The D.C. Department of Human Resources - which for the past eight months has been leasing a still unoccupied office building in Northeast Washington - expects to pay more than $300,000 in rental and renovation costs before the facility is ready to be opened to the public.
DHR officials estimate the department will have paid 10 month's worth of rent - $220,636 - and another $110,000 in renovation expenses for the aging two-story office building at 60 Florida Ave. that is not expected to open until April as a community service center.
Under terms of a controversial 20-year, $5.6 million lease that the agency signed with developer and parking lot executive Dominic F. Antonelli Jr. last June, the city has been paying $22,063.62 in rent each month since July for a facility it can not yet use.
Antonelli officially purchased the building and another property at the same location last June for $800,000 shortly after he successfully completed rental negotiations with DHR and its then director Joseph P. Yeldell.
During the same eight-month period, DHR has had to cut back on numerous services to children and the elderly and handicapped poor because of fund shortages in the agency's budget for programs.
The funds to rent and renovate the Florida Avenue property come from a different part of DHR's budget that has been specifically earmarked for rental and renovation costs.
DHR acting director Albert P. Russo has said the money spent so far on the building could not have been used to support other programs in the department. He said 95 per cent of the money spent on programs goes for salaries, which can not be paid for by transferring operating funds normally used for rental and renovation expenses.
However, deputy DHR controller Ray Peters has acknowledged that while some restrictions apply, unused departmental funds could be reporgrammed for other purposes with congressional approval.
The Florida Avenue leasing agreement is described as unique in the history of the city, since never before has the District ended up paying rent so well in advance of its ability to occupy the premises. Sources familiar with present and past leasing procedures followed by the district say it is extremely rare for the city to agree to pay rent on any property that is not yet available for use.
Virgil McDonald, DHR's director of general services, said the agency has not yet been able to use the Florida Avenue building because it has taken all this time to develop extensive renovation plans for the structure.
He said the department had "questioned some of the (renovation) estimates" before allowing contractors hired by Antonelli to begin work last month on the building.
The contractors, a firm known as ACF Developers that is headed by Antonelli's son, John, had estimated that renovating the Florida Avenue property would cost about $150,000. But that figure ran into conflict with the federally-imposed Economy Act of 1932, which sets limitations on how much the city can spend to make alterations on property it leases - no more than one-fourth of the first year's rent.
Only permanent renovations are subject to the provisions of the Economy Act, and DHR's staff has devoted much of its time to a detailed review of which renovations are considered permanent and which are temporary, such as movable partitions.
McDonald said Antonelli has agreed to pay for $40,000 of the estimated $150,000 in renovation costs since the city is prohibited by the Economy Act from paying more than about $66,000 for permanent renovations. According to McDonald, DHR will pay $60,000 for permanent renovations, with the balance of its total $110,000 in costs to be spent on temporary renovations.
When the service center opens, it will house about 80 DHR employees from the agency's public assistance administration, social rehabilitiation adminstration and mental health administration. Each of those three divisions will pay a portion of the center's operating costs.
McDonald said renovations at the building will include construction of a ramp for the handicapped, installation of a visual alarm system for deaf patients, a security cage for distribution of food stamps and construction of a health clinic.
The Florida Avenue building was the first property DHR leased when it was given its own leasing authority by Mayor Walter E. Washington in December, 1975. Prior to that, the city's Department of General Services had refused to lease the property because it felt Antonelli's rental price was too expensive.
The Washington Post previously reported that, according to sources, Yeldell signed the profitable agreement with Antonelli at the insistance of city administrator Julian Dugas. Dugas has denied the allegation.
Yeldell was suspended from his post as DHR director Dec. 3 following news accounts alleging nepotism, cronyism and leasing irregularities in his department.
Also in December, the U.S. Attorneys Office launched an investigation into reports of leasing irregularities and other allegations of possible favoritism shown by Yeldell's department towards hospital and other financial ventures involving Antonelli, the multimillionare owner of Parking Management, Inc., the city's largest parking operation.