How D.C.'s 28-Year-Old New Council Member Plans To Reduce Downtown Office Vacancy, Support Retail
For the first time in nearly three decades, Downtown D.C. is now represented on the D.C. Council by someone other than Jack Evans.
The longtime Ward 2 council member resigned in January after a series of ethics violations, and the special election to fill his seat was won in June by 28-year-old attorney Brooke Pinto. She also won the Democratic primary, making her the presumptive winner in the November election to represent the ward for the next four years.
Pinto's rise to the council comes during a year that has presented major new challenges for the District and for Ward 2, which includes a large portion of the city's office market, from Georgetown to the Central Business District to Chinatown.
The District's office market last quarter reached a record-high vacancy rate, the result of a years-long supply-and-demand imbalance that was worsened by the coronavirus. The pandemic has also taken its toll on the District's restaurant and retail market, with dozens of small businesses closing permanently.
Before running for council, Pinto served in the office of D.C. Attorney General Karl Racine, where she worked as a lawyer representing the Office of Tax and Revenue. She said this role gave her a window into the city's office vacancy rate, which she called a "huge issue."
"A lot of the buildings in the city are suffering from really high vacancy rates now, many of which predated COVID, and this is just exacerbating it," Pinto said. "Some businesses can’t afford the rent, and other businesses realize they can be productive with a remote workforce and are not re-upping their leases."
One legislative change Pinto is considering to address the office vacancy rate is to incentivize short-term leases to make them more attractive for property owners. Many buildings sit vacant, she said, because owners are holding out for a 10-year lease instead of inking one- or two-year deals, which have become increasingly attractive to smaller tenants looking for flexibility.
"We as a city need to do everything we can to incentivize shorter-term leases so that our small businesses in particular can access these spaces," Pinto said. "If we incentivize shorter-term leases through the tax code, I think it would benefit our property owners, the city would still be paid our tax revenue, and it would benefit the small businesses who are looking to access the space."
Pinto is also looking to incentivize office owners to convert vacant buildings to residential. These conversions can benefit both sectors by taking vacant office out of the supply and adding much-needed housing downtown, but they can be challenging for owners to make work financially.
The differences in floor plates between offices and apartments can make adapting the properties costly, and many owners prefer to seek office tenants that pay a higher per-SF rent. These hurdles have made downtown office owners hesitant to pursue conversion projects, but Pinto said she is seeing them increasingly embrace the idea.
"I’ve been very pleased to find in the last few months, in talking to buildings owners, that they are open to this idea," Pinto said. "A couple years ago, many of the building owners I spoke to about this were not as enthused about the prospect. They wanted vacancies to go to office. I think more and more people trying to address our affordable housing crisis, as well as the building owners trying to find some use for vacant spaces, many of them are in agreement that this is a really interesting model worth exploring."
Pinto said she wants to work on this strategy with the Downtown D.C. Business Improvement District, which is piloting a program to provide tax abatements for office-to-residential conversion projects.
"The Downtown DC BID looks forward to working with Ward 2 Council Member Brooke Pinto on many issues of mutual interest, and we appreciate Council Member Pinto’s interest in the pilot office-to-residential conversion incentive program," Downtown DC BID President Neil Albert wrote in a statement. "We believe it will be beneficial for the office market and contribute to Mayor Bower’s housing goals.”
Stonebridge founding principal Doug Firstenberg, chair of the Developer Roundtable group that advocates to the council on behalf of the commercial real estate industry, said office-to-residential conversions can be difficult because of building configurations, but incentives could make them more feasible.
"You're not just going to take some walls down and turn it into residential, there's going to be significant work to make this all come together," Firstenberg said. "If you can get some incentives to redevelop buildings and provide benefits in terms of workforce and affordable housing, there might be a great opportunity to align the costs and have a robust, successful program."
Firstenberg tuned into the council's lengthy virtual hearings on the Fiscal Year 2021 budget, which it passed last month in the face of major revenue shortfalls, and said he was impressed by Pinto's ability to dive right into the unusually challenging budget process.
"It's certainly not the easiest of times to take office," Firstenberg said. "Typically you take office in January and the first budget is in May. She arrived in late June in the middle of the budget process. I was very impressed with how fast she was able to ramp up and the breadth of issues she tried to work on in such a short period of time. She certainly seems to have a balanced approach to the issues."
Golden Triangle BID Executive Director Leona Agouridis said she took Pinto on a late-July walking tour of the neighborhood, which is part of Ward 2, and came away with a positive impression of the new council member.
"I think she’s very bright, I think she’s a good listener, she hears and wants to learn," Agouridis said. "There are a lot of smart people in commercial real estate, and I do get the feeling she’s going to be talking to many of them to get their perspectives, and based on input from a variety of people, come to her conclusions."
During the budget hearings, Pinto voted for an amendment that reduced the funding for an economic development program that gives tax incentives to technology companies. While she wants to incentivize businesses to lease space in the downtown office market, she said this particular program did not appear to be working. By reducing the funding, the council saved $28M, of which more than $5M went to vouchers for permanent supportive housing.
"I didn't think that it was constructed in a way that really incentivized tech companies to do business here," Pinto said of the program. "The research that I had read indicated that those businesses would have come to the District even absent the incentive."
Pinto said she is not opposed to all types of economic incentives, which have increasingly been used as a tool to lure companies that were deciding between multiple jurisdictions, and she said they have been effective in some instances. But with the current crisis straining local budgets, she said the District should focus more on supporting its existing businesses than spending money to attract new ones.
"That’s what I'd like to use our limited tax dollars for primarily, is to incentivize and empower our current businesses to get back on their feet, keep their people employed and pay their rent," she said.
Keeping tax rates competitive with other jurisdictions and having an overall business-friendly economic policy is important to keep businesses from leaving, she said. A Connecticut native, Pinto said she has seen these issues firsthand as her home state raised taxes on businesses and lost companies to nearby states.
"Over time, Connecticut became the 50th worst state to do business in, and so that's something I'm very wary of ensuring doesn't happen to the District of Columbia," Pinto said. "Particularly given our unique placement geographically, being so close to Maryland and Virginia, it is important that the District remains a competitive place."
Pinto, who lives in Logan Circle, said she has been concerned by the number of restaurants she has seen announce permanent closures during the coronavirus crisis. At least 30 restaurants had closed as of mid-July, and restaurant owners and brokers said they expect to see a host of additional closures as the pandemic continues to hurt business.
"It's the thing that keeps me up most at night," Pinto said of restaurant closures. "I think there's a lot more we need to be doing."
The council has sought to support small businesses with direct funding, such as a grant program it passed last month using $100M of CARES Act funding, but Pinto said the District needs more federal aid. While it waits for Congress to pass another stimulus bill, Pinto said the council should continue to look for ways to support retail businesses.
"It’s incredibly important for us to have an additional influx of cash into businesses so they can continue to pay their workers and pay their rent and pay their real estate taxes," Pinto said. "We continue to look for other sources of funding so that they can do this. But absent funding, there are other regulatory methods we've employed to make things a little easier for them."
The regulatory changes Pinto mentioned included allowing businesses to expand outdoor seating areas on sidewalks and streets. Along with that change came an insurance issue — some businesses said they weren't covered for the liability of serving food and drinks on the sidewalk. Pinto said she worked with the Office of Risk Management to allow general liability insurance to cover sidewalk operations.
Restaurants have also had issues with a complicated tax process that led some small businesses to inadvertently fail to pay their sales taxes on time this year because they thought they were deferred, Pinto said. This caused some businesses to incur a financial penalty, but Pinto said she worked with the Office of Tax and Revenue to have that penalty waived.
Restaurants in Ward 2 have been hurt by the lack of foot traffic as office buildings remain largely empty during the day, and now another demand driver appears to be disappearing. Several D.C. colleges, including Georgetown University and George Washington University, have announced they would shift fall classes online, potentially stopping thousands of students from coming to the District and spending money at the area's businesses.
"I’m very concerned for those businesses surrounding the universities, but as we’ve learned throughout 2020, we have to put health and safety first," Pinto said. "It’s going to be more detrimental for businesses if we prolong the health crisis."
Her previous experience working with the AG's Office of Tax and Revenue showed Pinto the problems with another real estate process she wants to see fixed: tax assessments.
The most frequent cases she worked on while representing OTR were appeals of property tax assessments, Pinto said, and she said the current structure of the assessment process encourages owners to appeal, adding unnecessary litigation costs.
The timeline with which the District assesses properties can create an inaccurate reflection of a building's value if a tenant vacates in the interim period, reducing the building's income. She said this is an issue she wants to fix while on the council.
"If we shift the timeline up three months from when the buildings are assessed, I think it would lead to a more accurate reflection of the true value of the building and would cut down on litigation costs both from the perspective of the property owner as well as the perspective of the city," Pinto said. "My view is we should spend more money upfront getting the value right and less money litigating the value of buildings over the course of a year, most of which settle anyways."
Agouiridis said she thinks it is important for the council to tackle the problems with the assessment process, and she thinks Pinto's work in Racine's office gives her a valuable background on the issue.
"She is coming with a base of knowledge I think is really important over the next couple years," Agouridis said. "[Assessments] are going to be a big issue and question and that’s going to be fundamental to the revenues that the city is going to be able to forecast, and that's fundamental to the budget. So it’s good she’s got that basis and that understanding at that granular level."
Contact Jon Banister at email@example.com.