Prince George's County officials gave a significant tax break last year to a developer as part of a deal in which he swapped a $300,000 parcel of land for a $1.1 million property owned by the county.
The county had paid $1.1 million for a Fort Washington commercial site two years before trading it to developer Robert W. Douglas Jr. in a transaction that was investigated by a county grand jury, which returned no indictments. At the time of the swap, the county had a new appraisal valuing its 14.9-acre parcel as high as $3.2 million.
In one of several concessions made to Douglas, the county executive's office agreed to consider the trade an even swap for Douglas's property. The county's handling of the transaction allowed Douglas to save an undetermined amount of federal income tax and at least $19,480 in county and state property taxes.
Douglas had signed a contract to pay $300,000 for 3.8 acres in the Route 301 median near Bowie, but had not actually bought the site. As part of the negotiations, Douglas paid for an appraisal that said the median property was worth as much as $1.7 million if it received commercial zoning.
County Administrator John P. Davey signed a 1989 agreement describing the trade as an even swap "for tax purposes" and agreed the county would "refrain from taking any position inconsistent with this reporting without Douglas's prior written consent."
Douglas declined to comment yesterday. His attorney, William Knight, said Douglas paid county property transfer taxes, a fee levied when land is traded or sold, on $300,000. Knight said the trade, which was negotiated to settle a lawsuit Douglas brought against the county, did not show favoritism to his client.
"They just don't understand the nature of the deal," Knight said of critics of the transaction. "It would take a fairly sophisticated real estate person to look at both sides and say whether it was a fair deal."
County records show that the transaction evolved from a 1987 decision by County Executive Parris Glendening to limit further commercial development in the Route 301 median, a swath of land as wide as a city block in parts and heavily congested.
The policy affected many landowners, and Douglas was among several who filed lawsuits against the county claiming that the policy had stripped his land of value. One such case is scheduled to come to trial this fall.
Davey yesterday defended the transaction -- which he described as routine -- as beneficial to the county, saying his office "followed an adopted policy" of trying to acquire land in the median. He said the county could not condemn Douglas's land to take possession of it because it "didn't have cash to put on the table" at the end of the condemnation proceedings.
"If you can avoid a lawsuit, you do it. Most people attempt to work out their conflicts before running across the street to the courthouse," Davey said.
Asked why the county agreed to structure the deal so that Douglas's taxes would be reduced, Davey said, "We were wearing a different hat than the revenue collector in this one." He called the decision a "judgment call" reviewed by legal and financial advisers before it came to his desk for final approval.
Although the grand jury that examined the land swap last year did not return indictments, several jurors have said publicly that the swap raised serious questions of favoritism and impropriety by county officials.
"This deal really stuck in my craw," said grand juror Paul Emmons.
Prince George's State's Attorney Alex Williams and Maryland Prosecutor Stephen Montanarelli declined to pursue the matter.
Douglas began discussions recently with the County Council about possible uses for the commercial parcel he acquired from the county.
The land is on heavily traveled Indian Head Highway in Fort Washington.
Council members say Douglas first approached them with plans to build an office condominium on the site, the former ABC drive-in theater that the Maryland National Capital Park and Planning Commission bought in 1987 from former secretary of state Fred L. Wineland. The commission planned to use the property as parkland.
Unable to get bank financing for the project, Douglas then approached the council through an intermediary about building a strip shopping center on the site. But the property has a covenant that forbids shopping center development on it until the year 2000.
Douglas's attorney confirmed that his client also has been trying to sell the property for $4.5 million.
Before the swap occurred, Douglas, had an option to purchase the undeveloped Route 301 median property from the Stuart Petroleum Co. for $300,000. The deal was contingent on approval of a zoning change from the county that would allow him to build a shopping center on the site.
County Planning Director Fern Piret, who then served as Glendening's adviser on planning matters, said county lawyers recommended that Douglas be offered a settlement to keep the case out of court.
She said the executive's office also felt compelled to deal with Douglas because of a County Council action in March 1988 specifically ordering the county to try to acquire certain parcels along Route 301, including the Douglas property.
Although Douglas did not technically own the land, county officials say he had legal standing because of his contract option.
Piret said she presented Douglas with a list of all available surplus county land that could be used in a swap.
Douglas rejected the sites, bartering for a property with commercial zoning already in place. A new list of commercially zoned sites was drawn up, and Douglas was attracted to the Fort Washington property.