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The suds are flying in a water fight between a community-owned laundromat and Horning Bros. developers.
On a blistering hot day in early August 1995, around 60 people gathered under a tent in the parking lot of Columbia Heights’ Nehemiah Shopping Center, at the corner of 14th and Belmont Streets. Executives from Riggs Bank and PEPCO, local residents, and members of the choir from the Community of Hope Church had showed up for an event that elsewhere might not have excited much attention: the opening of a laundromat.
The new venture, called Big Wash, wasn’t your ordinary laundromat, with an absent owner and a dog chained up in the back room. Big Wash, rather, was a community-owned establishment, financed in part via shares sold to locals. The store quickly became a poster child for the revitalization of Columbia Heights. As recently as last spring, the Washington Post ran a warm and fuzzy profile of the place. “Entrepreneurs Build a Bubbling Business in Columbia Heights,” read the headline.
The enthusiasm was understandable. After all, the neighborhood’s image had been on a 30-year bad streak. After burning in 1968, large parcels of land sat fallow for decades, reverting from hapless landlords to an equally hapless city. So when something good popped up in Columbia Heights, reporters descended in search of the elusive man-bites-dog story.
A few years later, though, a growing pile of legal briefs has started to muddy Big Wash’s waters a bit. By 1997, the community-uplift project had turned into a battleground for a rumble between Big Wash and its Nehemiah Center landlord, Horning Bros. For the past three years, the little laundromat and the big property manager have been unable to agree on how much Big Wash should pay for the lifeblood of its business—water.
So far, no one’s come out clean. Big Wash officials say they’re abiding by their lease, and paint Horning as a tough landlord bent on squeezing them dry. Horning Bros., on the other hand, portrays Big Wash as a freeloader that’s shirking its share of the water bill. So far, the laundromat has won at one trial. But the landlord has appealed, and Big Wash says it can’t afford to lose Round 2. “If Horning gets all the money they want from us, we’ll be out of business,” says Reuben McCornack, the chair of Big Wash’s board.
For years, Henry Gibson dreamed of opening a cooperative laundromat. Sitting on his stoop, the longtime Columbia Heights resident watched neighbors push, roll, and lug bales of laundry up and down 14th Street.
With help from nonprofit housing developer Hope Housing and about 20 of his neighbors, Gibson took his idea door to door in the early ’90s, selling $100 shares in the business, and eventually raising $30,000 in start-up funds. He lobbied the nonprofit Development Corporation of Columbia Heights (DCCH)—and in 1994, Big Wash won a spot in the Nehemiah Center, which DCCH was then building with Horning Bros. atop a blighted patch of the street.
In its first two years of operation, the store created eight jobs and returned $175 in dividends per share to its 30 or so small-time local stockholders. “There were people who bought shares who really had to think about whether they could afford to give up $100. When you buy stock, you have no guarantee of anything ever showing up again, but it’s a risk that people in the neighborhood felt they needed to take,” says shareholder and former D.C. Shadow Representative John Capozzi, who had an office at 14th and U Streets NW when he bought five shares.
Big Wash’s early success, though, may have owed more to its lease than to a booming laundry market. Nehemiah tenants pay a proportional percentage of taxes and assessments, based on how much of the center they occupy. And the contract’s definition of “taxes” includes “water and sewer rents and other governmental impositions and charges of every kind and nature whatsoever.”
The lease sets Big Wash’s proportionate share at 9.2 percent—regardless of the fact that a laundromat will always use more water than neighbors like hair salons and convenience stores.
Horning Bros. claims that D.C.’s Water and Sewer Authority didn’t bill the shopping center until early 1997. After that, however, Horning charged tenants on the basis of how much water they used, which Horning calculated by hiring a water-management expert, because Nehemiah has only one water meter. Using the expert’s figures, the landlord decided that Big Wash owed an extra $1,000 a month to cover its share.
To Horning, the charges seemed like a straightforward request. But to Big Wash managers, it was a shakedown. As far as they’re concerned, Horning Bros. had negotiated the lease and known from the beginning that Big Wash was a laundromat. “If they messed up, they shouldn’t come crying to us about it,” says McCornack.
But the language in the lease isn’t as clear-cut as McCornack might like. Horning Bros. found support for its arguments in a different section of the lease, which reads, “If any utility is not separately metered, Tenant shall pay Landlord its share of the cost of such utility within five (5) days after receipt of Landlord’s bill therefor.”
“If your main product is washing people’s clothes, you have to pay for supplies. Their main supply is water,” says Joseph F. Horning III, son of the Horning Bros. president and co-founder—who has no official job at the company, but sometimes acts as his father’s spokesman. “Those are the costs of doing business.”
Unable to iron things out on its own, Horning took Big Wash to Landlord and Tenant Court in June 1997. Two months later, after the laundromat’s lawyers cited examples of case law and D.C. Code in which water costs are defined as “water rents” rather than as a utility, Judge Ann O’Regan Keary ruled in favor of Big Wash. Keary acknowledged that the landlord’s lawyers may have screwed up in drafting the lease. “This court is not without sympathy for the landlord,” she said, “but the landlord’s remedy does not lie within this court but rather perhaps in an effort to renegotiate the lease with the tenant.”
Horning Bros. hired another lawyer and appealed the case in October 1998. “We believe the judge is mistaken,” says Roger D. Luchs, the attorney handling the appeal. “The other tenants are paying their share. Big Wash uses 80 percent of the water, but they pay only 9 percent.” A Superior Court judge will hear the company’s appeal in March.
Still waiting for a ruling from the court, Horning Bros. looked for other ways to go after Big Wash’s managers. In December 1998, the landlord filed a separate lawsuit in Superior Court seeking to recover the money it wants from Big Wash’s guarantors, the handful of founders who promised to cover debts if Big Wash became unable to. If Big Wash went under, these same guarantors would be expected to pay off $50,000 in start-up loans.
Among the guarantors Horning’s lawsuit named are Michael Bright, the former president of the Big Wash board, who recently became unemployed; Joe Pearson, who works part time at the laundromat; and Gibson, who was permanently disabled and confined to a nursing home after he suffered a stroke last May. (Horning Bros. later dropped Gibson from the case after learning about his health.)
Big Wash, in turn, has named members of the Horning family in a civil suit disputing a hike in common-area maintenance, or CAM, fees. Big Wash seeks an accounting of the CAM charges. There is no date yet for oral arguments in that case. “We’re only doing this as a fight for survival,” says McCornack.
“They named my aunt, my mother,” responds Joseph F. Horning III. “This is purely harassment.”
The whole water fight might be dismissed as an obscure neighborhood scrap if it weren’t for the fact that Horning Bros.—and its relations with tenants like Big Wash—took on a much bigger profile as of last September. That’s when the District’s Redevelopment Land Agency granted the firm, and Grid Properties of New York, the rights to redevelop city-owned land near the new Columbia Heights Metro station.
During its campaign to get the development rights, Horning presented itself as the only competitor with local grass-roots connections. But an organized group of neighbors who supported another developer have blasted the decision as having more to do with crony politics than good development.
Big Wash, in fact, isn’t the only tenant in the Nehemiah Center to gripe about charges. When Horning Bros. sent its terse form letter to all tenants informing them of the CAM hike, the company cited increased security as one of several new expenses. But one store owner, who asked not to be identified, says she was irate to see CAM costs shoot up from $340 to $800 a month. Horning did, in fact, hire security guards to patrol the mall.
Horning “is a typical landlord in that they tried to get as much as they could,” says a business owner who briefly had a shop in the Nehemiah Center before packing it in for lack of business. “They found themselves in a bad lease situation for themselves and tried to spread costs over to tenants.” All of the tenants eventually agreed to pay the CAM increase. Other Nehemiah store owners and several landlord-tenant lawyers say there is nothing unusual about Horning Bros.’ tactics or its request for higher CAM fees.
But Horning wasn’t supposed to be your typical landlord—at least not at the Nehemiah Center. The center, after all, was a community development project built with hundreds of thousands of dollars in public subsidies for the purpose of revitalizing a battered neighborhood. “Horning and DCCH are not living up to the spirit or the letter of their commitment to help neighborhood businesses. We ask that they honor their commitment to the city and the funders,” McCornack says.
The Hornings don’t take issue with such lofty expectations. In fact, Joseph Horning III is quick to point out that Horning Bros. lost $500,000 on the project during the first four years the Nehemiah Center was open. Only since this past fall, when the company leased the center to full capacity, has it come out of the red. “The Nehemiah Center is my proudest achievement,” says Horning Bros. President Joseph Horning Jr. As far as negotiating a settlement with Big Wash goes, “We’d certainly rather go that route than go to court,” he says.
Yet all attempts at brokering a settlement have failed. Last spring, Big Wash asked Leroy Hubbard, a longtime neighborhood resident who sits on the board of DCCH and Hope Housing, to jump-start negotiations. Hubbard says he went to Joseph Horning Jr., who agreed to an informal meeting. But when Big Wash insisted on bringing an attorney, Horning balked.
Last fall, Luchs brought up the idea of settlement talks with Big Wash attorney Kathleen O’Reilly (who’s also married to McCornack), but neither side could find common ground to even start negotiations. In an affidavit filed in Superior Court, Big Wash board member and retired University of the District of Columbia Professor of mechanical engineering Allen Uzikee Nelson says he approached DCCH president Robert Moore about negotiations. “Bob’s final comment was, literally, that ‘We’ve got you by the balls,’” wrote Nelson.
Besides this comment, Moore’s role in the dispute has been noticeably low-key. As the majority owner and general managing partner, Horning Bros. is responsible for settling disputes with tenants. Moore has no legal obligation to step in, but his absence baffles people who’ve been watching Columbia Heights. “The community development corporation should’ve been paying closer attention to what’s been going on at the property,” says J. Christopher Walker, program director of the Urban Institute’s Metropolitan Housing and Communities Policy Center. “The community development corporation is in the business of making these projects work. They can’t just walk away and say, ‘Private developer, handle this.’” (Moore did not return several calls seeking comment.)
Moore’s low profile contrasts with the role he played a few years ago, when he took the lead in developing the Nehemiah Center, buying the vacant lots from the city, lining up public financing, and bringing in Horning Bros. as the co-owner, builder, and property manager.
And the reason for the reticence may lie somewhere in the vicinity of 14th Street and Park Road NW. The group Moore heads, DCCH, is a partner in Horning’s Tivoli Theatre project, part of the redevelopment package at the new Metro station, as well. With the selection already controversial, trouble at Nehemiah—which helped the developer get the deal in the first place—would only fuel community anxiety over another DCCH-Horning production.
“We’re in a difficult position,” says Joseph Horning III. “Other developers would close up the shopping center if they didn’t see a profit right away. But that’s not my father’s style.”
But Big Wash doesn’t buy Horning’s protestations. “We’re not asking for a free ride. We just don’t want to pay for unfair costs,” McCornack says. “Horning Bros. is a tough, take-no-prisoners operation. Joe Horning [Jr.] has a reputation for being a civic-minded developer, but that’s not the way we’ve experienced him.” CP