Early Briefing: Affordable Trumps Luxury

Donatelli Development in recent years has constructed mostly luxury condominiums and apartments on sites overlooking Metro stations in Northwest Washington.

But in what city officials say is a reflection of the changing dynamics of the real estate market, the District Monday chose Donatelli to build nearly 400 units of affordable housing next to a Metro station in Northeast.

Neil Albert, deputy mayor for planning and economic development, said the need for luxury housing in the District is no longer what it was "a few years ago, when there was a greater demand for housing, when housing prices were on a trajectory."

At that time, he said, the parcel where Donatelli plans to build, next to the Minnesota Avenue Metro station, "could have had a larger proportion of market-rate housing."

But Albert said that economic analyses by developers bidding for the site show that the neighborhood "doesn't support market-rate housing." The administration, he said, could have allowed the site to sit fallow until the housing market regains strength. But he said that the development would help a commercial corridor that is now a hodgepodge of strip malls, discount stores, banks and boarded-up storefronts.

"Once we get a project in the ground, it will catalyze other development," Albert said.

The announcement of Donatelli's plans drew criticism from some Ward 7 community leaders who said they would prefer the project to include more luxury housing, which they contend would help the neighborhood draw better restaurants and shops.

In other news:

*Some DC Council members are criticizing an agreement to pay the Washington Nationals $4 million to resolve a dispute to pay stadium rent.

Under the terms of the settlement, reached late Friday by Acting D.C. Attorney General Peter J. Nickles and Nationals Vice Chairman Edward Cohen, the team will pay $3.5 million in rent that was due to the city last spring.

The team had withheld the money, saying the ballpark was not "substantially complete" because thousands of items, from carpeting to sound system wiring to the scoreboard, remained unfinished or were not up to standard.

The settlement calls for the District to pay $4.25 million to reimburse the Nationals for expenses the team incurred after the ownership group led by Theodore N. Lerner ordered changes to the ballpark design. Some of the money also will allow the "punch list" of unfinished work to be completed by the end of the year.

"On its face, I've got some questions about it," said Chairman Vincent C. Gray (D). "The way I read it, we got the $3.5 million we would have gotten anyway, and we gave up $4 million in additional concessions."

* Metro columnist Marc Fisher calls the long and complicated standoff over the contract to operate the DC Lottery "the most brazen display of cynicism and shady dealings we've seen in the District in decades, and that's saying a lot."

Lottery Technology Enterprises (LTE), the company that has held the $120 million contract to operate the District's lottery since the games were introduced nearly a quarter century ago, has been fined $1.4 million for security breaches involving fraudulent winners and stolen tickets. LTE gets lousy scores on the quality of its work. LTE proposes to charge the city about $5 million more than its competitor in the bidding for the city contract, W2I, a joint venture between the national gaming firm Intralot and the family of local businessman Warren Williams Jr.

But despite a fair bidding process and a clear superiority of the challenger's bid, the Council has spent months refusing to vote on the contract. Now, a memo from the city Lottery Board's chief officer, Jay Young, puts the situation plainly: If the council rejects W2I's winning bid, Young writes, "it will do so on grounds not related to the substance of the offers, the soundness of the proposed solution, or the administration of the procurement process, but rather...by legislative fiat."

And that fiat will result from what council members frankly say is raw political power. When I asked several council members why they couldn't bring themselves to approve the most economical deal for D.C. taxpayers, they were good enough to tell me that the obstacle is the political donations and power of the current contractor, LTE's Leonard Manning. (Manning has consistently failed to return calls from me and other reporters; his spokeswoman, Ann Walker Marchant, says the city is unfairly fining and otherwise punishing LTE even though it has done a good job.)

*Fannie Mae of the District and Freddie Mac of McLean, the mortgage-finance companies seized by the U.S. government last month, said they are rethinking their policies on investing and bond-guarantee pricing to provide aid to the housing market.

Industry executives including Herbert M. Allison Jr., Fannie Mae's chief executive; Freddie Mac chief executive David M. Moffett and Federal Housing Finance Agency Director James B. Lockhart III are at the Mortgage Bankers Association's annual meeting to discuss solutions for the worst housing slump since the Great Depression.

*Federal Diary columnist Joe Davidson writes that some federal employees invested for retirement in the Thrift Savings Plan's ultra-safe G Fund became unnerved recently. They worried that with the government on the hook for billions of dollars in financial rescue funds, it might raid the G Fund to help pay for it.

TSP Executive Director Gregory T. Long had to go online to calm nerves. He posted a letter on the program's bland but informative Web site to reassure investors that this will not happen.

"The answer is no," Long wrote. "By law, the assets in the TSP are held in trust for each individual participant. So, you don't have to worry about anyone 'tapping' your retirement investments for another purpose."

By Dan Beyers  |  October 21, 2008; 8:40 AM ET  | Category:  Economy Watch
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