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Bureaucratic Fog Shrouds $46 Million Tax Abatement for Line Hotel; Developers Not Yet Met Requirements, Say City Officials

Accompanying images can be viewed on page 1 of the January 2018 issue pdf

By William G. Schulz*

The newly opened Line DC hotel in Adams Morgan has not yet met the conditions of its $46 million real property tax abatement agreement with the DC government, says David Umansky, a spokesman for the District’s Office of the Chief Financial Officer. He says a determination of compliance will be made once the hotel owner, New York-based Sydell Group, requests the abatement.

 Sydell Group tells The InTowner they are in full compliance with the terms of the agreement, but did not offer proof.

Adams Morgan community leaders, including current and former ANC commissioners, hotel worker union officials, and others, say Sydell has never been in compliance with the tax abatement agreement — and likely never will be. They say Sydell group and previous developers involved with the project have made many promises to the community — particularly in regards to jobs and wages — that were never fulfilled.

The city’s conditions for the abatement require, as mandated by the legislation, that at least 51% of construction hours shall be filled by District residents and a minimum of 342 construction full-time equivalent employees and at least 51% of permanent jobs in the hotel shall be filled by District residents with a minimum of 51% of the District resident jobs reserved for Ward 1 residents.

Moreover, the legislation demands a job training program, funded by the developer; that the developer work with an outside auditor or trade union to ensure that local hiring minimums are being met and maintained; and that the development shall include no less than 4,000 square feet of community and nonprofit incubator space at no cost to the community.

The legislation — which was highly controversial at the time it was enacted — makes no mention of compliance deadlines.

Former Adams Morgan ANC 1C chair Bryan Weaver says, in terms of hiring, when he checked on compliance with the agreement about a year ago, “Sydell was definitely not in compliance, not even close.”

As for city officials who have claimed to be monitoring the project, Weaver says, “It wasn’t on anybody’s radar.” Negative press coverage in 2016 of Sydell’s hiring in DC, he says, finally prompted some attention by city officials.

Waver was instrumental in negotiating the agreement and shepherding it through city council to be enacted as law in 2010.

Umansky says when Sydell Group requests the abatement — and no one seems to know just when that will be — an audit to determine compliance with hiring and all other conditions of the agreement will take place. The abatement itself is to begin in the tax year following the tax year in which the hotel received a certificate of occupancy.

Other city officials with responsibility for monitoring the terms of the Sydell Group’s tax abatement agreement have told The InTowner both that an audit of Sydell’s compliance is not yet complete and that an audit has not yet commenced — again, because the tax abatement has not been requested by the developer.

A tax expert in city government, who asked not to be identified, says it is not clear how often audits of the agreement are to be conducted over the 20-year time period, nor what consequences would apply if Sydell Group falls out of compliance.

There has never been a continuous audit inspection by a third party of Sydell’s compliance, says Odie Donald II, director of the DC Department of Employment Services (DOES). He says there is ongoing monitoring of the Line DC project’s compliance, particularly in regards to employment of DC and Ward 1 residents, but on the basis of self-reporting by Sydell Group to the city’s First Source Register where Sydell is required to file payroll and other information about its employees on a monthly basis.

The InTowner has requested Sydell’s last three months of First Source reports from DOES, but has not received the information by deadline.

Umansky and Donald tell The InTowner that Sydell can receive its tax abatement subject to complying with the following procedures:

■ Sydell submits a request for the tax abatement;

■ DOES performs an audit of Sydell’s compliance with the tax abatement agreement, which includes specific numbers of jobs that are to be reserved for DC and Ward 1 residents both in the construction phase and hotel occupancy phase of the project;

■ Based on audit results, DOES makes a recommendation for approval of the abatement to the city’s chief financial officer;

■ The Office of the Chief Financial Officer makes a final determination as to whether the tax abatement is granted.

This process is not spelled out in the legislation, nor could city officials explain where it might be found.

“We’re in uncharted territory here,” says Donald, in part because tax abatement agreements are usually not laws that have been passed by the city council.

“They are covering their asses,” says Weaver, of the procedures now being touted by DOES, its parent agency, the Office of the Deputy Mayor for Greater Economic Opportunity, and the office of the CFO.

Weaver says the process described by Umansky and Donald is news to him and is contrary to the spirit of the agreement when it was drafted.

Furthermore, “It wasn’t a rolling timetable,” Weaver says. “The deadline to meet the terms was the issuance of the certificate of occupancy,” which had to have been granted in order for the hotel to open. What’s more, he says, the agreement covers both the construction and operational phases of the project. It makes no sense, he says, that an audit of the construction phase would happen long after the hardhats are replaced by bellhops and other service workers at the hotel.

Current ANC Commissioner Wilson Reynolds agrees that determining compliance with the agreement has always been understood to be necessary before the city would issue a certificate of occupancy to the Line DC Hotel.

Like many people in Adams Morgan, he says he wants the hotel to succeed, but he is disappointed about the trail of broken promises and the city’s failure to adequately monitor compliance.

“We wanted a stick,” Weaver says of the idea to have city council pass the agreement into law, so that the developers would be further motivated to meet their end of the bargain. But, he says, it doesn’t seem to have worked as well as he and others had hoped.

The InTowner has made repeated requests to speak with local management of the Line Hotel, only to have those requests routed to M18 Public Relations in New York City, which required that questions be submitted by email with responses provided by email, a practice that does not meet with this newspaper’s standard of journalistic practice.

M18 also denied a request for an InTowner reporter to tour the hotel on the grounds that guests would be disturbed and managers were too busy trying to open the hotel –- notwithstanding that other media organizations were assisted, including WRC-TV’s NBC Channel 4 which featured one of its on-air reporters and camera crew on a recent Friday evening broadcast.

 *Associate Editor William G. Schulz, a resident of Dupont Circle since the 1980s, has been a journalist specializing in science and investigative reporting for over 30 years.

Copyright © 2018 InTowner Publishing Corp. & William G. Schulz. All rights reserved.