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Councilmember Insists Line Hotel Must Keep its Promises; Agencies on Notice to “do Their Jobs”

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

By William G. Schulz

Ward 1 Councilmember Brianne Nadeau is drawing a line in the sand for the Line Hotel DC in Adams Morgan to be held to the terms of its whopping $46 million tax abatement agreement with the city. She questions whether city agencies have followed through on their responsibility to ensure that hotel owner, New York City-based Sydell Group, is in compliance, particularly with local hiring quotas spelled out in the agreement.

In a June 8 letter to City Administrator Rashad M. Young, Nadeau writes of the hiring quotas, “I have been increasingly concerned with the oversight done by the Department of Employment Services over the last three and half years. I have raised this issue with each DOES Director during this period, and the Deputy Mayor for Planning and Economic Development.”

As The InTowner reported in January, while many Ward 1 residents are happy with the new hotel and the activity it has brought to their neighborhood, many others believe Sydell has been getting a pass on promises it made to the neighborhood and the city — particularly in terms of hiring. They are afraid that a lucrative tax abatement will be given to rich developers who don’t need or deserve the money.

Sydell Group, in statements issued to The InTowner and other publications, has long insisted that the Line Hotel DC is in compliance with all points of the agreement, including hiring quotas for DC and Ward 1 residents. The company has never provided proof that it has met the stipulated, agreed upon quotas.

Young responded to Nadeau, saying, “DOES is actively monitoring the project’s status and compliance with the abatement requirements and will report the findings to the DC Office of Tax & Revenue (OTR) once the construction and operation phases are completed.” He said the hiring statistics in particular would be substantiated via an independent audit.

However, city officials have also told The InTowner that it is not clear when or how often audits of the agreement are to be conducted over its 20-year lifetime, nor what consequences would apply if Sydell Group fails to comply at any point along the way.

The city is supposed to be keeping records of the Line Hotel’s employment of DC and Ward 1 residents on the basis of Sydell’s self-reporting to the DOES First Source Register. Further, Sydell has been required to file with DOES payroll and other information about its employees on a monthly basis since the start of construction.

Sydell’s tax abatement agreement with the city demands many contributions to the Ward 1 neighborhood beyond hiring. For example, a job training program and 4,000-square-foot community and nonprofit incubator space are also stipulated. The latter amenity was featured prominently in the hotel’s publicity campaign at the time of its opening in January. Community activists have questioned whether the space allotted in the hotel for these programs actually meets the terms of the agreement.

The InTowner requested Sydell’s First Source reports from DOES in January, but has never received the information, nor, after repeated requests, received any response or explanation as to why the department will not release the reports.

OTR officials contend that an independent audit of the hotel’s compliance with the agreement will be triggered once the owners file an application to receive the tax abatement. The abatement itself is to begin in the tax year following the tax year in which the hotel receives a certificate of occupancy.

And that certificate of occupancy is another big bone of contention for Nadeau and Line Hotel critics. She has written to City Administrator Young that she has “recently been made aware of the fact that the Line Hotel has been operating under at least 9 consecutive Temporary Certificates of Occupancy after its opening…. I am concerned the procurement of Temporary Certificates of Occupancy is an attempt to disingenuously extend the construction period for one purpose: to delay when the hotel must begin complying with the conditions of the tax abatement and still receive the abatement in full.”

From virtually any perspective, she continued, “It appears the hotel is fully occupied and functional.”

A spokesperson for Nadeau says, “The official construction phase does not end until a permanent certificate of occupancy is granted, so the councilmember is asking if it’s possible that, by getting temporary certificates, the hotel is trying to count this period as ‘construction’ while it has actually been in operation for many months.”

A key part of the tax abatement agreement requirements are job creation goals, the spokesperson says, adding that Nadeau’s oversight is “motivated in part by the fact that good paying construction jobs for local residents will help put Ward 1 residents who need jobs back to work.”

Nadeau closes her letter to Young, writing, “I am hopeful that the Line Hotel is complying or will comply with the requirements of the tax abatement, however, this money could be spent in many other ways to help District residents.”

A total of 12 temporary certificates of occupancy have been issued to Line DC over the life of the project. Sydell Group must apply for a final certificate of occupancy on or before July 31. Its last temporary certificate of occupancy expires Aug. 1.

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

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Hotel Receives its Final Certificate of Occupancy

Ward 1 Councilmember Brianne Nadeau’s spokesperson informed The InTowner late Friday, the 27th, that with the issuance of the C of O city “agencies can begin their audits to determine if the hotel is meeting the requirements of its $46 million tax abatement.

“Last month, Councilmember Nadeau sent a letter questioning why it was taking so long to get the final certificate in place.”

The Councilmember’s official statement on the importance of this action is set out below:

“Yesterday evening, I received confirmation from the Line Hotel that its final certificate of occupancy has been issued. I am glad the administration and the hotel worked quickly following my letter to get a final certificate of occupancy in place. The next step is for the Office of Tax and Revenue and the Department of Employment Services to perform independent audits to see if the terms of the deal are being followed.

“I will be watching the verification process closely. District taxpayers demand that we are good stewards of their tax dollars, so I will be using my oversight authority to monitor the agencies as they determine whether the hotel is meeting the requirements of the abatement. I am hopeful that the hotel is in compliance.”

The requirements needed to be met by the hotel in order to qualify for receiving this tax benefit will be reviewed and by the city’s employment services department to verify that the hotel and its contractors are in compliance with six of the seven requirements (including the hiring requirement); the Office of Tax and Revenue is tasked with verifying the seventh requirement.

[Note: For background, in addition to the July lead story, see also our January 2018 report.]