The House Appropriations Committee yesterday placed strict controls on the ability of the District of Columbia infant home-rule government to lease space in private buildings without first getting approval from Congress.
In doing so, the Committee dealt a serious setback to plan for a $75 million to $150 million privately owned office and retail complex at 12th and G Streets, NW. The city intended to pay $3 million a year to lease space in the complex, hoping its construction would help to pump new life into the dormant economy of downtowns Washington.
Ironically, the retail and office complex was supposed to be a prime receptable of the economic benefits of building a proposed $110 million convention center near Mount Vernon Square, less than a mile away. The committee approved $27 million in start-up costs for that project yesterday, but made it clear that it is opposed to the city leasing space in the planned office complex.
The exertion of new and tighter federal oversight of city leasing practices was prompted in part by congressional concerns about alleged leasing abuses by the D.C. Department of Human Resources and its former director, Joseph P. Yeldell, according to a committee aide.
DHR leasing practices, "had a lot of bearing on it," the aide said of the Committee's decision. "It was a culmination of all the leasing problems that seemed to be arising. The publicity (of the DHR situation) just pointed up the problems."
The Committee's action came as it adopted its report on a $1.4 million D.C. budget for the fiscal year beginning Oct. 1, which the Committee approved and sent to the full House.
The Committee report, which spells out the ground rules for future procedures, said that during the next year the city is to enter into no lease of more than five years without prior approval from the House and Senate appropriations committees. In the past, the city has had authority to sign leases of up to 20 years.
For more than a year, plans for the complex at 12th and G Streets have been stalled because the developer, the Gerald D. Hines Interests of Houston, Tex., wanted a binding committment from city officials to sign a 20-year lease for 300,000-square-foot in the complex.
The city had signed a "memorandum of understanding" to undertake such a lease in July, 1976, but could not make a firm commitment until the 1978 budget was approved by Congress. Without such a firm commitment, Hines was unable to attract other tenants necessary to secure financing of the project.
R. Robert Linowes, Hines' attorney in Washington, said yesterday that a firm commitment from the city was "pivotal" to securing the other leases. Without the city as an anchor tenant, Linowes said, it appeared "more doubtful than ever before" that the project could be completed.
Already, Hines has agreed to two six-month delays on a final decision by the city. Linowes said yesterday that it would be "quite problematical" for Hines to accept a third delay when the current one expires next months.
"Hines has spent substantial funds, a lot of time and a good-faith effort in trying to put the deal together. There's a real question as to whether they want to proceed under these kinds of conditions," Linowes said.
"It looks like the project is stalled," he said, "Whether that means the project is ended we don't know yet. We're going to have to take a very hard look at the situation."
The 12th and G Street area is now one of many small and aging stores with paint and plaster pealing from their fronts.
Just two months ago, mayor Walter E. Washington and some downtown business leaders announced plans to spend $87,000 to refurbish the buildings, even though many of them were scheduled to be torn down if the new complex were built.
City housing director Lorenzo W. Jacobs said then that city officials feared they would have to re-evaluable their leasing needs if Congress approved plans to build a new $35 million D.C. municipal office building at 4th and D Streets NW.
That is exactly what the committee approved plans for yesterday. "The committee is of the opinion," its report says, "that the construction of a new office building will be much more economical and advantageous to the District government than continuing an increasing program of leasing space . . ."
The city presently spends about $10 million a year to lease 3.4 million square feet of space in 50 different buildings throughout the city. A study done earlier by the Office of Municipal Planning calculated that the city could use all of the 715,000 square feet of space in the new city office building and the Hines building.
Sam Starobin, director of the Department of General Services, which does most of the city's leasing, said the imposition of new congressional authority would have a minimal effect now on other D.C. leasing because most major leases are not up for renewal for another three years.
Then, the tighter controls could pose problems, he said. "The legislation speaks for itself. They do intend to exercise more authority than before," Starobin said.
Questions about DHR's leasing practices began Nov. 19, when The Washington Post reported that DHR, then under Yeldell's direction, had signed a 20-year, $5.4 million lease on a vacant building at 60 Florida Ave. NE. Parking lot magnate Dominic F. Antonelli Jr. had purchased the building only months earlier for $800,000.
Starobin had opposed both the terms and cost of the lease, but DHR, which had been granted independent leasing authority by the mayor, signed the lease anyway.
In April, after key members of Congress raided questions about DHR's leasing practices, the mayor took the independent leasing authority from the agency. A federal gran jury is now investigating whether Yeldell's actions as DHR director that benefited Antonelli financially were influenced by $54,500 in personal loans Antonelli helped Yeldell to obtain.