Petition for Review of a Decision of the District of Columbia Board of Zoning Adjustment.
Before Rogers, Chief Judge, Farrell, Associate Judge, and Pryor, Senior Judge.
The opinion of the court was delivered by: Farrell
FARRELL, Associate Judge: In granting the two area variances disputed here, the Board of Zoning Adjustment (BZA or Board) stated that its decision was not, and could not be, "based on economic factors." Because we are unable to determine from the Board's decision what non-economic factors formed the basis of the decision, and because we think the Board's disavowal of reliance on economic considerations (despite explicit testimony by the applicant's witnesses that these motivated the request for variances) may reflect a misunderstanding of our precedents, we must vacate the decision and remand the case to the Board for further consideration. Either the Board must explain the non-economic reasons that justified the disputed variances, or it must expressly consider the evidence of economic feasibility offered in support of the application. See Levy v. District of Columbia Bd. of Zoning Adjustment, 570 A.2d 739, 753 (D.C. 1990) ("A court may not supply a rationale for the agency decision by conjecture from what it did"); Gilmartin v. District of Columbia Bd. of Zoning Adjustment, 579 A.2d 1164, 1171 n.6 (D.C. 1990) ("court may not substitute its reasoning for BZA's when that reasoning appears to be lacking in its order").
The property at issue is located at 2521-2523 K Street, N.W., and is improved by two townhouses (known as the Cooper Houses) which have been designated historic landmarks. Applicant Saint James Washington Limited Partnership (St. James) is the current owner of the property, and intervenor Bronberg, Inc. has a contract to purchase the property contingent on the grant of the requested variances. The BZA granted St. James six variances to permit construction of a twenty-unit apartment building on the property which would preserve and incorporate the Cooper Houses. Petitioners, who are area residents, oppose only two of the variances granted. The first would permit a variance from the maximum allowable height (90 feet) *fn1 to provide for a residential apartment building 107.5 feet in height. The second would permit a variance from the maximum allowable FAR (Floor Area Ratio) of 6.0 *fn2 to provide for a FAR of 7.7.
The Cooper Houses were designated landmark buildings in 1984. *fn3 After an application for a permit to demolish the buildings was denied by the Mayor's agent, D.C. Code § 5-1004, the former property owner obtained certain variances from the Zoning regulations to construct an apartment building on the remainder of the site, but then abandoned the project. Bronberg, Inc., in conjunction with its (contingent) purchase of the property from the present owner, St. James, originally offered a plan to leave intact and incorporate the facade of each of the Cooper Houses but otherwise to demolish them. Opposition to this plan resulted in a revised proposal from Bronberg which, as finally approved by the Historic Preservation Review Board, permitted temporary partial demolition of the houses, to be followed by their complete restoration using original materials after the apartment building was erected. The Cooper Houses would then constitute two single-family dwellings incorporated into the twelve-story apartment building constructed behind them.
A hearing on the application for the six variances (together with a request for a special exception pertaining to the roof structure) took place before the BZA on October 25, 1989. The Board had received the recommendations of Advisory Neighborhood Commission (ANC) 2A and the Office of Planning in favor of the variances. ANC-2A applauded Bronberg's agreement to preserve the two historic structures rather than merely the facades, since the Cooper Houses are "the oldest houses remaining in the Foggy Bottom area and among the oldest in the city." At the same time, ANC-2A acknowledged that the houses were "in precarious condition, not likely to last another year," having been the victim of years of neglect and recent fires and vandalism. In favoring the variances, ANC-2A recognized that the need to preserve the entire structures "had added significantly to [the developer's] costs by reducing usable space within the structure, and requiring additional major expenditures to retain the integrity of the total structures of the Cooper Houses." ANC-2A noted that Bronberg's president had made available to the ANC's consultant "a financial statement prepared in connection with a loan application," and that "the figures were reasonable." The Office of Planning likewise affirmed that "the presence of the landmark structures on the property has created the need for the requested variances," since "without the [Cooper Houses], the applicant could develop a comparable 20-unit residential building, as a matter-of-right without variance relief."
Testifying before the Board, Gerald I. Goldberg, Bronberg's president, stated that the FAR and height variances were necessary, in essence, "to make this economically feasible." Echoing ANC-2A's Conclusion that the Cooper Houses -- uninhabited since 1983 -- were "in a terrible state of disrepair . . . that continues to get worse," Goldberg explained that the obligation to preserve them imposed by the Historic preservation Review Board made construction of the apartment building "very expensive . . . because of the great area that the historic buildings cover." In particular, the need to depart from the normal FAR limitations was
strictly one of economics. The [cost of the] restoration of these town houses will far exceed the . . . income that we can derive from the resale of these town homes. . . .
In order to have a design which fits in with the historic structures, which fits in with the scope of the block, we have a very, very complex structure. This cost has to be recovered through the sale of square footage, of retail square footage.
We have done an economic balance to determine the amount of FAR that we had to market if we . . . would be able to build the project. That then drove the height, because the only place that we were allowed to build by the Historics Board was back and up.
According to Goldberg, since the "debt ratio coverage" reflected in the proposed plan had "no excess," a construction loan could not be obtained without the height and FAR variances: "If you take anything out of that building . . . the equation no longer balances and you can't get a construction loan. So, it's really like a no-go game."
The project architect testified and confirmed that the restoration of the Cooper Houses would mean "a negative economic value" without the variances. Among other things, incorporation of the two-story homes into the apartment building would result in there being no "new saleable area" in the building up to a height of twenty feet. According to the architect, the "additional FAR, additional density on the site helps us offset the cost of restoring the Cooper homes, and that's really what Mr. Goldberg is requesting here."
In its decision granting the FAR and height variances, the BZA acknowledged the architect's testimony that "the additional height compensates for the inability to build anew on the front of the lot." It also took note of opposing testimony by the representative of ANC-2A-03, the single-member district in which the property is located, "that the developer failed to support his statement that resulting profits from the project would be exceeded by the cost of preserving the Cooper Houses if the FAR and height variances are not granted." Nevertheless, as we pointed out at the beginning, the BZA expressly concluded "that its decision in this matter cannot be based on economic factors," and therefore determined that "detailed financial information from the developer would be irrelevant." In denying petitioners' application ...