City Paper Widget

Friday, August 1, 2014

Cheater's Guide to "Dream City" -- Part 9 (Greed City)

This is the ninth installment of a series (see the first installment here) summarizing the 1994 book Dream City: Race, Power, and the Decline of Washington, Harry Jaffe and Tom Sherwood. This book has recently been republished as an ebook and a paper book. HBO has plans to use material from the book to make a movie about the life of Marion Barry.

Chapter 8: Greed City

This chapter chronicles the DC real estate boom of the 1980s.

Developer Jeffrey N. Cohen started buying and renovating Dupont Circle brownstones in the 1970s. In 1979, Cohen and partners bought the dilapidated Parkside Hotel at 14th and I Streets NW, then a district of flophouses and strip clubs.

"Enter Marion Barry. The new mayor awarded Cohen a contract to shelter homeless families... for $507,000 a year, more than enough to cover the mortgage" (l. 2513).

In spite of appalling conditions, the city increased the contract to $530,000 and bought three surrounding buildings. In 1985, Cohen sold the property for $12 million. Two years later, it was re-sold for $39 million to a developer who put up an office building.

This pattern was repeated many times both in downtown DC and in many Maryland and Virginia suburbs. "Revenues from commercial property taxes doubled and then tripled.  The questions became how the new black political structure could ensure that the city's African-American community shared in the economic boom" (l. 2546).

James Gibson was Marion Barry's first planning director. Gibson "saw the potential in moving the central business district to the east, into the one hundred city blocks immediately north of Pennsylvania Avenue between the White House and the Capitol" (l. 2561). Developers levelled the structures that were there and put up office buildings.

"The city owned some choice pieces of property, especially over the downtown stations of the new Metro system" (l. 2585). In 1980, the city sold a parcel over Metro Center at $133 per square foot. At the time, comparable properties went for $500 a square foot. One of the partners in the firm that bought the property was the city's Democratic party chair and had gone on a trip to Africa with Barry. Other firms, with minority partners, got similar deals.

Another choice parcel was Gallery Place. A DC government agency valued the land at $31 million, the developer paid $17 million in July 1981. "In exchange for a low price, they promised to build offices, a hotel, shops, and apartments for low income residents" (l. 2594).

"But a decade later not a spade of dirt had been turned, the grand notion of building apartments was history, and Gallery Place was dead in the water" (l. 2608). It was sold to Oliver Carr, the city's biggest developer.

"What started as an attempt to broaden the economic base of the city soon proved to be a rich source of political favors. The city would sell land at fire-sale prices to development teams that boasted minority partners, who always seemed to be the same people with strong social and political connections to Marion Barry" (l. 2612).

" 'I call them the chosen ones,' said John Wilson, whose Ward Two council district encompassed downtown. 'What started out to benefit the minority community at large has meant some politically influential blacks can move out to posh suburbs like McLean or Potomac' " (l. 2620).

Meanwhile, the city paid increased prices for basic goods and services (e.g., heating oil, corn flakes, trash collection), supplied by influential friends and political contributors. The goods and services were often delivered late, or not at all.

"The most egregious examples were in housing and the treatment of the homeless" (l. 2654). A well-connected man named Cornelius Pitts got $3300 a month for every homeless family he shelter and fed inadequately. He also got the city to lease office space from him at $97 a square foot, when prime office space cost $25 a square foot. "Between 1985 and 1989, ....  Pitts received approximately $16.4 million in contracts" (l. 2673).

Another friend, Roy Littlejohn "came back in 1987 to go into the shelter business and opened two, Urban Shelters and the R Street Shelter, with millions of dollars in contracts. He charged the government $2800 per apartment per month and furnished small, dingy rooms with metal folding tables and chairs, or nothing" (l. 2680).

A DC city auditor explained it to Congress: "... the financial flexibility needed to carry out the agency mission is too easily subverted to the agenda of greedy, corrupt, highly placed individuals ..." (l. 2690).

"No matter how many millions of dollars in city contracts flowed to Barry's friends, it was chump change compared to the hundreds of millions of dollars that enriched the white community during the real estate boom" (l. 2693).

Oliver Carr and Barry did not get along, and Carr supported Barry's challengers for mayor in 1978 and 1982. However, Barry needed money for his campaign warchest, and Carr needed city permissions to develop land, so the two eventually met and, although not friendly, established an uneasy peace.

Investors from England, Holland, Japan, and Canada bought standing buildings in DC's downtown. Developers from Texas and Massachusetts moved in to challenger Carr and other locals.

However, many areas still bore the scars of the 1968 rioting. "To his credit, Barry chose the corner of 14th and U Streets, where the riots began, to build a new municipal center" (l. 2737).

"The only white developer who tried to bridge the gap between Washington's two worlds was Jeffrey Cohen, and he did it by attempting a major redevelopment in the Shaw neighborhood" (l. 2742).

"Cohen first scored on the abandoned Children's Hospital building at 13th and V Streets NW. He and a few partners had bought it for $5 Million in 1978 and promised to build a new rehabilitation hospital..." (l. 2747). Barry helped Cohen get a "certificate of need" for the hospital.

"Cohen never built the rehabilitation hospital. Instead, he sold the coveted certificate of need to the Washington Hospital Center for $8.7 million. As part of the deal, Cohen's group received $5.7 million in architectural and legal fees. In all, Cohen's group made $14.4 million for not building a hospital. Shaw got no jobs and no nearby health-care facility. Cohen then turned around and sold the Children's Hospital property to the city for $5.8 million, for an $800,000 profit on the land" (l. 2755).

Cohen used connections to finance further deals in Shaw throughout 1985. He also took on Barry as a 10 percent partner in a commercial development on Nantucket. "Cohen then created a dummy corporation to hide Barry's stake" (l. 2772).

"Four months later, on December 2, 1985, the mayor sent city council chairman David Clarke a bill that would float $9 million in tax-exempt bonds for Cohen to use in the renovation of the Manhattan Laundry, a sturdy structure that Cohen wanted to turn into offfices for himself. The bond passed, and once again the city picked up Jeffrey Cohen's tab" (l. 2776).

Cheater's Guide to Dream City continues next week

Further installments will appear on successive Fridays. All posts will be cross-posted on the ad-hoc "Cheater's Guide to Dream City" blog.

Full disclosure: I have a commercial relationship with Amazon. I will receive a very small portion of the money people spend after clicking on an Amazon link on this site.

This is a great book and well worth reading in its entirety.

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