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D.C. Council delays $46 million tax break for Adams Morgan hotel

The Line Hotel in the District’s Adams Morgan neighborhood.
The Line Hotel in the District’s Adams Morgan neighborhood. (Evelyn Hockstein/For The Washington Post)

The D.C. Council on Tuesday deferred a $46 million tax abatement for a swanky Adams Morgan hotel after an initial finding by the city that the developer failed to fulfill hiring requirements mandated when lawmakers approved the subsidy.

The one-year delay allows the District government time to finalize an audit that examines whether the developer met requirements that included hiring more than 300 District residents to construct the Line, a 220-room boutique hotel.

A city review this year found that the hotel failed to meet at least two of seven requirements for the 20-year abatement, which was supposed to begin this year.

The owner of the hotel called that review inaccurate and has offered its own audit, from December, which it says proves the hotel deserves the subsidy.

The council decision, part of an overall vote on next year’s budget, followed vigorous lobbying from the Sydell Group, the hotel’s owner, which asserted that it may be forced to lay off workers if the tax abatement is rescinded.

Crawford Sherman, the Line’s managing director, said the development group is “confident” that an audit by the Department of Employment Services “will show what we have said from the outset, that we have met all required provisions of the real estate abatement.”

But Bryan Weaver, a former Adams Morgan advisory neighborhood commissioner who helped conceive the tax abatement legislation, said the council already possesses the evidence to rescind the subsidy.

“It’s not ideal, but it’s better than nothing,” Weaver said of the delay. “If it’s a one-year put-off, fine. I don’t see how they’re going to find new numbers.”

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Tax subsidies have drawn increasing scrutiny in recent years, as elected leaders and government watchdogs ask whether they are necessary to spur development in a city as prosperous as the District.

The 2011 legislation granting the tax abatement to the Line was the first to give the District the power to rescind the subsidy if the requirements were not met.

Council member Brianne K. Nadeau (D-Ward 1), whose district includes Adams Morgan, said the city needs to uphold the abatement’s mandates to ensure that developers comply on future projects. “Otherwise, folks are going to think that they can [fall short of] the requirements and still get their tax abatements,” she said.

The hotel was the focus of bitter debate in Adams Morgan when it was proposed in the early 2000s, with proponents saying it would boost the neighborhood’s commercial corridor and opponents warning of new traffic burdens and higher real estate prices.

In exchange for the tax abatement, the developer agreed to requirements that included hiring 342 D.C. residents to build the hotel. The developer also agreed that District residents would work at least 51 percent of the construction hours.

Weaver said the legislation was intended to help create opportunities for low-income African Americans from the District “to get their foot into a career path job where they would have skills to take them into the world of work.”

“I was hoping it would be transformative,” Weaver said. “This would be how we would do business in the future.”

In April, the employment services agency notified Nadeau and council member Elissa Silverman (I-At Large), who oversees the agency, that the developer had failed to hire the full complement of D.C. residents. It also found that D.C. residents had not accounted for 51 percent of the construction hours as required by the abatement.

Instead of withholding the subsidy, the agency recommended fining the Sydell Group $600,000, asserting that the hotel had “made a good faith effort toward compliance.”

But Attorney General Karl A. Racine contended that the original legislation mandated strict adherence for the city to grant the abatement.

An employment services representative said Tuesday that the agency “is continuing its review of additional information as it is submitted by the Line Hotel.”

At a rally in support of the hotel on Monday, Sherman, the managing director, said that the Line has created a new destination in Adams Morgan since opening at the end of 2017 and has given the District an additional source of tax revenue.

“It’s almost like kicking the goose that lays the golden egg,” he said of the threat to rescind the tax abatement. “I would like to see us to be allowed to continue what we’re doing.”

Several of the names and companies listed in the audit financed by the Line, and on a recently created website that is supposed to document how many D.C. residents were hired, have raised questions about what the hotel company considers to be construction work.

In its audit, for example, the Line identifies as a source of construction workers the Adams Morgan Youth Leadership Academy, a nonprofit entity that provides “mentoring, life skills, service learning, expeditionary programs and job opportunities for our youth & families,” according to its website.

According to the Line’s audit, the nonprofit supplied the hotel project with 230 workers. The hotel includes Nigel Okunubi, ­AMYLA’s managing director, on its list of construction workers. Okunubi did not respond to an email seeking comment.

The hotel’s list of construction workers also includes Brian Friedman, a Line development executive; Sherman, the hotel’s managing director; and four workers from EHT Traceries, which describes itself as a research and consulting firm “relating to the history and culture of the built environment and historic preservation.”

“The idea that the hotel is trying to pass off the hotel’s developers, interior designers, their hotel managers, architectural historians as construction workers is a ridiculous, cynical money grab off the backs of blue-collar workers,” Weaver said.

Michael Robbin, a hotel spokesman, dismissed Weaver’s view as “irrelevant.”

“We followed the regulation set forth by the D.C. government,” he said.

The council on Tuesday approved a proposal by Silverman requiring the employment services agency to make public all supporting documents for the audit once it has been finalized. Lawmakers also agreed to use about $1 million that would have gone toward the abatement to repair public housing in Ward 1.

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