Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Friday, September 25, 2015

The FBI building as another example of "I told you so"

Just as DC Government is often bollixed up because it doesn't have a distinct capital planning and budgeting system distinct from the annual budgeting and appropriations process ("Capital/civic asset planning, budgeting and management processes"), the Federal Government has the same problem.

This comes up with financing federal buildings, especially large and expensive projects. When Congress is controlled by representatives with an anti-government ideology, they are not predisposed to vote in favor of capital investments in buildings for government agencies--instead, they'd rather "starve the beast."

Locally, this has extranormal impact on real estate development programs in DC, Arlington, and Alexandria especially.  It's why redevelopment of the St. Elizabeths West campus as a home for the Department of Homeland Security has languished for years ("Will Congress Pull the Plug on Homeland Security's Move," Washington Post)) and why other agencies aren't getting improved spaces ("Consumer bureau headquarters renovation plan gets GOP flak" Los Angeles Times) and why some agencies are moving from better located but higher cost locations to worse located lower cost locations ("National Science Foundation headquarters to move to Alexandria" and "TSA moving headquarters from Arlington to Alexandria," Washington Post).

FBI Building, Wikipedia photoWhen it was proposed that the FBI could move, build a new facility, and consolidate all of its employees into one place from more than 20 different locations in the Washington Metropolitan area, it was suggested that the cost of land and the buildings, while even though expected to be at least $1 billion, wouldn't cost anything--that it could be paid for through the value in redeveloping the FBI's current headquarters site on Pennsylvania Avenue in Downtown Washington.

In 2012, doing a very rough calculation, I wrote ("Hyperbole on the redevelopment of the FBI building site on Pennsylvania Avenue NW") that was extremely unlikely, even though virtually all the other writing on the subject accepted that premise.

Now, three years later, it turns out I was right, according to a New York Times article, "Funding Dispute Over F.B.I. Headquarters Delays Next Step":
In August, the Office of Management and Budget notified the F.B.I. and the G.S.A. that there was no money in the budget to cover costs for the project, including what the government might pay up front to acquire the chosen site or to rent back the facility once it is built. How to make the developer whole if the value of the Hoover building is less than its cost to build the new headquarters is also at issue.

A congressional appropriation is an option, but it is considered unlikely. An alternative would be to have the developer include the cost of acquiring the new headquarters property in its formal bid, essentially an add-on that would be charged to the government.

The budget office has told the bureau it must fund the project’s costs from its annual operating budget, according to an official with direct knowledge of the discussions who was not authorized to speak on the record. Under another scenario, the government would own the land, lease it to the developer, who would build the headquarters, and lease it back to the government upon completion. But the budget agency would prefer a plan in which, as Mr. Tangherlini described it, “the full costs have to be reflected in the budget for the year in which the obligation is made.”

There is a widespread belief that the Hoover site, despite its prime location blocks from the Capitol and the White House, will be worth much less than the cost of constructing the new headquarters. How to compensate the developer for the difference has been a major part of the discussion.
The sad thing is the time that has been wasted in the interim, certainly Prince George's County isn't happy as their opportunity to capture the FBI headquarters could diminish, not to mention how this will significantly delay the ability to strengthen and redevelop the part of Pennsylvania Avenue where the FBI building hulks and sucks out and diminishes the vitality of the street.

See "Pennsylvania Avenue DC planning initiative" and "Could bringing premier regionally headquartered business enterprises to the Pennsylvania Avenue Corridor be key to its renewal and revitalization?."

There are many problems with how Congress deals with budgeting.  Besides the need to create a capital budgeting approval and appropriations process separate from the annual budget process, I've thought for a long time that the budget process should be moved to a two-year cycle--I think something like twelve different bills are required each year.  Split them in half, and approve six each year as part of a two-year cycle.

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At 9:02 AM, Anonymous Anonymous said...

one wonders how this will affect other government agencies planning moves out of the city for various reasons- some seem to be making the decision to leave DC because the top managers do not live in the city and seem to dislike DC vehemently- this is the case for at least one agency I am aware of. Trends are going to reverse this movement out of the city and already it is proving to be too expensive. It is not sustainable. This sort of thing does not happen in places like Europe where the governmental agencies desire to locate in the cities and seldom away. Even La Defense in Paris is within the city although not in the historic sections- thank god. In Berlin the government has actually consolidated back in the historic core.

At 11:15 AM, Blogger Richard Layman said...

Interesting point. Certainly the similar pipedream GPO has--to move to a different site, probably not in DC, paid for by a developer who would reap millions in redevelopment from the current site--is a no go.

The GPO site is encumbered in that the buildings are big but historic and can't be torn down, and the ability to build new is only on the parking lots between the building and New Jersey Ave. NW.

While worth a lot of money, it's nowhere near enough to build a new campus.

I think for the city it's a two edged sword. maybe some agencies can't leave, are stuck. OTOH, it diminishes the ability of agencies to accomplish work and slows significantly the economic value of improvement of those sites, either for continued government presence, or for alternatives.

E.g., probably the SW Ecodistrict plan won't go anywhere either, with these kinds of delays.

At 11:28 AM, Anonymous charlie said...

St E?

I was going off on the hollowing out of compotency, and Dan tangherlini is an interesting case. Given his resume, he should know the most about this.

Or is he a case of a paper tiger?

Or did he build this deal to fail so he can now step in the private sector and build on the FBI space?

At 11:40 AM, Blogger Richard Layman said...

Interesting surmise.

Certainly, the reality is that GSA created unrealistic expectations of a free lunch, given the height restraints in DC.

I'm no expert in real estate finance, but maybe it'd be possible to make such a deal work in a city like NYC, where you can develop much taller buildings.

E.g. a Burj type building on the FBI site would, if financeable, maybe cover the cost. Then again, the developer wants to make some money too.

And if someone much more anti-govt. than Boehner becomes the Speaker of the House, things are even worse vis a vis Congress and getting approvals for extranormally expensive construction projects and buildings.

2. wrt your point about hollowing out of expertise, if you are really good at RE development, you'd want to work in the private sector, not GSA, where you could make a lot more money. cf. Singapore

I was surprised that when Stan Wall was director of RE for WMATA he was allowed to pursue personally other non-WMATA development projects on his own dime for himself. Or it might have just been that he was allowed to finish up projects he had started before he joined WMATA.

At 11:42 AM, Blogger Richard Layman said...

wrt the paper tiger thing, if there is no joint "consideration" on the part of the federal govt., not just the private sector, these kinds of deals don't seem very attractive if they require 100% funding by the private sector.

At 11:49 AM, Anonymous charlie said...

Well the GSA is essential an anti-corruption move the Hoover Commission brought on. Not saying they can't be corrupt --when the FCC was dragging their feet on moving to the Portals (GSA wanted to, they didn't) it took on real estate buddy of Al Gore to call Al Gore who then called Reed Hundt to get the deal signed.

At 12:02 PM, Anonymous Anonymous said...

hopefully in the future if agencies seek more land they will look to places like Anacostia instead of far flung exurban locales as they do now. These agencies propose to move there and the localities all get wet dreaming about it and then they find out that they are not prepared to handle the car traffic and congestion, etc. This is an unanticipated burden and expense. The city is already set up for this kind of thing and the government built a huge subway to service these agencies and now it seeks to abandon this investment- which is more of a waste? Knee jerking to leave for the suburban pastures and having a super expensive subway system unused to rot away or staying in the city and maybe taking a hit on maximum production in the agency? Again- they can also renovate these buildings and make them better before thinking of leaving. Maybe in the future they will have real architecture instead of the crap they put up on Pa Avenue. What is puzzling is that there is a lot of empty land in Anacostia and they could easily relocate there. And our DC mayors, asleep at the wheel, have also done nothing to keep the agencies here. A bunch of do-do brains retardates all around.

At 12:44 PM, Blogger Richard Layman said...

to be fairer to the city:

1. The city can't compete when conditions are set in the RFP that make city locations uncompetitive.

2. One of the problems with the justifiable increases in requirements for hardened buildings vis a vis terrorism is that urban locations become less desirable, because of the blast impact beyond the site.

new requirements require significant setbacks and/or moats which from an urbanism standpoint mostly defeat the purpose and value of in-city locations.

3. agglomeration benefits do mean that the federal government should work to keep agencies in the city. But that's complicated, plus the aforementioned problems with getting funding and approvals from an anti-government Congress.

4. But yes, the city could be more creative in keeping agencies.

But I don't agree with you about the value of campuses mostly. Some agencies are worth trying to keep from an ROI standpoint, others aren't.

The trick is to create a good matrix of benefits and costs and a framework for deciding what's valuable and what isn't and making appropriate choices accordingly.

5. But the city doesn't do good solid planning anyway. The Council f*s things up a lot, e.g., the current bag job by Vincent Orange and others wrt RFK.

At 1:11 PM, Anonymous Anonymous said...

Never was I advocating for campuses- I was simply saying that the city should leverage its fallow lands and make the feds more aware of these assets. As it stands now there are large tracts in Anacostia, there is the old soldiers home land that has come up for some sort of redistribution, and there is the gigantic Walter Reed complex abandoned by the military that could easily house some of these feds. The only trouble with WR is that it is not served by rail presently but it might be possible in the future to do so. Yes there are setbacks and security barriers that must go into place but these locations would allow for the space - at least one would think so. I fear that these agency heads are besotted with exurban anti - city car dependent locations. A more forceful policy to locate these federal agencies near established transit should be put into place. This might have the effect of making / encouraging them relocate to more urban places.

At 6:11 PM, Anonymous Anonymous said...

Have been meaning to post this for months... DanTan left the GSA in February for--you guessed it--a RE firm.

IMHO, predictable and unseemly.


At 6:30 PM, Blogger Richard Layman said...

I didn't write about it at the time, but I did see an article about it.

At 11:23 AM, Anonymous Alex B. said...

Richard, I think you've misread the GSA's original intentions with the FBI. They never expected to get a new HQ for free. Instead, their approach was informed by their known constraints. Before you hit them with the 'I told you so' comments, I think you should take a closer look at their actual intentions.

The GSA, under the constraints from Congress, can't even lease much new office space. They certainly can't get funding for any large new office complexes. None of that changes the very real space needs for various government agencies.

The strategy you see is a direct result of those constraints, not some magic thinking about getting something for free. Without any direct federal funding, the GSA has to use the assets it has, namely land.

Also remember that the direct pressure from Congress (and the Administration) was for the GSA to get rid of their unproductive and unneeded real estate assets. That's why they struck the deal with Trump for the Old Post Office; that's why they sold off the Georgetown heating plant. These are all, I would argue, good moves for both the city and for the GSA as a more creative, deal-making agency.

The intent was never to get a new FBI for free, but to get a new FBI at a substantially reduced cost. And that's where they are now: they've tested the market, they know the parameters of a deal, and the asking price for Congress is now much, much lower than it would be had they asked for a St. E's style massive DHS campus.

Perhaps the press mis-represented the GSA's intentions (though I think there was plenty of skepticism from the business and real estate reporters on the ability of the GSA to make this cost neutral), but I really don't think the GSA ever intended for this to cost them nothing.

I really like this new approach from the GSA because it engages the real estate community in a way that (in my opinion) is likely to result in better government buildings and provide better value to the taxpayers.

At 6:50 PM, Blogger Richard Layman said...

well, I'll admit to some puffery. But the coverage and quotes back then implied something different.

And yes, I have written here and in many other entries about the constraints that GSA works under and how it makes developing space in the Washington area very difficult.

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