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DC mayoral candidate David Catania opposes trading the Reeves Center as part of D.C. United stadium deal, but he's making some critical errors

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David Catania, At-Large Council Member and Independent candidate for mayor in the upcoming city elections, has said he'd prefer to auction the Reeves Center and use the cash to assemble land on Buzzard Point rather than include it in the proposed land swap. Here's why that would be a mistake.

There are a few criticisms - several of them legitimate - you can levy at the proposed deal that would ultimately allow D.C. United to build a soccer stadium on Buzzard Point. In fact, some critiques from D.C. Council members have been catalogued over at Curbed. But I'm just going to focus on one of them, most recently voiced by At-Large CM David Catania, widely seen as the biggest threat to Democratic mayoral nominee (and Ward 4 CM) Muriel Bowser.

Before we get to the actual quote, though, here are the basics of the proposed deal, for those who need a refresher:

  • The city will dispose up to $150 million in cash and assets (currently projected at ~$120 million) to assemble the stadium site, including a land swap that would the Reeves Center site at the corner of 14th and U streets NW for development firm Akridge's parcel on Buzzard Point and cash to make up the difference in value. There would also be a land swap with utility Pepco, giving them some land in a rapidly developing a few blocks northwest of Union Station in exchange for a decommissioned electrical substation on the stadium site.
    • But how will the land swap work? A team of three accredited appraisers - one each selected by Akridge and the mayor's office and a chairperson for the panel selected by those two appraisers - came to a consensus on the value of each of the relevant parcels as they stood the day before any stadium announcement. This panel set the value of the Reeves Center at $55.6 million and Akridge's parcel at $21.1 million, a difference of $34.5 million, which Akridge will make up with a cash payment to the city.
  • The city will use cash (supplemented by contributions from Akridge and D.C. United) to purchase land from Mark Ein and a salvage yard, the remaining parties who also own land needed for the stadium site. These landowners are getting a windfall, as they will receive payment well over the appraised value of their parcels, essentially paid by those contributions from Akridge and United to avoid the delays and costs of eminent domain litigation.
  • Once the land is assembled and cleared, D.C. United will build a soccer stadium, leasing the land at a nominal cost for 30 years with three 5-year extensions possible. There are also various tax incentives involved in the early years of the lease and a per-ticket fee on all events held at the stadium in the later years.
  • Meanwhile, in Ward 8, the District will build a new Reeves Center to spur development there the way the original spurred development in Ward 1.

As it happens, the most controversial aspect of the deal for members of the Council - particularly those running for mayor - is the Reeves Center's involvement. The Reeves Center is a hulking city office building that has - in everyone's minds save Ward 1 CM Jim Graham - outlasted its useful life. The roof leaks, it's expensive to maintain, and there's a lot of wasted space. Basically, the building is a drag, and it's time has come. (Back in 2011, the CityPaper painted a picture better than I could.)

It's not getting rid of the building that's the problem though (except, of course, for CM Graham). It's the nature of the disposition: that land swap. Catania was on the Politics Hour with Kojo Nnamdi on Friday, and he had this to say:

If what Mr. Akridge wants for the property he owns in Southwest is x amount of dollars for that land, we can give him x amount of dollars. We don't have to sell the Reeves Center to come up with the x amount and then give him the Reeves Center, where the spread is incredible.

I take a lot of issue with the assumptions and conclusions CM Catania draws here. For such a short quote, there's actually quite a bit to break down, so let's start at the beginning.

If what Mr. Akridge wants for the property he owns in Southwest is x amount of dollars for that land...

Matt Klein, the president of the Akridge development firm, has done everything but shout from the rooftops that he is not interested in selling his company's land on Buzzard Point for cash. He wants to parlay it into additional development potential. It is unlikely that Akridge would accept the appraisers' value for its land outside of the proposed deal. Just look at Ein and the salvage yard, who each extracted a premium for their land; there is no reason to think Akridge would fail to do the same, assuming they are inclined to sell at all in. In short, it is simply not the case that "Akridge wants x amount of dollars for that land." Mr. Catania's first assumption is incorrect.

We don't have to sell the Reeves Center to come up with the x amount...

Now, strictly speaking, this is true. The District is right now under no obligation to sell the Reeves Center. But it strikes me as a good idea given the building's obsolescence and the opportunity cost of sitting on it. I don't think that Catania meant he is against any attempt to sell Reves, though; rather, he means the city does not need to dispose of the building to raise money to facilitate this land swap, which is also true in a technical sense. (In that there are other theoretical ways the city could finance its purchase of the stadium site land, which Catania does not seem to oppose.)

But in the practical sense, the Reeves Center presents the best opportunity for the city to raise funds to put together the stadium site. Sure, it would be preferable to just spend money from the city's treasury or from a bond issue, but the city is close enough to its legal debt limit that that course is not an option. Hence the land swap. Nobody wants to include the Reeves Center as part of this deal just because; it's included because the city doesn't have a better way to acquire the land for the stadium site. If the DC had a way to spend $120 million without resorting to land swaps, we would be a lot closer to opening the stadium rather than talking about funding the city's portion of the stadium deal. Everybody would prefer that, but it's not possible.

The Reeves Center represents the best chit for the city to trade in this deal. It's land the city wants to see redeveloped - though exactly how remains an open question; more on that below - and it's a property that Akridge covets to the point of accepting the city's terms in the proposed land swap (potentially even conditions on what it can do with the Reeves site). The city could potentially trade other parcels like the police headquarters near Judiciary Square, but it would provide less capital for the city and brings its own complications.

Where the spread is incredible...

I'm not entirely certain which spread CM Catania refers to here - the spread between the valuations of the Reeves Center and the Buzzard Point land or the spread between the panel's appraisal of Reeves and a previous one done by the city's Office of the CFO. Either way, the point is more semantic than practical. Akridge is making up any difference between the appraised values of the two parcels with cash, so the "spread" there is covered.

The perceived spread between two valuations of the Reeves Center is similarly addressed. The same appraisal that valued the Reeves Center at a higher amount also appraised Akridge's land at a higher rate, meaning that the difference in what the city would realize in the two scenarios is minimal.

Ultimately, though, the "spread" isn't his point. Catania, like Bowser and Graham and others, want to see the Reeves Center sold at auction because they are convinced the certified appraisers, who can face professional expulsion or even prosecution for slanting their reports toward a preferred outcome, are wrong. Especially galling is the fact that none of them actually wants an open auction for the Reeves Center: Each of them has their own limitations they would put on the sale, whether it be to require additional low-income housing, or a hotel, or offices, nobody advocating for an auction of Reeves would actually set up the auction in such a way to maximize revenue, despite that being the big argument for an auction in the first place.

As to those proposed restrictions, despite their initial plans to place luxury housing (the "highest and best," which is to say most profitable, use) on the Reeves Center site, Akridge is apparently willing to accept conditions on the Reeves site: City Administrator Allen Y. Lew, the Gray administration's chief negotiator in this deal, has opened talks with the developer on this very issue. So an auction is not guaranteed to bring in more revenue, and it's not guaranteed to have a better result on land use policies at the site. And that's even assuming an auction isn't held up for years by litigation and other missteps that tend to plague efforts to micromanage development of big properties in and around the U Street corridor.

* * *

I appreciate skepticism about privately negotiated deals involving public assets. That's why we require legislation and have hearings, and that's why the Council has committed $200,000 for their own consultant's study of the proposal. But internally inconsistent criticisms like those being leveled at the proposed deal can seem disingenuous, especially when paired with platitudes about supporting the club and their stadium efforts.

This is the wrong moment, with the Council's consultants in the field, for members of the Council to make sweeping statements about the nature of the proposed deal - or else why spend the $200,000 at all? If an objection to the deal has to do with economics, what harm comes from waiting till we know something from the consultants' report before taking a centerpiece of the deal off the table? If the objection is philosophical, why not say so outright?