Community benefits agreements and energy considerations

This memo has gone through a number of iterations over the past few years. This version was written in February 2008 and updated in June 2008. Below is the complete version, updated to last June, with edits and expansions as of today.

One of the reasons I'm reprinting it is to have one master version with the June 2008 revision. But the other is that I just read something, "Building Green," from the April issue of Chain Store Age magazine (a trade magazine for the chain retail industry) that reiterates a point that was made below. "Green building practices" are merely good business, they are profitable for developers and store owners, and therefore when considering proffers or community benefits in the context of zoning decision-making, green building characteristics should not receive any special consideration.

From the article:

The survey, called "Green Building Market Barometer," is from Turner Construction ... Survey respondents said that green buildings enjoy lower costs than non-green buildings in three important areas:

- energy;
- overall operating expenses; and
- total life cyle over a 10-year span.

The executives also reported that green buildings have better financial performance than non-green ones in terms of:

- higher building values;
- higher asking rents; and
- greater return on investment and higher occupancy rates.

Those perceptions are confirmed by other studies...

Although 87% of the surveyed executives believed that green buildings cost more to construct, some 73% said that higher costs would be paid back through lower operating costs, with a median estimated payback period of seven years. The results indicate that many executives still believe that green construction is significantly more expensive than traditional building methods, when in fact, according to Turner, it can often be achieved with little or not premium.

For example, a review by Davis Langdon, of a wide range of studies, found that hte average construction cost premium required to achieve a moderate level of green features (equivalent to LEED SIlver certification) was only 1% to 2%.

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The current community benefits system is ad-hoc and the lack of transparency and structure disproportionately benefits developers at the expense of communities

Through my involvement in community land use matters since 2000, including participation on the ANC6C Planning and Zoning Committee from 2003 to 2005, I have become increasingly concerned about the lack of structure and inadequate levels of citizen participation in the negotiation of community benefits agreements generally, the lack of transparency of agreements negotiated between developers and local nonprofits deemed "community organizations" to determine how monetary benefits are spent, as well as the relatively paltry amount of benefits provided by most projects, and the failure to garner amenities in ways that could significantly contribute to substantive structural improvements in the neighborhood and at the city at large.

Doesn't anybody remember the great reporting in The Common Denominator about the community amenities agreements associated with development at Fort Lincoln, agreements that have never been effectuated, and the fact that the DC Government isn't too worked up about this? (See May 6, 2002 - News - Residents cry foul: Ft. Lincoln developer reneges on city deal that delivered land rights; June 3, 2002 - News - Fort Lincoln residents seek Norton's help; August 12, 2002 - News - Residents sue, charge Ft. Lincoln New Town developer with fraud; and May 6, 2002 - News - LBJ's 'Great Society' spawned Fort Lincoln development plan all from The Common Denominator.)

Furthermore, communities that are better organized and have resources end up getting more (or some) benefits, while under-organized communities get little to nothing in terms of benefits from new development occuring within the neighborhood. (This should be considered a violation of the 14th Amendment to the U.S. Constitution, and the provision of "equal protection under the law." But this line of inquiry has been inadequately tested through the Courts.)

Justification for community benefits/proffers

The economic justification for developer-paid community benefits/proffers is two-fold. First, adding developable square footage to the project through zoning use changes (including planned unit developments), variances, and special exceptions make a property significantly more valuable. It is reasonable to ask that a developer pay back to the community some of this increase in value.

Second, development projects too often have a "trickle down" effect. Developments are frequently touted for their revitalization benefits, but in my experience without specifically linking the project to other improvements simultaneously, it is difficult to achieve the kinds of benefits touted by the project in short to intermediate periods of time.

For example, the "overnight" success of H Street NE actually represents more than 30 years and hundreds of millions of dollars of already expended federal and city development funds. People still complain about the failure of revitalization -- "when is it going to come? -- not realizing that so much time and money has already been invested.

But part of the "failure" is the failure to coordinate investment and improvements, and to ensure that a project fully connects to the neighborhood and/or commercial district beyond the confines of the lot lines of the development.

My joke about the two office buildings on the 600 block of H Street NE is that in 20 years, the only economic development spawned by the project was one hot dog cart Monday through Friday. (They started with two but there was only enough business for one.)

This "failure to thrive" comes from the failure to link big new projects to necessary and complementary neighborhood improvements simultaneously.

At the same time, coordinating private investment with investments in public space and community capacity will make new projects more valuable more quickly, so one could argue that for certain kinds of developments, especially commercial and probably condominium development, that the money comes right back in terms of increased value. E.g., if H Street were currently a thriving commercial district, it is likely that the Akridge "Burnham Place" development would already be underway, and that the Senate Square development would have sold out, despite the housing downturn, etc.

How much are zoning changes worth?

The Zoning Commission and Office of Planning do not provide a metric for calculating how much density bonuses are worth. Some projects receive density bonuses worth tens of millions of dollars, and frequently the community benefits offered are worth significantly less than $200,000.

For the sake of argument, I suggest that the economic value of density bonuses be paid into a proffer fund at the rate of at least 10%. So added density worth $10 million would generate a minimum of $1 million in funds for proffers.

Communities must first set priorities for neighborhood improvements

Having a structured conversation about community benefits is a necessary first step in the consideration of a wider-range of public-private partnerships organized around land use and development that is designed to yield neighborhood and/or city-wide stabilization and improvement benefits.

Without such a conversation, communities give up a lot with little in the way of calculable return, judging by my experiences thus far. Most benefits agreements are paltry, and too often are little more than graft projects designed to fund an ANC Commissioner's pet projects or organizations. In the past, while rare, individual residents have received personal benefits (such as health club access to a hotel) or air conditioners.

In order to craft agreements, first neighborhoods/Wards/ANCs must work together to develop a set of neighborhood priorities, and ensure that proffers are directed only to those items which the community agrees are important.

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There was a letter to the editor of the Post on 4/5/2009 about the need for a canopy over the Foggy Bottom Metro Station, "Foggy Bottom Metro Needs a Canopy." It seems painfully obvious that this would be a public space improvement that should logically be funded through proffers related to the various development projects in that community, projects that are still going forward despite the recession.
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Priority areas for funding include civic institutions (public schools, libraries, parks), transportation-mobility improvements, streetscape improvements, community history and interpretation, public art, and commercial district revitalization programs, and historic preservation-based building rehabilitation.

Contributions must be substantive, yielding long-term benefits and consequences, rather than "flash in the pan" benefits with little in the way of structural impact. For example, a project at Fort Totten in Ward 5 provided funds for improvements to a local school and library, and an offer was made to the National Park Service to fund improvements to an adjacent park.

Probably improvements to public charter schools should not be considered an acceptable proffer, because the buildings and facilities are not owned by the DC Government (and thereby held in trust for the Citizens of the District of Columbia).

Is design improvement a community benefit but not a proffer?

Another consideration is project-specific design and urban design considerations more generally. "Design" is currently considered a community benefit under the Planned Unit Development system, but almost every instance where I have been involved the benefit to the community is nonexistent and changes to the project come only after an inordinate amount of work on the part of particularly engaged residents.

This is especially important with housing developments. In the current system of development, a commercial building may have a useful life as short as 20 years. In any case, it can be "freshened up" with a new facade at some point to extend its useful life. Owner-occupied housing is likely to never change its design. The hip modern designs of today are likely to become quite dated in as soon as 10 years.

We must remember with housing developments that "what you see is what you get," forever. Fostering design improvements to projects should be an important part of the development process, although I believe personally that this type of benefit should be built into the project as a direct cost independent of the proffer system.

Participation of community development corporations in the proffer process

In the past local CDCs have received ownership positions in development projects by private developers as a community benefit. In part this was done to assure that a particular developer would win development rights from the government entity that controlled the property, such as the Redevelopment Land Agency. But the contracts for these benefits are not open to the public (for the most part) and no accountability and oversight mechanism has been built into these agreements to ensure that "community benefits" truly result from the economic interest awarded to seemingly local organizations.

This must change. No development participation should be awarded to community organizations without the provision of transparency, the provision of direct benefits to the community, and a process of oversight and accountability over such agreements.

How should a community structure its thinking about community benefits?

Proffers can be categorized as one of five types:

1. National benefits;
2. City-wide benefits;
3. Neighborhood benefits within a geographically defined area such as an ANC;
4. Building-specific design improvements; and
5. Site/area physical improvements located within a few block radius of the project, the area most impacted by the project during and after construction.

National benefits. This category covers green/environmental/LEED type requirements. Generally, these kinds of investments pay back to the developer, and for the most part are "merely" good business practices that deserve little in the way of special consideration when valuing community benefits agreements.

It is important that these types of project improvements be considered in an absolute rather than a relative manner. E.g., who cares if a gas station has a couple solar panels? And losing the embodied energy of a building through demolition can likely not be recovered through green construction practices on new construction.

However, building materials recycling could be considered a national benefit deserving of special consideration as a proffer, because the cost of deconstruction is higher than standard demolition. Construction materials make up 50% of the waste stream and much could be recovered through building deconstruction. Therefore, it could be categorized as a city-wide benefit as well.

City-wide benefits. This category relates to city-wide policy, and would cover affordable housing, DC-based employment agreements, minority contracting requirements, and transportation infrastructure investments, among others. These are public policies that serve the city more broadly, rather than the specific neighborhood in which a project is located.

Employment and contracting requirements should be considered standard business practices not deserving of special consideration. Affordable housing requirements do cost money and should be awarded consideration.

Transportation demand management practices (spaces for car sharing, secured bicycle facilities, showers [for office developments]) should have been required as part of the recent Comprehensive Plan revision but were not. ANCs could step and demand that TDM planning and facilities be required for new housing and commercial developments.

Certain of these investments could be considered community amenities to the extent that they provide neighborhood benefits beyond benefits strictly for users of the site, such as car sharing spaces where the car can be used by members not living on the property and shared parking facilities.

Funding improvements of important projects with both neighborhood and city-wide benefits could also be included within the proffer system, e.g., the rehabilitation of a cultural resource asset such as a neighborhood movie theater, deaccessioned school building, etc.

Neighborhood benefits. This category would encompass proffers that are directed to facilities, organizations, services, and residents located within the defined geographical area where the project is located. For example, affordable housing, hiring policies, and business source agreements that target neighborhood/Ward residents and businesses specifically would be considered community benefits deserving of special consideration.

So would improvements made to local public schools, parks, and libraries. Or assistance made to important neighborhood projects. (For example, in the H Street neighborhood, proffers could have been used to help fund the cost of rehabilitating the Atlas Theater.)

Other examples of neighborhood benefits would be the provision of shared parking facilities, i.e., a parking garage supporting residents but also providing access to consumers visiting an adjacent commercial district, funding of historic preservation/cultural resource surveys, paying into community development education programs at the neighborhood level, funding of commercial and neighborhood improvement projects such as:

• community heritage/history interpretation and signage programs;
• public art projects;
• business directories/maps for installation in neighborhood-commercial bus shelters;
• bus stop, treebox, street furniture, sidewalk lighting, and other streetscape/infrastructure improvements deemed important by a neighborhood;
• neighborhood marketing programs including the development of brochures, booklets, and banner programs;
• traffic calming projects including bulb outs;
• funds paid into business development programs to support the development and improvement of local retail and home-based businesses; etc.

For example, in Brookland, the east side of the station does not have a canopy over the escalator/stairs. The cost to install a canopy is $900,000, and installation of this desired facility for the east exit at the Brookland station is not currently scheduled. Proffers could fund the installation of a canopy there independent of WMATA funding streams.

Similarly, a development project on the 600 block of H Street NE has agreed to pay for the creation of a mid-block crosswalk and the cost of the installation of a traffic signal. The signal alone costs $150,000.

Building-specific design improvements. A possible improvement would be urban design additions to the project that the developer does not want to make because of value engineering desires. This is a tougher nut to crack, and could be considered a neighborhood improvement as well.

For example, I was not able to convince the developer of the 600 H project to develop the south side of the project, rear buildings which will border houses and a historic alley, to comparable to traditional rowhouses--think crappy south Fairfax new townhouses around Fort Belvoir vs. the 1890s brick rowhouses that typify Greater Capitol Hill.

Partly this was a failure due to their suburban design sensibilities, but part was over cost, as the labor cost for traditional masonry is $15/s.f., much higher than the cost of slapping up a pane of glass for a commercial building or some hideous siding.

Site/area physical improvements. This category covers activities benefiting the area immediately around the specific development activity, the area that is most impacted physically, and on a day-to-day basis, by the project both during construction, and after it is finished. This includes streetscape improvements and other enhancements.

Conclusion

Equity. Somehow, the value of proffers needs to be shared more equally between city-wide, neighborhood, and micro project improvements.

Neighborhoods with many development opportunities will benefit disproportionately from the proffer system that does not "tax" the overall revenue stream generated by proffers. Improvements in other parts of the city can be funded in part by directing a percentage of all proffers to a fund for city-wide funded projects.

Another resource. Community Benefits Agreements: Making Development Projects Accountable,

Monitoring and Enforcement. This article from the New York Times, SQUARE FEET; The Trade-Offs in Zoning Trade-Offs," discusses how important monitoring is to the maintenance of public benefits. From the article:

Since 1961, when the first density bonus was codified into city zoning law, public amenity trade-offs have proliferated. The Hearst Tower, under construction at Eighth Avenue and 57th Street, was granted a density bonus in exchange for making improvements to the Columbus Circle subway station. The Biltmore Theater on 47th Street was fully restored by the developer of a residential tower on that street.

More common, however, are spaces that have been taken over for private purposes. For example, many spaces that were created for the public have been appropriated for cafe seating, a common violation of the density bonus that was publicized by Jerold Kayden, a professor of urban planning and design at the Harvard University Graduate School of Design, in his extensive study of public spaces created in New York City since 1961.

After the study was published, the city started enforcement procedures against a number of building owners, and Professor Kayden established a small nonprofit monitoring group called Advocates for Privately Owned Public Spaces, which is financed by the Municipal Art Society. The group keeps an updated database of more than 500 public spaces, but has neither the staff nor the resources to track public amenities built by private developers that are not regulated by city zoning laws.

It is important that the proffer system be open, transparent, and trackable.

Arlington County has a capital improvements database, which is now publicly accessible. (See the past blog entry "A laudable example of municipal transparency: Arlington opens municipal construction project tracking database to the public.")

A similar kind of database needs to be created in DC that would list all properties owned by the DC Government and its instrumentalities, including publicly chartered Community Development Corporations, and any and all such proffers and community benefits agreements associated with properties/developments.

And a system needs to be set up for monitoring and tracking compliance, with reports provided annually to ANCs for all projects within their borders, as well as a master report including all projects across the city.