EPILOGUE: ‘Erdhaus’ (Earth House) Is Complete

December 25, 2010

In May 2009 the Falls Church Times wrote about the “Erdhaus” under construction on Grove Avenue, built from dirt bricks manufactured on site. The house is finished now, and while our staff enjoy their holiday we are reprinting an informative article by Wendy Koch, the USA Today writer who recently finished building her own “green” house on North Virginia Avenue.

By WENDY KOCH
USA Today

In Washington, D.C. suburbs, most new houses qualify as McMansions, but not the “Erdhaus” — a small, super tight, Dwell-like home built of compressed earth bricks.

Its German name, meaning “earth house,” speaks to its unusual exterior building material. All 5,600 of its bricks were made from the dirt on the home’s narrow sliver of a lot in Falls Church, Virginia.

As regular Green House readers know, I’m also building an energy-efficient home in the same town, less than a mile away, so I’ve visited Erdhaus a few times. Its owners, German-born Andreas Bentz and Mike Nichols, both very well versed in green building, have been quite helpful in my own journey.

Why compressed earth? “I like the solidity of bricks. Mike liked the energy conservation aspect. It turned out to have both” says Bentz, an airline pilot who grew up in southwestern Bavaria and earned a PhD in economics in England.

The result is an organic, minimalist yet striking gem of 1,460 square feet (not counting a full basement) that I’ve picked as “This Week’s Green House.” It uses rainwater collected in three large cisterns (a total of 4,200 gallons) to irrigate the landscaping and flush the toilets.

(Click here to read the complete article)

Three Choices Under a Million as Home Market Sizzles

By STEPHEN SIEGEL
Falls Church Times Staff

December 6, 2010

While much of the country continues to struggle with a supply of too many homes and too few buyers, fortunate Falls Church City continues to have the opposite problem: Too many buyers, too few houses.

It’s certainly a high-class problem to have, but the lack of inventory of single family homes for sale has frustrated buyers and recently reached what by definition is near an all-time low.

There are currently eight single-families for sale in the City, a small number in its own right. But if your budget is under $1 million, as most people’s budgets are, your choices dwindle to just three.

Those three are at 118 Greenway, 401 North Oak, and 514 Anne, and are presumably getting most of the attention from buyers about now.

“We have been getting outstanding traffic,” confirmed Dick Coogan, agent for 514 Anne, which has been on the market for just a little under three months. “We’ve had over 100 showings.”

514 Anne Street has received over 100 showings.

Despite the interest, and what Mr. Coogan called the “meticulous” condition of the home, it remains for sale. The home doesn’t have a basement and is small, which has been the primary complaint among buyers, he said. The price has been reduced once, from $575,000 to $560,000. The sellers are moving because of a job transfer.

118 Greenway, priced at $865,000.

The North Oak home is adjacent to the Washington and Old Dominion Trail and is priced at $565,000. Listing agent Bethany Ellis says the home is a bit of a fixer-upper but features good “bones” — real estate lingo for a solid and functional structure. She said she’s had over 50 showings in the first month, but buyers have balked at doing the work required to update it.

The property at 118 Greenway is priced at $865,000. Agent Isabelle Williams did not return a phone call seeking comment.

401 N. Oak, priced at $565,000 needs updating

“It’s true — there’s hardly anything on the market,” said Stacy Hennessey, an agent at Fall Properties, which recently opened an office at West and Park streets. “People are clamoring to get in here.”

Ms. Hennessey added that while the schools are a key driver of demand for City homes, access to Metro, the W&OD Trail, and the farmer’s market also are big draws.

Additionally, she said, the schools are in demand not only because of their quality, but also because of their small size.

Meanwhile, there are only five homes over $1 million available. Make that four. As this article was being written, 101 Buxton Street, a 5,500 square foot home built in 2005, the most expensive home available in the City, went under contract, priced at $1,395,000.

Ironically, as the contract for Buxton was being finalized, Ms. Hennessey was saying it was a beautiful house, but that buyers she had shown the home to had turned it down because it’s at the corner of Buxton and busy East Broad Street. Still, someone decided that wasn’t a deal-breaker.

The market for high-end homes has improved since the depths of the mortgage mess in 2008, when jumbo loans were hard to come by. A new home on Highland recently closed for $1,345,000. But that market clearly remains slower than that for homes that are lower-priced. In 2010, 18 City houses have sold in five days or less, an incredible number, but all of those quick sales sold between $460,000 and $899,000.

Even the condo market, one of the banes of the City budget, may be improving. A foreclosed condo at The Byron, 513 W. Broad, recently went under contract after just 23 days. Priced at $429,900 for a 2 bedroom, the condo sold in 2006 for $569,500 but is only assessed at $347,000.

It probably sold for well beyond the current assessment, which means the assessment, and thus the City’s revenue from it, will likely be rising. That should be music to the City Council’s ears.

Update, Dec. 7: A fourth home under $1 million is now on the market: 801 Lincoln Ave., priced at $795,000.

Zoning Official Overruled on Forest Drive Setback Permit

By SUZANNE UPDIKE
Special to the Falls Church Times

October 19, 2010

BACKGROUND: On July 6, 2010, the Falls Church zoning administrator issued a permit to New Dimensions, Inc., to construct a house at 217 Forest Drive. Despite City regulations which require the front setback to be determined by averaging the two adjacent front yards (in this case, 47 and 50 feet), the permit only required a 30.5 foot front setback, which would allow it to extend 18 feet past the surrounding homes.  Neighbors on Forest Drive appealed to the Board of Zoning Appeals, as reported here.

The Board of Zoning Appeals met October 14 to decide the appeal of the permit for 217 Forest Drive. At the meeting, the zoning administrator explained his rationale for only requiring a 30-foot setback: the definition of front yard in the code (section 48-2) did not reference the location of actual houses: a yard extending from side lot line to side lot line, between the front lot line and the front building setback line. He had been interpreting that definition to mean that, for the purpose of the code, front yards are only the minimum front setback; therefore he “averaged” a minimum setback of 30 feet for each of the adjacent properties rather than the actual front yards (averaging 30 feet and 30 feet to get 30 feet).

The chairman of the BZA noted, however, that the definitions in section 48-2 of the code are not to be construed as regulatory. The Board found that the regulatory language of the code does require averaging the actual front yards: the minimum front yard for new construction, new buildings, and new additions to existing residential structures . . . shall be the average of the nearest front yards on either side . . . no front yard shall be less than 30 feet in an R-1A district and 25 feet in an R-1B district, and that no front yard need be more than 50 feet. (Sec 48 -1102 (c).

The BZA also noted that the front yards are to be measured to the actual building:  Each yard shall be measured horizontally to the nearest point of the building or nearest line of the use area, except for allowable projections. (Sec 48-11-02 (d)).

In a 5-0 vote, the BZA supported the appeal and vacated the building permit for 217 Forest Drive because the front setback for the proposed house is only 30.5 feet rather that the average of the two adjacent front yards (which are 47 and 50 feet from property line).   The builder has 30 days to appeal the case to the Arlington Circuit Court if he wishes to challenge this decision.

This appeal is significant because the BZA had not been asked to review a permit regarding the issue of front setback averaging since neighbors challenged a permit for 807 Ridge Place in 2005. As noted in the earlier Falls Church Times report, the Zoning Administrator has continued to issue permits with front setbacks which do not appear to meet the code requirements for averaging, despite a 2006 court settlement in which the City explicitly agreed that it would average the nearest front yards as set forth in the zoning ordinance in all future cases.

There was some question as to whether or not this decision would provide new procedures for the zoning administrator to follow in future cases.   The chairman of the BZA noted that he would be happy if this decision provides guidance to the zoning administrator, but reiterated that all the BZA was doing was applying the code as written to the permit issued for 217 Forest Drive.

EDA Chair Says City Must Revitalize Commercial Areas

By FALLS CHURCH TIMES STAFF

August 24, 2010

The Falls Church Times recently interviewed Economic Development Authority chairman David Tarter regarding his organization’s role and his thoughts on the state of development here.  Tarter’s responses reflect his personal views, not an official position of the EDA.

FCT:  Dave, thanks for taking time to interview with us.  Let’s start with the basics.  What is the EDA?

Tarter:  In general, Economic Development Authorities are created and authorized by state code to perform a number of functions relating to economic development, particularly ones that cities and counties are constrained in doing themselves.  For example, EDAs can buy and sell land, construct and lease buildings, finance projects, grant development incentives, and do so in creative ways that local governments often cannot do directly with taxpayer funds.

An additional function of the Falls Church EDA is to advise the City Council on proposals and issues related to economic development.  Proposed new projects are routinely referred by the City Council to the EDA (and other City boards and commissions) for review and recommendation.  In connection with these proposals, the EDA also examines the estimated net fiscal impact of proposed new projects, the impact on the local business community, and many other factors.

The EDA also generally promotes business within the City.

FCT:  So how does one become a member of the EDA?   And how long is the term?

Tarter:  EDA members are appointed by the City Council.  Member terms are four years, but positions are often filled to complete unexpired terms.   Individuals who reside in the City or an adjoining jurisdiction or who live outside the City but have a business interest in the City of Falls Church may apply to fill an open seat on the seven-member board.  There are currently two openings on the EDA.  The process requires the completion of an application form that is available on the City web site.  Applicants are required to attend at least one board meeting prior to consideration for appointment.  The City Council’s Appointments Committee conducts interviews of EDA applicants and makes recommendations to the City Council for new appointments.

FCT:  How long have you chaired the EDA?

Tarter:  Since 2008.

FCT:  What’s your background?

Tarter:  I was born and raised here in Northern Virginia.  I attended college and law school at the University of Virginia.  I moved to Falls Church almost seven years ago and live here with my wife and three children.  I am a commercial real estate attorney and work mostly with builders and developers primarily in Arlington.  In connection with this work, I have been exposed to high quality planning and development which I think Falls Church can, in many instances, emulate.

FCT:  What kind of activities has the EDA been involved in recently?

Tarter:  The Falls Church EDA has been active on many fronts.  The EDA sponsors a number of events throughout the year designed to attract business and visitors to the City, including First Fridays, Watch Night, Tinner Hill, Creative Cauldron, and the Washington Area Music Association’s annual Wammies award event at the State Theatre, among others.  We also co-sponsored the development and periodic update of the City’s fiscal impact model.  The EDA has hosted numerous “developer forums” to raise community awareness about issues such as Smart Growth principles, the economics of mixed use and commercial development, retail recruitment strategies, “green” development, the Eden Center, the dynamics of the hotel/hospitality industry, affordable housing, among many other public presentations.

Over the past two years, the EDA has also retained a former senior planner with Arlington County as a consultant to provide guidance with the revitalization of some of the key commercial areas of the city.  This effort has led to the involvement of Virginia Tech’s graduate urban planning program in undertaking focused studies of the City’s Eastern Gateway, the N. Washington St./W. Jefferson Corridor, and most recently, the 100 and 200 blocks on the north side of W. Broad Street.  This fall, Virginia Tech students will examine the redevelopment potential of the City’s West End.

FCT:  How is the EDA funded?

Tarter:  Our funding is generally separate and distinct from the City’s general fund and is essentially funded by EDA activities.  At present, our income comes predominantly from administrative fees generated by the EDA’s issuance of Industrial Revenue Bonds.  In the past we have also received money from the rental of EDA owned property, such as the former Two Sisters’ site on Broad Street.  In addition, we have a reserve accumulated from prior surpluses which we use to fund special projects such as the EDA’s Branding Initiative.

FCT:  Interesting.  Property in Falls Church City does not come cheap.  Where did the EDA get the money to buy the property?  And how much property does the EDA own?

Tarter: The EDA owns the former Podolnick (Two Sisters) property at 255 W. Broad Street, which contains about three-quarters of an acre of land.   The City provided the funds for the purchase of the property in 2000 and then transferred ownership to the EDA to land bank and hold for future redevelopment.

FCT:  Is the EDA taxpayer funded or not?  Are the administrative fees on Industrial Revenue Bonds paid by the taxpayers?

Tarter:  The EDA is a volunteer group of residents, while the EDO is the City’s full time professional staff.  We work closely with each other.  The EDO currently has two staff persons, Rick Goff and Becky Witsman, who provide a broad range of services for the City and the EDA, including the day-to-day, in-the-trench work of business assistance and development support.

Business assistance is directed at attracting new businesses and retaining and expanding existing ones.  This entails reaching out to prospective businesses, providing information about available space and other opportunities, hosting business development workshops such as the Franchise and Entrepreneur Express, preparing regular reports on the City’s business and commercial leasing and sales activity, preparing business attraction materials such as the City’s restaurant guide, and general business development visits and follow-up work.

Development support involves assistance and promotion of new ventures such as BJs Wholesale Club, the Mad Fox Brewpub, and financing of the Tax Analysts Building.  EDO staff analyzes the potential impact and, later, the performance of new City developments in terms of tax generation, fiscal impact, and other criteria.

FCT:  Does EDA have any authority over EDO employees or functions?  Or are you strictly an advisory organization?

Tarter:  The EDO staff assists the EDA, but are City employees and report directly to the City Manager.

FCT:  What is the EDO’s annual budget?

Tarter:  The EDO’s 2011 budget is approximately $345,000, a 16% decline from FY 2010.

FCT:  One recent EDA project was the development of a city motto, which ultimately resulted in “The Little City.”  Are you happy with the process and result?

Tarter:  I am.  The project entailed much more than the creation of a motto, however.  The Branding Initiative was generated by a comment at a business roundtable co-hosted several years ago by the EDA and City.  The initiative seeks to establish a more distinct identity for the City of Falls Church from the broader Fairfax County area of Falls Church.  We retained the Falls Church firm of Smith Gifford to assist us with the effort.  We have one of the most affluent and educated communities in America with market demographics that appeal to many retailers and other businesses, yet most people do not realize we are a separate jurisdiction and community.  In many ways the wonderful community we have here is one of the area’s best kept secrets.  The initiative has also included the creation of a restaurant guide and publicity in connection with a number of City events.  I believe the branding effort is catching on and will continue to do so as people become more familiar with it.  It is, and remains, a work in progress.  I would like to see additional implementation by the City government itself.  The branding effort is a small piece in the puzzle.

FCT:  What, in your view, is the most pressing problem facing Falls Church City?

Tarter:  In my opinion, the most significant challenge for the City is how to revitalize and transform our aging and underperforming commercial areas into vibrant, attractive, income producing ones.  Many of the buildings in our commercial areas and main streets are fifty plus years old and auto centered, such as car lots and dealerships, repair shops, car washes, u-haul and other rental, etc.  Nearly a million cars pass through Falls Church a month, yet only a small percentage of them stop to patronize our businesses.  As a result our tax base is heavily skewed to the residential tax base.  We have two Metro stations with our name on them, yet we have not effectively connected and used them for our economic benefit.  If the City is to remain economically viable and independent we must create a better balance to the City’s tax base, with the ultimate goal of a balanced commercial and residential tax base.  I believe that the first step in this effort is for the City to clearly articulate its own long range vision for these areas and the City as a whole.  This requires the City to engage in more detailed long range planning of its commercial areas than has been done to date.  The best way to get desired development is to let the development community know what you want.

FCT:  So you’re referring to “sector planning”?  How does that work?

Tarter:  Yes.  A sector plan – or an “area plan” — is a detailed long-range plan with a design framework and revitalization/redevelopment plan for a particular area.  It generally involves establishing building heights and mass, uses such as mixes of office, retail, hotel, or residential uses, and a myriad of other details such as locations of crosswalks, on-street parking, loading docks, open space, and building setbacks.  Sector plans have been used successfully by many communities.  Growing up in this area, I have seen Arlington use them to transform areas such as Clarendon, Shirlington, and Ballston from industrial, suburban, and/or auto-oriented areas to walkable, urban villages, which in turn have generated the revenue to provide excellent schools and other services with substantially lower property taxes.

Sector planning does not necessarily mean tall high rise buildings.  Quite the contrary, this form of planning requires context and sensitivity to existing neighborhoods.  I would argue that there are few places in the City where buildings taller than 5 or 6 storeys would be appropriate.

Good sector planning starts with substantial community involvement to set the economic and redevelopment goals for the area’s future.  It is a collaborative effort that includes the Planning Commission, City staff, and others, and may also include changes to the Zoning Ordinance to facilitate and encourage desired development.  Once the community vision for an area has been established, and the plan approved, the City Council needs to hold its ground and wait for redevelopment to occur in the prescribed manner.  Falls Church will not and should not redevelop overnight.  The redevelopment of areas such as Shirlington and Clarendon each took 20+ years.  At times we may need to pass up new development that is inconsistent with long-term goals.  For example, some years ago, the Arlington County Board rejected a Home Depot that would have brought in immediate tax dollars in order to achieve what are now the Clarendon Market Commons, Whole Foods, and related development.

FCT:  Which areas of Falls Church City should be our focus for property development?  Which single area would you start with?

Tarter:  I believe that there are a number of nodes where redevelopment can occur and provide substantial fiscal benefit to the City and yet have a limited impact on the immediate neighbors.  One such area is the Eastern gateway to the City, including the Syms and Koon’s sites.  The area is close to transportation such as Route 50, Wilson Boulevard and the East Falls Church Metro station and a portion of this area is buffered from the residential neighborhood by the adjacent cemetery.  However, the nearly 7 acres currently occupied by the car dealership generates relatively little per acre tax revenue to the City because almost all sales tax revenue from the sale of cars is sent directly to Richmond.  By contrast, the twin First Virginia Bank towers located just outside the City’s boundary would generate approximately 1.2 million dollars in tax revenues, or the equivalent of approximately four cents on the City property tax rate if located within the City.  It is unclear whether this type of development would work on any of these sites, but certainly this area could support more intense development.

FCT:  What else should Falls Church City be doing to improve its economic development?

Tarter:  I talked about sector planning. That’s only a start to the long term revitalization of our commercial core.  Without Metro stops immediately within our City, high quality commercial redevelopment is more difficult to attain than it is for some of our neighbors.  This means that the City needs to be more creative and nimble than others, but we can do that.  The tax sharing agreement with the BJ’s Warehouse Club developer, in which the EDA played a major role, is a good example.  The EDA participated in its negotiation and acts as a conduit for the distribution of tax proceeds.  The BJ’s deal ended up being the second largest (by square footage) retail transaction in the Washington, DC Metropolitan Area in 2009. The return to the City on its investment is tremendous and is expected to increase the City’s sales tax by ten percent.  The City also has a Technology Zone tax abatement program that approximately 60 businesses have utilized.   Many of our immediate neighbors including Fairfax County do not provide direct financial incentives for business, which can also give us an advantage.  New incentives also could include a popular tool used frequently around the nation – tax increment financing – to help pay for special public improvements such as a parking deck financed with the incremental increase in tax revenue from new development investment.

More broadly and longer term, the City should invest in its own infrastructure to make our commercial areas more attractive and accessible, including improvements to the streetscape, pedestrian and bicycle access, and undergrounding utilities, particularly through grants or in connection with new development.  Even longer term, the City should plan for and seek to participate in regional transportation improvements such as the streetcar service which is already being planned through Arlington to Skyline.  Expansion of this service from Baileys Crossroads to Tysons Corner or to the East and West Falls Church Metro stations seems a natural extension and could provide the catalyst for substantial economic development on a scale appropriate for the City.

FCT:  How about business recruitment?  How are we doing there?

Tarter:  I believe we are doing pretty well in that area but it is obviously a challenging economic time.  In addition to the previously mentioned BJs deal, I would point out that the Economic Development Office had a major role in attracting the Mad Fox Brewery which looks like it is going to be a major business success story.   Back in 2008, EDO staff came across an article in the Washington Business Journal about a brew master who was seeking to open his own brewpub and restaurant somewhere in Northern Virginia.  Staff acted quickly to bring this prospect to the attention of the commercial broker for the Spectrum, who, in turn, began aggressively pursuing the lead.

The EDO assisted in interpreting parking requirements for the proposed use and provided important demographic, traffic count and other site-specific information that helped persuade the business owner of the desirability of this Falls Church location.  The City Manager reiterated the City’s interest in the business and let the owner know that the City would cooperative in making the proposed use work in the building.  This was an important point in Mad Fox’s site location decision.

Despite the difficult economic climate, Mad Fox signed a long term lease for the prime commercial space that they now occupy.  The City estimates that gross tax revenue from this popular new business will exceed $350,000 per year, which is more than the entire annual budget of the EDO, or the equivalent of more than one cent on the City’s property tax rate.

FCT:  You’ve given us a lot of information.  We appreciate it and look forward to following these issues.  Thank you very much for taking the time.

Fell Today, Gone Tomorrow — Tall Trees Epilogue

August 17, 2010

By FALLS CHURCH TIMES STAFF

On Monday the tall trees across from the Public Library finally came down — 13 months after a development company posted signs announcing “Imagine Your New Home HERE!” But the great majority of comments following our July 2009 story were about what readers could not imagine — the loss of the park-like atmosphere across from Mary Riley Styles Library.

The top photo was taken yesterday morning, and the bottom photo is from July 2009.

Wilden Affordable Housing Project Reported Dead

By FALLS CHURCH TIMES STAFF

August 5, 2010

The Falls Church News-Press reported Wednesday evening that the Falls Church Housing Corporation (FCHC) has announced an end to its efforts to build a senior affordable housing project, “The Wilden,” on South Washington Street.

According to the News-Press story, FCHC Board President Steve Rogers issued a statement blaming the project’s demise on the Falls Church City Council’s failure to accelerate half of a $2 million loan agreed to in March. Under the terms of the loan agreement, the money was to be provided after funding from other sources was secured, but the parties involved in The Wilden were unable to secure all required funding.

In a four hour session last Thursday night, it became clear that three members of the Council, Mayor Nader Baroukh and Council members Ira Kaylin and Johannah Barry, opposed providing the early money, while three others, Vice Mayor David Snyder and Council members Robin Gardner and Ron Peppe, favored it.  The swing vote, Council member Lawrence Webb, decided to neither approve nor reject the FCHC request, instead sponsoring a motion to delay consideration of the early loan request until August 9.  With Snyder, Gardner and Peppe siding with him, Webb’s motion passed, putting the decision on hold for a week and a half.  Kaylin’s earlier motion to deny the FCHC request, which Webb initially said he would support, failed 3-4 when Webb changed his mind in favor of a delay.  Baroukh and Barry voted for Kaylin’s motion, and Webb, Snyder, Gardner and Peppe opposed it.

The decision to delay, however, seemed too much for the project’s fragile health.  A few days after the vote, City Manager Wyatt Shields told the Falls Church Times that the Virginia Housing Development Authority had recommitted $4 million in federal funding originally dedicated to The Wilden.  Some hope existed that the $4 million could be made up with additional tax credits, but the FCHC’s decision to end the project moots that possibility.

The “dagger” to the project, according to the News-Press, was Councilman Lawrence Webb’s comment on the Falls Church Times web site stating that he had “made it clear to [FCHC] that if they are unable to come up with their own funding source that I would not support moving funding earlier than previously agreed to.”

According to the News-Press article, Rogers said that finding other funding source was not an option, and specifically rejected the idea of  using the Winter Hill Senior Apartments, another FCHC property, as collateral.

The FCHC could face difficult financial circumstances as a result of the project’s failure. According to a document Rogers shared with City officials prior to last week’s vote, the organization has significant bills coming due, with little cash remaining after significant pre-development expenses for The Wilden.

The FCHC did not respond to the Falls Church Times’ request for comment on the loss of the $4 million federal funding.

UPDATE: See our story, ‘FULL TEXT: Why Housing Corporation Gave Up on Wilden.’

COMMUNITY COMMENT: Taken Aback by FCHC Request

By RICHARD SOMMERFELD

July 29, 2010

This comment is my personal view as a taxpayer and a voter, not as Chairman of the Long-Range Financial Planning Working Group.

I was more than taken aback by the request from the Falls Church Housing Corporation (FCHC) for the City of Falls Church to bail it out of its current financial predicament.  In no way is this a “minor modification” of the terms set forth by the City Council for the Wilden Project.  It is a major change to the terms and to the project risks.  Anybody who understands real estate development would understand that fact and Mr. Young confirmed it in his interview with the FCT.  What we now have here is an admission by the FCHC that it is financially insolvent because it cannot make payment of its $2.7 million note due on August 7.  To be clear, the definition of financial insolvency is when a borrower cannot meet its financial obligations as and when they come due.  It also admitted that it may have to sell assets at a loss to make good on the note.

The FCHC also admits that it is attempting to help the Sawner estate settle its debt to the City.  It goes on to admit that whoever the other “partners” are who invested $750,000 in pre-development work will lose their funds.  The FCHC, for reasons that defy logic, spent $1.2 million on pre-development work when it had neither complied with the very soft terms set forth by the City Council nor had it lined up all of its equity and bank financing.  By way of clarification, a loan from the City does not qualify as equity by normal accounting principles, even for a non-profit.  Now, the FCHC has the audacity to ask the taxpayers of Falls Church for a bailout caused by financial mismanagement and overly optimistic forecasting for the entire Project.  The City would not just be bailing out the FCHC, but all of the parties associated with this project, according to the FCHC memo.

Any assertion that this project ever made financial sense for the City is distinctly contrary to a thorough and well-reasoned analysis prepared by Mr. Mike Novotny of the EDA and comments made by Mr. John Lawrence, Chairman of the Planning Commission, who voted against the project.  It would cost the City at least $100,000 in lost tax revenue–when every penny counts.  If this project made that much sense, perhaps Mr. Young should advance the FCHC $1 million, inasmuch as he would be a benefactor of the total project.

To put the $1 million request into the context of the Schools’ budget, that would be the equivalent of 12 teaching positions plus 2 or 3 support staff.  Down the road, the subsidized cost of at least $100,000 per annum would be the annual equivalent of 1.5 teaching positions.  If we go through the math of the project, it is expected by the FCHC that in 15 or 16 years the City would essentially forgive the $2 million loan.  How many teachers or policemen or firemen does that equate to?

In terms of the financial gimmickry of the FCHC request, if I understand Mr. Rogers’ memo to the City Manager, taxpayer funds will flow from the City to the FCHC and then back and forth between the FCHC and the Sawner estate, with a some portion of the funding maybe returning to the City in some guise to make it appear this is nothing more than a usual and customary fiscal arrangement.  It would also allow Mr. Young to proceed with his development and then recoup $25,000 per parking space from the City.

I think that the City Council would be making a huge mistake taking taxpayer funds that were meant to restore the depleted fund balance and finance operations such as public safety and the schools and redirect funds for 66 subsidized housing units.  The City Manager even stripped the CIP of all but $385,000 of capital expenditure to fund the operating budget.  We just heard from the City Manager that he had approached Davenport & Co., the City’s investment bankers, about going to the debt markets to fund the depleted CIP.  The Assistant Director of Finance has confirmed that tax collections are running $3.5 million behind last year.

After we listened to City employees pleading for their jobs in the Council Chambers (and on the City’s TV station) just 3 months ago, this is a major insult to them and their families.  At the end of the day, the real issue is not whether the City Council would be voting on 66 subsidized housing units in the middle of the commercial district to be funded by depleting the fund balance again, but whether this Council wants to bail out the financial mismanagement of the FCHC and place further strain on the City’s operating budget.

Even if the City borrows the money from a bank, it would be sending the wrong signal to every household in the City that had to accept a 16% hike in real estate taxes to support the City’s operating budget, not bail out an entity that is admitting insolvency.  It is an audacious argument on the part of Ms. Jackson and Mr. Rogers to say that the Virginia Development Housing Authority would turn its back on Falls Church for not funding this $1 million request for an admittedly insolvent FCHC.  The Council needs to call in an independent auditor to examine the finances of the FCHA and its financial controls and not bail out the FCHC.  The City should not the “bailout banker” of last resort for a non-profit that speculates in land development.

Mr. Sommerfeld is a businessman who lives in Falls Church City

Editors’ Note:  The Falls Church Times has invited the Falls Church Housing Corporation to submit a Community Comment making the case for its request in this matter, and we invite others to share their views on this topic or others of importance to the City.  Our comment policy appears in our “About” section.  Please send your submissions to contact@fallschurchtimes.com.

Key Players Provide Comments on Housing Corp Funding Request

By FALLS CHURCH TIMES STAFF 

July 28, 2010 

On Thursday night, the Falls Church City Council will meet in a rare special session to consider an emergency request from the Falls Church Housing Corporation (FCHC) for early release of $1 million of a $2 million loan the City Council approved in March for support of the proposed affordable housing project, “The Wilden,” at 350 S. Washington Street.  The request has been made because The Wilden’s sister project, “The McKeever” office building planned for the adjacent property at 360 S. Washington Street, has been unable to obtain the funding necessary to proceed.  In order to continue with the project, the FCHC would like to assist in the funding of the McKeever project by purchasing the underlying property at 360 S. Washington Street, thereby relieving the McKeever developer, Bob Young of Jefferson One LLC, of that obligation and allowing him to continue with other aspects of the project. 

In response to a request from the Falls Church Times, representatives of the FCHC and Jefferson One LLC have supplied comments regarding FCHC’s emergency request for early release of $1 million of City loan funding.  Members of the Falls Church City Council have also provided brief comments of their position on the matter.  All comments appear below.  

Questions to Carol Jackson, Executive Director, Falls Church Housing Corporation  

Jackson:  I understand the City Manager is complying with your request to receive documents Steve Rogers used as his talking points in a closed door session with Mayor and Vice Mayor and City Manager laying out our partnership reasons for the request to release one half of the City’s Loan to The Wilden upon Loan Agreement settlement.   We will be happy to answer clarifying questions once you have reviewed all materials.  

FCT:  How will the  $1 million that would be diverted from the Wilden be made up?  

Jackson:  It’s not being diverted from The Wilden, it is part of The Wilden pro forma as the price for parking. It was always to go to 360 construction control, in exchange for a condominium deed for part ownership of The Wilden % of the 360 garage (39 spaces) on the 2 lower levels. That’s why we think this a reasonable request. We truly just need the funds a few months earlier than we would have requested them within the current set of 12A Loan Terms approved on March 22. What we are asking for now is just the first rung in the necessary 360 construction plan ladder. You can’t begin construction until the land changes hands, so The Wilden parking purchase budget item is to be used for that part of the garage construction instead of a slightly later part of the construction work plan. It’s a timing to the City’s funds to solidify the 360 property to begin building the necessary garage that will support the office development to follow.

[Additional comments from Jackson appear in the comments section of City Releases Documents on Housing Corp $1 Million Request.]

Question to Bob Young, Jefferson One LLC

FCT:  Can you tell us what has changed from your perspective to make this request necessary?  Originally you had planned to purchase the 360 S. Washington Street property, but now FCHC is planning to purchase that property.  What has changed, and what will be your role going forward if the City Council grants the FCHC’s request? 

Young:   Much has changed since March when the Council approved the loan.  We have considered and worked on many possible ways to get this building done, from the City occupying a large portion to obtaining a long term lease on over one-half the building to selling the entire building to one user to selling medical condominiums to starting up a Community Development Authority (CDA).  One or more of those approaches will yet work, or more likely a combination.  We always knew that obtaining a commercial loan in this economic environment would be difficult at best, but that now is our only choice.  Under those circumstances, the Wilden Partners need to help us come up with the cash to buy the land so we can borrow the money to build the entire garage.  Jefferson Investment Group [Young's company] still will be purchasing the property and building the commercial office structure on a non-profit basis.  Nothing has changed in that regard.

Question to Members of the Falls Church City Council

FCT:  Do you know what your position will be on the FCHC’s request?  Do you have any other comment?

Mayor Nader Baroukh:  What is being proposed is not a minor change.  This is not an advance of the money already promised but rather it is effectively a new request for funds.   FCHC is now proposing to purchase the 360 property.  FCHC has not fully explained how they are going to cover other project costs if the City advances the $1 million now.   The proposed change will place greater risk on the City and will increase the City’s financial exposure given the likelihood that the McKeever building will not be constructed or will be substantially delayed.  When the Council originally approved the FCHC project, we linked the Wilden and the McKeever buildings.  These linkages were critical to protect the City’s investments, ensure that there was parking for the buildings, and to reduce the overall costs to the City.  The Council and City staff spent countless hours negotiating these linkages and now we are being asked to substantially change and effectively sever these linkages.  The City has given FCHC every opportunity to succeed.  It is now the responsibility of FCHC and The Community Builders to make the project work within the context of the original agreement.

Vice Mayor David Snyder:   The FCHC project as it has evolved to include senior affordable housing, an office building and parking that is adequate for both buildings while providing additional spaces for surrounding commercial activity, is in the public interest.  It also makes sense financially, in that we get all of this benefit and value with a City financial participation that leverages the investment of non-City funds that are many times greater than the City’s participation. The timing and substance of this latest request, however, raises questions that need to be answered.  Most importantly, while the proposed earlier payment slightly increases the City’s risk, my main concern is whether the project as now proposed, can and will be built.  I will need adequate assurances on that most fundamental issue.  I will be interested in seeing the relevant financial documents, questioning the representatives of the interested parties, and determining whether there are new measures that could be put in place, if the requested change is made.  

Councilwoman Johannah Barry:  My deep concern is the position the City is being compelled to accept. We are first in line with risk and last in line with benefit to our citizens.  It is unfortunate that the FCHC has developed a large financial shortfall, but I am concerned that for the City to bail out the organization in this way would result in much greater risk going forward.  Our efforts to stabilize the City fund balance will be completely undercut, and the taxpayers could see a significant tax increase in the future.  I am concerned about stepping in to resolve the FCHC’s financial problems while the City has other large budget pressures.

Councilwoman Robin Gardner:  I have been working with our community for the past 10 years to bring affordable housing to our City.  We are now at the point where we can realize this opportunity and increase our commercial base through the Wilden and the McKeever projects.  The Housing Corporation, due to a change in the market, is asking for half of the the funding we approved in March now so they can meet the financial obligations they committed to, and we as a City committed to, as well.  If we cannot work with the Housing Corporation to realize this opportunity, I believe that we will not see affordable housing in Falls Church, and that will truly be a shame for this community and the senior citizens who deserve this new affordable living space.
 
Councilman Ira Kaylin:  I am concerned that the Falls Church Housing Corporation is no longer a “going concern”.  The Wilden project has a $1 million funding shortfall.  In addition the FCHC has a $2.7 million short term note due next week.  According to the FCHC it cannot not meet that debt obligation and requires that the City’s accelerate payment of $1 million in order to continue with the project and prevent the financial collapse of the FCHC.  Given the FCHC’s self-created financial stress, it is almost certain that future financial support above and beyond the $2 million originally authorized will be requested.  Any future funding requests can only be covered through further budget cuts or tax increases. 

Councilman Ron Peppe:   I do not have a position yet.  I am waiting to hear the discussion at the meeting.

Councilman Lawrence Webb:  I have not made a final decision yet.  I am trying my best to gather the information that I need between now and Thursday.  I will say that I do have some concerns that have not been addressed fully, and I will be trying to get that information.

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