[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
   ECONOMIC DEVELOPMENT IN THE DISTRICT OF COLUMBIA: THE ROLE OF THE 
                 NATIONAL CAPITAL REVITALIZATION CORP.
=======================================================================

                                HEARING

                               before the

                SUBCOMMITTEE ON THE DISTRICT OF COLUMBIA

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 8, 2002

                               __________

                           Serial No. 107-154

                               __________

       Printed for the use of the Committee on Government Reform








  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform

                              _______

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                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia                    DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida                  ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California                 DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky                  JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia               JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania    THOMAS H. ALLEN, Maine
DAVE WELDON, Florida                 JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida              DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho          STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia                      ------
JOHN J. DUNCAN, Jr., Tennessee       BERNARD SANDERS, Vermont 
------ ------                            (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

                Subcommittee on the District of Columbia

                CONSTANCE A. MORELLA, Maryland, Chairman
TODD RUSSELL PLATTS, Pennsylvania    ELEANOR HOLMES NORTON, Washington, 
THOMAS M. DAVIS, Virginia,               DC
------ ------                        DIANE E. WATSON, California
                                     STEPHEN F. LYNCH, Massachusetts

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                     Russell Smith, Staff Director
                 Howie Denis, Professional Staff Member
                          Matthew Batt, Clerk
                      Jon Bouker, Minority Counsel


















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 8, 2002....................................     1
Statement of:
    Heller, Rod, chairman, Board of the National Capital 
      Revitalization Corp.; Elinor Bacon, National Capital 
      Revitalization Corp.; Eric Price, deputy mayor for economic 
      development, District of Columbia government; Donald Carey 
      Williams, regional administrator, the National Capital 
      Region; Shabbir Safdar, chair of D.C. Public Affairs 
      Committee of the Greater Washington Board of Trade; Nelson 
      Bregon, Deputy Assistant Secretary for Grant Programs, 
      Office of Community Planning and Development, U.S. 
      Department of Housing and Urban Development; Ronald J. 
      Herbert, Director, Community Planning and Development 
      Division, HUD; and Richard J. Kennedy, Director, Office of 
      Block Grant Assistance at HUD..............................     8
Letters, statements, etc., submitted for the record by:
    Bacon, Elinor, National Capital Revitalization Corp., 
      prepared statement of......................................    16
    Bregon, Nelson, Deputy Assistant Secretary for Grant 
      Programs, Office of Community Planning and Development, 
      U.S. Department of Housing and Urban Development, prepared 
      statement of...............................................    60
    Heller, Rod, chairman, Board of the National Capital 
      Revitalization Corp., prepared statement of................    11
    Norton, Hon. Eleanor Holmes, a Delegate in Congress from the 
      District of Columbia, prepared statement of................     5
    Price, Eric, deputy mayor for economic development, District 
      of Columbia government, prepared statement of..............    28
    Safdar, Shabbir, chair of D.C. Public Affairs Committee of 
      the Greater Washington Board of Trade, prepared statement 
      of.........................................................    50
    Williams, Donald Carey, regional administrator, the National 
      Capital Region, prepared statement of......................    36
















   ECONOMIC DEVELOPMENT IN THE DISTRICT OF COLUMBIA: THE ROLE OF THE 
                 NATIONAL CAPITAL REVITALIZATION CORP.

                              ----------                              


                         FRIDAY, MARCH 8, 2002

                  House of Representatives,
          Subcommittee on the District of Columbia,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:06 a.m., in 
room 2154, Rayburn House Office Building, Hon. Constance A. 
Morella (chairwoman of the subcommittee) presiding.
    Present: Representatives Morella and Norton.
    Staff present: Russell Smith, staff director; Heea 
Vazirani-Fales, counsel; Robert White, communications director; 
Matthew Batt, clerk/legislative assistant; Howie Denis, 
professional staff member (Davis); Jon Bouker, minority 
counsel; and Jean Gosa, minority assistant clerk.
    Ms. Morella. Good morning. I'm going to call this 
Subcommittee of the District of Columbia to order for the 
purpose of convening a hearing on economic development in the 
District of Columbia, the role of the National Capital 
Revitalization Corp.
    It is a pleasure to welcome all of you here today. I 
certainly want to make mention of our witnesses, all who have 
impeccable credentials and are dedicated to improving the 
economic vitality of our Nation.
    You know it has been 4 years since the District of Columbia 
established the National Capital Revitalization Corp., and at 
the time of the NCRC's creation the District was mired in 
financial chaos. Redeveloping vacant or rundown properties was 
seen as one way to help the District rebound and stand on solid 
economic footing for the long term.
    Well, the District has certainly emerged, and now NCRC is 
poised to begin the transformation of some key properties and 
projects in the District. The Federal Government, of course, 
gave the NCRC $25 million in seed money, a welcome sign that 
the Federal Government was willing to make a substantial 
contribution to the betterment of the Nation's Capital. Today 
we are going to examine what is being done and what is planned 
with that money.
    There has been a good deal of excitement about the newly 
released plan for the Southwest waterfront, and I'm sure we 
will be talking about that proposal in depth as well as plans 
for the St. Elizabeth's campus, Georgia Avenue gateway and 
other projects.
    Revitalization is certainly critical for the District, and 
as I've said many times since taking over as chair of the 
subcommittee, the District must have three things in order to 
ensure its long term economic stability. It must have strong 
schools, low crime, and vibrant, affordable neighborhoods. I 
think a lot of times we overlook the housing and neighborhood 
aspect of bringing the city back. Without affordable places to 
live, the District will not be able to grow its middle class. 
And we've seen from the recent tax assessments how quickly 
popular areas of the city can go from affordable to expensive 
for young families.
    Commercial redevelopment is equally important. One of the 
great success stories of the past few years in the District has 
been the use of tax credits, and other incentives to spur 
development enterprise zones.
    As we talk about reauthorizing this legislation in the very 
near future, I believe we should strongly consider extending 
the enterprise zone designation to the entire District of 
Columbia. I see no reason why this program shouldn't be used to 
benefit the entire city.
    Finally, the second part of today's hearing will examine 
the Federal and District Governments' roles in overseeing money 
spent by nonprofit community development corporations in the 
city. A recent series in the Washington Post that I know you 
have read and have reacted to went into great detail about 
wasteful spending and lack of meaningful progress toward 
completing projects on behalf of some, not all, but some of 
these groups. I know I was shocked to read it. About $100 
million of Federal and local money has been allocated in recent 
years to these CDCs and it is clear that not enough oversight 
has been done in making sure these groups are using the money 
wisely. It is very frustrating for those of us in Congress to 
repeatedly learn of wasted opportunities and squandered 
resources in the District, particularly at a time when city 
leaders are trying to make the case that the District of 
Columbia needs more Federal assistance to remain economically 
viable.
    So I thank you all for being here, and I would now 
recognize the distinguished ranking member, Congresswoman 
Eleanor Holmes Norton.
    Ms. Norton. Thank you, Mrs. Morella. I want to thank our 
chair, Congresswoman Morella, for this hearing that focuses on 
the National Capital Revitalization Corp. as part of our D.C. 
Revitalization Act passed by Congress in 1997. However, we had 
to put in considerable further effort to get a provision 
through Congress, and finally in fiscal year 2000, Congress 
appropriated $25 million in startup capital for the NCRC as 
passed by the City Council. In addition, Fannie Mae pledged $75 
million in debt and equity financing for housing.
    At the press conference introducing the initial four 
members appointed by the mayor and three appointed by the 
President, I remember cautioning that considering the long-
standing systemic problems the District had had in mounting 
successful economic development projects, what mattered was for 
the NCRC to show that it could produce tangible results. Nearly 
2 years later, it is fair to ask what has been accomplished 
thus far. Now that the NCRC has passed its startup phase, we 
also will be interested in what the corporation can 
realistically be expected to achieve in both the short and long 
term.
    Many residents who celebrated the coming of the NCRC are 
confused and concerned about recent reports of deep troubles in 
parallel neighborhood development organizations, the Community 
Development Corp. [CDCs]. Of course, the CDCs are not a part of 
the NCRC.
    However, the point of establishing a professionalized 
development corporation was to bring cohesion to economic 
development activities in the city. We need to learn how the 
city means to achieve cohesive and effective economic 
development with a set of very different institutions, 
apparently held to different standards. How did the city come 
to have a $100 million economic development problem today and 
what is it doing about it, and how it will keep it from 
happening again if those institutions remain as they are?
    Because Department of Housing and Urban Development, or 
HUD, money is involved, another subcommittee of the House has 
already asked for a briefing. This is entirely appropriate. 
However, the D.C. Subcommittee has direct jurisdiction and will 
be asking the appropriate questions today and following through 
until satisfied that the CDC problems are under control. I hope 
that other committees that do not have direct jurisdiction will 
first allow us to perform our oversight with respect to the 
Federal funds, and, out of respect for home rule, allow the 
D.C. City Council to perform its own oversight of the 
District's economic development apparatus and to take the 
anticipated corrective action.
    It should be noted that the problems in the CDCs were 
uncovered in the District by the city's own inspector general 
and that he had done an extensive investigation and prepared a 
report and had done so before press reports of the problem 
appeared.
    Further, Mayor Williams has indicated that he intends to 
take back properties from the CDCs if he does not see immediate 
tangible results, and the City Council will hold a series of 
hearings beginning on March 14th. This unapologetic response 
from the city is a departure from old patterns, is typical of 
the Williams administration and the City Council today, and is 
exactly what for years the Congress has admonished the District 
to do. I hope that Congress reinforces the District and home 
rule when the city takes effective and aggressive action to 
come to grips with its own problems.
    I spend a great deal of my own time on economic development 
for the District and, whenever appropriate, seek to marry the 
advantages of the Federal presence as an engine for economic 
development to the needs of the District. As a member of the 
subcommittee of basic jurisdiction, the Subcommittee on 
Economic Development, Public Buildings, and Energy Management, 
I have had to fight to keep Federal agencies and jobs in the 
District, such as the Security and Exchange Commission and the 
Bureau of Alcohol, Tobacco and Firearms, both buildings now 
going up, and both spurring economic development in blighted 
areas of the city. The most important of these efforts has been 
my legislation, Public Law 106-407, the Southeast Federal 
Center Public-Private Development Act, which will bring private 
sector development to 55 acres of very valuable Federal land 
that had been allowed to go to waste by the Federal Government 
and spur blight for 30 years. The request for proposals to 
develop this entire 55-acre site near the Anacostia River with 
a mixture of uses will go out this month.
    Moreover, recently the General Services Administration 
announced that the new Department of Transportation 
headquarters, the largest single Federal construction project 
in the District since the massive Ronald Reagan Building, will 
be built at the Southeast Federal Center.
    With the development of the DOT at the Southeast Federal 
Center will come jobs for D.C. residents and the synergy of 
private development in mixed use housing, amenities, and 
amusements.
    I particularly appreciate how the majority has worked with 
me to get valuable economic development tax incentives for 
economic development in the District. With my allies in the 
Senate, including Senator Trent Lott, Senator Joe Lieberman and 
former Senator Connie Mack, we achieved several D.C.-only 
Federal tax breaks passed in 1997, including a $3,000 wage 
credit for every D.C. resident employed, zero capital gains 
taxation, $15 million in tax-exempt bonds and increased 
business property expensing. Although the Congress limited the 
use of these benefits to neighborhoods in certain zones, these 
credits are liberally available in every ward of the city and 
downtown, and have been responsible for much of the 
construction boom in the District.
    In another D.C.-only tax benefit, the $5,000 home buyer 
credit has been so popular that, when passed, it immediately 
made D.C. first in home sales growth in the Nation. Since then 
it has been a major factor in reversing the flight of D.C. 
residents from the city. As a result, for the first time in 
decades, the District's population is in equilibrium, the first 
city in the United States to stop the flight of residents to 
the suburbs.
    I particularly appreciate how Speaker Dennis Hastert has 
worked with me to extend both the business tax benefits and the 
home buyer credit. The Speaker and I have agreed orally and in 
writing that he will help me extend the credits when they are 
due to expire at the end of 2003. I am also seeking to extend 
the D.C. tax credit enterprise zone citywide, as the Chair has 
just remarked. The zone approach, as she indicates, in a city 
of this limited size, is inappropriate. It has had irrational 
results favoring businesses in some neighborhoods over similar 
businesses in similar neighborhoods.
    The District must achieve more benefits and more revenue 
from more vigorous and targeted economic development. We must 
all work together to ensure that all the District's economic 
development machinery is effective. Residents and local 
businesses have a right to expect substantial benefits not only 
from the NCRC, but if the District chooses to have a similar 
neighborhood structure such as CDCs, they must be held to the 
same high standards.
    I welcome today's witnesses and look forward to their 
testimony. Thank you, Madam Chair.
    [The prepared statement of Hon. Eleanor Holmes Norton 
follows:]


[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Mrs. Morella. Thank you, Congresswoman Norton, and thanks 
for the work you have consistently done through the years and 
continue to do for our Nation's Capital.
    I am now very pleased to have before us our very 
distinguished panel of witnesses: Rod Heller, Chairman of the 
Board of the National Capital Revitalization Corp., accompanied 
by Elinor Bacon of the National Capital Revitalization Corp., 
and Eric Price, Deputy Mayor for Economic Development, District 
of Columbia Government, Donald Carey Williams, Regional 
Administrator, the National Capital Region, Shabbir Safdar, 
chair of the D.C. Public Affairs Committee of the Greater 
Washington Board of Trade, and Nelson Bregon, Deputy Assistant 
Secretary for Grant Programs, the Office of Community Planning 
and Development of the U.S. Department of Housing and Urban 
Development.
    I am going to ask you as it is the policy of this 
subcommittee and all committees, if you would stand to be sworn 
in. I would ask, joining you to stand for the oath, Stan 
Jackson and Michael Hodge, if they are here. Great. So if you 
would raise your right hands. I'm going to add a few more to 
this list. I'm going to add Ronald J. Herbert, who is the 
Director of Community Planning and Development Division of HUD, 
and Richard J. Kennedy, Director of the Office of Block Grant 
Assistance at HUD. So if you would raise your right hand.
    [Witnesses sworn.]
    Mrs. Morella. Thank you. The record will demonstrate an 
affirmative response by all of you.
    So I am very pleased to have you here, as I've said, and 
we'll get started. What we traditionally try to do is to ask 
each of you to not expand the 5-minute limit, remembering that 
your entire testimony will be in the record in its entirety, 
and therefore we'll have a chance to ask questions of you. So 
we'll start off then, Mr. Rod Heller, as I mentioned, who 
chairs the board of the National Capital Revitalization Corp. 
Thank you, Mr. Heller.

   STATEMENTS OF ROD HELLER, CHAIRMAN, BOARD OF THE NATIONAL 
  CAPITAL REVITALIZATION CORP., ACCOMPANIED BY ELINOR BACON, 
NATIONAL CAPITAL REVITALIZATION CORP.; ERIC PRICE, DEPUTY MAYOR 
  FOR ECONOMIC DEVELOPMENT, DISTRICT OF COLUMBIA GOVERNMENT; 
  DONALD CAREY WILLIAMS, REGIONAL ADMINISTRATOR, THE NATIONAL 
 CAPITAL REGION; SHABBIR SAFDAR, CHAIR OF D.C. PUBLIC AFFAIRS 
  COMMITTEE OF THE GREATER WASHINGTON BOARD OF TRADE; NELSON 
 BREGON, DEPUTY ASSISTANT SECRETARY FOR GRANT PROGRAMS, OFFICE 
   OF COMMUNITY PLANNING AND DEVELOPMENT, U.S. DEPARTMENT OF 
  HOUSING AND URBAN DEVELOPMENT; RONALD J. HERBERT, DIRECTOR, 
 COMMUNITY PLANNING AND DEVELOPMENT DIVISION, HUD; AND RICHARD 
 J. KENNEDY, DIRECTOR, OFFICE OF BLOCK GRANT ASSISTANCE AT HUD

    Mr. Heller. Good morning, Chairperson Morella, Ranking 
Member Norton. We are delighted to be here. My name is Roderick 
Heller. I am chairman of NCRC. We have submitted a prepared 
statement, but I would like to emphasize four points for the 
benefit of the committee.
    First, as the ranking member indicated, our board was sworn 
in on July 15, 2000. Thus we have been in place approximately 
18 months. I think it is fair to say that the status of NCRC is 
now of an entity already established and moving forward. 
Indeed, as Congressperson--Chairperson stated, poised to move 
forward aggressively.
    We received on January 15th of this year the RLA portfolio 
of 88 properties with an assessed value of approximately $600 
million, to add to the approximate $80 million of capital to 
which the ranking member referred. Thus I think at the present 
time we have a capital base which enables us to balance the 
business development and related objectives of NCRC with the 
real estate objectives of the RLA portfolio.
    Second, our goal--and indeed I remember well the ranking 
member's reference when we were sworn in several years ago that 
we would be judged by action. Our goal is not to engage in 
studies or comprehensive planning but to implement programs 
quickly and efficiently and to try to bring private sector 
objectives. As an example of what we're trying to do, I would 
like to refer you to the first award our board has made under 
the RLA program, that is the designation of a group led by 
Horning Brothers for the wax museum site at 5th and K. We 
imposed--and I believe this is the first time certainly in the 
District and one of the first times nationally--a series of 
conditions on the developer which included not only completion 
of the project within a certain time and letter of credit 
guaranty of project completion, but also a participation 
sharing such that NCRC and the District generally will benefit 
if the developer over a certain time achieves returns in excess 
of 12, 15 and 20 percent. And we expect to follow that kind of 
program to ensure that District land is always used not only to 
the benefit of the developer, but to the District as well.
    Third, I would like to emphasize again a statement that the 
ranking member made. In talking with many people who have been 
long observers of the District economic development scene, 
constant reference is made to the dissipation and fragmentation 
of the economic development approach. We have too many entities 
engaged in too many fragmented initiatives. What NCRC hopes to 
achieve is to become a center of excellence to which people 
will turn as economic questions arise and to become a group 
that will be able to move quickly and effectively. We recognize 
that this is not going to be handed to us on a platter. We have 
to earn the reputation as a center of excellence. We must 
demonstrate in our programs and our actions that we are an 
entity that can get things done and achieve the economic 
development goals of the city.
    Last, I would like to refer to the tax incentives that were 
passed in 1997 to which the ranking member referred. My 
background personally is that of a lawyer and a participant in 
business turn-arounds for the last 20 years. I have been long 
enthusiastic about several of the components in that tax 
program, and particularly, the waiver of capital gains taxes 
for enterprises established which conduct most of their 
businesses within certain areas of the District. That program 
has not been used to its fullest, but it offers enormous 
potential, I believe, for attracting the kind of business 
activity that we need in this city. And we look forward at NCRC 
to working with members of this House in carrying that forward.
    With that background, I now turn to Elinor Bacon, the chief 
executive officer of NCRC, who will describe what we have been 
doing and what we hope to achieve.
    [The prepared statement of Mr. Heller follows:]

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Bacon. Thank you, Mr. Heller. Good morning, Chairman 
Morella and Ranking Member Norton. My name is Elinor Bacon. I 
am the president and chief executive officer of the National 
Capital Revitalization Corp. I would like to thank you for this 
opportunity to present testimony this morning. This is the 
first time the NCRC has appeared before your committee since 
its establishment, and we thank you for this honor and this 
opportunity to discuss NCRC's role in the economic development 
of the District of Columbia.
    In my testimony today I would like to summarize four areas: 
Our mission; what we have accomplished to date; our plans for 
the foreseeable future; and how our work strengthens and 
complements the work of my esteemed colleagues here today.
    NCRC was established by an act of the council of the 
District of Columbia in 1998. It is an independent corporate 
instrumentality. We are charged with a specific mission, that 
of spurring economic development throughout the District and 
creating jobs for District residents through real estate 
development, business development and finance, and jobs 
creation.
    We focus our resources on the District's neighborhoods and 
in particular those areas that have been underserved, such as 
the areas east of the Anacostia River and across and along the 
Georgia Avenue corridor. Our map up here shows our priority 
areas, which include Columbia Heights, Georgia Avenue, the 
Howard-Shaw area, NoMa, H Street, Southeast Washington, east of 
the river, Buzzards Point and the Southwest waterfront.
    In all our development activity, we work in close 
connection with Deputy Mayor Eric Price and his staff, 
including Andrew Altman, who heads the exemplary Office of 
Planning. The planners plan, we implement. We work closely 
together so the plans they develop are plans that we can move 
forward.
    In addition to our cooperative relationship with the 
District's planners, we also work closely with the National 
Capital Planning Commission.
    Partnerships with other District and Federal agencies and 
local and regional organizations, including those represented 
here today, are critical to ensure that our collective efforts 
to promote job training, economic development and real estate 
development throughout the District are well coordinated.
    With regard to our Federal partners, we are in discussion 
about our mutual goals and possible cooperative efforts with 
the General Services Administration. Currently we are engaged 
in complementary development efforts in the Southeast, such as 
the Southeast Federal Center as Capper Carlsburg redevelopment. 
And as NCRC establishes a track record and its expertise 
increases, we look forward to continuing our dialog about other 
opportunities.
    With regard to our funding, as you mentioned, we received a 
$25 million appropriation. We do not receive operating funds. 
To help us become self-sustaining, NCRC was given the power of 
eminent domain with council approval and the authority to raise 
capital through the sale of bonds. We can also receive 
contributions of funds, property and other assets, and we 
intend to earn fees from financing development management and 
service programs.
    We also received a commitment of $75 million from Fannie 
Mae, as mentioned. We are thrilled by the Federal commitment 
which demonstrates the strength of this unique Federal city 
partnership to improve the economic health of the District, and 
by the Fannie Mae commitment, the only one of its size and 
scope in the Nation.
    Let me take a moment to thank you, Chairman Morella, for 
your leadership and your keen interest in economic development 
in the District and your support for NCRC's efforts. We 
tremendously appreciate your support. And we also want to thank 
Ranking Member Norton for all of her help, and she has been a 
staunch advocate in the District in so many aspects of economic 
development.
    As you are aware, NCRC's priority areas include the 
enterprise zones and the range of benefits which you mentioned 
included in the Taxpayer Relief Act are key to the success of 
our efforts. For example, several of the developers who are 
competing for our site at 5th and K Streets included enterprise 
zone tax bonds--or tax enterprise zone bonds in their financing 
packages. We would hope that this act would be continued and 
extended districtwide since it is a vital tool in our economic 
development tool box.
    We greatly appreciate our partnership with all the branches 
of the Federal Government. The Federal Government is critical 
to our mission of building our capital city. In NCRC's first 
year, we have accomplished a great deal. First, we completed, 
secured approval of our organizational documents and policies. 
We got the organization up and running by securing space, 
professional staff and support, and putting systems into place. 
And finally we actually launched our economic development 
activities.
    Some of our programmatic accomplishments include the 
following: First, in connection with the proposed redevelopment 
of the Southwest Waterfront, NCRC acquired the leasehold 
interest in the Gangplank Marina with half of the funding 
provided by the District. As you will recall, Congresswoman 
Morella and Delegate Norton, you participated in the exciting 
event last spring when Mayor Williams announced the Anacostia 
waterfront initiative at a meeting of more than 500 people in 
Southwest Washington,a comprehensive effort to plan for the 
redevelopment of our beautiful but underutilized waterfront.
    The primary purpose of our acquiring the leasehold interest 
was to have a seat at the table in moving the redevelopment 
forward. We have wonderful assets in the Southwest such as the 
fish market, as you well know, a Federal lease. We want to 
build these assets to make a waterfront which is a wonderful 
neighborhood and destination for District residents and 
visitors. Here is the fish market and our initial plan for what 
we hope we will be able to do there. And also an artist's 
rendering of what our concept is of what it could be.
    We also have been working diligently with the Hillcrest 
community east of the Anacostia River. The rendering of what 
the artist sees that the Southwest could look like. We have 
been working diligently with the Hillcrest community east of 
the river in support of Mayor Williams and council member 
Chavous on the community's effort to transform an 
underdeveloped shopping center called Skyland of potentially 16 
acres to a vibrant retail center that would reflect the 
demographics of the area.
    With regard to business development, we hired a long time 
District leader in the field of business development, Mr. Kwasi 
Holman, and he is working to develop a program which should be 
done--a plan for which will be done in the next couple of 
months.
    In January, we announced an agreement with the three 
District-based community banks to put money into the three 
banks, which include Adams National Bank, City First Bank of 
D.C., and Independence Federal Savings Bank. These deposits 
will allow these banks to spur economic development in 
underserved neighborhoods.
    We also assumed, as Mr. Heller mentioned, the powers and 
the responsibilities of the board of the Redevelopment Land 
Authority transferred to NCRC as well as its assets. And the 
first development that we are working on is the transformation 
of the wax museum site at 5th and K. And here you can see a 
before picture of what it looks like now, and an artist's 
rendering of what is planned to go there.
    We are very pleased with our progress, but we fully 
recognize there is much more to accomplish. We are tackling our 
challenges day by day and moving forward with deliberate speed. 
We have launched into a strategic planning process that we 
intend to complete within the next few months which includes 
developing a plan for self-sufficiency and long range 
programmatic plans for the next 3 to 5 years.
    During our first year, we believe we established an 
excellent working relationship with our many partners and our 
stakeholders. We genuinely value these relationships as 
critical to our success and we appreciate the support and 
cooperation we have received. We know that our partners and 
stakeholders have high expectations and the NCRC and our LARC 
board and staff are fully committed to meeting and exceeding 
these expectations.
    Mr. Heller and I will welcome your questions. Thank you.
    [The prepared statement of Ms. Bacon follows:]


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    Mrs. Morella. Thank you very much, Ms. Bacon, for that very 
extensive testimony. I note that you have more even in the 
written testimony that you have submitted.
    I am pleased to recognize Eric Price, the Deputy Mayor for 
Economic Development for the District of Columbia.
    Mr. Price. Good morning, Chairwoman Morella, Ranking Member 
Norton. My name is Eric Price and I am the Deputy Mayor for 
Planning and Economic Development in the District of Columbia. 
I also serve as the representative for Mayor Anthony Williams 
on the board of directors of the National Capital 
Revitalization Corp.
    One of my primary tasks upon being appointed by Mayor 
Williams in October 1999 was to make the NCRC operational. I am 
pleased to come before you today to report on those efforts and 
how NCRC fits into the mayor's overall economic development 
strategy for Washington, DC.
    Because the subcommittee's hearing notice also requested 
information about the District's current enterprise zone laws, 
I am accompanied today by Michael Hodge, the director of the 
Industrial Revenue Bond program. Mr. Hodge is the point person 
in my office with respect to economic development incentives 
that were included in the District of Columbia Revitalization 
Act and Taxpayer Relief Act of 1997. We believe that these 
incentives, including the enterprise zone benefits and the home 
buyer tax credit, have been very successful and I want to thank 
Ms. Norton in particular, as well as other Members of Congress, 
for enacting these important economic development initiatives.
    On behalf of Mayor Williams, I ask Congress to extend these 
incentives which are set to expire at the end of 2003 and make 
enterprise zone citywide. Mr. Hodge will address these matters 
in more detail on questions.
    Because Mr. Heller and Ms. Bacon talked about NCRC 
operational matters, I will skip that part of my testimony. I 
will talk about where they are operationally, and I am going to 
go straight to NCRC in the context of the District's economic 
development structure.
    As we know, the vision was for the entity that would 
operate more like a private sector with fewer of the many 
constraints of government but still consistent with economic 
development and policies and planning developed with 
significant local government and community input. It is 
important to note that when the council first passed the NCRC 
Act in 1998, the economic fortunes of the District were very 
different than they are today. The District was in the third 
year of the control board. Years of budgetary retrenchment have 
weakened or decimated the District's government, planning, 
business, regulatory, and economic development apparatus. There 
was a real and perceived reduction of executive branch 
leadership on economic development issues. And in such an 
environment it is understandable that the District government 
would seek to create an expansive new entity to focus on 
economic revitalization. Then, as now, economic revitalization 
remains critical to all our hopes and aspirations for the 
District. A strong tax base, with all that means for enhanced 
home rule and real self-determination, schools with the 
resources to prepare our students for an ever more competitive 
world, neighborhoods that are reborn with new and rehabilitated 
housing, and commercial activity offering opportunity to long 
time residents and newcomers as well.
    The environment in which NCRC operates today, however, is 
much different, although the need for it remains the same. 
Working with the council, Mayor Williams is reinvigorating the 
operations of the District government. We have significantly 
rebuilt the Office of Planning and improved the delivery of 
services to businesses and residents. The mayor and the 
executive branch are fully engaged and working hard to attract 
new businesses from technology companies to retailers and to 
provide opportunities for existing businesses to expand and 
prosper.
    The business community is responding by investing over $12 
billion in development capital in the District of Columbia. 
Forbes, Fortune and Black Enterprise magazines have all touted 
the economic renaissance now under way. Yet the long term 
economic future of the District is uncertain and much work 
remains. As the mayor, chief financial officer, Nat Gandhi, and 
Representative Norton have all said, constraints imposed upon 
the District's ability to benefit fully from the economic 
activity generated within our borders places the District one 
financial emergency away from physical calamity. I hope that 
sooner rather than later Congress will review and direct these 
structural impediments to the District's long term financial 
health.
    In the meantime, I believe that NCRC will play an important 
role in helping us to accomplish the work that still must be 
done. I meet with Elinor Bacon on average at least once a week 
and she or a member of my staff attends my regular interagency 
meetings on housing and business development. NCRC is present 
at the table when the mayor convenes his monthly meetings with 
the entire economic development cluster. NCRC is a full and 
important component of that cluster, which includes the Office 
of Planning, the Department of Housing and Community 
Development, the Department of Employment Services, and the 
Department of Consumer Regulatory Affairs, as well as several 
others. Because its charter is so broad and demand is so great, 
NCRC runs the risk of becoming involved in everything and 
accomplishing very little. The mayor and board have expressed a 
desire for NCRC to achieve tangible results as quickly as 
possible, to work closely with but not duplicate the work that 
other District agencies--the work of other District agencies, 
and for the corporation's business plan to complement the 
District's economic development initiatives and objectives as 
established by the mayor and council.
    Mayor Williams believes that NCRC can be most hopeful and 
effective by serving as a focused entrepreneurial real estate 
company that works with the District government to implement 
significant real estate projects that strengthen the District's 
economic base.
    The corporation should also stand ready to provide other 
agencies such as the Department of Housing and Community 
Development with high quality transactional and asset 
management services for parcels owned, leased, or financed by 
the District. For its part, the District has transferred to 
NCRC the portfolio of the former Redevelopment Land Agency, and 
already NCRC has moved to expedite the disposition of long-held 
District parcels such as the old wax museum site, as referred 
to by Elinor Bacon.
    In closing, I hope that you will agree that NCRC is now 
poised to make a real impact on the future development of the 
District. NCRC has the support of the mayor and council. The 
support of Congress and the President will also be required as 
the corporation matures and takes on new tasks. We appreciate 
the important partnership that has been established between the 
Federal and District governments in creating NCRC and look 
forward to the many things we can do together to build the 
Nation's capital.
    I want to thank you, Chairwoman Morella and Congresswoman 
Norton, for your interest in and support of the District's 
economic development efforts. Thank you.
    [The prepared statement of Mr. Price follows:]


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    Mrs. Morella. Thank you, Mr. Price. I am now pleased to 
turn the microphone over to Donald Carey Williams, regional 
administrator for the National Capital Region. Thanks, Mr. 
Williams.
    Mr. Williams. Thank you, Chairwoman Morella, Ranking Member 
Norton. My name is Donald C. Williams, the regional 
administrator for the General Services Administration's 
National Capital Region. I have a pretty bad cold, but I am 
pleased to be with you today and have the opportunity to 
discuss the impact that GSA, through the work of the National 
Capital Region, has on the economic development of the District 
of Columbia.
    As the largest real estate management organization in the 
Washington metropolitan area, NCR manages over 49 million 
square feet office and other space used in the District of 
Columbia, of which one-third of that space is leased directly 
from the commercial marketplace.
    The economic impact of NCR's real property activity is far-
reaching. Currently new construction activities total over $213 
million in the District of Columbia alone. One project provides 
a signature building as well as a gateway to the District on 
New York Avenue in the Bureau of Alcohol, Tobacco and Firearms 
headquarters that Congresswoman Norton spoke of earlier.
    The region's leasing activity has a significant impact on 
the local office market as about 10 percent of lease space 
expires each year. Additionally, NCR typically spends about $1 
billion annually on lease payments.
    NCR's proudest heritage is our historic inventory of 
buildings in Washington, DC. Many of these buildings are well 
over 50 years old and now only being renovated for the first 
time since built. Currently GSA is spending $1.6 billion in the 
District, including renovations of the Department of Justice 
and Eisenhower Executive Office buildings. We take our 
stewardship of these historic structures very seriously.
    NCR has over 15 years of experience in working with 
alternative approaches to major redevelopment projects such as 
the completion of the Pennsylvania Avenue Development Corp. 
work here in the District of Columbia. Therefore we recognize 
the potential of working with the National Capital 
Revitalization Corp. and some of the projects here in the 
District that may interact with GSA.
    In our more traditional role as Federal real estate 
manager, NCR's work is also an important catalyst to the area's 
economy. For instance, the Ronald Reagan Building and 
International Trade Center includes over 3 million square feet 
of government and private sector space, demonstrating our 
ability to combine governmental and private sector functions.
    In the Penn quarter section I am especially proud of the 
efforts of the Tariff Building. GSA employed the National 
Historic Preservation Act to assist in the redevelopment of 
this historic building. When completed, this renovation and 
conversion project will have injected $32 million into this 
historic project and the District's economy.
    One of our most impressive examples of the use of 
development, innovative development tools is NCR's ongoing 
redevelopment of the Southeast Federal Center. The most 
important milestone for the redevelopment of this area was the 
passage of the Southeast Federal Center Public/Private 
Development Act of 2000. Congresswoman Norton's leadership was 
instrumental in this legislation which gives GSA exceptional 
flexibility in developing this important site.
    NCR has worked closely with the District to ensure the 
anticipated mixed use development will provide far-reaching 
benefits to all parties.
    GSA also manages the disposition of surplus real property. 
The disposal activities in Washington, DC, were formerly 
managed out of GSA's Atlanta office, but due to the unique 
needs of this region, and particularly the real estate market 
in Washington, DC, Administrator Perry recently established a 
property disposal office here in the National Capital Region.
    There are disposal projects that will have an important 
impact on the local marketplace such as the west campus of St. 
Elizabeth's Hospital. St. Elizabeth's Hospital opened for 
business in the 1850's, and its last patient left there in--
left its west campus in the 1960's. Under the jurisdiction of 
the Department of Health and Human Services, the west campus 
site comprises about 186 acres with some 50 buildings. Many of 
the buildings are in such decline now that they cannot be used. 
The District's Department of Mental Health is in the process of 
consolidating its operations to the east campus which it 
already controls. The St. Elizabeth's property provides a 
significant opportunity for both GSA and the District of 
Columbia. As NCR looks to the future of the west campus, there 
needs to be a close coordination with the District on planning 
of the overall site.
    In closing, I would like to reiterate that we recognize our 
impact on the local economy and continue to make decisions that 
reflect a sensitivity to it. We are committed to working with 
the District of Columbia whenever possible, attempting to 
ensure that all parties receive benefits from the Federal 
presence here in Washington, DC. In particular, NCR looks 
forward to identifying opportunities to work with the National 
Capital Revitalization Corp. on behalf of the District on 
certain projects of mutual interest.
    NCR is committed to working closely with our customer 
agencies, the marketplace that provides us with services and 
space, the District of Columbia, and you, as we face challenges 
of our unique mission. I want to thank you, Chairwoman and 
Ranking Member Norton, for your interest and support for our 
work in the Nation's capital and am prepared to answer 
questions if you have any. Thank you very much.
    [The prepared statement of Mr. Williams follows:]


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    Mrs. Morella. Thank you, Mr. Williams. I am now pleased to 
recognize Mr. Shabbir Safdar, representing the Greater 
Washington Board of Trade.
    Mr. Safdar. Good morning, Chairwoman Morella, Ranking 
Member Norton. My name is Shabbir Safdar, chairman of the D.C. 
Public Affairs Committee of the Greater Washington Board of 
Trade. The Greater Washington Board of Trade is a regional 
chamber of commerce representing business members from D.C., 
Maryland, and Virginia. I am also the co-founder of a local 
Internet political campaign firm of 21 employees headquartered 
here in the District of Columbia.
    Thank you very much for giving me this opportunity to speak 
with you about economic development in the District. Many 
things go into making a city attractive to business. Setting 
the policies to achieve the perfect mix is a delicate balancing 
act. The District must send a positive message of cooperation 
and partnership with businesses, it must stabilize its 
regulatory processes and, most importantly, it must demonstrate 
a consistent, predictable performance in providing services. I 
want to touch on each of these today. More information is found 
in my prepared testimony.
    The first issue I'd like to address is the great hope we 
have for the National Capital Revitalization Corp. As with any 
urban core of the region, the District has unique assets and 
opportunities for economic development. The readapting of 
existing land resources is critical in an environment where 
real estate is scarce. We have an especially unique opportunity 
to enhance our competitive situation through initiatives such 
as Brownfields redevelopment, the development of Washington's 
waterfront, the redevelopment of the crown jewel of the 
District real estate, the old convention center site. To 
maximize these initiatives and deal with the scale and 
complexity of these projects, the city government created the 
National Capital Revitalization Corp. and the $25 million in 
initial Federal funding.
    The board of trade hopes that the NCRC will be fully 
supported in its pursuit of those economic development projects 
consistent with its mission.
    On the topic of incentives, there's a number of excellent 
incentives and initiatives either in the works or being 
proposed that we hope you will support. Last year Mayor 
Williams signed into law the new Economy Transformation Act 
which creates meaningful incentives to assist technology firms 
to grow in the District of Columbia.
    As I know from your previous statements, Madam Chair, this 
is a topic that is high on your list of priorities for the 
District. The results from this legislation are not yet 
available, but I look forward to reporting on their success to 
you later this year.
    These tech incentives go hand in hand with the benefits 
available to the District through the Federal enterprise zone 
legislation. Continuing the enterprise zone benefits for the 
District through 2009, as was originally granted to other 
states, is essential to our success in recruiting and retaining 
business.
    Additionally, we have supported the expansion of enterprise 
zone status to the entire District as an opportunity to create 
fertile ground for economic growth. We hope that members of the 
committee will support Mrs. Norton's Omnibus District of 
Columbia Tax Incentive Act calling for the expansion of the 
enterprise zone status throughout the city or, at the very 
least, to rationalize the qualifications of a certain area so 
that current anomalies are eliminated.
    Additionally, the citywide first time home buyer tax credit 
has proved enormously successful. Ongoing proof of that is in 
the statistics which show the District's population flight has 
finally reversed itself. Anecdotally, we have information, as 
was seen in yesterday's Washington Post, where companies 
building new housing all over the District talk about how they 
are receiving requests from potential buyers outside the 
District even before the projects begin their March marketing 
phase.
    The board of trade supports Mrs. Norton's proposal to make 
permanent the $5,000 home buyer credit to further reduce the 
flight of resident homeowners from the District and give 
homeownership opportunities to current residents. Of course, 
incentives are designed to attract and retain businesses. When 
it comes to growing a business, the governing factor is 
regulation. Every regulation is an opportunity or a pitfall. It 
is an opportunity to clearly guide a business in how they will 
have to deal with the government and the community as they 
grow. Yet, if poorly written, these same regulations provide 
uncertainty and ambiguity, distorting the market's level 
playing field.
    As the District negotiates the daily tension between 
regulatory and quality of life issues, its economic development 
strategy must take into account the sensitivity of market 
forces that are profoundly and immediately affected by the 
daily decisions of the District government. When regulatory 
processes are upended, when construction permits are rescinded, 
or when rules are changed in the middle of the game, the 
marketplace takes notice and the loss of commercial and retail 
opportunities is immeasurable.
    Much progress has been made, but yet much remains. We urge 
this committee's support of the mayor's efforts to continue the 
regulatory reforms that began with the council's Omnibus 
Business Regulatory Reform Act of 1998.
    Finally, the District does not exist in a void but rather 
operates the community of communities that profoundly affect 
each other's fortunes. Regional response to emergencies such as 
September 11th--the September 11th attack on the Pentagon 
requires resources, manpower, equipment and expertise. These 
resources are at the local government level. Such a response 
also requires a shared or an assumed indemnification, a 
commitment of an unknown level of resources and revenues by 
responding jurisdictions, some of which cannot now engage in 
that commitment without violating state or local law.
    The Metropolitan Washington Council of Governments has 
asked Congress to support legislation entitled The Washington 
Metropolitan Region Public Safety Cooperation Act. This 
legislation would facilitate an intergovernmental response to 
civil emergencies or disasters on a regional, mutual assistance 
basis. We ask that the committee lend its support to this very 
important legislative proposal.
    Another wisdom of emergency response was among the early 
conclusions of Mayor Williams post-September 11th task force on 
transportation. They concluded that the Federal Government must 
cease its practice of unilaterally closing streets and 
eliminating curbside parking. They must reach a reasonable 
balance between the security needs and the movement of traffic 
throughout the city consistent with the potential level of 
threat. We ask your support in ensuring that the decisions 
regarding the security around the prerimeter of Federal and 
congressional buildings are balanced against their relative 
impact on the local economy.
    Finally, the availability of insurance coverage for losses 
due to the acts of terrorism could put the District of Columbia 
and, indeed, the entire region at a critical competitive 
disadvantage when it tries to market itself to employers from 
outside the region. Without affordable insurance coverage for 
terrorism, the tremendous recovery the District has experienced 
over the past 4 years will stall. Of course, the liability 
created by the Federal presence in the District should be 
addressed separate from the District budget.
    Thank you very much. Your support of the District is much 
appreciated. I'll be happy to answer any questions.
    [The prepared statement of Mr. Safdar follows:]


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    Mrs. Morella. Thank you, Mr. Safdar. Now I am pleased to 
recognize our final panelist, Nelson Bregon, Deputy Assistant 
Secretary of the Grant Programs of the Office of Community 
Planning and Development of HUD. Thank you, sir.
    Mr. Bregon. Good morning, Chairwoman Morella and Ranking 
Member Norton. My name is Nelson Raphael Bregon, and I am the 
Deputy Assistant Secretary for Grant Programs, the Office of 
Community Planning and Development with the U.S. Department of 
Housing and Urban Development. Thank you for the opportunity to 
be here this morning as part of the subcommittee's examination 
of the District of Columbia's community and economic 
development activities. I am here at your request to discuss 
one of HUD's most important tools in community and economic 
development, the Community Development Block Grant Program, and 
our review of the city's use of the CDBG funds to assist 
community development corporations in the District.
    Secretary Martinez, Assistant Secretary Bernardi and I are 
as concerned as you are regarding the District of Columbia's 
CDCs, HUD's recent monitoring findings and the reports 
published by the Washington Post. For this reason, my 
colleagues and I would like to provide you with the information 
that we have on this matter.
    Before I begin, I would like to introduce Mr. Richard 
Kennedy, the Director of the Office of Block Grant Assistance 
in our headquarters office. Mr. Kennedy reports to me and is 
responsible for assisting me in developing policies and 
procedures related to the CDBG program.
    Also with me is Mr. Ron Herbert, who is the director of the 
Office of Community Planning and Development in our HUD 
District of Columbia field office. Mr. Herbert is responsible 
for assisting and working directly with our program grantees 
such as the District of Columbia in undertaking the activities 
that are funded with community development block grant funds. 
The community development block grant program is a $4.4 billion 
program that assists communities in undertaking community and 
economic development.
    One of the things that we pride ourselves on about the CDBG 
program is the flexibility that this program brings to the 
communities to undertake those activities that they deem 
necessary and appropriate to assist neighborhoods which are 
primarily resided in by low and moderate income residents of 
the community.
    The activities that are undertaken under the CDBG program 
must not only be eligible under the regulations that regulate 
the program but also must meet one of the three national 
objectives of the statute, those are benefit to low or moderate 
income residents, aiding prevention or elimination of slum or 
blight, or to meet an urgent community need that the community 
is unable to finance on its own.
    The responsibility for ensuring that the local community 
development block grant programs meet Federal requirements 
rests with the executive authority of each CDBG grantee. In the 
case of the District of Columbia, it would be the mayor who is 
responsible for ensuring that the local CDBG program meets 
these Federal requirements.
    As in the case of the District of Columbia, many executive 
authorities delegate CDBG program administration to local 
community development corporations. In addition, these local 
community development corporations have the prerogative to 
provide assistance to non-profit organizations to undertake 
CDBG-funded activities.
    In fact, it has been determined that about 17 percent of 
all CDBG funds are passed through nonprofit organizations. 
Thus, nonprofit organizations are a very important conduit for 
neighborhood program delivery. It is important to note that 
nonprofit organizations such as CDCs are often asked to 
undertake projects that are inherently risky because of factors 
such as locations, high crime, poverty and disinvestment. 
Cities like to utilize CDCs because they have skills and 
neighborhood acceptance in many instances.
    It is important to note, however, that the responsibility 
for ensuring that CDBG funds are used to revitalize low and 
moderate income neighborhoods belong to the CDBG grantee, and 
that is applicable to the District of Columbia as well. The 
District of Columbia provides approximately $4 million a year 
in CDBG funds to assist the District Neighborhood Development 
Assistance Program. It is our understanding that the goal of 
the Neighborhood Development Assistance Program in the District 
of Columbia is to assist CDCs by providing funds for financial 
support and capacity building as part of a CDC's efforts to 
implement community development activities and, as a result, 
revitalize low and moderate income neighborhoods in the city, 
such as Anacostia and Columbia Heights just to mention a few.
    The District grant agreements with the CDCs, which is a 
requirement of the Federal regulations, indicate that CDCs will 
undertake administrative and technical activities to pursue, 
for example, joint ventures with developers, secure project 
financing, and apply for grants or loans from other sources.
    After reviewing the District's annual performance report, 
which is a requirement of the CDBG program, and based on HUD's 
risk management approach to monitoring, the HUD D.C. Office 
conducted a monitoring review of the city's Neighborhood 
Development Assistance Program in August 2001. During the 
monitoring HUD reviewed several project files for CDCs and 
conducted site visits to several CDCs. The HUD D.C. Office 
staff found that the city provided funds to CDCs to carry out 
eligible activities.
    However, the District grant agreements with CDCs and 
program files were found to lack sufficient budget details to 
link this allocation of the CDC grants award to specific 
projects and activities cited in the grant agreements. In 
addition, it did not appear that the city conducted any cost 
analysis for the items purchased with CDBG funds. Moreover, CDC 
grant agreements failed to specify measurable outcomes for each 
project or activity to be assisted by the CDCs.
    The HUD District of Columbia field office found that CDC 
grant awards were reviewed for a second year without 
competition or evaluation of performance in the prior year. The 
HUD field office was particularly concerned about the 
inefficient and ineffective use of Federal resources and the 
possibility of questionable costs.
    Tracking CDBG activities were further complicated by the 
fact that this organization often leveraged other financial 
resources from private, public, city, and other Federal 
sources, making it difficult to isolate activities that were 
funded with CDBG funds.
    Finally, HUD's monitoring review concluded that the current 
design of the NDAP program lacked detailed policies and 
internal management controls for governing the use of CDBG 
funds. As part of the monitoring findings, HUD advised the city 
to discontinue funding under the existing Neighborhood 
Development Assistance Program and especially for all core 
funding awards to CDCs for projects that were not directly 
related to carrying out eligible CDBG activities.
    HUD also advised the District to revise the Neighborhood 
Development Assistance Program application funding process to 
include a review and analysis of all proposed costs to ensure 
that each project was eligible, met a national objective, and 
that the costs were reasonable and appropriate.
    In response to HUD's monitoring letter, the District of 
Columbia indicated that effective with the city's 2002 fiscal 
year, the city would discontinue disbursement to CDCs for core 
funding using CDBG funds and that the District would use CDBG 
funds to pay for costs that are directly related to project 
delivery cost. These monitoring findings and advisories are in 
addition to the ongoing technical assistance and guidance that 
the D.C. Office provides to the District of Columbia.
    In June 2000, HUD advised the city to incorporate outcomes 
measures and performance indicators to ensure that CDCs 
carrying out community development activities produce tangible 
results that impact low and moderate income neighborhoods. In 
July 2001 HUD again advised the city to review the Neighborhood 
Development Assistance Program procedures to ensure that CDBG 
assistance to CDCs were for eligible activities and that the 
program incorporated performance measures and tangible 
outcomes.
    HUD is perturbed by the District's use of CDBG funds to 
assist CDCs that cannot clearly and directly be linked to 
activities that achieve tangible neighborhood development in 
the low and moderate income communities. HUD continues to 
advise the District to either discontinue funding Community 
Development Corp. or provide these organizations with funding 
that must be used for a specific community and development 
activities.
    HUD is currently awaiting further information from the 
District of Columbia to demonstrate that review guidelines and 
procedures are in place that will correct the program 
deficiencies that have been identified, not only by the city's 
IG office but also by HUD's Office of Community Planning and 
Development. If the city's response is not satisfactory, HUD 
will be forced to take further actions, including possible 
grant reductions.
    The CDBG program statute and regulations require that 
grantees identify eligible activities that will provide 
benefits to communities, especially low and moderate income 
communities. It is important to note, however, that the 
flexibility of the CDBG program allows grantees to implement 
community development activities based on local decisions. 
Communities may choose to provide assistance to nonprofit 
organizations for neighborhood development initiatives as they 
deem necessary.
    Although the CDCs can be viable partners in undertaking 
community and economic development activities, the success of 
any community development initiative must include 
accountability, and the District of Columbia is responsible for 
ensuring that CDBG funds are used to create tangible results in 
its neighborhoods.
    Thank you very much, and we are willing and able to answer 
any questions that you may have.
    [The prepared statement of Mr. Bregon follows:]


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    Mrs. Morella. I know we will have some questions for you, 
Mr. Bregon. The ranking member and I have decided since there 
are two of us here, we will allocate 10 minutes apiece for 
questioning back and forth. So I will start off then with NCRC 
since that was originally the intent of this hearing, was to 
look at the role of the National Capital Revitalization Corp.
    I would ask you, Mr. Heller and Ms. Bacon, how has NCRC 
used the $25 million that the Federal Government contributed as 
the startup of NCRC? I would further ask have the funds been 
used to acquire property or have they been used to leverage 
other funds? And then what other funds are available to NCRC?
    Although you have received a commitment that was mentioned 
in the testimony of $75 million from Fannie Mae, what is the 
time line, when are you slated to receive the actual funds, and 
do you have an intended use for the funds? What other moneys 
come into NCRC?
    Mr. Heller. Our objective is to use the funds sparingly and 
with the greatest degree of leverage possible. We have I think 
tried to achieve that. Ms. Bacon will give the details. Both of 
us will be available for questions.
    Ms. Bacon. Yes. I would like to elaborate----
    Mrs. Morella. That was a very good political answer.
    Mr. Heller. Yes, thank you.
    Ms. Bacon. First of all, this is our first year of 
operation, as you know, and we have had to use some of the 
funds for our startup costs for staff, etc., while we get our 
program going. We also this year, as I mentioned, acquired the 
leasehold interest of the Gangplank Marina in the Southwest 
Washington area. We did use part of our Federal funds for that 
acquisition and half of the funds were provided by the 
District.
    However, in addition to having this important aspect of 
being, as I mentioned, at the table with regard to the 
redevelopment, it also was a significantly important financial 
investment for us, and our return on the money that we did 
invest is substantial. We are--we have not yet called upon the 
Fannie Mae funds because we don't have projects.
    As you know, when you're doing real estate development, it 
takes a long lead time to get into projects. The whole due 
diligence and then predevelopment phase is quite extensive. We 
have been in very close touch with Fannie Mae, however, and 
they have been prepared to allow us to move ahead using their 
funds, but this is for debt or equity. It is obviously not a 
grant. It's very different from the funds appropriated by 
Congress, and so we will be able to use it for debt and equity 
in projects which do include a housing component.
    We certainly do intend to leverage the funds that you so 
generously have appropriated to us and we are just now 
launching into a strategic planning process headed by Mr. 
Heller where we are focusing on how are we going to make 
ourselves self-sufficient.
    We receive no operating funds from other sources, as you 
know, and so we must figure out how to both cover our operating 
expenses and obviously make money in addition. We do receive 
funds from the disposition of the RLA properties. Mr. Heller 
mentioned that we do have a portfolio of approximately $500 
million, of which approximately $300 million is actual land 
assets, and so we will be receiving funds in the disposition of 
those properties.
    However, I just want to add that the property--the funds 
that we do receive are subject to the requirements of the CDBG 
rules and regulations; so all use of those funds must be 
consistent with the CDBG rules and regulations.
    Mrs. Morella. Do you have a competitive process?
    Mr. Heller. I would like first to just amplify Ms. Bacon's 
comments. We are expending funds somewhat in excess of $2 
million a year operating costs to build the staff, for both the 
business development and real estate programs. We regard $25 
million as a splendid start, but obviously given the magnitude 
of the task that we're addressing, it doesn't go very far 
meeting operating costs.
    So at some point we have to through our operations ensure a 
sustaining flow of capital so we can both use our funds for 
investment but also to meet operations. We have thus far had a 
competitive process operational with respect to the RLA 
portfolio. With respect to the NCRC funds, we do have a process 
under which people can submit suggestions to us, but frankly, 
given the development activities that we're initiating, much of 
it is left to us. For example, both the Southwest waterfront 
and the Skyland, two of the most important projects we are 
pursuing, are carrying those forward at NCRC's initiative 
because of the long-term developmental benefits for the city as 
well--obviously the potential return as well.
    Mrs. Morella. So it's a decision that you all make in terms 
of whether it will be a competitive bid.
    Mr. Heller. In the RLA certainly we envision that all 
proposals will be submitted to us on a competitive basis, 
although there may be some circumstances otherwise considering 
the speed and leverage with which we hope to operate. With 
respect to the broader developmental aspects, this is, as I 
think the committee recognizes, not an easy process. If 
economic development had been easily carried forward, it would 
have been--there would have been a lot of projects presented 
particularly the east of the river in the past and they haven't 
been. Thus we see our role is to try to initiate projects that 
we think make sense. Certainly if projects are presented to us, 
we will be evaluating those competitively.
    Mrs. Morella. Do you have accountability built in? You can 
complete that answer Ms. Bacon.
    Ms. Bacon. Yes. Thank you. I could perhaps use Skyland, the 
Skyland shopping center redevelopment as an example of the NCRC 
side of our business. This is a shopping center which is east 
of the river which does not reflect the middle income and upper 
middle income demographics of the area. It is a shopping center 
which is deteriorated at this point and the Skyland Shopping 
Center Task Force and the Hillside--Hillcrest community has 
been pushing for many, many years to get this redeveloped.
    We are working very closely with Eric Price's office on 
this. We have--we're going to be assembling the land and we 
have put out a request for expressions of interest by 
developers. So we do need to find a developer that would be 
compatible with us in terms of moving it ahead, but certainly 
price and experience, expertise, and what the developer would 
bring to the table will all be--will be brought to bear. So in 
fact it would be a competitive process.
    I also do want to mention too the board is absolutely 
fundamentally committed to transparency and full public process 
in everything we do. All of our board members are committed to 
this, all of our board meetings are in the public in the 
communities, and we discuss the projects as we proceed.
    Mrs. Morella. I'm glad you mentioned that point because we 
have heard from some people, that there have been some concerns 
about the operation, whether it is in public forum, whether 
people are invited or allowed to attend and whether the records 
are open to the press and to interested citizens. Could you 
amplify that?
    Ms. Bacon. Yes. There clearly are informal discussions that 
are had, but our public board meetings are all open to the 
public, to the press. We have had issues about our Web site 
which we are now fixing, and perhaps we haven't had a Web site 
which is user friendly sufficiently to make sure everybody 
knows what we do. We also are required to have notices into the 
paper about when the meetings will be held. Minutes are 
available. Where we do have confidential negotiations with 
developers, those matters are of course kept private until we 
are able to release that information.
    Mrs. Morella. Do you follow the open rule?
    Ms. Bacon. Yes.
    Mrs. Morella. And you say your hearings, the minutes and 
all, are available for perusal by citizens and the press?
    Mr. Heller. Yes. I can certainly amplify Ms. Bacon's 
comment, the board is committed to the openness to which she's 
referred, a transparent process. I would only note one possible 
source of concern we have not thus far released publicly the 
exclusive rights agreement that we executed in mid-February 
with respect to the development of the Wax Museum site. That, 
as I mentioned earlier in my testimony, included references to 
sharing relationships under which we and the developers will 
participate depending on the success of the project. We will be 
carrying that agreement from an exclusive rights agreement to a 
full development agreement, and pending the completion of those 
negotiations our counsel has felt it appropriate to keep that 
document private because of the sensitive nature of the ongoing 
discussions.
    Mrs. Morella. I've asked about the criteria that you use 
for selecting projects. What specific performance criteria does 
the NCRC use to evaluate the effectiveness of your projects in 
promoting economic development in neighborhoods?
    Ms. Bacon. We have developed a draft policy and procedures 
manual for how we will be making selections of real estate 
development projects that would come to us both from the 
outside and how we would make decisions internally as to how to 
proceed. That is--the draft is completed and we are now going 
to be going out for public input to that.
    We'll be meeting with an organization which represents 
local community organizations to take a look at it. We have to 
balance obviously our mission and our return when we look at 
each project. Since we are charged with being self-sufficient 
we need to be sure that for the most part our projects are in 
fact giving us a return.
    We also are not going to be duplicating the work of the 
CDCs or the smaller community-based organizations. Our projects 
are supposed to be very large and spur neighborhood 
redevelopment rather than, for instance, facade treatments of 
commercial corridors, things like that. Our projects are 
supposed to be large and spur development throughout the 
neighborhood.
    Mrs. Morella. I want to ask the Board of Trade, what do you 
think should be part of that performance evaluation?
    Mr. Safdar. Well, of course the board is interested in all 
revitalization of the District and every opportunity we believe 
should be handled as efficiently as possible for the greatest 
gain. Accountability is crucial both as business people, we 
have to experience accountability or we are not in business 
anymore, and we hold public projects to the same standards.
    Mrs. Morella. How about Mr. Price?
    Mr. Price. I think NCRC already has taken a number of steps 
to ensure the accountability. In fact, on the Wax Museum site 
for the first time before the day we entered into the ERA, the 
board actually went through a negotiation process and that set 
up those milestones and was very clear to the other bidders 
that if the developer that was chosen could not make them, then 
we would choose one of the other bidders for that particular 
site, and I don't think that has been done in--at least not in 
the 3 years that I've been here. So I think that process is 
beginning now.
    Mrs. Morella. I wanted to get to Mr. Bregon. It seems you 
have painted a picture, picking up on what the Washington Post 
articles have demonstrated, that there has not been a response. 
There have been some, it seems to me, evaluations with regard 
to CDCs but no remediation, kind of ignored. And you have 
indicated some actions that HUD will be taking in that area. 
Have you stopped funding the CDCs at this point and when did 
you--I know you became aware of this earlier, but was it 
motivated by the press accounts to really clamp down at this 
point or say stop, we have got to take a better look at it?
    Mr. Bregon. Well, Chairwoman, we don't have the authority 
to stop funding CDCs. We can advise the city when we see a 
problem with one of their programs and we can advise them 
whether to revise the program to comply with the applicable 
rules and regulations or we can advise them to stop funding 
those subgrantees, if you will, if for some reason they cannot 
bring the program into compliance, and that's what we have been 
telling the city up to now, that there are some major flaws in 
design of the program that must be corrected and in the 
meantime, while this is being done, we recommended that they 
cease funding the CDCs, and the city agreed with that 
recommendation and they have indicated to us that they have 
corrected the problems that the city's IG identified, that--the 
problems and concerns that HUD outlined as a result of their 
monitoring visits, and that they have refunded again those CDCs 
but that those financial checks and balances, if you will, are 
in place.
    They have indicated to us. We requested a copy of the new 
policies and procedures. We have also requested a copy of the 
new application process by which the neighborhood CDCs get 
funded, and we are waiting for that information so we can 
review it and then provide the city with feedback as to whether 
the revised program does comply now with the program rules and 
regulations.
    Mrs. Morella. My time has expired but when I get my turn 
back, I will also ask the Deputy Mayor. Thank you. 
Congresswoman Norton.
    Ms. Norton. Thank you very much, Mrs. Morella. Before I get 
into the testimony, all of which I found to be very helpful and 
illuminating, I'd like to raise the question of jobs. Having 
worked continually on economic development since coming to 
Congress, I became very concerned about the time we got through 
the Convention Center project that essentially what we were 
doing was funding jobs for the region, that there was very 
little being done in this city to make sure that the economic 
development that occurred in this city had a benefit for those 
who live in the city and if that's the way the city wants to 
build, that was one thing. I didn't think that was the way how 
to be bringing Federal projects into the city. At the time of 
the Convention Center, I called in the builders, as it turns 
out that was a union built matter, called them in, called in 
the Convention Authority and everyone agreed to use a certified 
apprenticeship program.
    A certified apprenticeship program is the following: It 
means that there are a few extra points given in competition in 
exchange for an agreement on the part of the developer to train 
some people on the job in the crafts. The reason that this is 
essential is if you do what the District has done for years, 
which is allow developers to set up their own apprenticeship 
program, a terrible thing happens to young men, and most of 
them are young men in this city, they then go to the next job 
and say I was on the XYZ program and of course then they say, 
OK, what did you do as an apprentice? They have nothing to show 
about the progress we made.
    It's as if saying to you and me go and study and then go 
try to get a job. I don't think you should be building anything 
in the city--I don't know what you're building them for if you 
cannot show you are providing jobs for the people who live 
here.
    I want to thank the GSA because the GSA has agreed to use 
certified apprenticeship programs on all of my stuff that I 
bring into the city. I would hope the city for its own stuff 
would be the first to want to require that and monitor that. 
There have been some terrible things that came out about people 
getting industrial bonds and paying no attention to the rules 
and regulations of the District with respect to hiring--not 
hiring, simply putting people in an apprenticeship program so 
they can learn the crafts.
    So first I want to ask whether or not Mr. Heller and Ms. 
Bacon are willing to give us a commitment that they will build 
nothing and support nothing in the District of Columbia which 
does not have a certified apprenticeship program. I did not say 
apprenticeship program. Those are frauds on the young people 
who get them because they cannot use them to build on. I'm 
asking you if you will commit here today to use certified 
apprenticeship programs on all of the support you are engaged 
in in the city.
    Ms. Bacon. You make an excellent point about jobs that are 
created that are not sustainable that they'll become a career 
path for jobs which are here today and gone tomorrow, and 
that's absolutely not what we want to do. We're absolutely 
committed that jobs that are created through projects that we 
do will be career path jobs to the extent possible.
    I don't--I would like to learn more about the certification 
process before we absolutely commit to you, but we will 
definitely take that under advisement and look at it 
immediately.
    Mr. Heller. Just to amplify the chairperson's questions 
about standards, we have developed and, as Ms. Bacon said, it 
will be going out, a two-part standard for evaluation of 
projects. First, one that sets forth a series of objectives on 
economic development bases, including job creation. We have 
already recognized that as a critical component of what we're 
doing. And the second relates to return parameters, depending 
on the type of project being pursued in order to achieve self-
sufficiency.
    The certification program seems like a very powerful 
program, and I--while we know obviously not as much about it as 
the ranking member, it seems like something perhaps we should 
now insist on, but that is something we will seriously evaluate 
and get back to you promptly.
    Ms. Norton. I very much appreciate it. I'd like you to 
arrange for a meeting with me. The Convention Center used to 
certify an apprenticeship program. These are people who have 
been trained to be electricians, to do sheet metal work, to do 
the high paying jobs that you don't have to have a Ph.D. or any 
of the kind of degrees you all have and they are bringing the 
Convention Center in ahead of schedule. This can be done and 
we'll talk about how to do it. There's a document setting forth 
how to do it.
    Now, as I understand it, Mr. Price, there is no requirement 
to use certified apprenticeship program. When you are given 
industrial bonds, no one says here's a certified apprenticeship 
program, go do it. There have been picket lines by the 
Washington Interfaith Network and others complaining to the 
District, to which the District I am told says, well, these 
folks we don't control, they're not city projects, so that 
there's been a lot of head butting without the District taking 
responsibility for its own guidelines.
    Mr. Price. Actually that's not true. We do have a 
requirement on every industrial revenue bond program that they 
use a certified apprenticeship program. The problem with the 
legislation as it's now enacted is that there's no teeth if 
they don't follow through. So in other words, Miller and Long 
and GW didn't want to do it. The only teeth we have is we can 
deny them any future project that they might want to use to 
get----
    Ms. Norton. I don't agree and I'm not sure that your 
guidelines say you have to use a certified apprenticeship 
program. I----
    Mr. Price. Our first source agreement--our first source 
agreement does say that.
    Ms. Norton. I don't agree that there's no way to get it, 
and I'd like you to set up an appointment to come see me so 
that we can talk about ways to----
    Mr. Price. That's fine.
    Ms. Norton. I know that's what you want to do----
    Mr. Price. Let's do that.
    Ms. Norton [continuing]. But there ought to be a way to 
proceed without waiting for picket lines to develop.
    Now, Mr. Bregon, I appreciate your testimony, very much 
appreciate it, because it was straightforward, it laid out what 
it seems to me was a road map for what the District could do to 
straighten out the CDC problem, and I know that the District 
heard Mr. Bregon, if the city's response is not satisfactory, 
HUD will be forced to take further sanctions, including 
possible grant reductions.
    I spent a good deal of time in the Congress fending off 
Members of Congress and saying let the District do it, 
especially now that the District is doing it and defending home 
rule. But I have to tell you I think that in the handling of 
the CDCs, you have both invited interference with home rule and 
threatened your own Federal funds, both of which get the 
Congress deep into your business. It's very hard--and I will 
not defend the District against Federal involvement.
    When the District gets the kind of warnings that Mr. Bregon 
apparently has been giving it and then expects me to say 
everybody in Congress step back, let them do it because don't 
you see they're doing it. So let me just say how disappointed I 
am as the chief defender of home rule up here spending a lot of 
time, a lot of energy that I don't intend to be put in the 
position where then the city is shown not to be doing it.
    Look at what we're talking about in the CDCs. These were 
not enterprises set up by this administration, but this 
administration is 4 years old now. There is supposed to be--I 
mean, I'm reminded of St. Elizabeth's Hospital, where the 
administration was there and the Control Board was there and 
all of a sudden it comes out that these folks have been 
overspending. This is nowhere near at that level of problem, 
but it's very disappointing to me as a defender of the city.
    I never defend the indefensible, and I think what's 
happened with the CDC is indefensible and I still have heard no 
explanation for why you have what looks like a good news/bad 
news story. You've got the NCRC. Of course it's in startup, but 
it looks like it's professionalized--because we had a lot to do 
with that, because this thing was set up from up here. The 
whole idea was initiated from up here and from the last 
administration.
    On the other hand, the CDCs go back a long time. While this 
administration can't be held responsible for setting them up, 
what I can't understand is the Mayor has to put the money in 
his budget every year because there is D.C. money involved. The 
Council, which has been much better at oversight than any 
oversight I've seen since I've been in the country, has to have 
hearings and yet I was just embarrassed as a Washingtonian to 
hear that there's anybody running around, you know, in some 
leased luxury cars or self-dealing, especially when I'm the one 
that says to the Congress, hey, they have oversight, they're 
doing oversight. I'm very disappointed and I still haven't 
understood, especially given Mr. Bregon's testimony, how I am 
to defend the District of Columbia against interference by the 
Congress.
    I still do not understand that given the testimony we have 
had here today, and so I want to ask--I want to first ask Mr. 
Price, Deputy Mayor Price, the Mayor said he would take back 
properties if they don't produce. That's pretty vague. They 
haven't produced. There are a lot of mad people, just to say 
angry people in the communities. It's all in the newspapers 
about these boarded up houses. What does it mean take back 
properties? When? What's the timetable? Mr. Bregon has 
testified that the 2002 budget, as I understand it will fund 
only the core costs, not all these personnel costs.
    Mr. Price. Directly related to the project, costs directly 
related to the project.
    Ms. Norton. What are you going to be funding? Two 
questions. What will you be funding--because, look, most of 
this money comes from HUD. What will you be funding that you 
weren't funding last year? That's the first thing I want to 
know. And then what does it mean we're going to take back these 
properties? What can I say to the subcommittee who's made an 
inquiry you are not to hold a hearing, please? The District of 
Columbia already has control of this. Mrs. Morella was quick to 
call a hearing. What can I say about precisely what the 
administration is going to do about funding in the budget that 
the Mayor will be putting before the Council now, and what can 
I say to them about the properties that have been lying out 
there all this time without being implemented for development?
    Mr. Price. There are a couple things. First, let me say 
that the article covers 10 years in the District of Columbia 
and I can really only speak to the last 3\1/2\ years and our 
direct involvement in it. There are a number of things that 
have been done since this Mayor came in, and I think you stated 
it earlier in your opening comments, Congresswoman Norton. The 
District actually has taken action without the direction of HUD 
and without the direction of the Washington Post. There are 
things that have actually occurred that we've been doing----
    Ms. Norton. So why don't you discuss that----
    Mr. Price. That's what I thought I would do.
    Ms. Norton. OK.
    Mr. Price. Beginning in 1999, we first looked at this 
problem of the CDCs and projects going forward. The actual 
requests to the IG to look at the CDCs came from the District 
government. We asked them to look at it because we had some 
concerns. We also at that time looked at the nonprofits and how 
they were doing on their ERAs at the time.
    The District several years ago when they did exclusive 
rights agreements trying to be spur economic development in 
neighborhoods, did these ERAs that didn't have a lot of 
performance milestones or they were very easy to meet and they 
did them in a fashion that didn't have deadlines on them. We 
were appalled to find they didn't have deadlines on them 
because it made it difficult for us to go back and then take 
these properties back. They also, along the way, while the 
nonprofit had the ERAs, in many instances they provided 
additional funding for other things, you know, further 
investing in the project that was not going forward.
    So what we did is we looked at that, we tried to find those 
projects that we would bring the developers in, and we did. And 
on many of those projects we did get them to go forward during 
that period of time because we indicated that we would come and 
try to take those properties back from them.
    The other thing that we've done over the time, we actually 
have suspended--we suspended one CDC that was in the article 
for failure to perform. I think that's the first time it's 
probably been done in a decade. That was--that happened in 
2000. We also eliminated in 2000 the homestead program. The 
District had a very popular homestead program where you held a 
lottery and the lottery was held, and individuals came in and 
they paid $250 and then they were given the homes to develop. 
We did our own internal audit and found out that this was not 
moving, these projects weren't moving quick enough. We stopped 
the program----
    Ms. Norton. Who used to do it before you all?
    Mr. Price. It was being done by DHCD. We have now stopped 
that program.
    Ms. Norton. DHCD stands for Department of Housing----
    Mr. Price. And Community Development.
    Ms. Norton. And now who did it to make it happen?
    Mr. Price. Well, what we did is we stopped the program. We 
now have a new program that is run out of my office that is 
much more competitive. It has for profit and nonprofit 
developers, and we are actually taking control of the 
development process from the Mayor's office. The other thing 
that we had to focus on, and I think you can tell your Members, 
is when we came in the District had $80, $90, $100 million in 
unspent CDBG, I mean not committed, not obligated. They had 
only----
    Ms. Norton. Why was that? Why was that?
    Mr. Price. The transactional capacity within the agency was 
part of the problem, not having a lot of producers in the 
District and then just overall----
    Ms. Norton. Like the CDCs.
    Mr. Price. Like the CDCs. And the overall condition of the 
economy at that time too also had something to do with that.
    One of our first things was how do we begin--we knew there 
was a need for affordable housing in these neighborhoods. How 
do we get these dollars out to the people who need them? In 
1998, the District financed about 600 units of affordable 
housing. 1999, we did about 1,300. In 2000, we did about 1,600. 
In 2001, we financed 3,700 housing units in the District of 
Columbia for low and moderate income housing. So we began to 
get that problem under control.
    We knew there was still a monitoring program--problem, had 
been working with HUD. We had a number of discussions with HUD. 
We had received letters from them, but there have been numerous 
meetings. In fact, we held one meeting with members of HUD and 
some of the members from the CDC who seemed to disagree with 
how the law was being interpreted and we brought HUD in 
themselves and said now, look, we're telling you this, we want 
HUD to be at this meeting as well to tell you this, and we held 
that meeting.
    There have been changes made. The article did not talk 
about the changes to the NDAP program which was referred to 
that has more accountability. In fact as a result of those 
changes that we made to the NDAP program our new director, Stan 
Jackson, there was actually CDBG--I mean CDC opposition to him 
being nominated. The hearing had to be postponed because of the 
changes that he was bringing into that agency and he's brought 
in since August and he's here today to talk about the other 
things that he's done in terms of training, in terms of how the 
moneys are spent.
    One problem with the NDAP program is the dollars were spent 
for brick and mortar projects and they are also spent for 
things like technical assistance, job training, predevelopment 
money for brick and mortar projects. The Department of Housing 
and Community Development has another pot of money, if you 
will, for development finance, and that's just brick and mortar 
projects.
    One of the things that Stan found is that there was some 
confusion where CDCs might come in for a project, you know, in 
1999 for predevelopment money out of the NDAP funding and then 
when they come back in through the development finance, there's 
a potential to be funding that again. We've stopped that. We 
separated the two. Brick and mortar financing only comes out of 
development finance. The technical assistance, job training 
comes out of the NDAP. And these were recommendations that did 
come from HUD but the other changes, to achieve more training, 
to bring in new underwriters, to look at our tax credit 
program, these are a number of things that we've been doing in 
addition to getting money out the door and financing housing 
for low income residents in the District.
    Ms. Norton. Thank you, Madam Chair. Madam Chair, if I could 
say, this explanation I think is important to have on the 
record. This was among the many programs in the District of 
Columbia that were broken, and I think your response does show 
some progress by this administration. And Madam Chair, the 
timeliness of these hearings plus the Council hearings it does 
seem to me indicate that the District is moving to get ahold of 
this on its own. I appreciate what you've testified to.
    Mr. Price. Thank you.
    Mrs. Morella. I agree it's important to have it on the 
record. Mr. Price, I don't think I heard you say that you are 
going to be able to retrieve those properties that have been 
misused by CDC.
    Mr. Price. We're looking at the legal ramifications of that 
now. You know, it could be a combination of trying to outright 
retrieve the properties and go through whatever lawsuit process 
we have to go through to get them back. It could be a process 
of making sure that another development entity comes in and 
actually finishes up the project in different cases.
    The Washington Post article, you have to understand some of 
the properties that they talk about, some of the projects were 
not--where CDCs were partners even with for-profit entities and 
they were projects that actually were anticipated taking 3 or 4 
years to complete. So we're just going to have to look at it on 
a case-by-case basis and make the decision at the appropriate 
time.
    Mrs. Morella. It may mean some kind of restructuring of the 
rules and regulations that you utilize in the future. Also, is 
there any chance that any of those properties would then be 
transferred to the NCRC?
    Mr. Price. Some of those properties are already transferred 
to NCRC. The properties that they were referring to in Columbia 
Heights, the Grid property and the Tivoli property are, and 
those projects are moving forward. So they have already been 
transferred. The other properties that I think were referred to 
were single family housing stock and we would either look to 
put those properties in our program, our home-away program that 
we've rolled out this year, or we will try to get those 
developed through NCRC or some other means.
    Mrs. Morella. And in response to the statement that was 
made by Mr. Bregon, the District of Columbia is going to be 
responding with the transparency and with the accountability 
that HUD would require. I have always been curious about the 
fact that the Inspector General came out with a report which 
said we should follow through and that there should be 
oversight. I always wonder about Inspector Generals' reports, 
whether they're just done, hidden away, and now agencies 
respond to it.
    So I hope that this hearing and the fact that it has been 
aired, that you will come back to us and we will see a 
smoothness in the entire process. Because the concept is a 
terrific one it's got to be done. In addition, it's the people 
that are so critically important.
    I'm going to jump on another topic now and ask about what 
is the District's plans for the St. Elizabeth site, and I think 
this is something that a number of you may be interested in. I 
know GSA will probably want to comment on that and Mr. Price 
will and we may have the NCRC also. So would you like to start 
off, Mr. Price?
    Mr. Price. Well, I was just going to say in regards to the 
East Campus, which is part of the whole mental health program, 
the city is committed to a master plan and the start date for 
that is going to be in May. We anticipate that will take about 
12 months to complete. In regards to the West Campus we are 
working with GSA and NCRC to establish a vision for the entire 
campus, and we also hope that process will also begin in May 
this year.
    Mr. Williams. Yes, ma'am. Madam chairwoman, as Mr. Price 
said, we are participating with the city as they look at a 
framework study for the whole site, not just the East Campus 
but also the West Campus. Currently the West Campus is under 
the jurisdiction, as I mentioned earlier, of the Department of 
Health and Human Services and they have transferred--there's a 
transfer of money going on so that we can proceed with some 
different surveys that need to be done on the site. 
Environmental, historical, and archeological type of tests will 
be done in the ensuing months as well and they've also had some 
money appropriated, it's my understanding, to maintain the 
current status of the West Campus. We're most interested, 
though, in the future and working with this visioning, as Mr. 
Price said, for what the whole property can be. It really is a 
tremendous site and one that has untold development 
possibilities.
    Mrs. Morella. Ms. Bacon, did you want to comment on that at 
all?
    Ms. Bacon. Thank you. As I mentioned earlier, we have 
excellent planners in the District and we are the implementers 
and so we are part of the planning process so that we're sure 
that both we understand what is going on and we would be able 
to implement them, but as Mr. Heller said, we are trying to 
develop a center of excellence in terms of real estate 
development implementation and we stand ready to assist in any 
way that we can, both in the Federal and city governments, in 
implementing the plans, and we are at the table in helping to 
develop the vision that would be carried out.
    Mrs. Morella. That also reminds me, since you are 
commenting about other projects, what projects NCRC are working 
with the CDCs jointly.
    Ms. Bacon. The only projects where CDCs are involved where 
we are, are the ones that we inherited from the RLA, as Mr. 
Price suggested, the Grid property and the Tivoli property. 
There are applications that are pending and I will go back and 
confirm if there's anything else, but the only thing that I'm 
aware of is there are several applications that are pending for 
projects in the Columbia Heights area. We had an RFP that was 
put out previous to NCRC's being--taking over the assets, and 
we're currently evaluating proposals from developers for seven 
parcels in Columbia Heights and there certainly is a CDC that's 
involved in at least one of those proposals.
    Mrs. Morella. I wonder what it would be like if NCRC were 
in charge of the CDCs, if they all went through NCRC.
    Mr. Price. They can have that responsibility if they----
    Mrs. Morella. You responded much too quickly to that one, 
Mr. Price.
    Mr. Price. No, no. Actually I would like to followup on 
that with a quick comment. There have been--you know, there are 
other funders to these projects. There's Liske, there's 
Enterprise, there's Fannie Mae. They've also been funding these 
CDCs for the last decade and we have actually sat down with 
Liske and Enterprise and talked to them actually about forming 
a partnership to have oversight of the NDAP program working 
with the District because they have a collaborative where they 
have banks and other institutions that invest in CDCs, and so 
those discussions are underway and one thing we've been talking 
about is they would take over the administration of that 
program beginning in probably October or November of this year.
    Mrs. Morella. Very good. I'm not going to let Mr. Safdar 
off the hook completely. We also said we are going to talk 
about enterprise zones and I wondered about the Board of 
Trade's point of view, and then maybe Mr. Price or Ms. Bacon 
would like to comment. Tell me about what you see is the 
effectiveness of the enterprise zone concept and why you think 
it should be expanded, and then I will ask Mr. Price if are 
there measurements you have about how effective it has been? 
Mr. Safdar.
    Mr. Safdar. Well, I think that the--well, the exact numbers 
I don't have here and I'd be happy to get you in writing, the 
ability to do economic development in the District and the 
turnaround we've seen in the last 4 years, particularly giving 
credit to the Williams administration. It has been tremendous 
and the only real issue I think we look at when we see the 
enterprise zone is the inequity. As with all things, the map is 
not the terrain, and when you try and use statistics to model 
particular neighborhoods, you end up with some surprisingly 
unexpected results.
    Georgetown is one good example where the student 
population, which tends to be very low on the economic scale 
tends, to make Georgetown look a little more impoverished than 
it necessarily is. I think as we look around the city and I 
think as Ranking Member Norton pointed out very effectively and 
you agree with, the area is too small for a rezone approach to 
where you cut the city up into particular pieces. The District 
as an economic center is I think extremely efficient and very 
small, at the same time very powerful, and the only way to 
apply these benefits judiciously and even-handedly to a level 
market playing field is to do it throughout the entire District 
because the other answer of removing those benefits for people 
who already have investments in the District is certainly 
unacceptable to the market.
    Mrs. Morella. Mr. Price, would you like to comment?
    Mr. Price. Yes. Just a couple of comments. I also brought 
Michael Hodge with me to--maybe he can go into a little bit 
more detail on how effective it's been.
    Mrs. Morella. Why don't we have Michael Hodge? Did I swear 
him in?
    Mr. Price. Yes, you did.
    Mrs. Morella. OK, great. Thank you, Mr. Hodge.
    Mr. Hodge. Thank you. Good morning. I'm very pleased to 
give you some indication of just how extraordinarily beneficial 
the enterprise zone designation has been. We have some direct 
information and of course some anecdotal information, anecdotal 
because the Internal Revenue Service, as you know, does not 
track this information. These are purely tax expenditures but 
we do have information based on our sample.
    Concurrent with the creation of the enterprise zone, there 
was--thanks to Ms. Norton and to this committee, there were 
also amendments to the Home Rule Act that were beneficial and 
that play into the enterprise zone, and those involved the 
ability to expedite our revenue bond approval process and also 
the ability to issue tax exempt securities on behalf of 
elementary and secondary schools, which we were not able to do. 
That culminated in, since enactment of that legislation and the 
enterprise zone, the issuance of more than $2.7 billion in 
securities, basically investment in our city. Among that--those 
bond issues, we have issued in excess of $100 million of 
enterprise zone facility bonds. These bonds are issued on 
behalf of private businesses and they involved offices and 
restaurants. In 1999----
    Mrs. Morella. What was that figure again?
    Mr. Hodge. Approximately $100 million securities. And the 
program has grown exponentially. We did one transaction in 1999 
at $11 million, three transactions at $17 million the following 
year. Last year we issued bonds on behalf of seven businesses 
with an aggregate value of $70 million. So it's clearly grown.
    So the CVS drugstore at Columbia Heights is an example of a 
transaction we've recently completed. The K-Mart project, which 
is part of the Brentwood Shopping Center, we issued $15 million 
on behalf of that business. We have--we will be funding the 
Penn Quarter parking facility near the Shakespeare and the 
Wooly Mammoth.
    The employment tax credit again is something that is filed 
with the employer's tax return and so we don't have direct 
access to that, but we did surveys on 41 businesses who in 
combination claimed some $7.7 million of enterprise zone 
credits.
    Again, that's merely a snapshot of 41 businesses. It 
includes hotels, restaurants and other retailers. There's one 
large sports facility operator who claimed in 1999 on behalf of 
56 District residents some $225,000 in credits. That doubled in 
2001, prompting them to claim some 113--some $615,000 on behalf 
of twice as many workers, 113 District residents.
    Again, because of the expanded authority under the bond 
program, we have been able to finance 11 elementary and 
secondary schools with bonds valued at $115 million, and among 
these are two public charter schools, the first charter school 
financings that we've done, and we now have four additional 
charters schools in our pipeline now that they understand that 
this can work. Despite all--yes.
    Mrs. Morella. Excuse me, sir. The charter schools, are they 
special education charter schools?
    Mr. Hodge. Yes. The Washington Very Special School for the 
Arts, that's a school on 16th Street that provides services to 
children that have developmental disabilities, and they use the 
arts as a vehicle for--as a pedantical device.
    The Seed, a public charter school, also provides services 
to special needs children, and the other elementary and 
secondary schools that we've financed also involve residential 
and day treatment for special ed and some regular school 
program children as well. The enterprise zone incentives were 
scored at 2.--at $1.2 billion and that was quite aggressive, 
and despite the success we have had in using this program, we 
doubt that we have exceeded the score.
    I bring that up to point out that I think the enhancements 
we'll be asking for will be at no additional cost to the 
Federal Treasury. We have not reached that point. And what are 
those amendments we would seek? Of course extension of the 
enterprise zone designation until 2009. That would correspond 
to the duration of the empowerment zones enjoyed in the various 
States. Also the renewal communities expire in 2009. The 
District of Columbia in fact is the only congressionally 
designated area that expires--that only had a 5-year life 
originally and that will expire in 2003. So we're looking for a 
conformity there.
    We would seek to expand the enterprise zone to the entire 
city because of the inequities that have been pointed out. The 
renewal communities also are able to issue enterprise zone 
facility bonds; however, those issuances fall outside the 
annual private activity bond volume limit. The District's EZ 
bonds are subject to the annual cap, and so our housing 
programs and our commercial development bond programs are in 
this untenable competition, and we would seek again to have the 
District treated in a similar fashion as the renewal 
communities.
    The zero capital gains tax treatment that was spoken of 
earlier today, we have received a ruling from the Internal 
Revenue Service; that is to say, they issued a private letter 
ruling expressly excluding providers of digital technology and 
information technologies from access to that benefit. This is 
unfortunate. Because it's a private letter ruling we think that 
a legislative fix is the only way of curing that and we would 
like to be able to be part of that future of our economy and so 
we would seek to have that corrected legislatively.
    And of course we would seek to have the first-time home 
buyer tax credit made permanent. The District still has an 
extraordinarily low rate of homeownership, and the first-time 
home buyer tax credit is targeted. It is targeted toward low 
and moderate income households. There is a cap there.
    Finally, something that we had not discussed with this 
committee previously is something that we think is very 
powerful and again is at no additional cost to the Federal 
Treasury, and that would be a grant to the District of Columbia 
of triple tax exemption. Of course people buy tax exempt 
securities because they are exempt. They do not have to pay 
interest on the Federal taxes on the interest earnings.
    The States and localities may or may not honor the 
exemption that attaches to a particular state issuance, and 
indeed that is often the case with the District of Columbia 
with some of our neighboring jurisdictions. Because the 
District doesn't have a State or county government, we really 
are the only jurisdictions that operate without an--outside of 
an intergovernmental fiscal system. We don't have a county 
partner or State partner to contribute tax revenue or handle 
programs. This triple tax exemption would be a way for the 
Federal Government to participate with the city by providing 
that our securities would be issued--would be exempt from all 
State and local Federal taxes.
    There is precedent for this for other jurisdictions that 
have a special relationship with the Federal Government. So 
this benefit is enjoyed by Puerto Rico, the Virgin Islands and 
American Samoa. We think it certainly is justified in the case 
of the District of Columbia, would enhance our fiscal capacity, 
again, at no cost to the Federal Treasury.
    Ms. Morella. Well, thank you, Mr. Hodge. You did a great 
job. Thank you very much. My questioning is pretty much 
completed. I now recognize the ranking member for her 
questions.
    Ms. Norton. Thank you very much, Mrs. Morella. I do also 
have some questions of the NCRC. I thought I had to find out as 
much as I could about the CDCs. I do want to say I appreciate 
how Mr. Hodges made information about the tax credits 
available, freely available to businesses and how the city is 
handling that. On the intangibles, one of the reasons why 
capital gain isn't used fully, as Mr. Heller indicated, one of 
the reasons is that intangibles are not included. By the way, 
they are never included. I do have intangibles in my citywide 
enterprise zone bill. I do want to indicate here for the record 
that the capital gains limitations--and here I had lots of 
allies on the capital gains limitations--because all of this, 
all of our capacity has not been used as you just testified, I 
am going to be arguing very strenuously for expansion of the 
capital gains authority. For example, for the capital gains 
authority, unlike the other authorities, it can be used only in 
10 percent poverty zones, and 80 percent of the business must 
be involved. My bill erases, of course, the zones and make it 
city wide and lowers the 80 percent to 50 percent and does 
allow intangible property.
    I do have a last question on the CDCs. First, are they 
audited along with the rest of the D.C. government?
    Mr. Price. DC does audit the CDCs, yes.
    Ms. Norton. No, are they audited like agencies of the D.C. 
government by an independent auditor.
    Mr. Price. I don't believe so.
    Ms. Norton. I wish you would report back. I mean, that may 
be part of the problem. You are here talking to the Enron 
Congress. Even when there is an outside auditor, as you can 
imagine, there develops a relationship so there may be a 
problem. So I want to know--let me ask you to do two things: I 
want you to report back to this committee within 60 days of how 
the auditing takes place and how the city intends to make sure 
that auditing is done on an independent basis without any 
agency or anybody else who is involved.
    In other words, I do not believe it is right that agencies 
of the D.C. government have to submit themselves to an 
independent auditor. But if you happen to have a contract from 
HUD involving D.C. money, you don't have an independent auditor 
look. I don't think that independent auditor should be chosen 
by each CDC. Again, you're talking to the Enron Congress. I 
think that--that somehow there should be some level playing 
field involved.
    So I ask that you report back in 60 days on that. I ask you 
to report back on the status of the properties that were 
underdeveloped. Let me just say, I know the city doesn't like 
for us to say report back. This is legitimate oversight of the 
D.C. subcommittee. And while we have complaints from the city, 
particularly when I have asked for reports back, let me just 
say, and just carry this back to the city, better to report 
back to me than to have other committees of the Congress 
intervene into your business, as one subcommittee has already 
attempted to do. I am trying to say to that subcommittee, back 
off.
    You will do it. One of the ways we're going to do that is 
that you're going to report back to this subcommittee on what 
you're doing. I ask that those things be done within 60 days. 
The city has not always honored the time limit. I don't want my 
staff to have to call and say by the way it's past the time 
period. So I would appreciate that.
    Let me ask, finally, has any evaluation of outcomes--I 
congratulate the Mayor and the city for the kind of performance 
reviews, evaluation of agency outcomes that you're doing, 
everybody has been very impressed with that. Is any such 
evaluation of outcomes or performance reviews done with the 
CDCs?
    Mr. Price. That's one of the things that Mr. Jackson is 
doing right now. I mentioned several different outside groups 
that he was bringing in like Apt Associates like working with 
Fannie Mae and working with Lisk, that's the process that 
they're going through currently.
    Ms. Norton. If you would simply report back in 60 days on 
that, I think that would take care of that.
    Could I ask Ms. Bacon, does the D.C. independent--does the 
D.C. IG audit the outcomes of the NCRC? If he wanted to, could 
he come in and audit the outcomes of the NCRC the way he does 
throughout the government, the Mayor's office, the way he can 
do anywhere else?
    Ms. Bacon. I'm afraid that I really don't know the answer 
to that, but I would be happy to report back to you on that.
    Ms. Norton. Do you know the answer to that?
    Mr. Price. You know I don't. I'm also on the board of the 
Housing authority. I know he has requested and the Housing 
authority thought he didn't have that ability. But I think at 
the end of the day, they agreed that he did. So I don't know if 
NCRC, if the law is similar to the Housing authority.
    Ms. Norton. Of course, that's a Federal agency. Well, it's 
an agency funded wholly by the Federal Government. So if the 
D.C. audit can go into the Housing authority, I would like you 
to report back on that. Let me give you my honest-to-goodness 
opinion, it is the money--the NCRC has funds from the Congress 
of the United States. Now, if you would like us to have the 
Congress of the United States do the audit, then we would be 
glad to do it. Other than that, I would like, within 60 days, 
to know whether you believe the IG has the authority, and if he 
does, not whether you will be submitting--whether you will be 
submitting legislation to give him that authority. We are very 
impressed with what they've done so far, but we believe that 
anybody who gets money from the Federal Government or from the 
District of Columbia should be treated any differently from 
other agencies.
    Let me ask Ms. Bacon, how did you choose the areas? There 
must have been a lot of competition to be chosen. What is it, 
six areas?
    Ms. Bacon. For the priority areas?
    Ms. Norton. Yes.
    Ms. Bacon. In fact, the number of areas that are listed in 
our revitalization plan as priority areas are greater than 
that. These are areas which were established during the whole 
process of developing the revitalization plan, and include 
enterprise areas, etc., that were determined to be underserved. 
And we are trying to focus on specific projects within those 
areas so that we are trying to address the unmet needs and the 
economic development potential, both east of the river and on 
the another side of the river in the main part of the District.
    So these are really areas that coincide with enterprise 
zones and other priority areas of the District, and also 
projects that we have decided we should focus on for the 
immediate time within those areas.
    Ms. Norton. How do you do procurement? Do you do your own 
procurement?
    Ms. Bacon. Yes, we have our own procurement rules, which I 
would be happy to submit to you. They were submitted last year 
to the Council for review as well. We don't have to carry out 
the same kind of procurement processes as the District does, 
but we certainly do enter into the spirit and also the 
requirements of competitive procurements. We can do sole-source 
procurements under certain conditions as well.
    Ms. Norton. One thing I would ask you to look into, I 
believe you may be eligible to use the GSA schedule. If so, it 
would save you some money if you could use the GSA schedule. 
And I'd ask you to look into that and see if you are eligible. 
I don't have any doubt about your rules for competitiveness 
but, of course, that's taken care of in the GSA schedule.
    For paying off bonds, what's the source of revenue for 
paying off bonds? First of all, are your--is your authority 
backed by D.C.? I mean, do you work through D.C.-backed bonds 
the way agencies do?
    Ms. Bacon. We are subject to the D.C. Cap. And we have not 
actually gotten to the situation where we would be issuing 
bonds. So I don't have the details about the bond issue.
    Ms. Norton. But go through the same process that a city 
agency does because you're subject to the cap.
    Ms. Bacon. We are subject to the cap. Again, I would like 
to be able to report back to you on the details.
    Ms. Norton. Yes. I understand you're in startup. Tell me 
about your ideas for self-sufficiency? What is the process 
you're undertaking to arrive at a self-sufficiency plan?
    Ms. Bacon. What we are doing currently is checking, first 
of all, with other similar, or not so similar, agencies around 
the country, agencies with development authorities and others 
who have been charged with doing economic development in their 
particular areas. Some of them have operational support, some 
of them don't. Some of them have other powers than we do. And 
so we're looking at all the other similar organizations around 
the country.
    And then we're looking at what would be the potential 
revenues and also the staff costs for different kinds of 
things. First, we feel that we're ready to serve as development 
manager for major projects. That would be a revenue-generating 
source. We are as I mentioned, receiving revenues from the 
Gangplank Marina. That is owning property and generating 
revenues. We will be generating revenues from doing 
developments in joint venture with private developers or with 
nonprofit developers.
    And so the board has asked us to do a paper that is due in 
several weeks that will outline different options for self-
sufficiency, and then the board will look at that and we're 
going to have a retreat actually on the 22nd of March where 
they will be looking at these different proposals we've made 
and make some preliminary decision as to how we do believe we 
can become self-sufficient.
    Ms. Norton. Mr. Safdar, could I ask you, are you in an 
enterprise zone that can take advantage of our D.C.-only tax 
credits?
    Mr. Safdar. You mean the New Economy Transformation Act?
    Ms. Norton. No, I mean our tax credits, the Federal tax 
credits. Which allows you, for example, for every D.C. employee 
on your payroll, you got $3,000 off the first $15,000.
    Mr. Safdar. No, ma'am, I am not. We are constantly looking 
for new real estate.
    Ms. Norton. Did you get here on your own or because the 
District helped you--you mean--I mean we're so glad to have 
you. Here is a technology company, a small one here.
    Mr. Safdar. And profitable. I know I'm kind of rare.
    Ms. Norton. Didn't move to Maryland where they all move to 
or Virginia. So you're kind of rare. Because you are rare I 
expected you to say that you were lured by some kind of 
incentive or you're--were you lured by the D.C. incentive?
    Mr. Safdar. I must confess that because my business is in 
the world of politics, I moved here from New York, moved into 
the district relocated my residence and moved my family and we 
have never looked back. The business has grown very well. And 
one of the things that's going to keep us here is, in fact, the 
New Economy Transformation Act, because it allows you to earn 
various credits as a tech company and then build them up and 
keep them for future years. Every company that takes advantage 
of these incentives actually has an incentive never to leave, 
because once you leave the District, you lose those built up 
benefits.
    Ms. Norton. I like that part of it, you have to pay back.
    Mr. Safdar. There's a lot of other intangible reasons you 
would like to stay in the District. The quality of life is 
simply superior. I think on your issue of intangibles and 
Federal enterprise zones, I think that is really an important 
topic for a business like my own where what we produce is 
either software which has no tangible component if it is 
delivered over the Internet as ours is, or consulting advice, 
there is no incentive necessarily to move to the enterprise 
zone that is as strong as if we produced mops, for example.
    Ms. Norton. There's a lot of incentive. For example, where 
are you located?
    Mr. Safdar. Near the corner of Vermont and K.
    Ms. Norton. This is an example because if you're near 
Vermont and K, which is near 5th and K, this is an example of 
why it makes no sense for us not to have a citywide enterprise 
zone. I don't think you should move. By the way. I really am 
not encouraging that. But I would like to say that the fact 
that you can get $3,000 off the first 15,000 you pay any D.C. 
employee helps us and would help the employer, so there is an 
advantage although we're glad to have you where you are.
    Mr. Safdar. I stand corrected. I would like to point out 
that the prohibitation currently on intangibles means that 
those information industry businesses which can provide a 
career path and improvement path for individuals in an 
enterprise zone is not as well incentivized as it could be. I 
think you're proposal is very important, and whatever we can do 
to help, I want to make that offer.
    Ms. Norton. Appreciate it. Madam Chair, I would like to ask 
GSA a few questions.
    First the Chair has raised the very important question of 
St. Elizabeth's. If ever there has been a plot of land that 
people talk about and do nothing about--and this is not, by any 
means, a District of Columbia problem. District of Columbia, of 
course, has the east side, doesn't have the west side. When I 
first came to Congress, let me tell you the Congress wanted to 
give you all of it, then you would be in real trouble. In fact, 
it was about to come over. I stopped it because it was coming 
over with all of that baggage that would have made it--which 
would mean you would clean up all that the Federal Government 
had done to it.
    I do want to make sure that what the Chair has done in 
opening up this conversation once again about St. Elizabeth 
leads to some concrete action. I know that the Mayor has tried 
his best to try to do something there and always is stymied in 
no small part by the Federal Government's role here.
    I wonder with GSA at the table, with Mr. Price--and that's 
not often the case, whether or not two of you--I mean, for a 
hearing. It is certainly often the case with respect to 
economic development in the city. And I appreciate the way the 
GSA cooperates with the city. But I wonder if you, Mr. 
Williams, and you Mr. Price, could indeed sit down to determine 
if you need legislation to develop the St. Elizabeth's site and 
report back to this committee, if you don't need legislation, 
then we need to know what you need. If you need legislation, 
for example, it could be legislation taking off from the 
Southeast Federal Center site.
    If that's what you need to kind of move us off the dime, 
then I'd be willing to ask the chair if she would move with me 
to try to move in that direction.
    If there is something you need the Federal Government to 
do, if there is some way in which GSA cannot move any further 
or faster than it is doing we need to have that--we need to 
have that spelled out so that St. Elizabeth's becomes more than 
a topic of conversation.
    Now, could I ask you, Mr. Price, all of us here have been a 
part of the Anacostia Waterfront Initiative, and I'd like to 
know what the status is of the initiative. You had a big 
celebration on a big ship out there a while ago. Does this 
project need legislation to proceed? Many Federal agencies are 
involved who own or occupy a part of the waterfront. The 
District has been working very hard on the waterfront. But I'm 
not quite sure what the comprehensive Anacostia waterfront, 
that is to say, that part that is out there on the water, 
whether it is going and what it would take to make it really 
happen in less than 50 years.
    Mr. Price. Right. Well, the planning process for the 
Anacostia waterfront is well underway. As you said, I think 
there are 16 or 18 Federal agencies that have been involved in 
that process. And Elinor might want to comment on a little bit 
more, because NCRC is heavily involved in that. So there are, I 
have seen from the director of planning and Elinor several 
plans for that. But you raise a good point, really, in regard 
to both St. E's and the waterfront. Because really, it's the 
infrastructure cost and the funding for that is critical here. 
We have been talking about St. Elizabeth's for a long period of 
time. We've been talking about a waterfront. But there are some 
significant infrastructure costs that need to be covered there. 
And there are some creative ways we think that we could go 
about funding those.
    We do--and I welcome coming back with GSA and coming back 
to you and talking about some those creative ways both from the 
District standpoint and from the Federal Government standpoint 
of how we can fund those infrastructure costs to get that kind 
of private development, the kind of development that your 
legislation is helping at Southeast Federal Center. In terms of 
some specifics, don't know if Elinor wants to comment a little 
bit.
    Ms. Bacon. Thank you, Mr. Price. One of the things I think 
is very exciting, we have the overall planning effort that is 
being undertaken by the office of planning. And then we have 
the example right now of the first--well, of course, there is 
the Southeast Federal Center, which is part of this whole 
effort, but you have NCRC and the Office of Planning and the 
Office of the Deputy Mayor working together to develop an 
actual development plan for the southwest, which I showed you 
earlier.
    And in this regard, we're working very closely with John 
Parsons and others in the Federal Government to be looking at 
how we could partner with them, because that would be a 
critical element. The infrastructure costs, in the southwest 
alone, we project at between 30 and $40 million. This is for 
the infrastructure costs for the underground utilities, for the 
extending the Promenade, for closing the street, etc. And so we 
certainly would like to come back and talk with you further 
about that particular project.
    Ms. Norton. Staff informs me, and now I remember that we 
actually got $8 million in the last omnibus, the last year of 
the Clinton administration, for downpayment on St. E's cleanup, 
and that was dropped in a final bill. It may be that we can 
revisit that. I have only a few more questions if I could find 
about the Southeast Federal Center status of that. I haven't 
been able to ask questions of the GSA. I will do it quickly at 
your urging, Madam chair.
    I'd like to know what's the status of the RFP for the 
entire southeast--I was told the RFP would go out in March. 
Well, you know we're approaching March 15th. Is it going to go 
out this month?
    Mr. Williams. Will, Congresswoman Norton, yes, ma'am, 
actually it's the RFQ that is going out.
    Ms. Norton. RFQ, I'm sorry.
    Mr. Williams. We do have--as when I met with you late last 
year I told you that I was going to try to move it closer to 
the date to which we met. We have finished the framework of the 
documentation. The work on the RFQ is done. What we've done 
recently, and it really bespeaks the relationship that we're 
building with the District of Columbia, we met Joe Moravec, the 
Commissioner of Public Buildings, and I met with the Mayor and 
some of his staff and our staffs to discuss the Southeast 
Federal Center, where to go. And we wanted the District to make 
sure that we all had the right shared vision for that site as 
part of that RFQ process. The RFQ is going to go out on the 
street this month.
    It's important, though, that as a part of that RFQ, there's 
an explanation of what the vision for that 55-acre site is so 
that we'll get the best ideas from the marketplace. Because 
that's--we want people to play. We want people involved in that 
project. We're going to have the best ideas in the private 
sector. So we want to give them as much information as we can.
    And as soon as--and we're developing our final work with 
the city now. We expect to have that out. We will have that out 
in March.
    Ms. Norton. Please come here and brief the staff on what it 
is you're talking about because I don't know what you're 
talking about. Please come and brief the staff and what you are 
talking about this vision notion, because we have not been 
briefed on that either.
    Mr. Williams. Yes, ma'am. Before you develop a large 
parcel----
    Ms. Norton. The Chair wants me to finish. I need a 
briefing, not an explanation.
    Mr. Price. The city is actually meeting with you Monday, 
and that is going to be the topic of that meeting.
    Ms. Norton. Thank you. Could I have a status report on the 
construction of the DOT building at the Southeast Federal 
Center?
    Mr. Williams. Yes, ma'am. We signed the lease the first of 
February. We're finishing the requirements and the occupancy 
agreement with Transportation dealing with their security 
issues. And some need possibly for some additional space in 
that area as well. So we're proceeding on that.
    Ms. Norton. There are two other buildings that we worked 
hard on up here. And you mentioned one in your testimony, the 
Tariff Building, but we haven't seen anything happen here; then 
there's the Old Post Office building. I would like to know the 
status on both of those.
    Mr. Williams. Yes, ma'am. The Tariff Building, there is 
work ongoing.
    Ms. Norton. There is work. I'm sorry. I've seen--you're 
doing some kind of gutting or something inside.
    Mr. Williams. Yes, ma'am. The contractor representing 
Kempton Group is developing that site into a hotel. They're 
doing the interior work.
    Ms. Norton. Do they have any date for completion there?
    Mr. Williams. I don't have that, but I'll get it to you for 
the record.
    Ms. Norton. This is really a major thing they've done. 
Because here, the GSA is developing a site that it owned into a 
hotel, but it was a historically preserved site. So you had to 
have very special rules for how it is developed. No private 
developer without the Federal Government being involved could 
ever have done it. What about the Old Post Office site? This is 
a big waste right here, what is it, 12th and Pennsylvania 
Avenue, a prime tourist spot that has always been underused 
ever since it no longer was a post office.
    Mr. Williams. Yes, ma'am. I would agree Congresswoman 
Norton that we haven't done very well in the past with the Old 
Post Office. The plan that was launched in the 1970's just 
didn't work. And in June 2001, both the House and Senate 
authorized us to implement a new plan for that building, which 
includes the award of a new lease for the entire building 
without restriction on how the uses are going to be apportioned 
within the building. We're working on that now. We're going to 
be releasing a request for proposals this summer on the re--
it's going to be a lot of renovation work but it's also going 
to be a complete recasting of that project.
    Ms. Norton. Don't let the building season pass you by. 
Madam Chair, I am through. I do want to indicate to the GSA, 
this is a building that was largest--the largest structure ever 
built by the Federal Government is the Ronald Reagan Building. 
There have been many complaints from the Federal tenants about 
this most expensive Federal structure ever built. We pressed it 
very hard because it's an international building and therefore 
there is an effect for the entire region and the city, an 
economic effect.
    They asked me to come and personally tour the Ronald Reagan 
Building. I did so 2 weeks ago. I was concerned about the level 
of maintenance of the building. Here are people paying top 
dollar for being on Pennsylvania Avenue, very near the White 
House, and they wanted me to see for myself what we found and 
we toured, it was the EPA part of the building, turned on the 
water, it says hot water, no hot water. Stains. I'm sorry, 
USAID. Stains on the carpets all up and down the halls, walls 
that needed painting.
    Now, the problem is with this is this is the prime space in 
the District. It's the most expensive space in the District of 
Columbia. What the Federal Government has done is to say 
because we wanted an international trade building, we will 
insist that Federal agencies that have to do with trade be in 
that building. Of course, they thought they were getting prime 
space there. And very crowded space. Constant complaints to the 
GSA. Some of the space unrented.
    My inclination is to ask my committee of primary 
jurisdiction to hold a hearing. But I want you to know I have 
seen it for myself, and I want to ask you what you suggest 
should be the next step. This is my last question, Madam Chair, 
having seen the problems in the most expensive rent, building 
with the most expensive rent in the District of Columbia.
    Mr. Williams. Yes, ma'am. Congresswoman Norton, I would 
agree that we have some obvious disconnects there. I've been 
trying to schedule a meeting with the head of the USAID for the 
last week or two myself, and for some reason, have not been 
able to get on his calendar. I am very concerned about the--
about the reports of conditions there. I've met with one of the 
tenants in the building in the last couple of weeks and talked 
with them about the same issues. There are also some people 
have security concerns in the building as well. Clearly 
something that we need to deal with. And I'll be more than 
willing to report back to you in the next--within the next 
month about the progress that we've made.
    Ms. Norton. I appreciate your doing that. Mr. Williams, I 
want you to know that the head of the--the head of the USAID 
put out an RFP to actually move out of the building. If they 
moved out of the building, you would have a massive hole and 
you would I have a hard time getting someone to move into that 
building, especially because the Congress has said it has to be 
an international agency. So I would ask that you do set up that 
meeting within the next week, and I will ask that my staff be 
invited to the meeting.
    Mr. Williams. Yes, ma'am.
    Ms. Norton. Thank you very much Madam Chair, for your 
indulgence.
    Ms. Morella. I found it to be very informative and very 
helpful. I think we can move ahead. I wanted to ask NCRC, since 
you talked about Southwest and Gangplank. What about Arena 
Stage, do you have any plans for that expansion?
    Ms. Bacon. The arena stage itself has plans that they're 
developing, and our plan is going to be very synergistic with 
its plans, so that we are all part of the same redevelopment 
effort. But they are doing their plans and ours will be in 
coordination with theirs.
    Mr. Price. We're actually working with Arena Stage. They 
have made a request to the city for some $25 million. When I 
talked to you about some of the creative financing that we can 
do, and perhaps the Federal Government, it's also related to 
the Arena Stage development.
    Ms. Morella. Very good. Mr. Williams, you may need for St. 
Elizabeth's some legislation with regard to the disposal of the 
site. Is that something you've thought of?
    Mr. Williams. We would like to take a look at that as well. 
I think Congresswoman Norton makes a very good comment about--
case about the whole issue of how we will redevelop. And it 
starts with disposal as well. We're going to take a look with 
the District and also would like to talk to you all about where 
we could find ways to maybe use some of those newer tools that 
we've been able to employ in Southeast Federal Center. That's 
one of the things that we'll look at.
    Ms. Morella. We'd be glad to help you, as was mentioned, 
with any mechanism that you may need legislatively or that can 
come from the Federal Government.
    I'm very pleased, Mr. Safdar, that you're doing so well in 
the District of Columbia. If you're doing so well, you could 
you have a little branch in Montgomery County, Maryland.
    And certainly, Mr. Bregon, I'm glad that you came and 
appreciate you coming and offering your insight. I think all of 
us have learned the need for accountability for auditing, for 
transparency and cooperation to work together. Of course the 
ranking member is critical to all of this. We can help 
legislatively and we can help to move things forward, but 
you're going to have to show internally. As was stated in your 
testimony, Mr. Bregon, that I think you said something like the 
successes can only be realized when communities learn lessons 
from their mistakes and incorporate those lessons into program 
design revelation.
    So I thank you all for being with us. I found it to be a 
very important hearing, because of all of you and the work that 
you are doing and will continue to do. So before I adjourn the 
meeting, I just must recognize the staff because they help put 
everything together. The majority side, Russell Smith; my staff 
director, Matthew Batt, Shalley Kim, Rob White, Heea Vazirani-
Fales. On the minority side, Jon Bouker and Jean Gosa. So the 
meeting is adjourned.
    [Whereupon, at 12:35 p.m., the subcommittee was adjourned.]

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