Bowser insiders get tax breaks to the west of the Anacostia amid accusations they cheated Black residents to the east
By Jeffrey Anderson
*This is Part 1 of a three-part series.
Mayor Muriel Bowser handed gratuitous tax credits on a high-end Southwest D.C. project to developers who engaged in a previous unrelated transaction alleged in court papers as a “brazen scheme” to “evade” the home purchasing rights of low income tenants seeking to acquire their distressed rental properties in Southeast D.C.
On June 30, Bowser touted the selection of Waterfront Station II among 10 projects to receive housing subsidies to build and preserve 940 affordable rental units (and 300 market rate units) through a $66 million investment from the Housing Production Trust Fund through the Department of Housing and Community Development (“DHCD”).
A development team that includes Bowser’s former economic advisor Geoffrey Griffis and campaign treasurer Benjamin M. Soto will receive premium tax incentives to deliver 450 units of rental housing, roughly a third of them characterized as “affordable.”
“We were very focused on adding and preserving affordable housing before the pandemic hit, and we still are,” said Bowser. “We know the important role safe and affordable housing plays in helping us build a healthier and more equitable [D.C.] These [10] projects–in addition to the many affordable housing projects we have in the works across the city–will help us keep hundreds of families and residents in [D.C.]”
The subsidy in question, a Low Income Housing Tax Credit, or LIHTC, is a dollar-for-dollar reduction in federal tax liability that typically is awarded to developers as an incentive to build or preserve affordable housing in small-to-medium projects.
Waterfront Station II is a major mixed-use project, just a 15 minute walk from The Wharf, a transformative hub of the Southwest Waterfront District.
At 50% of Area Median Income, or AMI, the affordability of roughly 150 units at Waterfront Station II is debatable.
The 9% LIHTC in question, a “9-percenter,” is not the only subsidy Griffis and Soto are getting at Waterfront Station II.
The project, a 400,000-square-foot, mixed-use community of retail, theater space and 456 housing units also will receive a 4% LIHTC paired with bond financing administered by the D.C. Housing Finance Agency (“DCHFA), according to a DHCD spokesman.
The Bowser finance package makes Griffis and his firm CityPartners and Soto and his firm Paramount Development “Triple-dippers.”
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Across the river, in Southeast, Griffis has engaged in a different type of transaction that involved Soto, a lawyer who served as title officer, and Earle “Chico” Horton, the lawyer who represented Griffis in the matter.
Residents of a trio of Congress Heights apartment buildings lived amid mold and infestation for years as Griffis, the Mayor’s appointee to the National Capital Planning Commission, arranged to acquire the buildings from alleged slumlord A. Carter Nowell, of the property management company Sanford Capital.
According to two lawsuits filed in D.C. Superior Court, Griffis and Nowell engaged in a “brazen” and “long-running” scheme that chicaned the residents out of their rights under the Tenant Opportunity to Purchase Act (“TOPA”), which affords low-to-moderate income residents who are facing displacement the first right to purchase their buildings.
They did this, according to the Office of the Attorney General and a group of tenants who filed the lawsuits, while refusing to rectify slum housing conditions, with the ultimate goal of razing the apartments and building a gleaming mixed-use project, offering tenants marginal sums to relocate along with a promise of being able to return to smaller new apartments for the same rent.
Congress Heights received media scrutiny. But previously unreported discovery in the case, reviewed by District Dig, provides a more detailed account of alleged bad faith dealings by Nowell and Griffis that involved professional services and financial investment provided by Soto and Horton.
Neither Soto nor Horton are named as defendants in the two lawsuits, and both deny taking part in any illegal or unethical actions. Griffis denies any wrongful intent or wrongdoing.
At the center of the transaction lies EagleBank, the local lender of choice for D.C.’s political and business establishment, beset by legal costs of government investigations into its relationship with former D.C. Council member Jack Evans and a federal class action that alleges securities violations. (Soto is a board member of EagleBank).
The contrast between Congress Heights and Waterfront Station II is stark. With the lucrative award at Waterfront Station II, Bowser is bestowing a prized funding stream to members of her inner circle who engaged in a transaction rife with allegations of impropriety at Congress Heights.
The opposing scenarios demonstrate a corrosive double standard.
So unfazed is Bowser that she continues to solidify the perception she is a politician unbound to ethics and propriety, her message being that a cloud of dishonest dealings is not prohibitive of favorable treatment–as long as you are one of her friends.
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Griffis, Soto and their respective companies have poured more than $70,000 into the campaign coffers of D.C. elected officials over the years, often maxing out their contributions to Bowser and her allies.
They also have received white glove treatment for their trouble. The two have landed major development projects such as O Street Market, Nationals Park, Capital Fire Station, Waterfront Station I and The Wharf–all of them receiving public financing.
Just recently, CityPartners and Paramount Development announced their plan to build luxury housing and a boutique hotel at 555 E Street S.W., setting aside just 30% of the units for the affordable housing of seniors.
That project will receive a $12 million DCHFA revenue bond issuance, and a $10.9 million “loan” from DHCD through the Housing Production Trust Fund.
The LIHTC program they are tapping into at Waterfront Station II offers a dollar-for-dollar reduction in federal tax liability that allows developers and investors to leverage equity contributions in order to rent some units at below-market rates.
Waterfront II is one of three projects to receive LIHTCs in the recent round of DHCD grants, issued through the District’s 2019 Consolidated Requests for Proposals (RFP) for Affordable Housing, according to a statement provided to The Dig by a spokesman for DHCD Director Polly Donaldson.
As awardees, the development team at Waterfront II will be able to claim a $1.1 million, 9% [LIHTC] allocation on their federal income tax returns each year for a period of 10 years, Donaldson’s statement says.
Packaged with a pair of other subsidies, the lucrative tax credit represents Bowser’s ongoing commitment to the urgent needs of low income residents who are most hard hit by the coronavirus crisis, Donaldson said, in a press release in June.
“Our values and goals did not change when the public health emergency hit,” she said. “With our continued historic investments in the Housing Production Trust Fund, these selected projects get us further towards our equitable distribution goals, ensuring residents can live anywhere in the city.”
Donaldson reports directly to Bower’s chief of staff and Deputy Mayor for Planning and Economic Development John Falcicchio.
The LIHTC program is complex, but can be worth the trouble if navigated properly, developers say.
Generally, projects must meet eligibility requirements for at least 30 years after project completion, meaning that owners must keep the units rent-restricted and available to low-income tenants, according to DHCD.
When the 30 year period expires, the properties remain under the control of the owners.
The LIHTC comes with other benefits: It converts to equity at closing, and covers 70% of the low-income unit costs in a project; it is a particularly valuable mechanism used to enhance the 4% LIHTC, a so-called automatic tax credit, which also is provided up front.
The 4-percenter covers 30% of new construction, with the use of additional subsidies. The 9-percenter supports new construction, but without any additional federal subsidies.
Rental properties that qualify for the LIHTC generally have lower debt service payments and lower vacancy rates than market-rate rental housing, say industry analysts.
LIHTC properties also typically experience a relatively quick lease-up and offer strong potential economic returns, primarily due to the existence of the credit.
Given its complexity, not all affordable housing developers pursue the LIHTCs or necessarily have experience obtaining them.
Developers and former District officials say they originally were awarded to firms that did not meet the scoring requirements to receive a voucher or tax credit on the front end, or failed to hit targets such as the number and affordability of units on the back end.
Veteran developers also say they often don’t bother applying for the tax credits, accustomed as they are to insider firms being first in line to take advantage of them.
Since 2015, the District has awarded the 9% LIHTCs to just 24 projects, according to the Office of the Chief Technology Officer. Of those, a third were for new construction, and six exceeded $1 million per year. (Waterfront II’s tax credit yields $1.1 million per year.)
Almost all of the projects that received the tax credits were medium-to-small in size, with just two of them expected to result in more than 60 affordable units. (Waterfront II is a premier mixed-use development and a key piece of the reimagining of the Southwest Waterfront District. It will receive credits for the creation of 152 affordable units.)
The application of such a financing arrangement on top of other subsidies for a project the size and scope of Waterfront II was well outside the norm.
But then, Soto and Griffis are not ordinary businessmen…
*Editor’s Note: Griffis, Soto and Horton responded to The Dig’s request for comment after publication of this article. They disputed the story and denied the allegations and claims contained in the lawsuits filed in Superior Court. This story has been updated accordingly.
Stay tuned for a detailed examination of the ongoing Congress Heights lawsuits, including an exclusive look at the distinct roles these insiders played in a transaction Attorney General Karl Racine’s office has alleged was a dishonest attempt to deny tenants their home purchasing rights.
