When governments sell land always put in clawback provisions

DC sold many school buildings in the 1980s and 1990s, mostly to nonprofit organizations.  The city's building inventory was large because segregation meant duplication of facilities.  Over time, many of these organizations sold the buildings off, to great profit.  But there was no provision in the sales contracts for the DC Public School System to get a portion of the increased sales price.

For example, Wormley School was sold to Georgetown University which eventually sold it to a developer for more than 5x what it paid ("University to Sell Wormley Property," Georgetown Hoya).

Although to be fair, partly they took advantage of new market conditions.  When the property sold first, DC was just about ready to take off in the c. 2000 change of consumer attitudes towards urban living which again favored cities.  

It makes sense then that the building is now condos but DC should have gained more from the transaction ("Apartment in Georgetown’s Wormley School Lists for $2.8 Million," Mansion Global).

Another building sold to the DC Teachers Credit Union, and they had offices there for awhile, has long since been converted to in-demand Capitol Hill condominiums.

Parkland, Florida is dealing with that now.  Decades ago they sold for $850,000 a piece of property to the county school system for an elementary school to be built in their community.  But the school was never built and the school system recently sold the same property for $14 million to the Broward Health hospital system ("Parkland seeks $850,000 refund from school district after land sale to Broward Health," Fort Lauderdale Sun-Sentinel).

Parkland wants their money back.  But they, like DC, didn't put provisions in the contract that the property should revert back to them if never used, or to be paid back the cost of the property if it were to be sold to a third party.

Traditionally, land bequests to governments and nonprofits most often include this provision of giving land with conditions that the property revert back to the original owners if the use changes.  

A D.C. streetcar passes the Douglas Memorial United Methodist Church near the H Street Corridor in Washington on March 7, 2018. (Evelyn Hockstein/For The Washington Post)

That's why the United Methodist Church on H Street NE in DC, formerly a "white" church, decided to integrate as the neighborhood changed.  They didn't see a future as a "white church" and wanted to sell the property but the conditions of the bequest made them change course ("This H Street church was a hub of the community in the 1960s, then came the riots. It never thrived again.," Washington Post).

Cy Pres Review.  I am not a lawyer, so take this with a grain of salt, but in some states, the State Attorney General's office is active in overseeing land sales and other dissolution acts involving nonprofits.  Such sales are supposed to be made with the continuation of the  property or monies still being used by nonprofits.

This is called Cy Pres Doctrine ("An Historical and Empirical Analysis of the Cy-Près Doctrine," University of Louisville School of Law Legal Studies Research Paper Series No. 2023-3) and the funds involved, Cy Pres Funds  In Pennsylvania this is in the news because of the closure of the University of the Arts.  A bunch of buildings were sold off by the bankruptcy court, not necessarily for non profit uses.  And a number of schools agreed to take their students.  

The Moore College of Art, the only independent private school of art in the city, argues it should get the bulk of the money, because it's closest organizationally to what UAS was institutionally ("Who should get the $63M endowment money of UArts? Depends on who you ask," WHYY/NPR, "University of the Arts’ $77 million endowment remains mired in court proceedings two years after the school closed," Philadelphia Inquirer) and New York AGs have been particularly active.

Among others, the AG was involved in the selling of Girard College and the move of the Barnes Institution ("Changing Donor-Imposed Restrictions: Cy Pres and Equitable Deviation," New York Community Trust) from Lower Merion Township to Philadelphia.  

Speculative ventures such as constructing this building without having tenants lined up put Cooper-Union at financial risk ("The Indicator: Cooper Union, I Love You but You’re Bringing Me Down," ArchDaily).

In New York State, a major case concerned Cooper-Union College, owner of the land under the Chrysler Building, the lease funds free tuition for the school, but the school wanted to start charging tuition because of financial exigency.  

They were allowed to do this, but with strict conditions ("A Second Chance for Cooper Union").

DC's AG hasn't been particularly proactive in these situations ("DC's Source Theater sold: cause for a cy pres review?").  I argued review should have occurred with the sale of the YWCA in Downtown and the Corcoran Gallery--its collection to the National Gallery, its building and art school to George Washington University ("When BTMFBA isn't enough: keeping civic assets public through cy pres review").

The YMCA at Rhode Island and 17th Street NW as another example.  I never got around to writing about a similar experience  with the YMCA in Dupont Circle. They sold their property to a developer and the recreation use at that site was abandoned.

YMCA said they didn't have experience with a facility serving both workers and residents and that they tried their best to increase membership but were unsuccessful ("Downtown YMCA to close amid rising competition from upscale gyms," Post; "Akridge to redevelop YMCA at 1711 Rhode Island as boutique office," Washington Business Journal).  From the Post:

The YMCA approved a deal to sell the hulking, 1970s concrete building to Akridge, a big local developer, for an undisclosed amount. At 100,000 square feet, it’s the YMCA’s biggest facility in the region, and the property, according to the D.C. Office of Tax and Revenue, has an assessed taxable value of $27.2 million. ...

The National Capital facility was never a typical one for the YMCA. The nonprofit organization traditionally serves neighborhoods, not business districts, and Reese-Hawkins said the money from the sale of the building will boost the organization’s community, after-school and summer programs throughout the region.

She hopes to eventually open another full-service YMCA in the city and is in talks with community leaders to assess the best fit. There are no gyms in the District east of the Anacostia River, and Reese-Hawkins said it is possible that one could land there.

The building that will replace the YMCA.

They never opened another full-service YMCA in DC.

The AG got involved in some cases but didn't meaningfully shape the outcome.  

For me, except DC City Government also lacks the imagination, Corcoran Galley should have been transferred to the city creating its first locally controlled arts museum--the other museums in the city are run by the federal government.  And the Corcoran School of Art and Design should have been merged into UDC ("Should community culture master plans include elements on higher education arts programs?").

With the sale of the YW and the YM the organizations argued that the money received would support their programs generally.  But the sale of these properties came at the expense of the availability of recreational resources made available to residents in the center city, and they had received membership fees and donations for years from patrons of these facilities, making the argument for there being a clear DC citizen interest.  

Both the YW and YM should have been "forced" to put some of that money towards the creation of a new city recreation facility serving those areas--if the city's Department of Parks and Recreation had a clue.  A proactive AG and some consultants could have shifted the dialog.

Parkland and cy pres?  With the Parkland case, I'd argue that the State AG could step in and do a cy pres review, and as part of a settlement, make the City of Parkland whole.