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January 5, 2016

County Board overpaid more than twice the actual costs for the latest subsidized housing project on Columbia Pike

On December 12, 2015, the Arlington County Board approved giving about $19 million in local housing funds and up-zoning of a property to high-rise commercial development to create a new subsidized housing project with 173 apartments in two 7-story buildings on Columbia Pike. The county board approved this Arlington Presbyterian Church (APC) housing project despite evidence that the land cost was above other commercial sites, and the construction cost was more than double what an apartment should cost in the Washington, D.C. Metro area. A private nonprofit organization APAH and a pool of private investors and developers will build and own this project.

Then county board chairman Mary Hynes said during the board’s public discussion of the APC project that the $8.5 million cost of the) property was reasonable even though the county’s assessed tax value was half this amount $4.3 million. She said that a price of $5 million per acre is a reasonable for land already zoned for commercial use.
arl presbyterian church jan 16 pic3

Unfortunately, the county board paid a price of $7.1 million per acre. The property was not zoned for high-rise commercial use and thus worth far less. However, even using Ms. Hynes’ inflated price of $5 million/acre, the county should have only paid $6 million for the land, and thus overpaid $2.5 million or 42 percent.

The county staff report to the county board indicated APAH and the APC had privately and earlier agreed to the $8.5 million, and they asserted without proof that the commercial value of the property was really $10 million or about double the price of other commercial land in the county. Without substantiation of these ten million dollars, one can only conclude this is wishful thinking and hyperbole.

The county was NOT a party to the negotiation of this $8.5 million price, and had no assessment of the property’s value. The county was negligent in not obtaining its own independent assessment of the property as then zoned for residential and church use only.
APAH’s pool of private investors will actually own the project and land, and the county government did not become the legal owner of the property even though the count paid for the land. APAH and its investors are going to sell off residential lots behind the new buildings for single family homes. Some of this space is already used for a tot lot and for green space that will be lost. This land could have been kept for a small park and retaining green space for the neighborhood if the county government owned the property. With probably 300 tenants including children living in the new project, this park would have been used and sorely needed.
arl presbyterian church jan 16 pic3

The construction costs for the APC project are well above what industry sources indicate are multifamily apartment costs. A well known industry leader R.S. Means Company has estimated that hard construction cost of a new apartment in a 4-7 story building in the DC Metro region is between $172-200 per square foot. The cost per unit of the APC project was $395 per square foot. Thus, APC construction costs are twice what a new apartment should cost in the DC Metro area. Total hard construction costs for the APC project were about $41 million for 173 apartments or $237,000 per apartment which is roughly $395 per square foot for a 600-square foot apartment.
The combined over-costs for just land and hard construction costs (not even considering the other inflated costs) were about $22 million for a total project cost of $67 million.

Arlington Greens have asked the county board on several occasions to use competitive bidding to avoid overpaying for construction of new CAF projects such as these, but they always choose to use a sole source contractor. Other county construction projects are all bid and given to the low cost bidder. This is irresponsible stewardship of scarce county funds for housing assistance.

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