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Board OKs Deal to Save Affordable Housing

County partnership will help preserve Gates of Arlington. But community activists say it comes at too high a price.

It was buried, deep at the end of the board’s agenda, 10 hours into the meeting.

At the end of their May 18 meeting, at 6:30 p.m., County Board members approved the beginning of a partnership to preserve affordable housing in Arlington.

The deal committed $500,000 of county money to AHC Inc., an Arlington non-profit dedicated to preserving the county’s stock of affordable housing. AHC would use the money as a down payment for the Gates of Arlington, a 465-unit garden apartment complex near Ballston Common Mall.

If AHC succeeds in acquiring the Gates, it would spend $35.5 million to purchase the building, along with another $10-15 million renovating the building. The entire partnership could require a county loan of $2 to 8 million to AHC, along with county backing for bonds issued by AHC.

Community activists said the action was a shameful override of the public process. "This item wasn’t on Monday’s agenda. It’s not on the agenda posted outside," Wayne Kubicki told Board members. "It seems like the ‘Arlington Way’ has been redefined to ‘Do it quickly and quietly.’ I’m surprised the lights are still on here."

But Chris Zimmerman, County Board Chair, said the Gates of Arlington simply took its place among a line of affordable housing projects that the county had to act quickly to save.

"Woodbury Park springs to mind," he said. "It should surprise no one, with the recent attempt to acquire the Gates of Arlington by a private owner, that the county would move to try to prevent that from happening."

It was the end of fevered real estate negotiations. "It’s true this came up fast," Zimmerman said. "But that’s the nature of the real estate market: You have to act fast."

In fact, the terms of the deal had been completed less than a day before the county meeting. "Right up until the eleventh hour, until Friday, we were in negotiations," said Walter D. Webdale, president of AHC. "We still haven’t signed contract on this yet."

<b>THAT’S GOOD,</b> because there are problems with the deal that still need to be worked out, Kubicki said.

"The County is putting up half a million dollars for… earnest money, which the manager acknowledges we may not get back," he said Saturday. "But it gets worse. The deal with AHC contemplates the County will guarantee some $16 million in secondary, unsecured debt for at least two years."

Kubicki, a former member of the county’s Affordable Housing Commission, said that the deal between Arlington and AHC is unusual for affordable housing preservation. The terms of the mortgage would not allow AHC to proceed with refinancing or renovations on the property for the first two years the group owned the Gates.

"The financial assumptions here assume the availability of low-cost financing and tax credits two years from now," he told the board. "The interest rate picture could change. So could the tax laws," leaving the county holding the bag, he said.

But Kubicki, along with Tim Wise and Robert Molleur, said the county’s involvement in the Gates of Arlington deal went beyond committing county money on questionable terms.

There was already an offer on the table for the Gates of Arlington, from Clark Construction, they said. That offer fell through only when the county threatened to condemn the Gates if the current owner, Hall Financial Group, didn’t sell to AHC.

"Is this what property rights have deteriorated to in the People’s Republic of Arlington?" Molleur asked.

Even county employees called the threat of seizure unfair, Kubicki said. "I have a quote, that the heavy hand of government threatened condemnation."

<b>ZIMMERMAN WOULDN’T SAY</b> whether the county had threatened Hall with eminent domain. "It would be inappropriate for me to comment on those negotiations," he said.

But he didn’t reject the use of eminent domain in other situations. "Obviously in negotiations, we have to advance the interests of the county," he said, and eminent domain was sometimes a tool to do just that.

Besides, Zimmerman noted, eminent domain is not inherently unfair to property owners: when eminent domain is invoked, county government would still end up paying market rate to compensate the owners. "I’m not saying that we used it in this case," he added.

Webdale said that the furor over the deal was misplaced. AHC has partnered with the county many times before, and has always repaid its loans.

Arlington’s board came through when it mattered on the Gates of Arlington, though, Webdale said. "We wouldn’t have been able to sign a letter of intent without the county," he said. "We’ve worked with the county before. But I’ve felt such backing on anything from the county board as here."

The board’s actions saved more than 1,100 people from eviction from the Gates of Arlington, and it has important ramifications for the future, Webdale said. "There are more Gates around, and the real estate market gets tighter and tighter."