Clues Suggest January Closed F.C. Council Sessions Involved Considerable Heartburn

EVAN GOLDMAN of EYA (second from right) spelled out the modifications to the agreement with the City of Falls Church for development of the 10.3 acre west end project to the City Council at its work session Monday. To his right is PN Hoffman’s Shawn Seaman. (Photo: News-Press)

Although everyone kept their cool at Monday night’s Falls Church City Council work session when terms of a modified agreement between the City and the development team of EYA, PN Hoffman and Regency (now known as the Falls Church Gateway Partners) for development of the 10.3 acre site on the City’s high school-middle school property designated for dense economic development were first made public, offhand remarks during the course of the discussion indicated that there was a lot more anguish involved in the four lengthy closed sessions the Council held on the subject in the last month than was being let on.

No sooner had the ink dried on the original agreed-upon initial terms between the two parties in December than the series of marathon closed sessions held in January took place. For as much pride as the City took in the transparency and openness of the process leading to the December compact, nothing was public about what transpired in the January closed sessions. At the beginning of the first one, Councilman David Snyder protested that the work was having to be done in closed sessions and actually voted against going there.

But he was quickly appraised of the seriousness of the matter, apparently offering no subsequent comment. On Monday night, he said only that “I commend the City Council for dealing with this difficult situation” in a manner that resulted in net additional benefits to the City.

City Manager Wyatt Shields said only that there were “financial challenges” that had surfaced, requiring a “give-and-take,” with “issues having been uncovered in the developers’ assumptions.”

Councilman Phil Duncan referred to “a very intense process” in the closed sessions and that “it was unfortunate that there needed to be changes so soon.” Councilman Dan Sze conceded that he was “scared” at certain points in the process but that the eventual outcome was “a pretty happy-happy compromise” that has left him “very excited.”

Councilman Ross Litkenhous referenced a “crisis that has become an opportunity,” and said, “I am hopeful the last critical crossroad has been passed.”

Mayor David Tarter chimed in, “Let’s not make a habit of doing this,” referring to the process as “a blip in the road.”

Having discussed the modifications in a public session for the first time Monday, the Council will vote on them this coming Monday, Feb. 11.

Shields said that the project schedule, with the modifications, “remains on track.

Evan Goldman of EYA, the principal spokesman for the developers, stressed Monday that “this is an incredible project that will change the west end of Falls Church for decades to come.”

Shields said the new terms represent “a fair trade” that will “allow the City to build up capital reserves at the beginning.”

The initial terms, including a $44.5 million price for a 99-year lease on the 10.3-acre site remain the same. The changes, according to a City staff document circulated Monday, “Will help ensure that the development can be financed. As a successful project is a benefit to the City, City staff and the Council have worked to ensure that these changes not only improve financeability, but also improve the City’s financial position and the proposed development.”

Five modifications, hammered out in five lengthy closed sessions held by the City Council during the last month, call for the following: 1. a real estate tax deferral offset by a ground rent increase; 2. an increase in residential density allowing an additional 50,000 square feet in senior housing and an additional 100,000 square feet in residential density of either condominiums or studio and one bedroom apartments; 3. profit sharing providing the City with 25 percent of any increase in land value during the financing period prior to the commencement of construction of Phase 1; 4. the establishment of a capital event fee of .25 percent applied to the sale of condos in the project; and 5. the requirement of a $1.5 million security deposit.

A deferral of real estate taxes during the initial construction and stabilization period will be paid back through an increase in ground lease payments starting in 2029 and continuing for the remainder of the 99-year lease, according to the modification terms. Over the deferral period, the developers are projected to pay $12 million in real estate taxes, $4.5 million less than would otherwise be due over the period. To compensate for this deferral, there will be an increase in the ground rent of $200,000 per year escalating at two percent per year for the remainder of the 99-year lease. This stream of additional payments has a nominal value of $48 million and a present value of $7.1 million, according to the proposed modification terms.