Updated Jan 31, 2019, 12:44pm EST
Anyone working on a land deal with the District of Columbia in this day and age would get a good chuckle when revisiting the effort to bring the Newseum to Pennsylvania Avenue, D.C.’s storied but underutilized corridor.
Why the laugh? The entire deal, from offer to close, took just five months and some change, despite the fact that it required the relocation of a city agency (Department of Employment Services), the signoff from a federal agency (the U.S. Department of Labor) and, oh, right, the approval of the federally appointed control board that was at the time administering the District’s finances.
Then-Mayor Tony Williams <www.bizjournals.com/washington/search/results?q=Tony%20Williams> and Newseum CEO Charles Overby <www.bizjournals.com/washington/search/results?q=Charles%20Overby> made the museum’s offer public on July 11, 2000. The two entities closed on the property Dec. 21.
At the time, it was heralded as a tremendous deal for the District, which longed to spread the nascent rebirth of downtown south to Pennsylvania Avenue and toward the Capitol.
Nearly two decades later, the effort is widely considered a success. But as the Newseum prepares to close and sell the building to Johns Hopkins University, officials hope the switch from cultural to educational use doesn’t set back the effort to energize Pennsylvania Avenue.
At the time of the 2000 deal, there was remarkably little controversy. The city got plenty of praise for the $100 million price tag, the highest payment for city-owned property in the District. City officials justified the sale, completed without a competitive bid process, because the offer was significantly higher than the appraised value, between $40 million and $50 million.
City officials were purposely working quickly. New York was courting the Newseum, and D.C. really wanted to lure a sexy tenant from Northern Virginia, something virtually unprecedented at the time, pointed out Councilman Jack Evans <www.bizjournals.com/washington/search/results?q=Jack%20Evans>, D-Ward 2, who served on the council at the time.
“Anything coming from Virginia to the District was music to my ears, because no one was coming from Virginia to the District,” Evans said.
D.C. did its best to sweeten the pot. Although it had planned to issue a request for proposals to sell the land, it skipped the competitive process after the Newseum’s offer came in and executed a sole-source contract for the property. The D.C. Council approved the deal unanimously.
The reasoning? The Newseum’s proposal was much more attractive than what the other developers circling wanted to build on the site, according to Eric Price <www.bizjournals.com/washington/search/results?q=Eric%20Price>, who served as the deputy mayor for planning and economic development at the time. The property housed the six-story DOES building, an aging government facility widely considered less than ideal for the high-profile site.
“Several developers had approached us about just building another office building there,” Price said, adding that the offers were all in the $35 million to $45 million range. “But we were trying to entice residential developers because the idea was the more office buildings we got, and the more those catered to government workers, we weren’t getting the full share of taxes for that. Where the District really profited from was bringing in housing and retail.”
In fact, it was District officials who encouraged the Newseum’s owner, the nonprofit Freedom Forum, to add the on-site housing, retail and affordable housing components to the deal.
“We said, ‘We have to have some sort of proposal that no one can match before we can talk about having a sole-source transaction,’” Price said. “‘We have to be able to go to the council and the public and say we don’t think there’s anything else out there that can beat this.’”
Proceeds from the land sale were divided like this: $25 million went to the new affordable housing fund that had just been established, $15 million went to help move DOES and $10 million went to a neighborhood retail program. The rest went into the city’s general fund.
The District required the Freedom Forum to find a high-quality restaurant tenant akin to the Capital Grille, located across the street, to ensure the new building would be a draw. That requirement is in place until 2022. The Source by Wolfgang Puck, which has become a perennial Washington favorite and power spot, opened there in 2008 and recently signed for a five-year option that lasts until 2022. Freedom Forum also built 135 luxury apartments.
There were other perks offered to the Freedom Forum: The city authorized at least $215 million in revenue bonds for the Newseum — a relatively new tool at the time. The nonprofit utilized all of the bonds authorized; currently, it owes about $160 million on those bonds, according to its attorney, Ed Rogers, who said the city will be repaid upon the building’s sale.
It was also one of the first uses of the payment in lieu of taxes structure. The nonprofit Newseum, which wouldn’t have had to pay property taxes, agreed to the PILOT payments as part of the land deal. They have averaged around $2.5 million annually, according to Rogers.
Despite the quick dealmaking, it still took nearly a decade for the project to open, given the sheer size of the building and the time needed to assemble the exhibits. The Newseum finally debuted in 2008, charging $20 per adult at the time