Tuesday, January 05, 2010

District Council Hands Out Tax Breaks to Developers

Today, the District of Columbia Council approved three bills that would exempt several developers from property taxes throughout the city, with one exemption lasting indefinitely. Yup. Indefinitely. Councilmembers were handing out tax abatements like candy at a parade to Affordable Housing Opportunities Inc., Neighborhood Development Company, and Donatelli Development. The tax abatements come in exchange for residential developments that provide housing at affordable levels in communities ranging from Georgia Avenue to Columbia Heights, Congress Heights to Naylor Road. Though abatements are often offered as a preemptive tool to encourage affordable housing, the Donatelli project delivered last July; the abatement in this case softens the blow of a major condo development that turned rental when the financial headwinds were too strong.

Donatelli's Park Place, which opened atop the Georgia Avenue-Petworth Metro station last summer boasting 156 rental apartments and 5 rowhouses, offered 20% of the units to low-income tenants. Park Place is a $71 million, 200,000 square-foot housing and retail project. The abatement begins FY 2009 and exempts the developer from property taxes for the next 10 years and increases by 10% for the years 11 through 20 until the point at which the developer is paying full property taxes. In 20 years. Though, according to Brian DeBose, Communications Director for Councilmember Jim Graham, this is the an unusual request from Donatelli, whose projects have consistently set aside affordable housing, without any expectation of tax abatement. Graham saw fit to support the developer, a DC resident, and to "better advantage the building" during an economic downturn.

Neighborhood Development Company's The Heights on Georgia Avenue proposes to bring 69 new residential units and ground floor retail with half of the units set aside as affordable. The Georgia Avenue site was acquired by a partnership of NDC and Mi Casa Inc. – a DC-based non-profit that specializes in restoring aging properties and converting them into affordable housing. Architect Graham Parker designed the building, which will come in at a cost of approximately $25 million. The project received the vote of approval from the ANC for the zoning adjustments needed to bring in the development. The abatement for The Heights is the same as the Park Place abatement.

A bill submitted by Councilmember Marion Barry also provides indefinite tax abatement on two properties owned by Affordable Housing Opportunities Inc. (AHO), and even paying back taxes already received from FY 2008. The exempted are the former Wilson Court Apartments at 523-525 Mellon Street SE, purchased in 2008 for $1.5 million, and 2765 Naylor Road in SE, which the developer purchased in July 2008 for $2.8 million. Nelson Architects designed the renovations for both buildings. Plans for the former property include 36 single room units and 15 efficiencies, including two for on-site staff. The units will be made available to special needs single adults all with initial incomes at or below 30 to 50% of the Area Median Income (AMI). Neighbors have objected strongly to the proposed use, but Troy Swan of SOME indicated the project plans may change since the Mellon Street project did not receive any Low Income Housing Tax Credits (LIHTC). The latter AHO property on Naylor Road will include 40 units at or below 60% AMI and received a LIHTC award from the DC Department of Housing and Community Development (DHCD) in August.

The approval of AHO's abatement for Naylor Road and Mellon Street comes despite a June letter from Natwar M. Gandhi, the District's Chief Financial Officer, stating funds are "not sufficient in the FY 2009 budget or the proposed FY 2010 through FY 2013 budget" indicating the total negative fiscal impact through FY 2013 would total $383,700. Though abatement bill also includes an amendment that would supposedly offset the cost of the lost taxes through parking meters.

Washington, DC real estate and development news.

Image of 523 Mellon Street SE Courtesy of South East Socialite.


Anonymous said...

I work in the real estate world and find it rather fishy that Donatelli took the risk to construct a building and is now getting a handout from the DC government when Donatelli is one of the single largest fundraisers for people in power in DC government.

Anonymous said...

I can't wait to vote Graham out of office. This is really the last straw. I echo Anonymous @ 9:17am as well (though I don't work in the real estate world).

JakeDaSnake said...

What a sham. Donatelli gets government land to build his projects, sents aside a small amount of units as "affordable"- but gets bonus density to make up for this, and now gets a $10 million bail-out because he can't move his units. I wonder if he shared his profits with the City when he was making millions. Pathethic. What will happen if ever developer does this. Cronyism at its highest.

monkeyrotica on Jan 6, 2010, 2:58:00 PM said...

Welcome to DC, where $h!t rolls uphill towards money.

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