Minnesota-Benning project. Image from DMPED.

The city routinely bids public land out to private companies. Instead of money, the city demands amenities like affordable housing, workforce development, or a library. Sometimes, these deals work well. Sometimes, they’re just a bad deal, or developers renege on promises.

WAMU reporters Patrick Madden and Julie Patel have been delving into this issue in a series this week. Their Tuesday and Wednesday installments look at the ways public land deals and subsidies can go wrong.

Their week-long series frames the issue around the inappropriate influence of money in politics. If campaign donors get a leg up in the competition for deals, that is a serious problem, and good for Madden and Patel for giving it attention. However, campaign cash is only one of several possible reasons these deals can turn out bad. At the same time, they can also bring valuable benefits as well.

Land deals aren’t just a giveaway

The Tuesday headline was “Million-Dollar Properties, $1 Deals.” The lede talks about 5 projects that went to Donatelli Development and Blue Skye Construction. “The appraised value of all this public land, according to city records: $17.5 million. The price paid by the developers to the city, a little more than a parking ticket: $88.”

Sounds like a massive handout! Where can I get a few acres for a buck? But later, Madden explains that it’s not quite so simple. The deals come with big strings. In particular, they often have to build affordable housing.

Certainly there’s some profit in these deals, and if that profit goes to the biggest donors, that’s a big problem. However, Donatelli’s profit isn’t anywhere close to the $17,499,912 that the intro might lead people to believe.

Madden gives a table of the top 5 land deals:

Project Payment to DC Value of land Contributions

by dev. team

Hine Jr. HS $21,800,000.00 $44,700,000.00 $194,045.00
West End (Library & Fire Station) $18,000,000.00 $30,018,000.00 $127,295.00
The Wharf $1.00 $95,000,000.00 $126,732.81
Capital Fire Station $15,000,000.00 $40,300,000.00 $123,646.00
Minnesota-Benning (Phase 2) $10.00 $13,176,000.00 $122,076.00

This table isn’t really, complete, however, without factoring in what the development teams have to spend on the public amenities that go into the buildings.

Project Pmt. to DC Value of land Public amenities
Hine Jr. HS $21,800,000.00 $44,700,000.00 20% affordable housing

C Street & plaza

West End $18,000,000.00 $30,018,000.00 New library, fire station
The Wharf $1.00 $95,000,000.00 15% affordable housing
Capital Fire Station $15,000,000.00 $40,300,000.00 (can’t find this)
Minnesota-Benning $10.00 $13,176,000.00 100% affordable housing

What makes a good deal?

Figuring out how much those public amenities are worth, however, is the tricky part, and whether the government is getting a good deal. People often disagree about how much affordable housing is fair. In the West End, DC is giving Eastbanc two parcels, which now contain a library and fire station. Eastbanc can build housing, but has to also build a new library and fire station.

Eastbanc is also building 52 units of affordable housing with an additional $7 million subsidy from the city. DC’s zoning commission then let Eastbanc out of the Inclusionary Zoning affordable housing requirement on one of the two parcels, after the developer and officials argued that the value the city is getting from the new library and fire station uses up all the value of the property.

Cheryl Cort thinks that despite the IZ exception, this is probably the best deal we can get. A library advocacy group Ralph Nader founded, the DC Library Renaissance Project is suing to stop the project, arguing that DC should have held out for more affordable housing. Many neighbors want the library, already and think the Nader group is going too far. There’s no definitive way to know who’s right.

Under the current leadership of DMPED’s Victor Hoskins, the city has been seeking less affordable housing from its public land deals, and more direct revenues.

Sometimes public officials don’t push for important amenities

DC economic development officials are often quite eager to get a deal done, even at the cost of important amenities. At Minnesota Avenue and Benning Road, a DDOT plan for the area recommended a new road connection to expand the grid around Minnesota Avenue Metro and a highly congested intersection.

One of the two bidders included the connection, while the winner, Donatelli, did not. Representatives of Mayor Fenty’s Deputy Mayor for Planning and Economic Development (DMPED) then joined Donatelli in lobbying against the concept or even reserving the right of way for a future street. Maybe it was too expensive or difficult, or maybe it was an important amenity that officials just didn’t bother to push for.

Madden and Patel discusses some other problems with public land development deals like this. A law requires the developers to hire small and minority-owned businesses. Sometimes they don’t. (Other times, those companies are just shells that give a payout to owners while a larger firm actually does the work.)

Patel writes,

A WAMU investigation of 110 D.C. developments that received $1.7 billion in subsidies found:

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

The series has an overarching thesis that much of this comes about because the developers are dishing out campaign cash. That certainly may be part of it, but it’s not the only reason. Plus, Aaron Wiener plotted donations against the size of deals and found only a weak correlation.

Cash probably does have an effect. So do other factors. Sometimes economic development officials or politicians just want to get the deal done because a ribbon-cutting is appealing while a project sitting unfinished is a hassle.

Public land deals, though often bungled, are still necessary

Madden says, “Activists and even some council members have asked why the city just doesn’t hold a public auction for these properties and award them to the highest bidder.” That’s an option, but then there would be no amenities. Where would the new library go? Making it part of a larger mixed-use project is probably the best way to use the land, since a library doesn’t need to take up an entire building. Wouldn’t we be better off with a broader mix of uses that maximize the value of this site?

DC could just rent space in an office building for a library, perhaps, but is that space going to be well-suited for a library and in the right location? Plus, that would mean library rent goes up as neighborhoods become more desirable, creating a risk that future budget cuts imperil libraries entirely instead of just shortening their hours. Meanwhile, there’s definitely no spec building out there that can fit a fire station.

Others, like Parisa Norouzi of Empower DC, feel that public land should never go to private uses. She’d like DC to keep all of the publicly-owned land for schools, libraries, and so on. Many other activists also view any public-private partnership deals with suspicion, and don’t want a private company building a library.

These public-private deals, imperfect as they are, seem to be a compromise between these two views. The public gets something for its land, but the land can also accommodate housing and offices when the public doesn’t need every square foot for public use.

Still, it’s important that public officials push to get the best deal for the city, and ensure that winning bidders keep the promises that helped them win bids in the first place. When officials don’t, sometimes it’s because of campaign cash, but there can be many other reasons as well, which are just as important to combat.

David Alpert is Founder and President of Greater Greater Washington and Executive Director of DC Sustainable Transportation (DCST). He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He lives with his wife and two children in Dupont Circle. Unless otherwise noted, opinions in his GGWash posts are his and not the official views of GGWash or DCST.