Legality of Deal to Turn Shelter Into Hotel Questioned

By Theola S. Labbe
Washington Post Staff Writer
Saturday, June 10, 2006

Several D.C. Council members and the panel's attorney have raised questions about a deal to turn a downtown homeless shelter into a boutique hotel, saying that the city's lease with the developer is invalid because the council has not approved the plan.

The D.C. attorney general's office disagrees, contending that the council gave "passive approval" to plans to dispose of the 137-year-old building when it took no action on a resolution submitted by Mayor Anthony A. Williams (D).

Under the lease signed in July 2005, the Franklin School at 13th and K streets NW would be redeveloped into a hotel by WDC Franklin, LLC. The company's managing member is developer Herbert S. Miller, who was part of the successful Gallery Place redevelopment and is one of the developers of the ballpark entertainment district.

The lease was supposed to begin in March, but the agreement says it can be delayed until the 41,000-square-foot building is "free and clear." The shelter at the Franklin School remains open, and there is no definitive plan on where to move the nearly 300 men staying there, City Administrator Robert C. Bobb said. He said the city hopes to relocate the men and close the shelter by the end of March 2007.

Charlotte Brookins-Hudson, the general counsel for the D.C. Council, said the council never approved a resolution to declare the building "surplus" property -- property no longer required for public purposes. Before a District-owned building can be leased or sold, the council must take such a step and then vote on disposition of the building, she said.

"In my opinion, this is not a valid lease," Brookins-Hudson said. "This violates separation of powers, and it usurps the power of the council. If the mayor is doing it on this, what's to stop him from doing it on everything else?"

The council voted in 2004 when the mayor's office proposed to sell the former Randall Junior High School at Half and I streets SW, which was being used as a men's shelter, to the Corcoran Museum of Art. Advocates for the homeless came to council hearings and protested, but the council declared the building surplus and voted to dispose of it, which cleared the way for the $6.2 million sale.

In October 2002, Williams sent the council a resolution to declare the Franklin School surplus and solicit proposals for its redevelopment. The council's committee on economic development held a hearing in November. But the council took no further action on the legislation, and it lapsed in December 2002 when the council session ended.

The mayor resubmitted the resolution in February 2003. It was referred again to the committee on economic development, but there was no further action by the end of the council session in December 2004.

Stanley Jackson, the deputy mayor for planning and economic development, said in March 2005 that the city had selected the hotel project over a competing proposal from the nonprofit Washington Center for Internships and Academic Seminars. The mayor later issued an order giving Jackson authority "to execute any lease for a term in excess of twenty years . . . with respect to the Former Franklin school site." The July 22 order said it was retroactive to July 6, the date the lease was signed. The order was published in the D.C. Register on Aug. 22, when the council was not in session.

Traci L. Hughes, a spokeswoman for the attorney general, said the Franklin lease is valid under a section of D.C. Code that covers "passive approval." She said the property was deemed surplus because the council took no action on the resolution Williams submitted.

Michael Hodge, chief operating officer of the planning and economic development office, said, "This has been a totally transparent process and a deliberative one."

Brookins-Hudson, however, questioned why the mayor's office resubmitted the resolution in February 2003 if it believed that a council vote was no longer necessary. She also noted that the mayor at the time sent the council a letter saying he was resubmitting the proposal because it had failed to act the first time.

Council member Adrian M. Fenty (D-Ward 4) said he agrees with Brookins-Hudson and plans to meet next week with Bobb, officials from the Department of Human Services, and council members Sharon Ambrose (D-Ward 6) and Vincent B. Orange Sr. (D-Ward 5) to sort out the conflicting opinions.

Under the 29-year lease, the developer would pay the District a rent of $50,000 a year initially and $400,000 a year plus 15 percent of profits after the project is completed. The eventual rent -- a rate of about $9.76 per square foot -- is well below the average rent of $44.56 per square foot in that area of the city, according to the Downtown Business Improvement District.

Even in its dilapidated condition, the building is assessed at $10.3 million, according to city records.

Hodge said that in setting the rent, city officials took into account what the developer would need to spend to redevelop the property into a hotel, an amount they estimate will total more than $20 million.

Council member Jim Graham (D-Ward 1) said the rent figure still sounded too low. Graham, who formerly chaired the council subcommittee that considered resolutions on surplus properties, also questioned why the mayor's office did not wait for the council to vote.

"The question is, why is the Franklin school going through a different procedure?" Graham said. "Unless they can answer that question to legal satisfaction, I don't think the lease is valid."

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