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‘Berg’ Tax Credits Approved — Demolition Cost Escalates

Samuel Madden Homes (Downtown), known as "The Berg," got a boost and a temporary setback last week in the decade-long quest to transform the site into mixed-market housing.

The boost came in the form of final approval of two essential tax credits from the Virginia Housing Development Authority (VHDA) that will amount to nearly $11 million over the next 10 years. These credits were pivotal in making the innovative project viable to the chosen developer, Eakin/Youngentob Associates.

Approval of the credits by VHDA was put in jeopardy by a federal lawsuit filed by the Alexandria Resident Council Inc. (ARC) against the U.S. Department of Housing and Urban Development (HUD) in November 2002, challenging the process for awarding the redevelopment contract. Final resolution of the ARC suit remains in the hands of Judge Thomas Penfield Jackson, U.S. District Court, Washington, D.C.

In support of its contention that residents, through ARC, had not been given equal opportunity to gain ownership on the site, the Resident Council sought an injunction to halt demolition pending adjudication of the case. When this was rejected, they sought a stay on that ruling, which was also rejected by the U.S. Court of Appeals for the District of Columbia. This enabled the Alexandria Redevelopment and Housing Authority (ARHA) to move forward in seeking the tax credits from VHDA.

DUE TO THE extreme competition for such credits from Housing Authorities throughout the state, VHDA will usually not approve applications that "have a legal cloud" over them until that is resolved, said Carlyle C. Ring Jr., vice chairman, ARHA. The primary ARC complaint is still pending before Jackson, awaiting a legal brief from HUD.

When the Appeals Court denied the stay, ARHA was free to proceed with its application for the tax credits, known as Competitive Low Income Housing Tax Credits. VHDA awards them only once a year.

The deadline for filing was March 14. The Appeals Court decision came down March 3. The credits also apply to the three off-site locations that are an integral part of the total project. They are located at 1700 Braddock Road, 423 S. Reynolds St. and 325 S. Whiting St.

Demolition of the project, bounded by Royal, Pitt, Princess and Pendleton streets, is now under way. It is scheduled to be completed by late summer.

However, at its May 19 meeting, the ARHA Board of Commissioners was notified "that additional asbestos material has been uncovered" and "in order for the contractor to proceed with the additional services, the CEO, as contracting officer, must execute a Change Order pursuant to the contract."

In a memorandum dated May 5, ARHA executive director William M. Dearman informed the Board, "On April 15 the (demolition) contractor removed a portion of the ceiling of the first building ... and uncovered additional asbestos material. Work was stopped in order to discover the extent of the newly discovered material."

According to Dearman, "The material consists of ductwork wrapped with asbestos paper, which is located above the first-floor ceiling and travels from the heating unit, through the floor joists to the registers entering the second floor bedrooms and baths."

DEARMAN EXPLAINED that this discovery constituted "an unforeseen condition and would be included in the original bid had it been identifiable." This, in turn, triggered a financial increase to the project costs, initially estimated by the contractor, Wrecking Corp. of America, at approximately $450,000, according to Dearman.

However, "after a review of methods and materials ... that change order was negotiated and finalized at $141,450. This change in the scope of work will also extend the contract period by four weeks to Aug. 4," Dearman informed the Board.

He further explained, "ARHA was presented with the Change Order on 5/7/03. ... Any delay in execution would have delayed the project and cost ARHA additional monies." Dearman reminded the Board that he, as the contracting officer for the Agency, "requires the authority to execute the Change Order... to keep the project moving."

Dearman requested the Board ratify his previous decision, which it did. The extra cost will be paid from the HOPE VI grant funds, according to Dearman. The project must be completed by the end of 2005 to remain eligible for federal tax credits, according to funding specifications.