D.C. Auditor Otis H. Troupe said yesterday the District is being denied tens of millions of dollars because of its handling of Gallery Place, the downtown redevelopment project that is still a parking lot more than 10 years after a local banker was chosen to develop it.

"The auditor finds it alarming that . . . years have passed and no noticeable development has taken place on this tract of land," Troupe said in a report on the project. "We also believe that the citizens of the District of Columbia should not have to wait 10 years or more before this section of the city is redeveloped."

Appraisers have said the District-owned site, bounded by Sixth, Seventh, F and G streets NW, would be worth as much as $105 million if developed solely for commercial use.

In 1979, the D.C. Redevelopment Land Agency awarded the right to develop the site to a partnership led by Independence Federal Savings and Loan President William B. Fitzgerald, Mayor Marion Barry's personal banker.

A few days after Fitzgerald and his partners presented their proposal to the D.C. government, his bank extended a below-market-rate mortgage to Barry to buy his Southeast Washington home. The mayor's wife, Effi, was then serving on the Independence board.

Although Fitzgerald argued that such loans to its officials were routine, the mayor gave up the discount. Effi Barry resigned in 1983.

Fitzgerald's partners in the Gallery Place venture include builder Melvin Lenkin and bankers Orlando W. Darden and B. Doyle Mitchell.

The partnership agreed to buy the land from the city but struggled for six years before acknowledging that it could not finance the deal. Fitzgerald's group then formed a new partnership with the Oliver Carr Co., one of the city's largest developers, that would give Carr control of the project.

Troupe said the District government "made several significant concessions to accommodate" Fitzgerald and his partners.

He also said the city has not yet met a legal requirement that it hold a public hearing to consider Carr's role.

Redevelopment Land Agency officials have said that a hearing will be held before the project receives final approval.

Troupe recommended that the District impose a time limit on negotiations for future redevelopment projects "so that developers would not be able to purchase urban renewal properties and 'sit on it' till the time is appropriate to develop."

D.C. Department of Housing and Community Development Director David S. Dennison, whose agency has led the negotiations over Gallery Place, could not be reached for comment yesterday, nor could Housing and Community Development spokeswoman Debra Daniels.

In a letter to Troupe, Dennison said he expects to complete the Gallery Place negotiations by June 30 so a public hearing can be held Aug. 15.

Carr was not among the original competitors for Gallery Place, and its entry would "be a significant change," Troupe said. He said that the Fitzgerald partnership was chosen largely because it was controlled by black executives and that Carr's entry as managing partner would reduce the minority ownership.

Under terms of the new partnership, Carr offered Fitzgerald and his original partners the chance to invest in another Carr project, and Fitzgerald himself would receive a $250,000 "consulting fee for past and future services," Troupe said.

Community activists have been arguing for years that the District should reopen the bidding for Gallery Place, and other developers have said they want a chance to compete for the project. When developers have failed to perform on other redevelopment projects, the District has revoked their development rights.

"Fitzgerald and his partners are making money on this for doing nothing," said Ron Richardson, a local labor union leader and member of a coalition fighting the Carr-Fitzgerald group.

Fitzgerald said he was entitled to the $250,000 fee. "I haven't gotten a dime in 10 years," he said. "All I have done is put up my money. My money, if I ever get it, comes from 10 years of hard work, and it's a pittance compared to what the architects get and what the engineers get."

Robert O. Carr, president of the Carr Co., said the Gallery Place deal still could work out well for the District because the price of the land has risen, more than compensating for the cost of the delay.