Kalorama Heights Ltd. Partnership v. D.C. Dep't of Consumer & Regulatory Affairs

• Title: Kalorama Heights Ltd. Partnership v. D.C. Dep't of Consumer & Regulatory Affairs
• Citation: 655 A.2d 865 (D.C. 1995)
• Decided Date: 16-Mar-95

Summary:

Petitioner appealed denial of an application to demolish Moses House, the former French Embassy and a contributing structure to the Sheridan-Kalorama historic district, to build a twelve-family luxury condominium building. The court upheld the Mayor's Agent's findings that the proposed development did not constitute a project of special merit and denial of the demolition permit did not subject Petitioner to unreasonable economic hardship.

Mayor's Agent Procedural:

Decisions of the Mayor's Agent must be upheld "if the findings of fact are supported by substantial evidence in the record considered as a whole and the conclusions of law flow rationally from these findings."

"[W]hen an agency's-and, correlatively, the Mayor's Agent's-decision is based on 'interpretation of the statute and regulations that it administers, that interpretation will be sustained unless shown to be unreasonable or in contravention of the language or legislative history of the statute."

"[T]he Mayor's Agent is 'not required to explain why [he or she] favored one witness' testimony over another or one statistic over another."

Special Merit:

The court upheld the Mayor's Agent's conclusion that the proposed condominium development was not a project of special merit. Petitioner argued that the development constituted a project of special merit because the luxury condominiums would generate increased tax revenues, increase the stock of luxury housing, and would prevent the building from being used as a chancery.

The Mayor's Agent rejected all three arguments finding that Petitioner's projections of increased tax revenues were based on uncertain estimates of expected sales price. Additionally, the prospect of increased revenues was not in and of itself a special merit under the Act. Petitioner's argument that the development would increase housing stock, taken alone, did not show special merit because under such reasoning "any residential highrise with more units than the historical building it replaced would be meritorious." Also, D.C. Law discouraged but did not prohibit chanceries in residential areas, and the community preferred a chancery to the development.

Finally, to meet its burden of showing entitlement to a demolition permit, a petitioner must show that it considered alternatives to the total demolition of the historic building and that these alternatives were not reasonable. Petitioner failed to show there were no other alternatives, such as maintaining the façade of the building and converting the interior into a multifamily dwelling.

Special Merit—Balancing Test:

Contrary to petitioner's assertion, the Mayor's Agent need only balance the historical value of the landmark against the proposed project if he finds that the proposed project has special merit. Here, the Mayor's Agent's conclusion that the proposed luxury condominium project lacked special merit was reasonable so no balancing was required.

Special Merit—Unconstitutional Vagueness:

The Special Merit provision of the Act is not unconstitutionally vague. §5-1002(11) makes clear that the offered benefits must be for the community at large, not primarily for a subset of privileged persons. Without precluding the possibility that an office building or apartment complex may qualify as a project of special merit if it provides particular social or other benefits, the court noted that:

[A]ccording to reasonably clear inferences from the statutory language itself, projects such as office buildings or luxury condominiums, while generally beneficial to the community, more specifically benefit the occupants and cannot, as such, be viewed as adequate compensation for historic buildings taken away from the community as a whole; something more is required.

The court's interpretations of special merit have enhanced the understanding of the statute by making clear that factors common to all projects are not considered special merits. The challenged provision of the Act was not standardless, given the purpose of the Act, the context in which the Act was applied here, and the judicial decisions clarifying the provision's meaning.

Unreasonable Economic Hardship:

The court upheld the Mayor's Agent's conclusion that Petitioner failed to show unreasonable economic hardship. Unreasonable economic hardship results when imposition of a restriction on the property deprives it of all reasonable economic use.

The Mayor's Agent found that the petitioner failed to show that no alternative reasonable uses of the property existed. Petitioner had received unsolicited offers for the property from several chanceries and the appraised value of the property had increased over $250,000 in two years.

The designation of the historic district after the petitioner's purchase of the building did not change the unreasonable economic hardship analysis, particularly where, as here, Petitioner was informed by counsel, prior to purchasing the building, that there were "strong preservationist trends in the area" that made the development plan a "speculative investment" or a "gamble."

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