Obscured in the haze of what will henceforth be known as the FY 2021 Budget Shitshow is a $48 million allocation to purchase the Georgetown Day School’s former lower and middle school campus on MacArthur Boulevard NW.
The item appeared in the budget after D.C. Council Chairman Phil Mendelson’s last-minute budget scramble, to the pleasant surprise of most councilmembers. The chairman called the sale a “once in a lifetime opportunity to purchase an asset,” and a potential solution to overcrowding in the Woodrow Wilson High School feeder pattern. Only At-Large Councilmember David Grosso and Ward 8 Councilmember Trayon White objected in the form of an amendment that would have taken the $48 million and redirected it to modernize Martin Luther King, Jr. Elementary School in Congress Heights. Grosso and White argued that it was unfair to use funds for another school in affluent Ward 3, where Mayor Muriel Bowser is proposing building a new $56 million elementary school, and where most of the schools have been modernized, when there are needs in economically disadvantaged Ward 8.
The amendment failed, 10-2, after a snippy debate that marked another chapter in the Grosso v. Mendo saga. (Ward 5 Councilmember Kenyan McDuffie recused himself from the vote because his kids attend GDS and he sits on its board of trustees. In response to a request for comment, McDuffie referred LL to the board’s chief of staff, Lauren Dickert, who did not return an email or phone message.)
On the dais, Grosso accused Mendelson of prioritizing students in Northwest to the detriment of students living east of the Anacostia River. Mendelson accused Grosso of manufacturing an equity issue because DC Public Schools and the Department of General Services have not done the planning necessary to start MLK Jr.’s modernization.
Ward 3 Councilmember Mary Cheh chimed in to point out a bit of hypocrisy in Grosso’s arguments, which Mendelson recalled fondly in a follow-up interview.
“Councilmember Grosso, later on in this meeting, at the behest of the mayor, but presumably with his own blessing, is asking the Council to reprogram money from a paid leave IT fund in order to purchase property on the Military Road School in Ward 4, to be used as a school to deal with Ward 4 overcrowding,” Cheh said. “A precisely analogous situation that he’s putting forth.”
What no one talked about was the disparity between the $48 million the Council put in the capital budget and the property’s assessed value of $20.5 million. Nor did anyone mention the fact that a mysterious third party already has an agreement to buy the property, and the District would essentially take over that agreement rather than negotiate directly with GDS. The question, therefore, is whether the District is getting the best deal.
Jeffrey M. Zelle, the president and CEO of JM Zelle, the commercial real estate firm that originally listed the old GDS campus in 2017, could not share the appraisal on the property or identify the third party that controls it due to a confidentiality agreement. He says the entity is a school that put down a “substantial deposit” in the original purchase agreement, and they must close the deal soon or risk losing the deposit.
“It’s probably the craziest confidentiality agreement I’ve ever seen,” Zelle tells LL. “That’s why no one is talking about it.”
***
At first, it might seem as though the $27.5 million gap between GDS’s assessed value and the price the D.C. government is willing to pay for the property is outrageous.
The disparity alarmed Jay Silberman and prompted him to email every councilmember, the mayor, the auditor, and Ward 3 State Board of Education Rep. Ruth Wattenberg.
Silberman, a former school board member, writes in the email that he supports the District’s efforts to acquire the property, but rather than pay the $48 million, he suggests the city flex its eminent domain muscle, an extreme move LL suspects officials might be reluctant to make. The city has invoked that authority a few times in recent history: to acquire a trash transfer station in 2018, as well as the land for Audi Field in 2015 and for Nationals Park in 2005.
Silberman says he’s gotten no response to his email from councilmembers or the mayor.
In subsequent interviews, Mendelson says he was unaware of the difference between the amount the Council approved in the budget and the assessed value. He tells LL that Deputy Mayor for Education Paul Kihn and City Administrator Rashad Young told him of their interest in buying the property, as well as the $48 million cost.
“So that’s what we put in the budget,” he says. “It doesn’t mean they have to spend that amount. We didn’t approve the price or look at the terms.”
He adds that assessments for tax-exempt properties, such as the old GDS campus, may not reflect the property’s true market value because the assessments are mostly intended to help the government calculate property taxes. Real estate agents who spoke with LL on background generally confirmed Mendelson’s assertion.
To get a clear explanation on whether the District is about to overpay for the GDS property, Mendelson suggested LL check with the Office of the Chief Financial Officer or the city administrator.
OCFO spokesperson David Umansky was unsure which government entity was in charge of negotiating the purchase andsent LL back to the Council or to the Office of the Deputy Mayor for Planning and Economic Development.
John Falcicchio, fresh off his confirmation as Mayor Muriel Bowser’s top economic development official, said his office was not involved and sent LL to the Deputy Mayor for Education and DGS.
Calls and emails with spokespeople for DGS and the Office of the City Administrator proved more fruitful, if equally frustrating. DGS and OCA referred LL to James Molloy, the real estate broker for Jones Lang LaSalle Americas, Inc., which is currently listing the property on behalf of the nameless third party.
Molloy tells LL he cannot comment on the sale. He declines to say whether his client’s contract is worth more or less than the $48 million the Council allocated and whether there is an appraisal of the property.
“I’m a real estate broker,” he says. “So we know how to ascertain value.”
Molloy points to the hundreds of millions of dollars the District spent to modernize Lafayette Elementary School, Duke Ellington School of the Arts, and Ben Murch Elementary School as one metric by which to measure the property’s value to the District,which strikes LL as a good argument from Molloy’s perspective but perhaps a bad argument from the District of Columbia taxpayers’ perspective.
Lafayette’s modernization cost $78 million. Duke Ellington’s upgrades were originally budgeted for $71 million, but, after finishing a year behind schedule, the final bill came to $178 million. And due to a math error, the $68.3 million originally budgeted for Murch’s modernization grew to $83 million by the time the project was complete in 2018.
“Replacement costs for an additional educational institution is considerably higher than what they’re paying for it,” Molloy says, adding that “we have other investors interested as well.”
An executive summary of the listing that DGS spokesperson Donna Harris provided identifies Molloy’s clients as the “Contract Purchaser,” and says they have an “exclusive purchase agreement to acquire the Property, and potential investors would become the owner of the Property through the assignment of that agreement.”
The original GDS structure was built in 1964, according to the document Harris provided. An additional classroom building was added in 1968, and more classrooms, a gymnasium, and parking were added in 1998. All of it sits on about 250,000 square feet of land.
The listing also notes that the land is zoned for residential use, and “possesses appealing redevelopment potential.”
“The median home value in the 20007 zip code is $1.1 million, nearly twice as much as Washington, D.C., as a whole,” the listing says. “It is also possible to unlock significant additional density and value through the rezoning process.”
Harris writes via email that DGS is working within the budget that the Council set and that the listing summary is the only information the agency can provide. She did not specify whether DGS was unable or unwillingto give the public more details about how it’s spending their money.
***
But forget, for a moment, about the shadowy third party, and look less than a half mile away to a property on Foxhall Road NW, where the Lab School of Washington, a private nonprofit school for kids with language-based learning disabilities, houses its lower school. It leases the building, the former Hardy Middle School, from the District.
The Lab School has tried multiple times to extend its lease, which expires in 2023, amid pushback from Ward 3 parents and officials who say the District should use the building to alleviate overcrowding in the Woodrow Wilson High School feeder system. Eight of those 15 schools were overenrolled according to numbers from the 2017-2018 school year, and four more were within 10 percent of maximum capacity. By 2025, all schools are expected to exceed their capacity, according to a February 2019 report from a working group that included parents, school leaders, and community members.
The group recommended in their report that the Council use the old Hardy building to address overcrowding.
“Not using it for a public school would mean the city would have [to] spend precious dollars to purchase and construct a school on land that is currently privately owned,” Brian Doyle and Melody Molinoff, co-chairs of the Ward 3 Wilson Feeder Education Network, wrote in a letter accompanying the report’s release.
In February 2019, Bowser introduced legislation to dispose of the property through a ground lease with the Lab School. Mendelson criticized Bowser for proposing legislation on an emergency basis, which would have excluded public testimony, but he remains reluctant to evict the Lab School. The chairman has yet to schedule a hearing on the bill.
In her FY 2021 budget, Bowser included $56 million to build a new elementary school on Foxhall Road NW right next to the old Hardy building to alleviate overcrowding in Ward 3.
Wattenberg, the Ward 3 SBOE rep, says it’s “utterly crazy” that D.C. hasn’t used the old Hardy building for public schools. She agrees that $48 million is a good price compared to the cost of building a new school, but LL wonders whether the building will require modernizations before it’s ready for students. Wattenberg says that DCPS officials have told her that they intend to negotiate a new contract.
Markus Batchelor, the Ward 8 SBOE rep and an alumnus of MLK Jr., wouldn’t say whether he would have voted in favor of Grosso’s amendment.
“I also don’t think it’s an either/or,” he says. “Often we pick communities and different constituent groups and different marginalized or underserved students and pit them against each other … We’ve gotta get out of those conversations that it has to be about one urgent issue or the other.”
Grosso remains convinced that there is no merit to Mendelson’s argument against using the $48 million to modernize MLK Jr.
“I already spoke to the mayor’s folks about this, and they said they would find a way to make it work,” Grosso says. “This is simply the privileged continuing to get their way in our city.”
To that, the chairman says, “B.S.”