Empty Promises: Developers Often Don’t Deliver

By Guest Contributor, on June 24th, 2013

Cross-posted from WAMU by Julie Patel

No. 4 in the series: Deals for Developers, Cash for Campaigns

Development won the right to develop public land over two Metro stops after proposing one neighborhood receive a share of the property’s annual rental profit. The other would get 17,000 square feet of shops and restaurants.

Sweetening the deal for D.C.? The developer said no public subsidies were needed.

But years later, the developer scored a 20-year tax break worth millions of dollars. And the other proposed neighborhood benefits weren’t delivered.

What was delivered were campaign contributions to D.C. elected officials: more than $69,000 in the past decade, making Donatelli, along with its affiliates, among the top five contributors of 133 groups examined.

The Capper Carrollsburg project’s recreation center was demolished six years ago as part of a redevelopment and still hasn’t been replaced. (Photo courtesy of Anu Yadav)

Donatelli isn’t alone. A WAMU investigation of 110 D.C. developments that received $1.7 billion in subsidies found:

Flaws with benefits pledged for about half A third missed requirements on hiring local businesses, or the city didn’t have paperwork for them Another 15 percent downsized or delayed benefits, costing the city millions in lost revenue and others arguably didn’t need the subsidy in the first place Less than 5 percent of the subsidies approved were for the city’s poorest areas, wards 7 and 8. “They’re not bringing reinvestment to Anacostia but instead to places like Georgetown, K Street or Chinatown,” said Greg Leroy, executive director of Good Jobs First, an economic subsidies watchdog. “We’ve got to think strategically about where areas really need help. We can’t just think about who is writing the biggest checks.”

Developers receiving subsidies are typically required to provide public benefits such as jobs, affordable housing and parks. But the District didn’t track whether many of those benefits materialized. It has been slammed for it in several nationwide studies such as one last year by Pew Charitable Trusts, which found D.C. and 26 states do little or nothing to test the effectiveness of tax incentives to businesses.

“Who is benefiting is the ultimate question,” said Parisa Norouzi, executive director of Empower D.C. “What we’ve seen from a number of these…deals is that the developers are benefiting and the taxpayers certainly are not.”

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In Fight For Deals, Developers Make Well-Timed Campaign Contributions

By Guest Contributor, on June 12th, 2013

Cross-post from WAMU by Julie Patel and Patrick Maden

No. 3 in the series: Deals for Developers, Cash for Campaigns

Construction on the Marriott Marquis Convention Center Hotel on June 6, 2012. (Flickr photo by thisisbossi)

Seven years ago, during D.C.’s real estate boom, the District asked developers to submit proposals to build on public land in the Southwest waterfront area.

Dozens of developers lined up for a shot, forming 17 development teams in early 2006. They could potentially score the land and receive other subsidies but they’d have to provide affordable housing and meet other criteria.

That’s why controversy emerged when the winning team later wanted to relax affordable housing requirements.

What most people didn’t know is that months before the city’s economic development committee approved scaling back the affordable housing, five of the companies on the development team made nine campaign contributions, on the same day, to the chairman of the committee, then-Council Member Kwame Brown. The council approved the plan shortly after the committee vote.

A WAMU investigation found a dozen developers donated the most the year their subsidy was approved. In addition, the investigation identified ten cases in which campaign contributions were recorded as being made on the same day, to a single candidate, by three or more developers working jointly on subsidized projects. In some cases, the subsidies were proposed or approved around the same time.

Two of the 110 projects examined that received the largest subsidies — the Wharf and the convention center hotel — are among those with developers contributing on the same day and around the time legislation was proposed or approved.

“The timing of a contribution is important,” said Sheila Krumholz, with the Center for Responsive Politics. “There have been times when contributions have come in right around a vote, before a vote. That might be a kind of carrot. There might also be an element of reward if a vote is taken that favors a special interest or donor.”

The investigation also found 133 groups donated more than $2.5 million in campaign cash and received $1.7 billion in subsidies over the past decade

“Trust is undermined if money is being exchanged with patterns like the ones [WAMU has] discovered. It gives rise to reasonable suspicions,” said Dennis Thompson, a political philosophy professor at Harvard and director of the university’s Edmond J. Safra Center for Ethics. “Is the subsidy going to the right person?”

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Major Campaign Donors Score Hefty City Subsidies

By Guest Contributor, on May 28th, 2013

Cross-posted from WAMU by Julie Patel and Patrick Madden

Tax-related subsidies increased 24-fold. Data from D.C.’s Office of Revenue Analysis.

No. 1 in the series: Deals for Developers, Cash for Campaigns

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A historic mansion in Georgetown, a downtown office building flipped for a record profit and luxury apartments with a car elevator, a block from the White House.

These are among the developments in D.C. receiving tax breaks and discounted public land.

A WAMU investigation found the city awarded $1.7 billion in subsidies to 133 groups in the past decade — and more than a third of the subsidies went to ten developers that donated the most campaign cash over that time. Meanwhile, a fraction of the subsidies went to the city’s poorest neighborhoods.

“By a lot of metrics the District is … the hottest real estate market” in the country, said Tommy Cafcas of Good Jobs First, an economic subsidies watchdog. “So why does the city need to be giving out all of these tax breaks to these major developers?”

On paper, the District has low campaign finance limits: From $500 for most council races to $2,000 for mayoral campaigns. In practice, developers can “bundle” donations through employees, family members and by writing multiple checks to a single candidate through limited liabilities and other affiliates.

Some of the developers said they donate to be civically engaged — not to win favors.

Likewise, city officials said they approve projects not to boost their campaign coffers but because developers pledge affordable housing, jobs and other benefits for taxpayers. But the promises often aren’t enforced, or the subsidies simply weren’t needed.

And what began as a targeted economic development tool, now looks to some like government handouts run amok.

WAMU’s investigation involved examining thousands of pages of city documents on 110 developments receiving city subsidies in the past decade, 133 groups benefiting from the subsidies and campaign contributions for council, mayoral and other local races over that time. It found:

* Groups receiving subsidies donated more than $2.5 million in campaign cash. * The ten developers that donated the most were on development teams that benefit from $641 million – or more than a third of all the subsidies examined. * Nearly half of the donors had multiple affiliates donating and 19 had at least 10. * Less than 5 percent of the subsidies were for projects in wards 7 and 8 — the city’s poorest areas with a fourth of the population. * A dozen developers spent the most campaign cash the year their subsidy was approved and there were 10 dates in which three or more companies developing a project together donated to a single candidate on the same day.

“This is, of course, pay to play politics in gory detail,” Bruce Cain, a political science professor at Stanford University, said after reviewing WAMU’s findings. “I doubt that anyone was so stupid as to be explicit about what was being traded…More likely [the trading] is done with quiet understanding about what is expected of people who want a subsidy.”

Cain added that most D.C. residents “lack both the means and the motive” to donate hefty sums of campaign cash: “This is about a system that forces elected officials to raise private money and the people with the most motivation to give are the people who get direct benefits from the system such as subsidies.”

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