Towers Boost Waterfront
Tax-Based System Will Be Used to Fund Housing Complex
By the start of the 2006 campaigning cycle, Hill staffers who wish to reap the benefits provided by low- and medium-income housing could sign a lease at the new $113 million mixed-use hotel and apartment complex known as the Capitol Hill Towers, which will be built just blocks from Capitol Hill.
When the project is completed, the Capitol Hill Towers will deliver 344 one- and two-bedroom apartments, a 200-room Courtyard Marriott, around 9,000 square feet of ground-floor retail space and parking for 200-plus cars, all located at 140 L St. SE.
The apartment complex will also include 128 affordable housing units for low- and medium-income renters, a prospect that Sheldon Stein, president and CEO of Valhal Corp., the New York-based development company running the project, thinks will attract young Congressional staffers. The affordable units will be priced for residents living at or below 60 percent of the area median income. According to Stein, the median income level in that area is about $80,000 to $90,000.
Sharon Ambrose (D-Ward 6), the D.C. city councilwoman who represents the Southeast area, agrees with Stein that Hill staffers and visitors would be a key market for the rental units and hotel business.
“Given the cost of rental units on Capitol Hill, I think it will be easier than some think to sell” the rental space, Ambrose said.
“If it looks like there are enough folks down there to make a shuttle route, we can talk with the Architect of the Capitol about that,” she added, explaining some of the possibilities that the Towers project could provide.
The ambitious development is the latest to take advantage of the city’s newest program designed to jump-start economic growth in the city.
The Capitol Hill Towers is the fourth development project partly funded through the D.C. government’s tax increment financing program and the first to be located outside of the downtown area. The project received $11.5 million in TIF bond assistance in July, which was approved by Williams’ office and the D.C. City Council. Pegged as a part of D.C. Mayor Anthony Williams’ (D) determined housing initiative, the project will also be a first step in bringing a new sense of community to the Near Southeast waterfront.
The TIF program is an economic development tool that allows the District government to sell bonds backed by a development’s future taxes, while the bond money is used to help pay the developer’s construction costs. According to the chief financial officer’s office, TIF funding is not a loan; the development’s taxes, which would already have to be paid, are used to pay back the principal and interest on the bonds. The District is authorized to have up to $300 million in TIF bonds outstanding.
Since the program’s inception in the District five years ago, the D.C. government has approved $148 million in TIF assistance, and while city officials agree that the program has not been an unqualified success, they do say that TIF assistance may still be the way future development in the city continues.
“It’s been reasonably successful,” said John Ross, chief of operations in the District’s office of research and development. “We’ve gone through a learning period. There’s been a learning curve with TIF.”
Members of the mayor’s office as well as developers agree that the TIF funding process is very complex and still perhaps not the most streamlined procedure.
While approval for the Capitol Hill Towers project came quickly from the D.C. Council on July 8, finalizing the TIF bond and selling it is another matter.
“It’s more of a hope than a certainty right now,” said Stein, who wants to have the project completed by the early fall of 2005. “Everyone believes the project will be successful, but no one knows if the bond buyer will buy the bond or not.”
While Stein had originally hoped to break ground on the Capitol Hill Towers project sometime this month, that date will have to be pushed back until the TIF bond process is concluded by the D.C. City Council and mayor’s office and the bonds are sold on the public market, a process that could take another five to seven weeks, according to Ross.
But despite the complexity of the TIF project, many development officials still feel the bond program will be reauthorized by the city government for use in future projects.
“A number of us are convinced that TIF is the only way you’re going to get projects done in some areas,” Ambrose said.
Michael Jasso, special assistant for TIF in the D.C. Office of Planning and Economic Development, agrees that “although TIF legislation has been challenging, it’s been successful.” In the future, Jasso sees TIF assistance keeping to the $5 million to $15 million range, as opposed to developments such as the Gallery Place Project, approved in 1999, which was the first TIF-assisted project and included $73.6 million in bonds. “I think we’re going to see more projects at smaller amounts,” Jasso said.
“Hopefully TIF will serve as a catalyst and reassurance that residential development is viable in some areas,” Ambrose said. “I think it’s going to be a very exciting time” on the Southeast waterfront. “The Capitol Towers will be a pledge for what’s to come.”
Stein agrees with that assessment.
“We see the Southeast area as an exciting area that has undergone a lot of change and has a lot of potential for new growth,” he said. “We think we’re in a good location to take advantage of that development.”