Despite a booming commercial real estate industry that is the envy of almost every U.S. city, the District of Columbia is unable to account for more than $1 billion of public/private funding in fiscal 2012 intended for local, small- and minority-owned businesses, according to a city report.
And while Mayor Vincent C. Gray recently pledged to reform the dysfunctional program, known as Certified Business Enterprises, or CBEs, nearly a third of his appointees to a 17-member task force charged with recommending reforms come from companies found by the D.C. auditor to be involved with projects that failed to file required expenditure reports or meet CBE participation goals last year.
Some of the biggest construction companies in the city have been engaged in commercial projects for years that fall far below the required goal of 35 percent CBE participation. Some are involved with projects that neglected to file a report for the fiscal year that ended Sept. 30, as required by CBE agreements.
Only 25 of 247 development projects met expenditure goals and filed reports for fiscal 2012, the auditor’s report states. Meanwhile, 54 companies submitted the reports yet failed to meet CBE goals, and 168 failed to even file the disclosures.
With a total CBE expenditure goal of $1.4 billion last year, only $33.5 million could be accounted for as having met or exceeded individual project goals, the report states.
“Until [the Department of Small and Local Business Development] is able to determine the current status of those projects and assess the business opportunities provided, [the department] will be unable to determine the impact the construction projects had on the economic growth and stability of the impacted communities,” the report concludes.
The CBE program aims to stimulate and expand the District’s local tax base while “increasing the number of viable employment opportunities for District residents and extending economic prosperity to local business owners,” according to the report.
But while the report stops short of determining whether penalties of up to 25 percent of the CBE expenditure goal should apply, it raises questions for the very firms whose principals are charged with helping to fix the program.
Some of those principals told The Washington Times that as project managers, they are not responsible for filing CBE reports or ensuring compliance. Others declined to comment.
In a statement, Mr. Gray’s office said it is committed to reforming the CBE program and welcomes input from anyone “who has viable ideas to make it better.”
Harold Pettigrew, former director of the Department of Small and Local Business Development, said he was reticent to criticize the report; however, he described it as a “snapshot” of a program the department is not adequately funded to police.
A number of prominent figures on the mayor’s task force are involved with projects detailed in the report.
The report, for example, states that a $763,103 payment to “Hines Interests LP East Region” for the Association of American Medical Colleges Headquarters Project was misreported as a CBE expenditure. Bill Alsup, senior vice president of development at Hines said the association is responsible for filing CBE reports and that it was a clerical error.
Jair Lynch Development is project manager on a Capital Area Food Bank project that has seen zero dollars spent on CBE participation despite an expenditure goal of $6.3 million, according to the report. The company also is project manager at the Shaw Campus of KIPP D.C., a network of public charter schools where zero dollars have been spent toward a CBE expenditure goal of $4.2 million, the report states.
CBE expenditures at the Unity Health Care-Upper Cardozo Community Health Center, another project that Jair Lynch manages, could not be determined, because no report was filed for fiscal 2012. A representative of Mr. Lynch referred questions to the sponsors of the projects.
McKissack and McKissack, co-founded by Gray task-force member Deryl McKissack, is reportedly responsible for selecting a general contractor and ensuring contract compliance on the D.C. Public School Modernization Program. But the firm failed to require an expenditure report for the E.L. Haynes High School expansion in Northwest, the report states, despite a CBE expenditure goal of more than $3.4 million.
Ms. McKissack was unavailable for comment Wednesday.
At the first residential phase of Northwest One, a massive, half-finished New Communities Project headed by William C. Smith, which has two representatives on the mayor’s task force and received a $16.85 million city grant in 2011, only $6 million has been spent on CBE participation despite a contractual goal of $28.7 million. A spokesman for the company pointed to projects on which it has met its CBE goals, and pledged to meet those goals for all unfinished projects.
And on Tuesday, the Washington City Paper reported that two unnamed task force members are principals at companies overseeing Anacostia High School’s $62 million renovation, a project tainted by reports of fraud and the subject of a civil lawsuit to be filed by the city under the Racketeer Influenced and Corrupt Organizations Act.