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Public seeks caution in use of federal funds
City proposes underwriting retail project loan
(Published March 8, 2004)

By JULIA BILZ
Staff Writer

Several Columbia Heights residents, business owners and civic activists voiced their concerns Feb. 28 about proposed public financing for constructing a new shopping center in the riot-scarred 14th Street NW corridor.

Their testimony came during a public hearing, before an almost capacity crowd in the auditorium at Tubman Elementary School, that provided specific details regarding the District’s plan to use federal Community Development Block Grant (CDBG) funds as insurance against borrowing money to construct DC USA, the name given to the new shopping center.

Robert Pohlman, executive director of the Coalition for Non-Profit Housing and Economic Development, urged government officials to "proceed with care." Pohlman said his group supports use of federal Section 108 loan funding for the project, but said, "We want to be sure CDBG is protected."

The District is applying for Section 108 Loan Guarantee funding assistance through the U.S. Department of Housing and Urban Development (HUD) to help finance construction of DC USA. Section 108 loans allow the government to transform a small portion of their CDBG funds into federal loans to fund large projects.

Local governments must pledge current and future CDBG funds to cover the loan amount as security. Michael Jasso, an assistant to Deputy Mayor Eric Price who deals with tax-increment financing projects, said Section 108 won’t impact CDBG unless the loan defaults.

"There is essentially no risk to CDBG during construction," he said.

CDBGs provide a core of funding in the neighborhood. Using the grants to back a government loan jeopardizes the future use of grants, Pohlman said. D.C. officials said the District receives about $22 million a year in CDBG funding.

At-Large Councilman Harold Brazil, who chairs the economic development committee, said he is concerned about CDBG funds as well.

"If something goes bad, the funds won’t be available to [use for] affordable housing," he said.

Pohlman suggested the government pledge its own funds as insurance instead of CDBG money.

"If the government chooses to take risks, put the government at risk, not the block grants," he said. "The resources for the whole city could be shielded from potential harm."

The District proposed to borrow $56 million to invest in Columbia Heights, the majority of which will go toward construction of DC USA and an adjacent parking facility. Approximately $6 million will go toward a neighborhood economic development fund to support local businesses and minimize their
displacement after the shopping center is completed.

Area business owners and residents said they support the retail project, but have concerns about the neighborhood benefiting from construction.

"There should be tremendous efforts to make this a better deal for residents," said Ed Lazere, executive director of the D.C. Fiscal Policy Institute.

Government officials said that DC USA will improve the neighborhood.

Theodore Carter, president and executive director of the National Capital Revitalization Corp., said DC USA would be a "renaissance in Columbia Heights" that would bring shopping into the District.

The project will also provide employment opportunities. "DC USA will create good jobs for D.C. residents," Jasso said.

Jasso estimated DCA USA would provide 1,650 permanent jobs and 700 temporary construction jobs.

Lazere did not see the increase in jobs as a neighborhood improvement.

"These are low-wage jobs," Lazere said. "Ninety-four percent of the jobs pay $10 per hour."

Based on the $10 per hour wage, affordable housing is $500 each month, Lazere said.

"This project will shrink affordable housing," he said.

"The cost to taxpayers and benefits to the community aren’t sufficient," Lazere said. "I hope this [project] could be modified to create good jobs, affordable housing and true benefits to the neighborhood."

While affordable housing could be affected if CDBG funds need to be used to repay the loan, local businesses could feel impact as soon as DC USA is built.

Many residents support the area businesses that make up the diverse Columbia Heights neighborhood and wonder how DC USA will affect local businesses.

"We are concerned with the role of small businesses in this community," said Juan Patlan, executive director of the Latino Economic Development Corp.

Sheila Reid, president of Avanti Real Estate Services, asked the government to look at the impact economic development will have on area retailers.

"[The] DC USA [project] needs assistance, but so do local businesses," she said.

Shelore Williams, who chairs the board of the Development Corp. of Columbia Heights, said the community has to make sure "small businesses aren’t afraid of the development, but can benefit from it."

Advisory Neighborhood Commissioner Mack James said he supports area businesses as well.

"Small businesses need a bigger piece of the pie," he said.

Many business owners don’t know how they fit, what’s in store for the future, or what options they have, Patlan said. It is not clear there are enough resources to help businesses that exist outside the
development, he said.

"It’s important that affected businesses be educated and involved on what will be done," Patlan said.

Participants at the hearing also were concerned that affordable housing could be affected if CDBG grants need to be used to pay off the loan.

James asked the District to strengthen affordable housing. "There is a need for truly affordable housing. We need to keep this community together," he said.

Brazil also said the government should be aware of the housing problems. "The government has a responsibility," he said. "We need to move the city forward [and] create jobs for residents so they have more money to buy housing."

The Section 108 fund application is scheduled to be submitted in April. The District hopes it will be approved in September and that construction of DC USA will begin in October.