Silverman and Nadeau had written to Racine expressing concerns about the deal, which was negotiated by the D.C. Department of Employment Services. The attorney general’s opinion means the hotel may not be eligible for the taxpayer subsidy, which was first approved by District lawmakers nine years ago.
The decision comes in a city whose practice of awarding generous tax abatements to developers has increasingly become a political sore spot amid gentrification and rising housing costs. It was welcomed by those who have criticized the hotel’s failure to abide by its promises to hire specific numbers of District residents for construction and hotel jobs.
Bryan Weaver, a former Adams Morgan advisory neighborhood commissioner who helped craft the terms of the tax abatement in 2010, said that Racine’s letter “points out the obvious” and that the subsidy was structured in a way “to ensure clawbacks if they didn’t meet a series of requirements.”
He added, “Why [the Department of Employment Services] thought they could bypass that is really just kind of beyond the pale.”
A spokesman for the Sydell Group, which owns the hotel, said in a statement that all conditions of the abatement were met and that construction jobs were “undercounted substantially.” The statement said that Sydell has put $145 million into the property and that the hotel could not have been financed without the abatement, which the company still intends to claim.
“The Line Hotel has exceeded its obligations to Washington, D.C. and looks forward to receiving the abatement of its real estate taxes as promised by vote of the City Council and signature of the Mayor of Washington, D.C.,” the statement says.
A spokeswoman for the Department of Employment Services said the agency “is currently reviewing the opinion of the Office of the Attorney General to determine the next steps and will continue to monitor the process to ensure the establishment is and remains in compliance.”
Silverman said she has been told by city officials that none of the property tax abatement — which would be worth up to $46 million over 20 years — has been disbursed yet.
The department determined that the 220-room hotel — which opened last year — hired only 273 of the 342 District residents it had agreed to employ for construction, according to the letter Silverman and Nadeau sent to Racine. The hotel also did not have Washingtonians work more than 51 percent of construction hours and did not reserve all apprenticeships on the project for District residents, the letter states.
Nevertheless, in April the department recommended to city tax officials that the abatement be granted as long as the hotel paid $600,000 to a D.C. workforce development fund over the next four years. In a letter to the District’s tax office, a department official said the developer “made a good faith effort toward compliance” with the original abatement conditions.
But Racine said that deal would not pass legal muster. Noting that the legislation creating the abatement did not give the department authority to waive its requirements, he said any loosening of those requirements would probably require new action by the council.