Kwame Brown's personal debt is ammo in primary for D.C. Council chairmanship
Sunday, July 18, 2010
When D.C. Council member Kwame R. Brown wants an escape, he can climb into a Cadillac Escalade, head down to a private yacht club on the Anacostia River and fire up Bullet Proof, his 38-foot powerboat, before returning to his four-bedroom Hillcrest home.
Since December, three credit-card issuers have sued Brown (D-At Large) in D.C. Superior Court, alleging nonpayment of bills and interest exceeding $55,000, court records indicate. Brown settled one of the cases in April, agreeing to pay $500 a month toward a bill of nearly $24,000; the other cases remain active. The debt is compounded by Brown's repeated borrowing against his home and the purchase of the boat, a 1994 Chris-Craft Continental express cruiser, on credit. Brown estimates that his personal debt exceeds $700,000.
The situation clashes with what Brown is saying on the campaign trail, where he often presents his financial bona fides and emphasizes fiscal responsibility in his effort to win a job that gives him great control over $10 billion in annual city spending. "I am a bean counter," Brown told some Ward 3 residents last month. As council chairman, he added, "you need to get in the weeds."
Brown's opponent in the Democratic primary, former Ward 5 council member Vincent B. Orange Sr., has started to make Brown's credit-card debt a campaign issue by directly linking it to the city's fiscal health -- the District is perilously close to a 12 percent debt ceiling that Brown voted to adhere to.
"It's poor judgment for him to not have cleaned that situation up," Orange said Thursday on WRC-TV. "Is this the person you want to send to Wall Street? Is this the person you want to send to the Congress?"
Brown, who leads the council's economic development committee and describes his professional record as "stellar," has sought to portray his debts as everyday household expenses, the "new spending that you take on as a growing family." But a review of public records and interviews with Brown indicate that he is emblematic of a time when ballooning real estate values and easy credit were taken as license to finance personal luxuries.
"We continued to spend, and we overspent," said Brown, adding that his family is now on a strict budget. "We were spending like we had no kids, and we had two [kids and] one income," he said. "I've accepted full responsibility, and we've made arrangements to make sure it gets taken care of."
Real estate boom
In 2006, like many homeowners across the nation, the Browns found themselves with a home that was valued at much more than they ever imagined.
Brown and his wife, Marcia, had purchased the brick home, on a hill across from a wooded gully, for $313,000 in late 2002. They got a 30-year, fixed-rate loan from Industrial Bank and within a year borrowed against the equity. According to real estate records, the couple refinanced in 2004, signing a $319,260 adjustable-rate note from Washington Mutual, adding soon after a $92,000 home equity line of credit from SunTrust.
In 2006, at the height of the market, the Browns refinanced again, borrowing $598,000 from McLean-based First Savings Mortgage Corp. At the time, Brown was drawing a $92,530 salary as a council member; his wife had left her job to raise their two children, born in 2001 and 2003, and would not return to work until 2007. "We made a sacrifice for that, and I don't regret that sacrifice," said Brown, who now is paid $122,530 a year and stands to make $190,000 if elected chairman.
In October 2006, less than four months after closing on the refinance, Brown completed an application for a Visa card through the Department of Commerce Federal Credit Union. (He was an executive in the department's Business Liaison Office during the Clinton administration.) On the application, Brown wrote that he had an outstanding mortgage balance of $506,000 on a home he estimated to be worth $850,000. At the time, the city's assessment -- which tends to lag behind market trends -- valued the home at $357,930.
Chuck Riley, a real estate agent active in the Hillcrest market and a neighbor of Brown's, estimates the home's current market value at no more than $420,000. The balance on the mortgage, Brown said, far exceeds that figure and the line of credit is still active.