Plans to redevelop the former Children's Hospital site and five nearby properties in the Shaw area will be in jeopardy unless the D.C. City Council approves $5 million in revenue bonds to finance the first phase of construction, developer Jeffrey N. Cohen said yesterday.
"If we don't get the bonds, we're in trouble because no bank will loan us money," Cohen said in an interview outside a City Council committee hearing on the bond request, which is sought by a partnership headed by Cohen. He said that banks for years have "redlined" the depressed Shaw neighborhood, refusing to extend loans to businesses and residents.
Council member John Wilson (D-Ward 2), who presided at the hearing as chairman of the council's Committee on Finance and Revenue, gave no indication that he is planning to move quickly on the request.
"I don't have a timetable," Wilson said afterward. Cohen, standing nearby, then said he would like action on the bond request "yesterday, as soon as is practicable."
Last year the city acquired the Shaw properties from Cohen, a close friend of Mayor Marion Barry, for $11 million plus interest in a complicated, controversial transaction.
At that time both Cohen and city officials cited Cohen's inability to get banks to finance redevelopment of the properties as the major reason for the city's assistance.
Cohen had been trying unsuccessfully to redevelop the sites for several years. A large chunk of the $11 million went to pay off liens previously incurred on the properties by Cohen-related businesses.
Under the unusual agreement, a consortium of banks, headed by the National Bank of Washington, financed the transaction with the understanding that the city would repay the banks the $11 million, plus interest that totalled $1.25 million by Saturday. The District government made that $12.25 million payment to the banks last Friday, from the capital improvement budget in the city's Office of Business and Economic Development.
Cohen said the proposed industrial revenue bond, amounting to up to $5 million, is likely to be only the first of several bond requests to fund redevelopment of some of the Shaw sites.
The first bond would be used to renovate the former Manhattan Laundry building, plus two adjoining buildings, into a warehouse. Under the plans for the laundry building, in the 1300 block of Florida Avenue NW, Cohen plans to convert the warehouse into an office complex within five years.
The various projects, collectively named the Samuel C. Jackson Plaza for a deceased Washington lawyer and businessman, would include low- and moderate-income housing and retail and office space, as well as renovation of the Lincoln Theater at 12th and U streets NW.
Council member Betty Ann Kane, (D-At Large), questioned Cohen and city officials closely during the hearing about the risks the city is facing in recovering the $12 million it has pumped into the project so far. Later, she said in an interview that the council is being given little choice but to approve the bonds.
"It seems like you're trapped," Kane said.
If the city approves the bond request, Cohen would then have to persuade a bank to sell the bonds. The city is not liable for bond repayment in case of a default.
Council member Frank Smith (D-Ward 1), who represents Shaw, endorsed the bond request and said the entire project is a bold attempt to revive a long-neglected area of the city.
His views were echoed by Ibrahim Mumin, a leader of the Shaw Coalition Redevelopment Corp. Inc., a nonprofit community group that has teamed up with Cohen to develop the Shaw properties and share in the profits.
"The project will provide increased job opportunities for area residents and increased revenue collections from real property and other taxes," Mumin said.
Under Cohen's arrangement with the city, the District will be paid back its $12 million investment in stages as work on the various sites progresses. For example, Cohen said that on the Manhattan Laundry site, the city will be repaid about $800,000 from the bond money. As financing is obtained for each site, that process would be repeated, with the developers paying predetermined amounts of money to the city until the full $12 million is paid off.
In a separate interview after the hearing, a city official confirmed yesterday that an independent appraiser hired by the city this year, months after the deal with Cohen, placed the Shaw properties' value at $6.6 million, well under the $13.9 million value set by another appraiser hired by Cohen. The city relied on Cohen's appraiser when it bought the properties last year.
City officials said the second appraiser, Morris E. James, acted with incomplete information, and they have asked him to take into account the properties' development potential in a new appraisal