Credit: Darrow Montgomery

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How hard could it possibly be for D.C. to get a new grocery store built in Ward 7, where residents have been clamoring for more fresh food options for decades? If the saga of the Capitol Gateway Marketplace project is any indication, it looks damn near impossible.

The District is currently engaged in a three-way battle with its own public housing authority and a Baltimore-based developer to try and make progress at the Northeast site, where two different mayors have spent the better part of the past 11 years trying to see a mixed-use project (complete with a new grocer) come to fruition. The city is currently trying to seize the land owned by the D.C. Housing Authority via eminent domain, a strategy cooked up by Mayor Muriel Bowser and her team last year, but the resulting legal battle has gotten ugly in recent months. It seems increasingly likely to Loose Lips that progress is still years away. Court documents and internal DCHA memos detail a bruising dispute over the long-stalled project.

And all this ugliness shines a light on the city government’s problematic relationship with DCHA, pointing to why the state of public housing in the District remains so dreadful. The housing authority controls this valuable piece of property, located adjacent to the Capitol Heights Metro station on the city’s eastern border, because it used to be home to a variety of public housing properties that were torn down and slated for redevelopment two decades ago. But DCHA could never manage to fulfill its stated mission and actually build any public housing there. Instead, the city stepped in and tried to wrest control of the land for its own purposes, sparking a legal firefight in the process.

“You have an entity that is, in theory, responsible for doing this stuff: Why not use them and let them do their job?” wonders Bill Slover, a former member of DCHA’s governing board recently ousted for raising questions about disputes just like this one. “It’s just a bully tactic that opens the door to what we already know: There’s no partnership between the city and housing authority.”

Before this article published, a DCHA spokesperson declined to comment on the project, citing the ongoing litigation, and a spokesperson for the Office of the Deputy Mayor for Planning and Economic Development, which is managing the project for the city, did not respond to requests for comment. After this article ran, DCHA Chief Operating Officer Rachel Joseph sent a lengthy email statement to LL, copying several DMPED employees, insisting that “the relationship between DCHA and D.C. government is not adversarial” and is, in fact, “the best that it has been in years.”

“It’s not accurate to say that our negotiations to determine a fair price stand in the way of or delay the grocery store,” Joseph wrote. “The plans for the grocery store can move forward as parties continue the negotiations and court process related to the fair price for the property.”

Others, having reviewed the history of the back-and-forth between DCHA and the District on the project, are not so sure.

“Given the urgent need for investment in the Capitol Gateway community and the potential benefit that investment could have on the lives of Black residents, it is troubling and unclear that DCHA, an independent authority of the District government, is choosing not to exercise its power,” the Council Office of Racial Equity wrote in an analysis of legislation authorizing the eminent domain action. “The mayor is right in her claim that ‘absent intervention by the District, residents near Capitol Gateway will likely remain robbed of the right to a full-service grocery store’…Unfortunately, DCHA is an accomplice to the robbery being committed.”

In many ways, Walmart is as responsible for the current mess at the site as the city and the housing authority. The company promised to build a store at Capitol Gateway, along with one at Skyland Town Center elsewhere in Ward 7, back in 2012, and that pledge was a key driver in advancing a broader project there. When Walmart suddenly backed out in 2016, the whole development fell apart. (Slover argues that then-Mayor Vince Gray should’ve known that Walmart never planned to fulfill its commitments east of the Anacostia, and only dangled the prospect of those stores to smooth its expansion elsewhere in the city; the company’s subsequent decision this year to pull out of a much wealthier area by shuttering its NoMa Walmart store lends some credence to that theory.)

Worse yet, Walmart essentially enabled inaction because it only chose to back out of the deal after signing a lease agreement with Capitol Gateway’s developer, a joint venture between DCHA and the private firm A&R Development. That means Walmart has been paying rent, to the tune of $1.3 million per year, even though it has no plans to open a store at Capitol Gateway. And that’s provided a steady income stream for A&R: not exactly a strong incentive for the company to pursue a replacement for Walmart, especially considering that the developer has generally withdrawn from D.C. business in recent years.

The District sought to break through this stalemate last year. D.C. struck a deal with Walmart in which the company would pay the city about $6.6 million to take over the company’s lease obligations. Then D.C. moved to use eminent domain to take the 12-acre property, aiming to cut DCHA and A&R out of the deal and restart the process with other private partners. Bowser says she already has an agreement with Giant to open a new store there if the city can ever resolve this dispute.

D.C. intends to pay just over $14.4 million to acquire the site, but the matter of who gets that money has fueled a lengthy legal challenge to the eminent domain action. The city has outlined plans in court documents to pay DCHA that money, since it owns the land, much to the dismay of A&R. The company countersued the city (and its putative partner, DCHA), claiming it’s owed at least half of that amount, in addition to the $6.6 million Walmart paid D.C. directly to resolve the lease. This approach effectively “wiped out [A&R’s] multi-million dollar income stream without offering [A&R] a penny,” the company’s lawyers at the prominent land-use firm DLA Piper wrote in an Aug. 15 filing. The developer found this particularly offensive because it “spent millions of dollars improving the property,” and took out a $6 million loan (personally guaranteed by CEO Theo Rodgers) to do so, financing it with Walmart’s rent payments.

“After years of work, the political winds shifted, and the District, despite the numerous
interlocking contractual obligations, began crafting a way to cut [A&R] out of the development, take the property, and pay all of the just compensation to its affiliate DCHA,” the company wrote. A&R’s attorneys declined to comment on the case, and Rodgers did not respond to a request for comment.

Both the city and DCHA have argued in court papers that their plans are completely appropriate, considering the terms of the lease A&R signed with DCHA to build on the site state that the developer can only expect compensation equal to the value of anything it actually built there, not the land itself.

“In the absence of any buildings at all—despite that [A&R] had an entire decade to develop Capitol Gateway—the condemnation clause reasonably directs that nothing be allocated to [A&R],” DCHA wrote in a Sept. 26 motion. “While [A&R] now laments that result, in the
absence of any buildings, [A&R] should realize precisely the benefit that it bargained for.”

The case could continue to drag on for some time. Court records show the two sides filing witness lists and other documents to prepare for trial, though they have agreed to several mediation sessions (set to start Thursday and run through the fall) to try and avoid that outcome.

But there’s another fight between the District and DCHA over this property. DCHA has also considered challenging how much money the city would pay the the agency for the land, according to internal DCHA documents forwarded to LL. Lorry Bonds, the housing authority’s senior vice president and general counsel, wrote in an Aug. 9 memo that DCHA secured an independent appraisal suggesting the land is worth closer to $21 million instead of the $14.4 million D.C. wants to pay. The city even offered $20 million for the property back when DCHA was trying to dissolve its partnership with A&R to try and avoid the eminent domain action, court records show.

“DCHA will vigorously argue for the maximum value of the Marketplace property in a final monetary judgment,” Bonds wrote to members of the DCHA’s Board of Commissioners. She noted that board members should not discuss the matter with then-board member and former Deputy Mayor for Planning Economic Development John Falcicchio, considering his agency was the one engineering the eminent domain plan, and that he’d recused himself from the discussions; Falcicchio would ultimately lose his spot on the board amid the Council’s reshuffling plan and resign as deputy mayor while facing sexual harassment allegations a few months later.

Bonds added that DCHA deliberated about objecting to the entire eminent domain action, but thought the agency would have more success in challenging the land’s value, according to the memo. Joseph wrote in her email that “DCHA decided against objecting to the entire eminent domain action in view of Walmart’s failure to honor their commitment and in support of meeting the needs of District residents in Ward 7.”

Slover continues to believe that the city’s rationale for taking the site is legally questionable, and has raised those concerns with the District’s attorneys, but they look unlikely to change course.

“The city said in its filings that it wants to take the property because it’s unsafe and an eyesore,” Slover says. “But couldn’t you apply that to any property DCHA owns? They all look like shit. Why stop there?”

In any event, that wrangling could add even more time and complexity to an already thoroughly screwed up process. The eminent domain move, as pitched by Bowser and Falcicchio, was designed to speed things up, but progress at Capitol Gateway looks as stuck as ever.

Gray, now the Ward 7 councilmember, pressed Bowser’s deputies on this point during Friday’s Council hearing on the mayor’s new budget proposal, noting that the spending plan includes $25 million for infrastructure improvements at Capitol Gateway in fiscal year 2024 but there’s no telling if the eminent domain proceedings will be wrapped up by then. City Administrator Kevin Donahue replied that he wasn’t sure where things stood, but is hopeful the city will be ready to start construction and spend that money by “next fiscal year,” which starts in October.

“The people of Ward 7 desperately want to know,” Gray said. LL suspects they may not learn anything for some time yet.

This story has been updated with comments from DCHA.