D.C. officials reached a milestone Wednesday when they closed a deal to help finance $3.7 million in upgrades and additions to the Calvary Bilingual Multicultural Learning Center in Columbia Heights.
It was the 100th deal under the District’s decade-old Revenue Bond Program, which has pumped more than $3 billion into community revitalization efforts throughout the District. But recent economic and political changes have clouded the future of the program and caused it to decline in popularity.
The program, by nearly all accounts, has been hugely successful in providing cash for nonprofit groups and universities that otherwise might not have found the money to fund needed upgrades. And it has attracted new office and retail space in areas that city officials have deemed in need of redevelopment.
Under the program, qualified nonprofit groups and manufacturers can receive loans at below-market interest rates, to be used for development or upgrade of facilities. Until last year, for-profit companies could receive the loans if they operated in certain underdeveloped areas of the city.
The loans are funded through the sale of tax-exempt and taxable municipal revenue bonds or notes.
Since 1994, the program has provided $43 million to public schools, $395 million for the arts and other cultural uses, and $1.1 billion for colleges. It has provided $98 million for businesses looking to move or expand in the District, including a recent deal by the National Association of Realtors to build its new headquarters on the site of an old gas station.
While the revenue bond program was wildly used in the late 1990s — the District dealt out a record $895 million in loans in 1999 — applications have dropped off in recent years. Michael Hodge, the District’s revenue bond director, said many of the larger organizations that received loans between 1995 and 2000 haven’t had a need for more funds since.
But the amount of loans paid has dropped also because interest rates have fallen so low that tax-exempt financing is not always an advantage for groups looking for funding.
While tax-exempt rates were once 2 percent to 2.5 percent lower than normal interest rates, the spread is now as little as a half percent. And that savings is often used up by fees to the additional lawyers and accountants needed to close tax-exempt deals.
“With the [interest] rate change, the rate benefit can diminish and can shrink to a point where it’s not as cost-effective,” Mr. Hodge said.
It is not clear whether for-profit companies will be able to apply for financing anymore under the District’s revenue bond program. A provision allowing for-profit groups to get funding if they operate in underdeveloped “Enterprise Zones” was not extended by Congress at the end of the year, and D.C. officials are working to have it restored, possibly by the end of the year.
But in the meantime, it is not clear whether all of the development projects in the city will get the money they need.
In other news…
• The U.S. Pharmacopeia will build two new buildings totaling 157,000 square feet at its Rockville headquarters. The $72 million project will allow USP to house all of its staff in one place.
• Property Lines runs Fridays. Tim Lemke can be reached at tlemke@washingtontimes.com or 202/636-4836.
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