Letter to Charlene Drew Jarvis on Bill 12-514
March 1, 1998

The Committee of 100 on the Federal City

1 March 1998

The Honorable Charlene Drew Jarvis
Chairperson, Committee on Economic Development
Council on the District of Columbia
441 4th Street, N.W., 7th Floor
Washington, D.C. 20001

Dear Ms. Jarvis:

This transmits the comments of the Committee of 100 on the Federal City with respect to Bill 12-514, the "National Capital Revitalization Act of 1998."

As you know, the Committee of 100, in our position paper entitled, "A New Economic Development Strategy and Structure for Washington, D.C." supported creation of a new, public-private organization to assist the economic revitalization of the District. We used the five guiding principles presented in that paper to evaluate and offer suggested amendments to the draft bill. Enclosed for reference is our 11 February 1998 letter to you conveying our key comments.

Since that time, we have been working diligently with the Committee on Economic Development to better understand various positions affecting legislative composition and to fashion language that might improve the bill. We commend you and the staff for making a number of changes. And, we understand that a number of additional improving amendments that do not appear in the "Final Committee Print" version of 13 February 1998 will be offered at first reading.

The Committee of 100, however, based on that 13 February version of the bill, is not able to support enactment without additional substantive amendments. Our principal concerns focus on four remaining critical flaws: 1) misconceived orientation to only large projects, 2) inadequate consolidation of programs and agencies, 3) overreaching delegation of authority, and 4) perpetuation of isolated decisionmaking on key economic development issues between the District and federal governments.

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The following discusses those concerns and how the bill might be modified to address them.

1. Misconceived Orientation. The bill segregates District businesses into two classes: a) "large," over $2 million, and b) small, $2 million or less. The Corporation would take responsibility for the large project. The current governmental agencies, principally DHCD, would be retained to handle "small" projects. That provision is bad economic development and worse government.

The focus of the Corporation must be growing healthy and diverse businesses. Most of these businesses will start "small." Two thirds of all jobs (probably a greater percentage of District resident jobs) will come from small businesses. These businesses will be located downtown, in neighborhoods and commercial/industrial outlying areas.

Recognizing the key role of small businesses, "best practices" among other jurisdictions places particular emphasis on fostering small business attraction, retention and growth. The current bill goes in the opposite direction with its focus on large development projects. In doing so, it is misdirected and of marginal benefit as a vehicle for true economic development.

We understand that a number of persons and organizations supporting the distinction between large and small projects offered concern that the Corporation will focus almost exclusively on development of very large projects and that smaller businesses and projects will not, therefore, be able to compete for attention and resources. We appreciate that concern; but conclude that it is precisely the reason that this Corporation should be reoriented and should undertake comprehensive assistance regardless of size.

To separate smaller businesses from the assistance of the Corporation will, we fear, deprive them of both resources and exposure to opportunities they need to succeed and grow. Further, the proposed classification would perpetuate, potentially strengthen, residual segregation of interest and investment between the Downtown and neighborhoods, small and large businesses, and, to a heightened degree, majority and minority-owned businesses. That is not a prescription for true economic development.

Further, the principal rationale for governmental involvement with most large projects is not the benefits they directly create, but the "spin-off" growth engendered by them. That spin-off is where the majority of new economic activity, business opportunities, job creation, and tax revenues is generated. That's where the real action is. Much of it will be with small businesses. And, it is a sad fact that the District has too often failed to capture its share of those benefits for its residents and businesses – because it has lacked the orientation and rigor to undertake integrated planning and systematic service delivery.

The Corporation offers an opportunity to correct this deficiency. Unfortunately, the bill, as currently constituted, maintains and even reinforces protocols that have failed to deliver for the majority of District businesses and its residents.

The bill should be amended to remove the project size distinction. It should specifically direct the Corporation to focus on small business and project development. Further, when contemplating major redevelopment projects or large special project initiatives, the Corporation should be required to prepare and implement a program that identifies anticipated business and employment opportunities and ensures, to the maximum extent feasible, that District businesses and residents have the resources and skills to complete successfully for those benefits.

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2. Integration and Consolidation. The Committee of 100 views the Corporation as an opportunity to make necessary improvements to government structure to increase coordination, effectiveness and efficiency. Regrettably, the bill (with the exception of incorporating the RLA and EDFC into the Corporation) fails to adjust governmental structure to follow shifts in function. This will undoubtedly result in continuing, potentially even exacerbating, duplication of services, inefficiencies and waste, lack of accountability – and general confusion among businesses and citizens as to where they should go for services. That result is just the opposite of the expressed interest of Council and the Authority – and one of the reasons given by Congress for rejection of the previous legislative attempt to form a corporation.

It is recognized that failure to make governmental consolidations is in large part a consequence of the bill's current two tiered (large/small project) system discussed above. Indeed, we suspect that the reason for those classifications has as much to do with preservation of existing structure and associated relationships as with concerns over service delivery.

Council should seize this opportunity to reorganize the government and its programs to improve service delivery. In doing so, it should reassure business and civic organizations that the Corporation will make available programs assisting them, not seek to usurp or duplicate their efforts. Further, Council should make known existing provisions of the bill that offer protections to employees of agencies consolidated into the Corporation, many of whom can be expected to compete successfully for jobs with the Corporation.

The bill should be amended to consolidate DHCD, OED, and the job training/employment matching components of DOES into the Corporation. The HFA should be made a subsidiary of the Corporation (maintaining its current authority, staff, and separate Board) to improve coordination and integration of its important programs; and further the HFA should assume certain programs (e.g., HPAP) now managed through DHCD. The duties of the Office of Tourism and the Committee to Promote Washington should be consolidated into the Corporation. The bill should provide a timeframe, say 90 days, for the Mayor, the Authority and the Chief Management and Financial Officers to propose reorganization plans for these consolidations as well as provide a date by which the transition in responsibilities will become effective (not more than one year from the effective date of the Act).

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3. Too Extensive Delegation of Authority. The Committee of 100 supports providing the Corporation with the powers and resources it needs both to create an environment that encourages economic revitalization and to be responsive to the needs of specific businesses and projects. We see it, however, as a vehicle for the implementation of economic development policy – not as the maker of that policy. Making policy must be reserved for out elected officials.

No matter how hopeful we are for the sensibilities of the appointed board members, our elected representatives should establish the policy parameters within which the Corporation operates, have oversight over use of public funds and assets, and provide guidelines for how the Corporation operates. In a number of important respects, we believe the bill would inappropriately delegate those responsibilities to the appointed Board members. They follow:

A. Comprehensive Plan. The Comprehensive Plan, through its local and federal elements and the more detailed ward and small area components, delineates policies which the public participated in formulating and elected officials have adopted. It provides the appropriate policy guidance for the Corporation.

The bill should explicitly state that the Strategic Economic Development Plan (SEP) is to be consistent with the Comprehensive Plan – and that SEP and major development initiatives of the Corporation are to be reviewed and certified as being consistent by the Office of Planning or the CPC, as applicable. Further, in areas where the Corporation proposed to undertake extensive redevelopment, it should (as in the example of the Pennsylvania Avenue Development Corporation) be required to prepare a small area plan for the consideration and adoption of Council as an element of the Comprehensive Plan.

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B. Use of Public Resources. To the extent that the Corporation makes use of public funds and resources, which it does in very substantial ways – and would even more extensively given the recommended consolidation of agency functions – it should do so with the appropriate oversight and approval of elected officials (and in a control year, the Authority). While we support providing the Corporation with broad and flexible use of public resources, the bill provides inadequate policy input and safeguards with respect to the use of public resources.

The bill should be amended to give the Corporation responsibility for preparation of annual Action Plans that describe the programs and projects the Corporation will undertake and the proposed allocation of public funds and resources related to them. Such Action Plans should meet requirements for use of federal grant funds (e.g., CDBG, EDA, SBA, Labor). Council should approve the Action Plans – by resolution, if possible.

Further, with respect to the disposition of publicly owned property (local or federal) to private parties, the bill should explicitly state that sites are to be competitively offered unless the Corporation shows cause for another means of disposition and the Council concurs.

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C. Eminent Domain. The Committee of 100 recognizes the value of the power of eminent domain to implement public policy. That power, or the threat of its use, is sometimes necessary. We support making it available to the Corporation. But, we feel equally strongly that no group of appointed individuals should have the authority to take a person's land without first having the approval of the elected officials. The bill would give the Board that power.

The bill should be amended to require the prior approval of Council before eminent domain may be exercised by the Board.

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D. Compliance with Law, Regulation and Process. The Council and Authority have and are making progress in improving outmoded and cumbersome laws, regulations and systems affecting the District's businesses. More work remains. The focus of the government should be to continue that work for the benefit of all businesses – not on providing certain entities, like the Corporation, with relief. You are to be commended for removing certain language from the bill that would have had the effect of giving the Corporation the ability to override local law, regulations and processes.

However, the bill still contains troublesome language in this respect. In addition, it effectively provides the Corporation with bumping rights in regard to governmental reviews and the issuance of permits. Those provisions have the harmful effect of putting all businesses not in the Corporation's priority areas or otherwise receiving the assistance of the Corporation at a competitive disadvantage. In effect, the business is hit with a double whammy – no assistance and pushed back in line. This is unwise and unfair.

The bill should be amended to delete any reference to the Corporation having special interpretive or handling priority. Instead, the bill should explicitly state that the Corporation and the businesses and projects it assists must abide by all District laws. regulations and procedures related to business operation and development approval and permitting (e.g., zoning regulations, historic landmark and district preservation pursuant to DC Law 2-144, design review, etc.).

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4. Expanded District and Federal Partnership. At the inception of the process leading to the legislation, we were hopeful that the Corporation would provide a vehicle for ending the isolation in meaningful economic development coordination between the District and federal governments. In one of the most damaging outgrowths of limited Home Rule, a system evolved where the federal government makes critical decisions affecting the District's economy with no real regard for local impact – and the District does likewise. Both governments seem more intent on preserving some notion of automy than in identifying areas of mutually benefiting cooperating and pursuing it.

The federal government is the District's biggest business, far and away the major landowner and the largest employer. In any other jurisdiction, the local government and biggest industry would have a strong working relationship. Very little in the bill suggests any meaningful shift in the current situation.

Aside from a three presidentially appointed Board members (and, we understand, a separate proposal of some federal contribution to funding), the bill does not address the issue. No substantive provisions deal with delineating an agenda, much less procedures, on which the two governments can work to strengthen economic development for their mutual benefit and that of local businesses and residents. As such, it represents a failure to take advantage of an important opportunity to correct a flawed relationship and system – by both government.

The bill should, at a minimum, include an agenda for developing a working relationship with the federal government. That agenda should include: coordinated planning and use of surplus federal property, facility location decisions to catalyze area economic development, business development programs to facilitate use of local businesses for goods and services, tourism coordination, job training and matching programs, and integrated development plans for properties retained, in whole or part, in federal ownership (e.g., the Southeast Federal Center and St. Elizabeth's Hospital, etc.).

The Committee of 100 continues to support the creation of a public-private organization to assist in the economic revitalization of the District. We hope that the Council will consider amending the proposed bill to incorporate the suggestions included in this letter.

Sincerely,

Joseph R. Bender
J. Kirkwood White

Enclosures [enclosure not on-line]

cc: Members of the Council