The General Accounting Office has criticized Washington's urban renewal agency for apparently using questionable procedures in the sale of valuable downtown properties at substantially reduced prices in an effort to spur economic redevelopment.
The GAO, the investigative arm of Congress, said that sales prices were set by appraisals rather than competitive bidding or auctions, that the city has no formal procedures for disposing of property and that there is no clear indication of why one developer is selected over another.
"We were not able to determine if the best possible sales prices were received for urban renewal properties because the market was not tested and appraisals used as the selling price were not current," the GAO reported.
The city agency, the five-member Redevelopment Land Agency, generally adheres to procedures set down by the Department of Housing and Urban Development, the report says, but those procedures allow considerable latitude.
"This latitude, the lack of District procedures for handling urban renewal property, and HUD's failure to enforce certain of its requirements, give the appearance of a loosely run activity," the report concludes, "and, as a result, much controversy exists concerning the sales of urban renewal property, sales prices and selection of developers."
The report, the second in two years critical of such city urban renewal practices, comes at a time when city officials and developers Oliver T. Carr and Theodore R. Hagans are trying to reach final agreement on the price for one of the city's choicest pieces of downtown real estate, the 3.7-acre Metro Center site near 12th and G streets.
The city wants to charge the developers $54 million, or $335 a square foot. The developers want to pay $37 million, or $229. One of the reasons cited by the city in asking the higher price is the controversy that has stemmed from other sales at prices substantially below those of other properties sold at the same time at market rates.
It was these prior sales that prompted the GAO investigation. After the sale of two pieces of downtown property at $150 a foot at a time when other properties were going for $500 a foot, citizen activist J. George Frain of the Eighteenth and Columbia Road Business Association asked Sen. William Proxmire (D-Wis.) to request an investigation.
Frain complained that at a time when the city was looking for new sources of money, the prices should have been higher.
In a written response to the GAO report, City Administrator Elijah B. Rogers disputed GAO's contention that, because some properties had sold for about $500 a square foot, that was a fair market price. "A few isloated private sales at a high value cannot be viewed in isolation as representing the true value of land for a large surrounding area," Rogers wrote.
Only three of 26 parcels sold in the downtown area in 1980 and 1981 and cited by Rogers sold for more than $400 a square foot. The price on the others ranged from $78 to $399 a square foot, according to the report.
City officials and real estate experts said the difference between the city prices and those received in private deals reflects the restrictions imposed on the developers by the urban renewal plan.
In effect, it is the cost to the District of the public policy objectives written into the plan such as provisions for affirmative action, minority equity and involvement by small businessmen.
Robert L. Moore, city housing director and RLA board member who negotiated all the land prices, has said repeatedly that all prices are based on two independent appraisals.
GAO investigators found, however, that sometimes prices are based on outdated appraisals and that the board has changed its guidelines for appraisals.
City officials and RLA board members also told GAO that their major concern was redeveloping an area in accordance with the adopted urban renewal plan rather than obtaining the highest possible price for land.
GAO also criticized the board for failing to established clear-cut criteria for selecting developers for potentially profitable sites and failing to established formal guidelines for land disposition.
"The records available for our review provided little data to demonstrate that one proprosal was superior to others," the report said.