Bowser insider feeds off public housing favors
Words and Photo By Jeffrey Anderson
The Board of Commissioners of the D.C. Housing Authority has handed an outsized subsidy to a crony of Mayor Muriel Bowser who just last year received gratuitous treatment on two other projects—one that city ethics officials are still investigating.
On May 13, the board approved a $34 million contract with MidAtlantic Realty Partners (“MRP”) for project-based subsidies at Phase 1 of the fallow Northwest One development at 2 L Street, N.W., shutting out more than 30 qualified bidders.
The award comes one year after a $41 million award to developers of nine separate projects.
D.C.’s loss in value is MRP’s gain.
The addition of Bowser insider and former development director David Jannarone to the MRP team assured the blessing of the mayor, who has seized control of the independent, federally-funded Housing Authority, according to current and former housing officials, affordable housing builders and housing rights advocates.
Bowser relies on two other cronies to control decision making at the Housing Authority, those sources say:
Former City Administrator and former Deputy Mayor of Planning and Economic Development Neil Albert, Jannarone’s former boss who now chairs the Housing Authority’s Board of Commissioners; and her chief of staff John Falcicchio, the latest in a line of successors to Albert that retain an automatic vote on the board.
Bowser’s dominion over the Housing Authority, according to numerous accounts, is such that its executive director, Tyrone Garrett, answers to Falcicchio and Albert first, then his own board as a formality, and often is summoned to meet with either or both of them to receive his instructions.
The problem is that Falcicchio has a fiduciary duty to both the city and the Housing Authority, which current and former housing officials say is a conflict, and Albert has a fiduciary duty to the Housing Authority, which is supposed to operate independently of the city.
Observers of this arrangement say the contract with the MRP joint venture over Northwest One Phase 1 is the most recent example of public resources turning into private gain for the mayor’s developer friends—in a city desperate for affordable housing that has become a mecca for gentrification.
“Why was there only one project awarded in this solicitation, since there were 33 projects that qualified through the initial screening process?” asked Vice-Commissioner Bill Slover at the board’s May 13 hearing. “Why did only one project get awarded?”
MRP—and Jannarone—benefited from a number of anomalies.
The Request for Proposal specifies that bidders are supposed to demonstrate that they have exhausted other sources of public subsidies before tapping into project-based vouchers funded by what is known as the Local Rent Supplement Program (“LRSP”).
While all 33 other bidders applied for those other subsidies and received no funding from the Housing Authority, the MRP team (which also includes CSG Urban LLC) applied for none of those available public funding sources, yet was the only team to receive an award.
In addition, the contract—payable over 15 years based on MRP’s request for 65 project-based vouchers at a 220-unit project that is long overdue—looks like a giveaway compared to last year comparable subsidies, which funded more than two times the vouchers and delivered more than four times the affordable units, according to the Housing Authority’s own report that Slover read into the hearing record.
The timing of the approval also is unusual, the vice-commissioner noted. The board approved the previous year’s subsidy in February; three months later, it approved this year’s subsidy.
As a result, MRP will receive $2.2 million this year to subsidize development at Northwest One, as opposed to last year’s allocation of $2.7 million for developer subsidies on nine different projects, according to the videotape and a transcript of the hearing reviewed by District Dig.
That’s not the first sweet deal the Bowser administration has handed to MRP and Jannarone in recent times.
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Northwest One is emblematic of the failure of D.C.’s public housing experiment known as the New Communities Initiative.
The initiative, launched by former mayor Adrian Fenty in 2007, was founded on four principles: build replacement housing before demolishing older units; build one unit for each one that is torn down, afford residents the opportunity to relocate on the premises or off, with the promise of a return to newly built housing; and incorporate mixed income housing.
New Communities envisioned community facilities and investments in education, training and healthcare services for residents, as well.
A decade after its creation, however, none of the targeted sites—Park Morton in Ward 1, Northwest One in Ward 6, Lincoln Heights in Ward 7, and Barry Farm in Ward 8—have come to fruition.
The plan was for the Housing Authority to provide the land and use local revenues to subsidize affordable housing. The deputy mayor for planning and economic development would administer the program, facilitate “gap funding” for acquisition, building and rehabilitation of low-cost housing through the Housing Production Trust Fund (“HPTF”), and oversee compliance with funding conditions.
But from the beginning, New Communities was more conceptual than realistic, according to a 2014 policy advisor’s report requested by the deputy mayor’s office.
Funding gaps between private financing, other sources of funding and what it would take to meet the demand for “deeply affordable” housing were too large for the city to manage, the advisor, Quadel Consulting and Training wrote in its report.
While the plan called for using HPTF monies to develop replacement units for families whose household income is at or below 30 percent of “area median income,” it also called for those funds to support developers of affordable units for middle income residents and market rate housing; as opposed to developers that solely build low-cost housing units, said the advisor’s report.
The trust funds are administered by the Department of Housing and Community Development (“DHCD”), which is required to direct 40 percent of them to creation and management of those low-income units.
Even if developers could afford to build enough housing to meet the demand at that level, they still would not be able to afford operating and maintenance costs, according to the D.C. Fiscal Policy Institute.
To address these shortcomings, the District created a voucher system under the LRSP, in 2007, to augment the trust funds that developers were getting to build the most “deeply affordable” housing units.
There are three kinds of LRSP vouchers:
Tenant-based vouchers help families or individuals supplement their rent at a private-market apartment (below a certain threshold) and can be used at other units within the District.
Sponsor-based assistance is for landlords or non-profit groups that provide affordable units to low-income families and individuals, and can be used to augment HPTF assistance. It requires that services must be provided to recipients, but it also can be used at other units run by the same landlord or non-profit group.
Project-based vouchers are provided to for-profit or non-profit developers for specific units that serve low-income families and also can be paired with HPTF subsidies. Project-based vouchers are not portable, do not require provision of social services and are considered to be the most valuable subsidy from a developer perspective.
Despite being under-funded and over-extended, the deputy mayor’s office nevertheless insisted on developing all four of the New Communities sites at once, rather than sequentially, as financing experts advised. Difficulties in resident relocation and legal challenges caused construction to lag, and as resident became permanently displaced, the promise of delivering deeply affordable “one-to-one” housing fell by the wayside.
Those who remained in their homes in communities such as Barry Farm were made to suffer, as the Housing Authority became unable to sustain its own maintenance responsibilities.
Not much changed under former mayor Vince Gray, so when Bowser came into office, her deputy mayor for planning and economic development restricted all project-based vouchers to New Communities projects, took over the projects themselves, and essentially deprived the Housing Authority of its most valuable tool for building new public housing anywhere else.
Meanwhile, Bowser began tapping the trust funds and allocating them for other purposes such as to build new schools and recreation centers.
As the trust funds depleted, the deputy mayor’s office turned to mixed-use development through public-private partnerships and loans issued by the D.C. Housing Finance Administration (“DCHFA”).
Bowser’s control over this alphabet soup of funding streams has allowed her cronies to obscure funding mechanisms, co-opt dedicated sources of funding, and divert public resources to private interests, according to sources at the Housing Authority, affordable housing builders and finance experts.
Eligible recipients of public housing assistance are being shortchanged, those sources say, as the deputy mayor’s office has gotten into the business of selecting developers, overriding competitive bidding and inserting itself into the Housing Authority’s decision-making, creating what one former housing official called a “three-headed monster.”
“The [deputy mayor] is supposed to attract and retain business interest in the District, create a regulatory environment for players who want to play, and provide gap funding,” a former veteran housing official says. “They’re not there to do development out of that office so they can feed their people.”
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Numerous entities associated with Northwest One Phase 1 appear in an org chart that has four tiers and nine boxes, and most of them are controlled by MRP.
But one entity in a box on the third tier carries more weight than others.
Taylor Adams Associates LLC is a development and advisory firm run solely by Jannarone, an insider from the early days of the Fenty administration, when he was director of development under Albert, a former deputy mayor for planning and economic development.
Jannarone also is a former interim chief operations officer with DHCD.
It’s hard to know what a “single shingle” businessman like Jannarone brings to the table. But it is undeniable that he has leveraged his stature as Bowser’s friend, advisor, confidante, and at one time an occasional social companion to position himself as a beneficiary of her Housing Authority takeover.
When MRP is in the picture, Jannarone, if he is not inside the frame, is likely somewhere behind it helping to hold it in place, say longtime members of the development community who are familiar with Bowser’s “Green Team.”
He is known to show up at the Wilson Building and walk right in to see his friend Falcicchio, the deputy mayor/chief of staff and and charter member of the Green Team since the earliest days of the Fenty administration—a political machine that Bowser now controls.
Or if he has business in play he shows up at the Housing Authority, where he still has connections, including Albert, his former boss. Or he places a call to a former colleague or subordinate at DHCD, an agency that is answerable to Falcicchio and, ultimately, Bowser. (Jannarone, Falcicchio and Albert did not respond to multiple inquiries from The Dig.)
Yet when the MRP-led joint venture requested financial assistance for the Northwest One project in an April 1, 2017, PowerPoint presentation to the deputy mayor’s office, Taylor Adams was not identified as a member of the development team.
Nor was Jannarone’s firm on the development team in June 2019, when the deputy mayor’s office and DHCD issued a consolidated Request for Proposals for LRSP funds that instructed bidders to first exhaust efforts to apply for other subsidies in order to build affordable housing at Northwest One.
It is unclear when Taylor Adams joined the MRP team, but the firm surfaced in January in a request for mortgage mortgage revenue bond financing to pay for acquisition and construction costs, according to a DCHFA resolution. (The agency’s board approved the request on March 10. Bowser crony Buwa Binitie was absent and crony Bryan “Scotty” Irving recused himself.)
At the May 13 Housing Authority meeting, Slover was incredulous as he homed in on the LRSP subsidy and saw MRP was the lone bidder that did not follow the solicitation and walked away with the award.
In a tense exchange, DHCD Director Polly Donaldson took sole responsibility for selecting MRP as the developer to receive the LRSP funds. (Donaldson previously had told bidders that she anticipates a second round of selections later this year.)
Slover was not satisfied.
“I’m just confused by this language that says you have to demonstrate that you maximized all your other financing sources,” he said, according to the videotape and transcript of the exchange, referring to MRP’s decision not to apply for the other subsidies that its competitors applied for. “So where is the rest of the money coming from?”
“Private financing,” Donaldson replied. “Borrowing from a bank. All of the deals have multiple sources of funding, public and private.”
“I know you’ve said that in your presentation,” the vice-commissioner persisted. “That’s why I’m confused that they didn’t apply for any other public financing other than this.”
“That was the way the project was presented,” said Donaldson. “And it passed the financial threshold. They showed their sources and uses. They balanced out. The operating subsidy is a key element to that particular transaction.”
Slover asked what the 33 other qualified developers would get in a second round of awards—should there be any money left by then. Garrett, the Housing Authority’s director, interjected that another $2 million would become available at some point.
“So, the other 30-some projects have to split half the pot?” Slover asked.
“Yes,” said Garrett. “But one thing that I think, and Director Donaldson can chime in on this if at all possible, not all projects need as many vouchers as the other project.
“So, it will vary…quite possibly we could have gotten to more projects, depending upon what their actual ask was.”
“Well, that’s where I’m going,” countered Slover, “because the idea is to generate as many units as possible.
“So, last year 146 vouchers created 1,031 units. And this year so far 65 vouchers are going to produce 220 units.
“Average voucher cost here is $2,900 a month. Average last year’s allocation is $1,500.”
“Yes,” Garrett replied.
“So, I’m just wondering, it seems like an outsized allocation for one project,” Slover said. “And who’s the developer again?”
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Officials at the Housing Authority did not provide comment in time for publication of this story. In response to an email from The Dig, a DCHD spokesman for Donaldson said budget pressures related to the pandemic weighed on her decision. A project at Waterfront Station also will get LRSP funding, the spokesman said, though he did not offer details.
“As such, DHCD decided to move forward with the selection of two projects that…met many of the financial objectives. This way, we’re doing what we can now to bring new affordable housing units online while we all work together to figure out the greater impact the pandemic is having on our budget, available resources, and options for recovery.”
None of that explains the premier-class treatment bestowed upon MRP and Taylor Adams by multiple housing agencies under the control of the deputy mayor—one of which, the Housing Authority, is “independent.”
In fact, it is just the latest installment in a narrative with a recurring theme.
Last year, an equally perplexing arrangement involving MRP, Jannarone and Donaldson set off alarm bells for D.C. Auditor Kathy Patterson, who took note of this latest deal.
“What was concerning for us in the recent [Housing Authority] approval of LRSP funding was the recipient or recipients…It appears to be the same parties who were the low-ranked HPTF applicants we featured in the report [we] published last May,” Patterson said in an email to The Dig.
In February 2019, as Patterson’s office was wrapping up a review of internal procurement procedures at Donaldson’s agency, an interviewee reached out to ask about the status of an ethics complaint he had filed with the Board of Government Ethics and Accountability and the Office of the Inspector General.
The whistleblower had alerted officials that political pressure from the Bowser administration led to internal procurement recommendations being overturned by leaders within DHCD on a $78 million Housing Production Trust Fund award.
The auditor’s report, last May, was titled “Low Ranked Projects Secure Affordable Housing Funds.”
“In brief, five of the nine proposals selected by leadership had been ranked in the bottom half of applications by staff evaluators and the final selection meant 353 fewer affordable housing units,” the May 30, 2019, report stated.
One of those awards went to MRP and Taylor Adams, on a project to develop city land at 3500 East Capitol Street N.E., that received funding in place of those with “objectively better applications.”
The project consists of 137 affordable housing units. The team received $19.6M from the HPTF, and $21.5M in tax-exempt bond financing from DCHFA, though just 15 of those units were set aside for households that earn 30 percent or less of the average median income, Bisnow reported in 2018.
Patterson’s office also produced a detailed report that showed dysfunction and dithering at the ethics board titled “BEGA Mishandled Whistleblower Complaint on Housing Procurement,” on October 2, 2019.
“[T]he ranking of projects by the well-ordered and objective criteria we had documented had, in fact, been overridden and two low-ranked projects had gotten funding,” she testified at a Council oversight committee roundtable, in November.
Ethics officials announced at the roundtable that they had launched an investigation of political favoritism in the management of the trust funds by DHCD. That investigation has not concluded, according to Acting Office of Government Ethics Director Rochelle Ford.
Last year the MRP-Taylor Adams team drew scrutiny on another sweetheart deal that was cut long ago.
In 2013, the Housing Authority had selected the joint venture over eight other bidders for the rights to develop its own headquarters—more than 1 million gross square feet at 1133 North Capitol Street N.E., in the middle of the NoMa Business Improvement District.
The selection allowed the MRP team to have the prime real estate for just $7 million, and would build a new 80,000 square foot office for the Authority, in addition to retail and housing, of which a third would be affordable.
In the midst of the 2014 mayoral transition, former chairman of the Housing Authority’s Board of Commissioners, Pedro Alfonso, said the Authority would work with MRP and its partners “to finance as many units for low and moderate-income families” as possible.
Three years later, however, as property values had risen to unprecedented heights, there was no development agreement in place.
Once the parties executed an agreement, on December 18, 2017, the project wallowed for another year-and-a-half, as contract extensions and unexecuted documents piled up.
After The Dig outed the deal, about a year ago, Garrett said just half of the 200 “affordable” units out of a total of 1,000 would be reserved for people at the lowest end of the household income scale.
Those people would still need a tenant-based rent voucher.
To date, zero units have been created, and it hardly seems like the redevelopment of 1133 North Capitol Street is going to do much for the creation of low-income housing—the core function of the Housing Authority.
Even after the mainstream media and Council overseers took notice, the re-negotiated cost to the developer of $67 million was below the assessed value of the property, according to the Office of Taxation and Revenue.
And under the new deal, the Housing Authority will now have to pay an additional $14 million to lease its own headquarters until a new headquarters goes up elsewhere.
By then, MRP and Jannarone will be eyeing new opportunities, and if history is any judge, Falcicchio and Albert will be right there, looking out for their best interests.
