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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

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

BOB BARR, Georgia

DAN MILLER, Florida

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

DAVE WELDON, Florida

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

C.L. ‘‘BUTCH’’ OTTER, Idaho

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

JANICE D. SCHAKOWSKY, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

———

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

THOMAS M. DAVIS, Virginia,

——— ———

ELEANOR HOLMES NORTON, Washington,

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

(III)

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

(1)

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.

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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 corVerDate 11-MAY-2000 12:05 Mar 19, 2003 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 D:\DOCS\84599.TXT HGOVREF1 PsN: HGOVREF1
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poration 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 valVerDate 11-MAY-2000 12:05 Mar 19, 2003 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 D:\DOCS\84599.TXT HGOVREF1 PsN: HGOVREF1
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uable 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:]

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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.

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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 turnarounds 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 acVerDate 11-MAY-2000 12:05 Mar 19, 2003 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 D:\DOCS\84599.TXT HGOVREF1 PsN: HGOVREF1
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tivity 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:]

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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.

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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.

15

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 Districtbased 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:]

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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 reVerDate 11-MAY-2000 12:05 Mar 19, 2003 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 D:\DOCS\84599.TXT HGOVREF1 PsN: HGOVREF1
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habilitated 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.

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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-reach- ing. 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

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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 commitVerDate 11-MAY-2000 12:05 Mar 19, 2003 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 D:\DOCS\84599.TXT HGOVREF1 PsN: HGOVREF1
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tee 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 per- manent 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

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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.

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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.

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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

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sistance 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

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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 com- ments. 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.

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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

72

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.

73

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.

74

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

75

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 timeVerDate 11-MAY-2000 12:05 Mar 19, 2003 Jkt 000000 PO 00000 Frm 00079 Fmt 6633 Sfmt 6633 D:\DOCS\84599.TXT HGOVREF1 PsN: HGOVREF1
76

table? 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 31⁄2 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

77

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.

78

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

79

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.

80

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

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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 evenhandedly 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

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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 extraorVerDate 11-MAY-2000 12:05 Mar 19, 2003 Jkt 000000 PO 00000 Frm 00086 Fmt 6633 Sfmt 6633 D:\DOCS\84599.TXT HGOVREF1 PsN: HGOVREF1
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dinarily 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.

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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

85

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?

86

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 fuVerDate 11-MAY-2000 12:05 Mar 19, 2003 Jkt 000000 PO 00000 Frm 00090 Fmt 6633 Sfmt 6633 D:\DOCS\84599.TXT HGOVREF1 PsN: HGOVREF1
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ture 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

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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

89

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

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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 crowdVerDate 11-MAY-2000 12:05 Mar 19, 2003 Jkt 000000 PO 00000 Frm 00094 Fmt 6633 Sfmt 6633 D:\DOCS\84599.TXT HGOVREF1 PsN: HGOVREF1
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ed 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.

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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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