A D.C. Superior Court judge ruled yesterday that the city's urban renewal agency acted improperly in March when it revoked the right of two of the city's most prominent businessmen to develop the coveted Metro Center site in the heart of downtown.
Judge Sylvia Bacon issued a preliminary injunction halting the Redevelopment Land Agency's plans to select a new developer for the site -- a decision that was scheduled to be made today.
She also ordered developers Oliver T. Carr and Theodore R. Hagans, who brought the legal action against the city, to post a $22 million bond to insure the city against any lost revenue should the city eventually prevail in a trial on the merits of the lawsuit. The injunction prevents the city from selling the valuable land until the case finally is settled.
Bacon agreed with the developers' contention that the city had tried to overcharge them for one of three parcels at the 3.7 acre Metro Center site, centered at 12th and G streets NW.
The court decision is the latest development in the city's protracted effort to launch redevelopment of Metro Center, now a collection of older two- and three-story buildings in the heart of Washington's historic downtown. The city has been trying to redevelop the parcels, which sit atop one of the city's busiest subway stations, since 1973.
In March, Carr and Hagans rejected the city's $51.6 million asking price for the land and RLA took away their development rights. RLA was poised to select a new developer today from among three groups that bid on Metro Center four years ago but lost out to Carr and Hagans. After RLA took away the rights, Carr and Hagans took the agency to court.
Phillip Carr, an official of Carr's development company, said yesterday he was pleased at the decision and added that the company is determining the procedures for posting the $22 million bond within the court's 48-hour deadline. If the bond is not posted the injunction will be voided.
The Rev. Ernest Gibson, RLA vice chairman, said, "I think it is unfortunate that the selection of another developer has been delayed. We hope there will be an early resolution so that the redevelopment of the important hub of our downtown area can be started." The Carr-Hagans team is the fourth selected by RLA for Metro Center since 1973.
The lawsuit came after the Carr-Hagans team and city housing director Robert L. Moore, who is also an RLA board member, had agreed on the sales price for two Metro Center parcels but failed to reach agreement on the third.
The city had lowered its price to make it economically feasible for the developers to include a department store on one of the parcels. On the third parcel, Moore wanted to charge the developers higher prices than would be normal for a site planned for office-building development. The developers, however, wanted to build a hotel on that site, and land for hotel development generally carries significantly lower prices.
Yesterday, Richard A. Green, the developers' attorney, argued that the city had failed to follow its own rules in setting the price for the third parcel. Instead of charging the developers a price based on the actual use of the land, Green argued, Moore was trying to charge them a higher price based on the "highest and best use of the land," which would be office-building development.
RLA attorney James Randall characterized the developers as "rejected suitors" who are "trying to stop the wedding." He said the law required RLA to establish the price at the "highest and best use," but later conceded that the city could lower its prices although it was not compelled to do so.
The three other groups now vying for the development rights all intend to build a hotel on the disputed third parcel.
Green argued that in asking for the higher price RLA officials were trying to "satisfy the public clamor for more money." RLA has been criticized by the General Accounting Office and others for selling its downtown holdings for less than the prices received by private landowners for parcels located nearby.
After hearing two hours of arguments, Judge Bacon agreed with the developers.
Since the city accepted the developers' plan calling for a hotel instead of an office building, "in the court's view, the statute is not designed to let the District have it both ways -- to approve a plan with a lower use" and then set a price at "highest and best use," she said.
A trial in the case was scheduled to begin Nov. 22.