City's budget woes could affect development plans

By Jonathan O'Connell
Monday, December 6, 2010

D.C. Mayor-elect Vincent C. Gray is a month from inheriting a real estate portfolio headlined by marquee development properties that lack the federal approvals or financing required for them to proceed.

Gray's predecessors, Anthony A. Williams and Adrian M. Fenty, both endured recessions during their tenures but neither entered office with private construction financing so tight and such a dire budget situation. The city is currently working to close a $188 million gap for the 2011 budget, and the 2012 shortfall is estimated at as high as $400 million. The District is also nearing a newly created limit on borrowing that led Gray to announce on Nov. 22 that he would propose freezing all capital projects "not yet underway" and create a panel to prioritize borrowing. No members of the commission have been announced yet and Gray has not identified the projects he would halt.

Some of the D.C. economic development projects that could be affected include:

-- St. Elizabeths east campus. After discussing the project with President Obama at their Dec. 1 lunch, Gray said Obama "recognized that this is a real opportunity to improve the quality of life in Ward 8." The District owns the land, and the headquarters for the Federal Emergency Management Agency is headed there, but the city has asked the federal government for millions of infrastructure dollars. It won't be easy to afford much without that money.

-- Walter Reed. Of major projects not already assigned to developers, this may be the most promising. The District is

already in line to receive 62 acres of the former hospital, and D.C. officials would like to see further development along Georgia Avenue on the northern part of the campus, which is controlled by the federal government. "We continue to work with our federal partners to determine what the makeup of the rest of the Walter Reed Campus space will look like," said Jose Sousa, spokesman for Deputy Mayor Valerie Santos.

-- Hill East. It has been months since Fenty narrowed the field of development teams he was considering for this 67-acre property to two, but he will leave the decision about what to do next up to Gray. "Hill East is not going to get decided before the end of the year," said Neil Albert, city administrator. The Hill's proximity to the waterfront makes this a strong market, but there are a number of public facilities that would need to be relocated.

-- Poplar Point. When asked during the campaign which projects he would put on the back burner until rosier times, this is the one Gray named. The District still does not control the site, there is environmental work to complete and the federal park service would have to move facilities.

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