B-123748, OCT. 27, 1955

B-123748: Oct 27, 1955

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OUR DECISION IS REQUESTED AS TO WHETHER AND UNDER WHAT CONDITIONS. HA (V-49110) MPH-1 WAS ENTERED INTO ON MAY 21. THE DISTRICT WAS OBLIGATED TO ASSUME ANY DEFICIT RESULTING FROM THE OPERATION AND MANAGEMENT OF THE PROJECT. WAS CANCELLED. OPERATION AND MANAGEMENT OF THE PROJECT WAS UNDERTAKEN BY CAPITAL UNDER CONTRACT HA (DCV-49110) MPH2. UNDER PARAGRAPH 7 OF THAT CONTRACT CAPITAL WAS AUTHORIZED TO CHARGE AGAINST RENTALS AND REVENUES ALL NECESSARY EXPENSES INCIDENT TO MANAGEMENT AND OPERATION OF THE PROJECT. CAPITAL WAS AUTHORIZED TO ESTABLISH A RESERVE FROM PROJECT INCOME TO MEET FUTURE EXPENSES FOR REPAIRS. THERE IS QUOTED IN THE LETTER OF APRIL 21. AS FOLLOWS: "THE COMMISSIONERS AGREE THAT BY VIRTUE OF THE FOREGOING ARRANGEMENT THE GROUND RENTAL AUTHORIZED BY FEDERAL PUBLIC HOUSING AUTHORITY TO BE RETAINED OUT OF GROSS RENTALS OF THESE DWELLINGS WILL BELONG TO YOUR AUTHORITY RATHER THAN THE DISTRICT.'.

B-123748, OCT. 27, 1955

TO THE HONORABLE SAMUEL SPENCER, CHAIRMAN, NATIONAL CAPITAL HOUSING AUTHORITY:

THE EXECUTIVE DIRECTOR'S LETTER OF APRIL 21, 1955, REQUESTS OUR DECISION CONCERNING DISPOSITION OF THE UNOBLIGATED BALANCE IN THE RESERVE FOR GROUND RENT ACCUMULATED UNDER CONTRACT HA (DCV-49110) MPH 2, ENTERED INTO ON AUGUST 29, 1946, BETWEEN THE NATIONAL CAPITAL HOUSING AUTHORITY, HEREINAFTER REFERRED TO AS CAPITAL, AND THE FEDERAL PUBLIC HOUSING AUTHORITY, HEREINAFTER REFERRED TO AS FEDERAL. THE CONTRACT RELATES TO THE OPERATION AND MANAGEMENT OF TEMPORARY HOUSING PROJECT V-49110 IN THE DISTRICT OF COLUMBIA UNDER TITLE V OF THE LANHAM ACT AS AMENDED, 42 U.S.C. 1521 AND FOLLOWING SECTIONS.

IT APPEARS FROM THE EXECUTIVE DIRECTOR'S LETTER THAT THE TENANCY NOW HAS TERMINATED AND TITLE TO THE BUILDINGS HAS REVESTED IN THE DISTRICT OF COLUMBIA FOR DISPOSITION AND REMOVAL OF THE HOUSING. ALSO, IT HAS BEEN INFORMALLY ASCERTAINED THAT A SETTLEMENT UNDER THE OPERATING AGREEMENT HAS BEEN EFFECTED BETWEEN CAPITAL AND FEDERAL. IN THE CIRCUMSTANCES, OUR DECISION IS REQUESTED AS TO WHETHER AND UNDER WHAT CONDITIONS, IF ANY, CAPITAL MAY RETAIN THE REPORTED BALANCE OF $88,705.39 IN THE RESERVE FOR GROUND RENT IN ITS LOW-RENT HOUSING FUND TO FURTHER ITS OVERALL PROGRAM OF PROVIDING LOW-RENT HOUSING IN THE DISTRICT OF COLUMBIA.

THE LETTER OF APRIL 21, 1955, REFERS TO DECISION OF SEPTEMBER 20, 1946, B -60353, TO YOUR PREDECESSOR AS APPROVING THE ESTABLISHMENT AND ULTIMATE DISPOSITION OF THE RESERVE FUND DERIVED FROM PAYMENTS IN LIEU OF TAXES. HOWEVER, AS YOUR EXECUTIVE DIRECTOR POINTS OUT, WHILE THE ORIGINAL SUBMISSION QUOTED IN THE CITED DECISION REFERRED TO THE GROUND RENT RESERVE, IT MADE NO MENTION OF THE ULTIMATE DISPOSITION TO BE MADE OF ANY BALANCE REMAINING IN THAT FUND AT THE TERMINATION OF THE PROJECT.

IT APPEARS THAT AFTER ERECTION OF THE DWELLINGS ON LANDS CONTROLLED BY THE DISTRICT, CONTRACT NO. HA (V-49110) MPH-1 WAS ENTERED INTO ON MAY 21, 1946, BETWEEN FEDERAL AND THE DISTRICT FOR OPERATION AND MANAGEMENT OF THE PROJECT. BY THE TERMS OF PARAGRAPH 2.04/E) OF THIS CONTRACT, THE DISTRICT WAS OBLIGATED TO ASSUME ANY DEFICIT RESULTING FROM THE OPERATION AND MANAGEMENT OF THE PROJECT. FOLLOWING EXECUTION OF THIS CONTRACT, THE DISTRICT BECAME CONCERNED WITH THE POSSIBILITY OF INCURRING A DEFICIT IN THE MANAGEMENT AND OPERATION OF THE PROJECT AND INSTITUTED NEGOTIATIONS WITH CAPITAL TO TAKE OVER THE PROJECT. AS A RESULT OF SUCH NEGOTIATIONS THE CONTRACT BETWEEN THE DISTRICT AND FEDERAL, INSOFAR AS IT RELATED TO THE MANAGEMENT OF THIS PROJECT, WAS CANCELLED. SIMULTANEOUS WITH SUCH CANCELLATION, OPERATION AND MANAGEMENT OF THE PROJECT WAS UNDERTAKEN BY CAPITAL UNDER CONTRACT HA (DCV-49110) MPH2. UNDER PARAGRAPH 7 OF THAT CONTRACT CAPITAL WAS AUTHORIZED TO CHARGE AGAINST RENTALS AND REVENUES ALL NECESSARY EXPENSES INCIDENT TO MANAGEMENT AND OPERATION OF THE PROJECT. UNDER PARAGRAPH 7/B), CAPITAL WAS AUTHORIZED TO ESTABLISH A RESERVE FROM PROJECT INCOME TO MEET FUTURE EXPENSES FOR REPAIRS, MAINTENANCE AND REPLACEMENTS.

APPARENTLY AS INDICATIVE OF CAPITAL'S CLAIMED RIGHT TO RETAIN THE RESIDUE FROM THE GROUND RENT RESERVE, THERE IS QUOTED IN THE LETTER OF APRIL 21, 1955, AN EXCERPT FROM A LETTER OF AUGUST 20, 1946, TO CAPITAL FROM THE ACTING PRESIDENT OF THE BOARD OF COMMISSIONERS, AS FOLLOWS:

"THE COMMISSIONERS AGREE THAT BY VIRTUE OF THE FOREGOING ARRANGEMENT THE GROUND RENTAL AUTHORIZED BY FEDERAL PUBLIC HOUSING AUTHORITY TO BE RETAINED OUT OF GROSS RENTALS OF THESE DWELLINGS WILL BELONG TO YOUR AUTHORITY RATHER THAN THE DISTRICT.'

ALSO, REFERENCE IS MADE IN THE LETTER OF THE EXECUTIVE DIRECTOR TO THE FACT THAT WHILE CONTRACT HA (DCV-49110) MPH 2, SPECIFICALLY REQUIRES PAYMENT TO THE DISTRICT OF ANY RESIDUE IN THE RESERVE FROM PAYMENTS IN LIEU OF TAXES, NOTHING IS CONTAINED IN THE CONTRACT CONCERNING THE ULTIMATE DISPOSITION OF THE RESIDUE OF THE GROUND RENT RESERVE.

WHILE IT IS TRUE THE CONTRACT CONTAINS NO SPECIFIC PROVISION CONCERNING THE ULTIMATE DISPOSITION OF THE GROUND RENT RESERVE, THE CONTRACT DOES MAKE SPECIFIC REFERENCE TO THE AGREEMENT ENTERED INTO BETWEEN CAPITAL AND THE DISTRICT FOR MANAGEMENT AND OPERATION OF THE PROJECT. THE AGREEMENT REFERRED TO IS CONTAINED IN AN EXCHANGE OF CORRESPONDENCE BETWEEN THOSE TWO AGENCIES. SUCH CORRESPONDENCE CLEARLY ESTABLISHES THAT THE DISTRICT AUTHORIZED THE ESTABLISHMENT AND RETENTION BY CAPITAL OF THE TWO RESERVE FUNDS WITH THE UNDERSTANDING THAT ANY UNEXPENDED BALANCE OF EITHER OF THE TWO FUNDS WOULD BE TRANSFERRED TO THE DISTRICT UPON TERMINATION OF OPERATION OF THE PROJECT. THE RECORD SHOWS THAT PRELIMINARY TO SUCH AUTHORIZATION YOUR EXECUTIVE OFFICER IN LETTER OF JULY 24, 1946, TO THE SPECIAL ASSISTANT TO THE ENGINEER COMMISSIONER, STATED THAT IF CAPITAL SHOULD RETAIN THE GROUND RENT FUND TO AVOID A DEFICIENCY, THAT FUND--- LIKE THE FUND FOR PAYMENT IN LIEU OF TAXES "WOULD BE PAID TO THE DISTRICT IN WHOLE OR IN PART AT THE TERMINATION OF THE (OPERATING) AGREEMENT TO THE EXTENT IT IS NOT REQUIRED FOR EXPENSES.' FROM A REVIEW OF THE ENTIRE RECORD, IT APPEARS CLEAR THAT THE PARTIES INTENDED THAT THE RESIDUE FROM BOTH OF THE RESERVES WOULD BE PAID TO THE DISTRICT AT TERMINATION OF THE PROJECT. THE QUOTED EXCERPT FROM THE LETTER OF AUGUST 20, 1946, REFERRED TO BY THE EXECUTIVE DIRECTOR'S LETTER, APPARENTLY WAS INTENDED MERELY TO INDICATE THAT THERE WAS NO QUESTION AS TO IMMEDIATE AND CONTINUED USE OF THE GROUND RENTAL RESERVE FUND BY CAPITAL IN THE OPERATION OF THE PROJECT. THE FAILURE OF THE CONTRACT TO CONTAIN ANY SPECIFIC REFERENCE CONCERNING THE ULTIMATE DISPOSITION OF THE RESIDUE IN THE RESERVE FOR GROUND RENTS MAY BE ATTRIBUTED TO THE FACT THAT THERE WAS NO QUESTION WITH RESPECT THERETO. IN ANY EVENT, SINCE UNDER THE EXPRESS PROVISIONS OF PARAGRAPH 4 OF THE "WHEREAS" CLAUSE PAYMENT OF THE GROUND RENTAL TO CAPITAL IS RESTRICTED TO ITS "USE * * * IN THE OPERATION AND MANAGEMENT OF THE PROJECT," THE RESIDUE IN THE RESERVE ESTABLISHED FROM SUCH PAYMENTS PROPERLY MAY NOT BE RETAINED BY CAPITAL TO FURTHER ITS OVERALL PROGRAM OF PROVIDING LOW-RENT HOUSING IN THE DISTRICT.

ACCORDINGLY, SUCH RESIDUE SHOULD BE PAID TO THE DISTRICT OF COLUMBIA IN ADDITION TO THE BALANCE OF THE RESERVE FUND FOR PAYMENTS IN LIEU OF TAXES.