The Oliver Carr Co. and its partners in the proposed $200 million Gallery Place office-hotel complex downtown are proposing to contribute about $40 million to inner-city causes over the next 20 years in exchange for a large discount on the D.C.-owned land, and other concessions.
The Carr Co. proposal -- to set up an independent foundation receiving 10 percent of the developers' earnings on the project in perpetuity -- is without precedent in the District, and is almost unheard of elsewhere, experts said.
The idea is a variation on an increasingly popular practice here, called "linkage," in which D.C. officials arrange for a developer to make a one-time payment of $1 million or so to build housing for the poor in exchange for the right to exceed the allowable size for a new office building.
"It almost amounts to a voluntary tax," Oliver T. Carr Jr., company chairman, said of the foundation plan. "It's a sharing with the community of value in land that has been owned by the government."
The city housing department is considering the new proposal, and the Carr group is meeting this week with community groups, some of which previously had expressed skepticism about elements of the plan.
Representatives of the neighborhood groups -- which could receive hefty funding from the foundation -- said that although the amount being offered is impressive, they want to know specifics before they drop opposition to Carr's proposal on the project, between Sixth, Seventh, F and G streets NW.
"It's very positive, but I have questions," said Gottlieb Simon, chairman of Ward 2 Democrats, who recently wrote a letter to D.C. officials on behalf of that group to question whether Carr should receive the proposed concessions. But he called the foundation plan "a gratifying recognition of community claims on the developer and this project."
The tract, which has been blighted since the 1968 riots, is on top of the Gallery Place Metro rail station.
Its development is considered key to the eastern end of downtown, which is awaiting an expected rebirth.
The controversy about the site goes back to 1979, when the D.C. Redevelopment Land Agency chose a development team to build the project. But the team -- including local bank president William B. Fitzgerald and Bethesda developer Melvin Lenkin -- was unable to raise financing for its hotel-office complex and missed numerous deadlines to present plans.
The team tried for years to get other partners interested in the project, but announced recently that the Carr company would revive it and become a 50 percent owner.
But the project still is considered risky financially, so the Carr group wants to pay the city only $17 million for the site -- the price the city set years ago with the initial team. The city now assesses the property $40 million higher, at $57 million.
In addition to the discount, the Carr group wants to avoid having to build residences there. Building downtown housing is a top priority of city officials. Community groups are lobbying the developers to include housing in their plans, and are saying the $17 million price is too generous to the developers.
The foundation is what Carr proposes paying to get its way on the price and housing issues.
"We're saying we know there's value in this land, and we want to plow it back into the community in a long-term plan," said Thomas Bourke, Carr's vice president of D.C. development. "It is a lot of money."
The Carr group is proposing, first, to help set up an independent foundation, and to provide $2 million in seed money over seven years. The developers also would set aside 10 percent of their Gallery Place profits. Carr officials said that conservative forecasts suggest it would receive $37 million to $40 million over 20 years.
They said any buyer would continue the 10 percent payments. They added that the foundation probably would focus first on financing housing elsewhere in the city, but could help other causes.
Terry Lynch, staff member of the the Downtown Cluster of Congregations, a church group that has pushed for low-income housing in the project, said that although the sums are "generous," they may not be worth the price of losing housing there.
City and federal officials are devoted to the idea of a "living downtown" in the run-down area, with residents living close to new restaurants, clubs, groceries and other services. But land prices are so high that developers prefer to build offices there, not residences, which may not sell and are considered financially speculative.
Several blocks south of Gallery Place, federal officials have offered developers of Pennsylvania Avenue area offices huge incentives -- up to $75,000 per housing unit -- to build residences in planned complexes. So several developers are planning a total of about 1,000 residences there. But they will be condominiums affordable only to organizations and the well-to-do.
Carr representatives and most housing specialists say that placing low-income housing in an upscale office project would discourage office tenants.