response mc council 11-29-10

8/8/2019 Response MC Council 11-29-10

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Berman Academy representative, Mr. Pasternak continued to refer to himself and the Academy as we, eventhough he was acting as the representative of the Montgomery County Executive and theoretically the citizens of Montgomery County. The sale was tabled at that time, partly because of prior Planning Board rejection of thesale, the Belt/Abramoff revelations and the recommendations of the ZHA report , which advised the county notto sell the property.

Also at issue is Mr. Pasternaks seemingly unlimited access to the County Executives office and close working

relationship with the County Executives Assistant Chief Administrative Officer, Diane Schwartz Jones. As aformer county employee, Mr. Pasternak enjoyed numerous meetings and information exchanges with SchwartzJones concerning the sale of Peary High School. Additional exchanges may have occurred with Schwartz Jonesand the Academys representatives from Garson Claxton, LLC (law firm), Mr. Pasternaks current employer .

Also keep in mind that the Peary lease predated the Belt Junior High School lease by a little more than twoyears. Both leases were approved and signed by then County Executive Doug Duncan, an elected official thePost cited for taking campaign contributions in return for selling county school land. Both leases are extremelysimilar in their language and lease/purchase terms. It has been stated by some that one or both leases were

prepared by Garson Claxton, LLC, the go to law firm in the Washington, D.C. metro area regarding leases .For future county land sales, it may be prudent to start with a county written boilerplate lease, making futureleases more taxpayer friendly.

Sale of Montgomery County school property to the aforementioned parties is not limited to Peary High School and Belt Junior High School . Other properties include, Arcola Elementary School , Town and Country DaySchool and Montgomery Hills Middle School . In each of these transactions, many citizens were concernedwith the low sales price and other related costs to the county. The Post documented County costs regarding BeltJunior High School in a 2006 article Yeshiva Facility Deals Costly for Montgomery . It is easy to see whymany might ask if these are cookie-cutter deals at the expense of taxpayers.

It must also be noted that in addition to contributions to former County Councilmembers and the former CountyExecutive, Berman Academy interests have donated more than $31,000 to current Montgomery CountyCouncilmembers as well as the current County Executive since the first proposals were made to convert thePeary lease to a sale. Most notably are contributions to County Executive Leggett for more than $17,000 and

Councilmember Leventhal for over $9,000 (attached). These donations do not include contributions, which may be reported in January, 2011.

Troubling, too, in this process, the sponsor to sell Peary comes in the form a lame-duck councilmember, not tomention that the proposed sale will be voted on by a lame-duck council, immediately after an election.

Many have asked why a majority of the Montgomery County Council would go forward with the sale of school property for pennies on the dollar in these austere economic times, when the Montgomery County Board of Education and even your own staff (Montgomery County Council Staff) has strongly recommended against it.

There may not have been wrong doing, but the sale of this valuable and irreplaceable Montgomery County assetis a textbook example of special interest access and potential manipulation of local government. It is a sad day

indeed in Montgomery County, when concerned citizens come before the County Council to express their apprehensions about the sale of public school property and are summarily booed, jeered and dismissed with the tacit approval of councilmembers . Which of you will stand up for taxpayers and ALL the countys children?

Most sincerely,

Drew Powell

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November 23, 2010

Montgomery County Council100 Maryland AvenueRockville, MD 20850

Re: Testimony regarding Possible Sale of MCPS Property

Good evening, my name is Drew Powell, I reside in Rockville and am the former Executive Director of a MontgomeryCounty watchdog group called Neighbors for a Better Montgomery .

Why is this a bad deal?

Its a bad deal for county taxpayers, who may see county land, valued at $15M under its current zoning (or significantlymore if zoned residential), given away for less than $2M.

Its a bad deal for our children, who may suffer in overcrowded classrooms, if this property is no longer available for MCPS school construction.

Its a bad deal for citizens, who yearn for fair and honest government and see that more than $30,000 has been contributedthus far by special interests, who may benefit from the proposed transaction.

According to the ZHA report, an impartial study commissioned by late Councilwoman Marilyn Praisner, concerning the proposed sale of this property in 2006:

The County will be selling the land for well below its value. The County may forever lose the opportunity to repurchase the Premises for use as a school. Given these qualitative concerns, the sale and repurchase option does not compare favorably to other alternatives

under the Lease. Unless more favorable terms are offered, the Countys various objectives will more likely be met by maintaining ownership and control over the site.

Even though some of details of the revised transaction may have been slightly modified, the impact to the county remains

the same and the warnings in the ZHA report hold true today.

In 2006, then County Executive Doug Duncan forever had his name inexorably linked to corrupt lobbyist Jack Abramoff in an MCPS school property for campaign contributions scheme. Many of the players in this deal are the same, with theapparent exception of Mr. Abramoff himself.

Referring to Jerry Pasternak, the same person who engineered this and the previous school deal, one of three 2006, pageA1, Washington Post headlines read: Duncan Campaign Aide Involved in School Deal. In a quote in that Post article,then councilmember Tom Perez, currently serving as US Department of Justice Assistant Attorney General, said of Pasternak, "The perception is there is some kind of quid pro quo involved." In the same Post article Ed Ferrigno, former member of the North Woodside Montgomery Hills Civic Association, stated, "But it certainly appears that a politicalcontribution drove a decision to override sound public policy."

Is the same happening here in this cookie-cutter deal? Please dont sell our countys children short. Thank you.

Most sincerely,

Drew Powell


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Former Mayoral Candidate Draws Boos at Peary HearingPowell rebuked for citing Yeshiva deal in testimony on proposed sale to Berman Hebrew AcademyBy Sean Sedam, November 27, 2010

The most contentious moment of Tuesday's County Council hearing in Rockville on the proposed sale of the former Robert E. Peary High School came inresponse to the testimony of Drew Powell.

Powell was a 2007 candidate for mayor of Rockville who served as executive director of the now-defunct political action committee Neighbors for a Better Montgomery.

Powell called the proposed $1.9 million sale of the Peary property to its current tenant, the Melvin J. Berman Hebrew Academy, a "bad deal" for three groups:Taxpayers who he said would see county land "given away." County schoolchildren who he said "may suffer in overcrowded classrooms." And citizens who hesaid "yearn for fair and honest government."

In referencing "fair and honest government," Powell quoted a 2006 Washington Post article and drew cries of disapproval from audience members, the majority of whom wore green stickers in support of the sale.

The article detailed county spending of nearly $10 million to cover renovations to two former county school buildings that housed programs run by the non-profitYeshiva of Greater Washington, whose board was at one time led by Jack Abramoff.

"Is this the same thing happening here in this cookie-cutter deal?" Powell asked.Behnam Dayanim, first vice president of the academy's Board of Directors, diverged for a time from his planned testimony so that he could respond to Powell.

"There has been no implication of any wrongdoing in any of the aspects of the Berman Academy's relationships, conduct or of this transaction. ," he said. "Totar our school and the hardworking members of Montgomery County, parents and citizens who support the Berman Academy, with wrongdoing by people whohave no relation to anything that we've been involved with here, is entirely unfair."

Councilman Roger Berliner (D-Dist. 1) of Potomac, in comments directed at Powell, said that he had "not seen any indication that the Berman Academy has actedin a manner that is anything but of the highest ethical standard.

"If you have evidence to the contrary I urge you to bring it forward. If you do not, I suggest that linking these very disparate situations in the manner in which youdid does a disservice to this community and to yourself."

"I would like to respond," Powell said.

"There is no response," said County Council President Nancy M. Floreen (D-At large) of Garrett Park, who presided over the hearing.

County Councilman George L. Leventhal (D-At large) of Takoma Park said he could "understand why some elected officials and some community membersmight confuse the Yeshiva Academy with the Hebrew Academy," though "they have nothing whatsoever to do with each other."

Leventhal (D-At large) of Takoma Park said that he circulated a memo to colleagues "that clarified that the two are not the same in any way and that it just isn't fair or reasonable to conflate the two.

"So although it's understandable, because there are some surface similarities between the two situations, it's understandable that some might make that error, it is anerror. And so while I would ask for those in the audience who feel strongly in support of the Berman Academy to understand that it's an easy mistake to make, Iwould ask those like Mr. Powell who make the error to understand that it's hurtful to those of my faith. It's hurtful."

"I agree with you Mr. Leventhal and Mr. Berliner," Powell said. "And I am not suggesting for a moment that there is any wrongdoing here and three minutesunfortunately I am not suggesting that. Three minutes doesn't give me the opportunity to state that I think the Melvin J. Berman Hebrew Academy is a fantasticorganization and I think it deserves to stay there under the terms of the lease. The only thing I object to is the purchase and all I'm saying is that there aresimilarities."

"This is not your time, Mr. Powell," Floreen said, interrupting. "And I'm going to ask you to stop because this is not your time."

"There are similarities," Powell said.

"You've had your moment," Floreen said. "Thank you very much. And when you have failed to identify the information that justifies your comment, asCouncilmember Berliner has suggested, I suggest you offer this community an apology."

Many in the audience applauded.

The County Council's Management and Fiscal Policy and Education committees will discuss the proposed sale at 9:30 a.m. on Monday. The full council isschedule to vote on the proposal at 1:50 p.m. on Tuesday. Both sessions will be held in the third floor Council Hearing Room of the Stella B. Werner CouncilOffice Building, at 100 Maryland Ave. in Rockville.

Link: http://rockville.patch.com/articles/former-mayoral-candidate-draws-boos-at-peary-hearing


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PAC Digs Into Debate on Growth, With TeethMontgomery PAC Tracks DevelopmentBy Ann E. Marimow Washington Post Staff Writer

Sunday, February 11, 2007; Page C01

Montgomery County Council member George L. Leventhal came loaded likea prosecutor to cross-examine two of the leading players in a group that hasfor the past year mocked him andother elected officials as being

puppets for the development industry.

The targets of his interrogation at a

recent public meeting: a retired actor from Bethesda and atelecommunications consultant fromRockville, who represent the evolutionof civic activism into a politicallycharged operation with an edge.

At the Montgomery County executive's ball in December, newly electedExecutive Isiah Leggett (D) with Jessica Warnick and Isabel Delapyente. He ranon a slow-growth platform. (By James M. Thresher -- The Washington Post)

Their all-volunteer political actioncommittee, Neighbors for a Better Montgomery, campaigned vigorouslylast fall for County Executive IsiahLeggett (D) and a new slow-growthmajority on the council that intends totighten controls on development. The group also helped frame the debate that the council is beginningabout how and where Montgomery should grow.

NeighborsPAC sought to dislodge Leventhal (D-At Large), who was first elected as part of a pro-growthslate in 2002, but he survived.

Lingering tensions boiled over last month in a heated exchange between Leventhal and Drew Powell andJim Humphrey, two leaders of the group, which has created a database of developers' campaign donationsand says that such contributions can have undue influence on policy decisions.

From the dais of the council auditorium, Leventhal suggested that the group's aim is to shut down growth,which he said is at odds with the wishes of most county residents. Leventhal quoted from Leggett'sinaugural address and accused the group of engaging in what the county executive said he hopes to end: a"permanent political campaign and gotcha politics."

Powell shot back, saying that NeighborsPAC "reported fact." He challenged Leventhal to dispute thegroup's findings, but Council President Marilyn Praisner (D-Eastern County) intervened to end theexchange.

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To admirers, NeighborsPAC is a watchdog, fighting to ensure that the voices of residents -- not just thoseof paid business interests -- are heard by government officials elected to represent them. Leggett andothers who have benefited from the group's backing credit the PAC's leaders with translating eye-glazing

policy decisions into tangible effects on taxpayers, the roads they drive and the schools their childrenattend.

"They made it easier for the average citizen to understand," Leggett said. "That helped create theatmosphere that I think led voters to make the decisions they made."

NeighborsPAC critics say its tactics are akin to those of national political parties and that it unfairlyaccuses politicians of making decisions based on inflated assumptions in the PAC's database about whatcounts as a development interest. Some critics have debated how much influence the group had in theelection.

Former council member Steven A. Silverman, who lost to Leggett in the Democratic primary, said that NeighborsPAC members might have reflected the public mood, but "I don't think they created the mood."

The group of self-described eccentrics has its beginnings in 2002. Then-council member Blair Ewing brought together community leaders to create a broad-based political action committee with campaignactivities to rival those of development and business interests.

Veteran groups such as the 80-year-old Montgomery County Civic Federation had long taken positions onissues, but the civic movement was not in the business of endorsing candidates or partisan politics.

"There was a sense that the county was in danger of becoming a decision machine for developers," Ewingsaid.

NeighborsPAC raised $63,000 that year, no match for then-County Executive Douglas M. Duncan (D),who helped make traffic congestion -- not growth -- the defining issue of the 2002 campaign. Duncan,along with real estate and development interests, poured hundreds of thousands of dollars into helpingelect an "End Gridlock" slate of five candidates.

After the PAC's dismal showing, which included Ewing's defeat, it regrouped, seeking to turn the businesscommunity's fundraising advantage into a weakness. With volunteers digging into the interests of individual donors, NeighborsPAC spread the word in public presentations and e-mails about the

percentages of contributions that council members collected from development-related interests.

An animated cartoon on the NeighborsPAC Web site portrays council members, including Leventhal, asmarionettes whose strings are being pulled by a fedora-wearing developer with wads of cash.

Two of the public faces in the PAC's newly aggressive front got their start in civic activism close to home.Humphrey, a former actor with a penchant for Hawaiian shirts, is the group's technician, having learned totranslate legalese at his former day job at the National Institutes of Health. He was inspired to master land-use policy after learning about a development decision affecting his neighborhood.

"That got my hackles up," said Humphrey, 56, who devotes 40 to 50 hours a week to NeighborsPAC andthe civic federation. "Developers have paid advocates; citizens don't have anybody."


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Powell, a sales consultant, is the burly, bearded public face of the group who turned data into quotablerhetoric. He was motivated to join the cause when he found out by accident that his home was in the pathof a proposed Potomac River crossing. Later, he pulled his youngest son, a special needs student, out of

public schools after losing a battle with school officials.

"Citizens cannot allow themselves to be intimidated by the school system or the county government," saidPowell, 51, the PAC's executive director. "All these people work for us."

In talking about NeighborsPAC, Powell emphasizes that his group is not against development: "There'snothing wrong with developers giving money. There is, however, something wrong with candidatesaccepting more than half of their money from any one industry."

The NeighborsPAC message resonated with a new crop of candidates in the 2006 campaign. Leggett wasamong those who received its endorsement after taking the group's voluntary pledge to limit donationsfrom development interests to no more than 33 percent of a candidate's total take.

Leggett said he was struck by the group's analysis of the council's decision in 2003 to rewrite the county'sgrowth policy. The changes effectively lifted a moratorium on home building in some of Montgomery'smost congested neighborhoods. The impact taxes that the council imposed on developers to build roadsand schools fell millions of dollars short of projections, in part because of a delay the council allowed

before instituting the higher fees.

NeighborsPAC had mixed results on Election Day. Marc Elrich and Duchy Trachtenberg, who ranunsuccessfully in 2002 with the group's endorsement, won at-large seats in a crowded field. But so did

Nancy Floreen and Leventhal, both members of Duncan's 2002 slate.

And there were other factors: the absence of Duncan as a kingmaker, the influence of the teachers' unionand its "Apple Ballot" recommendations, and revelations by Clarksburg residents of a breakdown in thecounty's oversight of development.

Regardless of whether the PAC was a determining factor in the election, few would dispute its emergingrole as a force in the county's debate over growth. The question is how elected officials whom the PACsupported will vote in the months ahead.

To Leventhal, the council's unanimous decision this month to back off a proposed moratorium and votefor a weaker measure was a defeat for NeighborsPAC.

To Powell, the measure's provision that would probably apply tougher growth controls to all plans filedthis year was a success -- and just the beginning of the broader debate he will be watching. "The jury iscertainly out," he said.

2007 The Washington Post Company

LINK: http://www.washingtonpost.com/wp-dyn/content/article/2007/02/10/AR2007021001280.html


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Developers a pivotal issue in Montgomery voteBy Jon Ward

THE WASHINGTON TIMES

September 14, 2006

Voter discontent with developers' influence on Montgomery County politics carried an underdog countyexecutive candidate to victory, political observers said yesterday.

"We're talking about a seismic change in Montgomery County," said Drew Powell, executive director of Neighbors for a Better Montgomery, a watchdog group -- also known as Neighbors Pac, that had a significantimpact on this year's races.

Isiah "Ike" Leggett defeated well-financed opponent Steven A. Silverman, an at-large County Councilmember, after results were delayed well into yesterday because of problems at polling places.

"I made the question of slowing down growth a pivotal issue," Mr. Leggett said. "My intent was to literallyslow it, not just manage what is growing already."

Mr. Leggett, 61, will run against Republican challenger Chuck Floyd, 56, a security consultant, andindependent Robin Ficker, 63, a lawyer, in the November general election.

Mr. Leggett would become the first black county executive in the county's history.

"It demonstrates that our community has matured beyond the race distinctions that far too many other communities still suffer from," said Mr. Leggett, who in 1995 became the first black person elected to theCounty Council.

Mr. Leggett also said that the 2005 building scandal in Clarksburg -- where residents discovered that thecounty was allowing developers to run roughshod over zoning regulations -- added to anti-developer sentiment.

"It became the poster child for those feelings that people had about special interests and the influence of developers," he said. "A case like this comes along [and] that sort of affirms the suspicions people had all

along."Mr. Silverman, who did not return phone calls, raised $2.2 million for this race, an unprecedented amount for

a county executive run. Mr. Leggett raised $831,000, state campaign finance records show.

Neighbors Pac said that more than 70 percent of Mr. Silverman's money came from development interests,while about 20 percent of Mr. Leggett's contributions were from developers.

The group criticized Mr. Silverman's development ties relentlessly, saying that many of his decisions aschairman of the council's Housing Committee were too developer friendly.

Neighbors Pac also posted large amounts of information on its Web site and endorsed candidates who vowedto take less than 33 percent of campaign contributions from developers. Mr. Leggett was among them.

"This is the first time I think [the Internet] was a big factor in Montgomery County elections," said councilmember Phil Andrews, a Rockville Democrat who has refused money from developers since being elected in2002. "It helped a lot in getting out information."

Council member Michael Knapp, Clarksburg Democrat, was one Silverman ally who easily defeated his primary challenger, though Neighbors Pac has said Mr. Knapp took about 60 percent of his campaign cash fromdevelopment interests.

Mr. Knapp said county government will look very different under Mr. Leggett.

"Ike is a good person at bringing people together," he said. "I'm not clear yet as to the vision that he has."

Copyright 2006 The Washington Times LINK: http://www.washingtontimes.com/metro/20060913-110456-5596r.htm


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Developers Help Silverman Dominate in FundraisingBy Miranda S. Spivack and Nancy Trejos Washington Post Staff Writers

Wednesday, August 23, 2006; Page A01

Development industry money is helping power Steven A. Silverman's bid for Montgomery County executive, allowinghim to open a wide fundraising advantage over Democratic primary opponent Isiah "Ike" Leggett, an analysis of campaignfinance records shows.

In a county where congestion and the pace of growth are near the top of voters' concerns, Silverman, a County Councilmember since 1998, is seen as more pro-development by the industry. Silverman has many more large contributions thanLeggett, and most appear to come from developers, builders, land-use lawyers and related businesses.

Since he began raising funds three years ago, Silverman has received at least 95 contributions of $3,000 or more.

At least 86 of those large contributors were people or companies associated with the development industry, and they gaveat least $285,000, according to the review of campaign finance reports that were posted on a state Web site.

The total amount of money Silverman has collected from the industry is difficult to precisely determine because Marylandcampaign finance laws do not require donors to disclose their occupations. The at-large council member has received atleast 2,162 contributions, and The Washington Post reviewed the largest ones.

Leggett, who has been raising funds since early last year, has received at least 12 contributions of $3,000 or more, with atleast half coming from development interests.

Overall, Silverman has raised about $1.9 million, a record for a Montgomery executive race; Leggett has raised about$770,000. The primary is Sept. 12.

The pace of development in Montgomery has emerged as a defining issue in a primary campaign in which the two leadingcandidates are seen by voters as holding similar positions on many other issues. A recent Post poll showed that the

county's residents are more concerned about development than voters elsewhere in Maryland.

Leggett and Silverman both say they want to manage growth and congestion but offer different solutions. Leggett believesslowing construction would unclog roads. Silverman argues that the county should build more roads and mass transit, notfewer homes.

"Leggett has been seen as fairly pro-business and pro-growth throughout his career. But now he is positioning himself towards slowing things down," said Montgomery County Chamber of Commerce President Richard Parsons, a longtimeDemocratic operative. "Someone who says 'slow things down further' is not likely to get a lot of support from this

particular industry."

Leggett, who served on the County Council from 1986 to 2002, said yesterday that Silverman had compromised hisobjectivity by accepting so many donations from the development industry.

"How can you bring people together . . . when half of the community will look at this and at least perceive there is noobjectivity?" Leggett said.

Silverman, who played an extensive role in crafting the county's land-use policies in the past four years and was a leadingmember of the "End Gridlock" slate that County Executive Douglas M. Duncan (D) helped elect in 2002, said developer donations do not influence him.


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"The contributions that I get are from people who support my views about building roads and transit and affordable andmiddle-class housing," Silverman said. "I will remain independent. I am happy to debate issues with Ike Leggett. There isno reason for him to be questioning my integrity, since I don't question his."

Silverman and Leggett have differed sharply on the campaign trail on managing growth.

In 2003, the council loosened restrictions on development while increasing the fees developers pay for roads, schools andother improvements. Silverman led that effort, which was sought by the development industry and backed by members of the End Gridlock slate.

Leggett said that if he is elected, he would ask the council to return to the pre-2003 standard, which had haltedconstruction in several parts of the county. Leggett also has complained that the higher taxes failed to raise money to payfor the new services needed for increased growth. And he has questioned Silverman's commitment to restrictingdevelopment in the county's 93,000-acre agricultural reserve, where housing is limited to one unit per 25 acres.

"I'm going to fight to protect it," Leggett said.

Silverman disputed Leggett's assertion that he wouldn't protect the reserve.

"He's clearly desperate in his attempt to paint me as something I'm not," Silverman said.

Some of Silverman's contributions from developers, builders and land-use lawyers have been made through multiplecorporate entities and by various members of families, allowing donors to avoid the $4,000 donation cap. The so-called

bundling of donations is legal in Maryland.

For example, Southern Management Corp., which has substantial holdings in downtown Silver Spring, gave at least$26,000 to Silverman through 11 companies July 6, according to campaign finance and state incorporation records. Atleast one piece of Silverman's campaign literature reminded donors last year that they could give through various entities.

In interviews and campaign literature, Silverman has accused Leggett of accepting large developer contributions in pastcampaigns, citing a Washington Examiner article from last year that reported Leggett received 64 percent of his campaignfunds from developers when he was on the council from 1994 to 1998.

But Leggett -- who vowed to limit developer contributions in this campaign -- said yesterday that in his 16 years on thecouncil, he raised about $400,000 and that no more than 25 percent of it came from developers.

Most of Leggett's contributions have come in small amounts in this campaign. As of the most recent finance reports,which were due Aug. 15, the average amount per donor for Leggett was $147.30, and the majority of the contributionswere from individuals -- not business entities -- who donated $25 to $35.

County Council member Nancy Floreen (D-At Large), who has endorsed Silverman, defended his fundraising.

"Politicians need money to run campaigns, so you have to ask people with money for money," said Floreen, who was partof the End Gridlock slate. "It's no more complicated than that. Nobody likes to do it, but it has to be done."

Staff researchers Meg Smith and Derek Willis contributed to this report.


LINK: http://www.washingtonpost.com/wp-dyn/content/article/2006/08/22/AR2006082201287.html?sub=AR


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Duncan to Return Abramoff-Tied Funds$20,000 in Donations Came From Firms Linked to LobbyistBy Cameron W. Barr Washington Post Staff Writer Friday, May 26, 2006; Page A01

Montgomery County Executive Douglas M. Duncan received $20,000 in political contributions from corporations he saidwere "related to or affiliated with" former lobbyist Jack Abramoff, at a time when the county was considering leasing aschool to a Jewish organization Abramoff supported.

Duncan said in a statement last night that he wasunaware of the contributions he received seven yearsago and was returning the money.

Duncan, who is seeking the Maryland Democraticnomination for governor, issued the statement threehours after answering questions about thecontributions from The Washington Post. Most of

the contributions reached his campaign account inJuly 1999, four weeks before Duncan authorized thelease and potential sale of a shuttered county publicschool to the Yeshiva of Greater Washington, a

private religious school that Abramoff served as a board member in the late 1990s and early 2000s.

"Last year, I reviewed my campaign account to see if I had received any contributionsfrom Mr. Abramoff and had none," Douglas M. Duncan says.

Photo Credit: By Andrea Bruce -- The Washington PostRelated Article: Duncan to Return Abramoff-Tied Funds, page A01

Yeshiva board President Jeffrey Lee Cohen saidyesterday that Abramoff was not involved innegotiations with the county over the leasing of theschool and never discussed contributing to Duncan.Cohen, three business partners of Cohen's and two

of their businesses donated an additional $15,000 to Duncan in the same week that the Abramoff-related contributionsreached the campaign account.

Duncan said there had "absolutely not" been any relation between the lease of the school and campaign contributions. "Ifeel very strongly that closed, abandoned schools are bad for neighborhoods. I wanted to get the schools reused."

Cohen said, "We're businessmen in the county, and we feel Duncan has been an excellent county executive for Montgomery, and we support him." He and his partners and their businesses and family members have since contributedan additional $50,000 to Duncan's political account, state campaign finance records show.

The Abramoff-related contributions came from five companies in the Northern Mariana Islands, a U.S. commonwealth inthe Pacific, and from a company in the nearby U.S. territory of Guam. All the contributions were for $4,000, themaximum allowed under Maryland law to a single candidate in an election cycle. Donations from the five Saipancompanies were recorded in campaign records July 31, 1999; the Guam contribution was listed Dec. 16, 1999.

In the interview yesterday, Duncan said he had no recollection of receiving contributions from Saipan or Guam, whichcame in the first year of his second term as county executive.

"Last year, I reviewed my campaign account to see if I had received any contributions from Mr. Abramoff and had none;other types of contributions made many years ago, however, were not as readily apparent," his statement said. Abramoff,a once-powerful Washington lobbyist, is at the center of a broad investigation into allegations of congressional corruption.In the wake of the scandal, some officials on the state and local levels have voluntarily returned money they received from


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Abramoff, even if it had no connection to the federal investigations. He is serving five to 10 months in federal prison for his role in the fraudulent purchase of a fleet of casino cruise boats.

Evelyn Sablan, the owner of Toys 4 U, a defunct toy store in Saipan, said in a telephone interview that she wasreimbursed for her contribution to Duncan by an executive of Tan Holdings Corp. Records show that in 2000, Abramoff

billed Tan Holdings chief executive Willie Tan for $223,679 in lobbying expenses. And Tan's companies contributed$650,000 to the U.S. Family Network, a conservative nonprofit organization largely funded by Abramoff clients. In the1990s and early 2000s, Abramoff lobbied extensively for the Mariana government and other organizations in the WesternPacific.

"I didn't give out any money from my own pocket, not even one penny," Sablan said. She said the executive who askedher to send money to Duncan and who later reimbursed her is Jack Torres, who is identified in Tan Holdings Corp. newsreleases as its personnel director. In a brief telephone interview this week, Torres said he didn't recall Duncan's name. "Idon't think I've ever been involved in organizing political contributions," he said.

A Maryland State Board of Elections official, Jared DeMarinis, said this week that a campaign contribution "has to comefrom the person" making the donation to be legal.

John Pangelinan, owner of Bobbie's Amusement, another business that sent $4,000 to Duncan in July 1999, said hecouldn't recall who solicited his contribution. Pangelinan is publisher of the Saipan Tribune, a Tan Holdings subsidiary. "I

contributed, but I don't know why I contributed -- I don't even know" Duncan, he said.

The Bobbie's Amusement check bounced, a Duncan campaign spokeswoman said last night, declining to be named because the matter predates Duncan's gubernatorial campaign.

The Saipan contributions occurred a month before Duncan signed a lease -- over community and school system opposition-- that gave the Yeshiva of Greater Washington the option to buy Belt Junior High, an unused and largely dilapidated

building in Wheaton. Then-Superintendent Paul L. Vance said before the lease was approved that the school systemwanted to modernize and reopen the facility and keep it public. The County Council backed Duncan and authorized thetransaction.

A group of residents sued the county to block the transaction, arguing that "the result will be an unlawful permanent

transfer of public property to a private interest at a grossly inadequate price." The assessed value of the property in 1998was $9.7 million; the sale price under the agreement was $1.75 million.

In 2001, Superintendent Jerry L. Weast reclaimed the school. School and county officials then found another unused public school, in Silver Spring, for Yeshiva. Duncan had a bill introduced in the council to exempt the transaction from areview mechanism instituted after the Belt transaction.

Yeshiva lost the option to purchase, but it obtained a lease that can stretch as long as 90 years for a rent of $40,000 a year.The county also gave Yeshiva $9.8 million to cover the cost of improvements it had made to the Belt property.

Dennis Berman, a Yeshiva board member and Duncan contributor, said the transfer of the schools has been a "win-win"for Yeshiva, its neighbors and the county. His donations to Duncan, as well as those by other Yeshiva backers, areunrelated to the school deals, Berman said. "I'm still giving to him for a job that doesn't do me a lick of good," he added,referring to Duncan's aspiration to be elected governor.

Staff researcher Bobbye Pratt contributed to this report.

CORRECTION TO THIS ARTICLE A May 26 article misstated the prison term for former lobbyist Jack Abramoff. He is serving five years and 10 months, not five to 10 months, for his role in thefraudulent purchase of a fleet of casino cruise boats.


LINK:http://www.washingtonpost.com/wp-dyn/content/article/2006/05/25/AR2006052502368.html


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Duncan Campaign Aide Involved in School DealAssistant Accepted Abramoff Fundraising HelpBy Cameron W. Barr and Ann E. Marimow Washington Post Staff Writers

Saturday, May 27, 2006; Page A01

A longtime aide to Montgomery County Executive Douglas M. Duncan played a key role in the county's leasing of twoschools to the Yeshiva of Greater Washington at the same time he was working as a political adviser and fundraiser for Duncan.

Jerry Pasternak, a special assistant to Duncan (D), knew lobbyist Jack Abramoff -- a Yeshiva board member in the late1990s and early 2000s -- from the Orthodox Jewish community and accepted his offer to help raise money for Duncan in1998, Duncan's gubernatorial campaign manager, Scott Arceneaux, said yesterday.

Pasternak's dual role raises the question of a potential conflict of interest. He is on leave from his county job while hevolunteers on Duncan's gubernatorial campaign.

On Thursday, after inquiries from The Washington Post, Duncan announced that he would return $20,000 in campaigncontributions from companies based in Saipan and Guam linked to Abramoff. The contributions, as well as $15,000 indonations from other Yeshiva supporters, reached Duncan's executive campaign in the last week of July 1999, a month

before he signed a lease/purchase agreement with Yeshiva for a closed county school.

Some residents who opposed the lease deals reacted angrily to the news of the Abramoff connection and said they wereworried that the deal was inappropriately influenced. But at the time of Abramoff's offer to Pasternak, Arceneaux said,"there was no reason to think that Jack Abramoff was anything other than a lobbyist who lived in Montgomery County."

Abramoff was sentenced in March to five years and 10 months in prison for his role in the fraudulent purchase of a fleetof casino cruise boats.

Although the 2006 campaign acknowledged Abramoff's role in helping raise money for Duncan, officials insisted that thecounty executive had no knowledge of the contributions from Saipan, an island in the U.S. commonwealth of the NorthernMariana Islands, and the U.S. territory of Guam.

One of those contributors, Evelyn Sablan of Saipan, said she was reimbursed by a businessman for her $4,000 donation.That businessman, Jack Torres, works for a company with links to Abramoff. Torres denied in an interview this week thathe had ever been involved with fundraising for politicians.

In 1999, over objections from the neighborhood and the school system, Duncan and the County Council decided to offer Yeshiva a lease with an option to purchase Belt Junior High School in Wheaton. The superintendent reclaimed the schoolin 2001, so officials offered to lease Montgomery Hills Junior High School in Silver Spring to Yeshiva.

County Council member Tom Perez (D-Silver Spring), who in 2003 opposed the lease of Montgomery Hills to Yeshiva,said Pasternak "led the negotiations on behalf of the county."

Yeshiva board member Dennis Berman said this week that Pasternak also "was probably" the person who solicited himfor contributions to Duncan's campaign account.

Pasternak declined an interview yesterday, but the Duncan gubernatorial campaign released a response to a reporter'squestion. "At no time during our discussions about Yeshiva, did I ask Mr. Berman for campaign contributions," Pasternak said. He said that although he was "involved in the project," county attorneys handled the leases.

In an interview Thursday, Duncan said he does not support any overlap between county business and political fundraising."You should not be asking people for contributions if you're negotiating with them," he said.


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Community activists said the timing of the contributions raises concerns that the money was intended to influence county policy. "This is a very clear example of special interest money securing favors," said Duncan critic Drew Powell,executive director of Neighbors for a Better Montgomery, a nonprofit group that tracks campaign contributions to localofficials.

Powell was incredulous that such large overseas contributions could have gone unnoticed among Duncan's donations, asDuncan has asserted.

That Duncan was unaware of the fine print of his contributions is not unusual and says nothing about his strength as an

executive, Arceneaux said. "It's not uncommon for campaign folks to be working on this and handling the campaign sidewithout Duncan's input on a week-to-week basis," he said.

Perez said Pasternak's possible mixing of official and fundraising roles creates a perception problem. "The perception isthere is some kind of quid pro quo involved," he said.

But council member Michael L. Subin (D-At Large), who supported the school leases as chairman of the council'seducation committee, said Duncan and Pasternak had kept a clear demarcation between their political and officialactivities.

The $35,000 the campaign took in from Yeshiva supporters and the Abramoff-related companies in late July 1999constituted a little more than a quarter of the $120,850 it collected that month. At the time, Duncan was six months intohis second term as county executive.

The $120,850 he raised that July was the most he had collected in a single month since at least the beginning of 1997,according to campaign reports examined by The Post. That month's 71 itemized contributions were larger than normal;during June 1999, for example, the Duncan campaign raised $42,675 from nearly the same number of contributions.

Isiah Leggett, a former County Council member and a Democratic candidate for county executive, said he takes Duncanat his word that he was not aware of the donations and praised him for immediately pledging to return the money. ButLeggett said he would have noticed an overseas contribution.

"I would know -- at least I would see the address," he said.

Montgomery residents who opposed the lease deals said the disclosure of the campaign contributions yesterday providednew insight into a situation they found puzzling at the time.

Ed Ferrigno, a member of the North Woodside Montgomery Hills Civic Association, was active in pressing for safeguardsrequiring greater public and official review of school reuse that were instituted after the Belt transaction. When Duncanand the council sought an exemption for Yeshiva soon after the safeguards were approved, he said, the group was "flooredthat they would reverse like that."

Ferrigno, a federal lobbyist, said he has no problem with local members of the Yeshiva board making politicalcontributions.

"That's part of the system," he said. "But it certainly appears that a political contribution drove a decision to overridesound public policy."

Baltimore Mayor Martin O'Malley, who is also seeking the Democratic nomination for governor, appears to have receivedno contributions from Abramoff-related entities, according to state campaign contribution records. Gov. Robert L. EhrlichJr. (R) returned $16,000 in contributions from Abramoff in January.

Staff writers Matthew Mosk, John Wagner and staff researcher Derek Willis contributed to this report.




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Duncan Defends Stance On Yeshiva Lease DealExecutive Says He Saw Prejudice in Plan's CriticsBy Cameron W. Barr and Ann E. Marimow Washington Post Staff WritersFriday, June 9, 2006; Page B05

Montgomery County Executive Douglas M. Duncan (D) said in an interview this week that he advocatedleasing a former public school to the Yeshiva of Greater Washington to combat neighborhood blight and

because he would not tolerate "the objections of anti-Semitic neighbors."

Duncan offered the comments to dispel the perception that his support for the 1999 transaction, which theschool system also opposed, had any connection to $85,000 in campaign contributions he has received fromYeshiva supporters in the past seven years. Of that money, $20,000 was linked to former lobbyist Jack Abramoff, who served on Yeshiva's board, including one term as president, in the late 1990s and early this

decade.

The deal's leading opponents say they were motivated by a desire to keep the school in public hands, not byanti-Semitism, and angrily dismissed Duncan's charge this week. Some of the opponents -- as well as a lawyer who represented them, Norman Knopf -- are Jewish.

Duncan's comments came in a meeting Monday with Washington Post reporters and editors. The commentsechoed those he made in an interview last week with Washington Jewish Week.

"That is so much garbage," said Thomas Robinson, one of the community opponents, referring to Duncan'scharge.

Similar allegations were part of a County Council debate during consideration of the lease in the late 1990s.

After more than a year of negotiation and two council votes in support of the deal, Duncan signed a lease withYeshiva in August 1999 that included an option to buy the Col. Joseph A. Belt Junior High School in Wheaton.

A month earlier, Duncan had received $35,000 in campaign contributions from Yeshiva supporters, includingAbramoff. Duncan, who is seeking the Democratic nomination for governor, announced last month that hewould return $20,000 in contributions from Saipan and Guam linked to Abramoff. The lobbyist was sentencedin March to nearly six years in prison in connection with the fraudulent purchase of a fleet of casino cruise

boats.

Duncan and Yeshiva's current board president, Jeffrey Lee Cohen, deny any connection between Duncan'ssupport for the lease and campaign contributions. Since 2000, Duncan has received an additional $50,000 in

political donations from Cohen and his partners and their businesses and family members.

In the interview, Duncan said that he backed the lease because he wanted to return a derelict public school to"productive use" and that he supported several similar leases of former schools after first being elected countyexecutive in 1994.

The anti-Semitism he perceived among the deal's opponents was "an extra incentive to me" to push the leasingof Belt to Yeshiva, a Jewish educational organization, Duncan added.


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Duncan cited a meeting he held with a half-dozen neighborhood opponents during the period when the countywas deciding whether to lease the school.

During his 12 years as county executive, Duncan said, "I've only walked out of one meeting, and it was ameeting with the Belt neighbors, because their comments were so outrageous. I said, 'I'm not going to listen tothis anymore.' "

He added that he felt the neighbors' anti-Semitism "was clearly part of their objection" to the school deal.

Jeremy Harris, a former resident of the neighborhood surrounding Belt and one of those who met with Duncan,said this week that "there was nothing anti-Semitic" about the community opposition. "We obviously wantedthe school to be reopened" as a public school, Harris said.

In the Post interview, Duncan recalled seeing an anti-Semitic placard held by a protester at a 1999 ceremony atthe Charles E. Smith Jewish Day School in Rockville. Council member Michael L. Subin (D-At Large)corroborates Duncan's recollection of what the placard said -- "We don't want your kind here" -- but said that

protest concerned the Charles E. Smith school, not the Belt transaction.

Council member Steven A. Silverman (D-At Large) received a letter in April 1999 from Robinson and Frank Vrataric, the main leader of the movement to retain Belt as a public school. In the letter, Robinson and Vrataricsay they "would not want to be put into the position [of] wondering if your change in heart on Belt is related toyour ties to the Jewish community."

"I don't want to suggest the entire community opposition was driven by anti-Semitism," Silverman recalled thisweek, adding that he was "shocked and appalled" by the letter.

Vrataric died in 2002, but his attorney David W. Brown said this week that he "never experienced any anti-Semitism in dealing with Frank." Brown and his partner Knopf also represented Vrataric in challenging anearlier plan to turn Belt into a private rental facility for senior citizens.

Robinson said he and other opponents of the lease to Yeshiva "never, ever played any religion card."

Knopf wrote in a 1999 letter to the council that "this resort to defamatory smear tactics is a clear indication the proponents of the [deal] realize the weakness of their position on the merits." The county reclaimed the schoolin 2001 so it could be reopened as a public school.




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Berman bid to buy site hits snagPlanning Board rejects proposal to sell propertyWednesday, Sept. 21, 2005 by Warren Parish, Staff Writer

The Melvin J. Berman Hebrew Academys bid to buy the Aspen Hill property on which it operates took a hit Thursday when the PlanningBoard rejected recommending the sale to the County Council.

The academy, which rents the 19.5-acre property from the county for $60,000 per year, is seeking to exercise a clause in a long-term leaseagreement entered into in 1996 and buy the parcel for $1.5 million. Under the proposal, the county would have the option to repurchasethe property beginning in 2026.

But selling the public property would complicate any future attempt to repurchase it, Planning Board Chairman Derick P. Berlage said.

The Berman Academy is an excellent use for the facility, he said. The question put to us was, Does it make sense for the county togive up the property?

Planning staff recommended rejecting the deal, arguing that the 1994 Aspen Hill Master Plan calls for the land to remain in publicownership. A staff report questioned the long-term reliability of county school system projections indicating the land is not needed for

public education purposes.

Regardless of whether the sale is approved, the academy must continue using the property as a school and allow the public access to itsrecreational facilities.

The Montgomery County Civic Federation joined the debate last week by unanimously passing a resolution opposing the proposed sale of the land, which formerly housed Robert E. Peary High School.

The Board of Education closed Peary High School in 1984. The school deteriorated and residents began complaining about criminalactivity and vandalism.

[W]e believe the terms of the proposed sale, as we understand them, are highly unfavorable to the taxpayers of Montgomery County,and unnecessarily favorable to the Hebrew Academy, states the resolution.

Federation member Arnold Gordon called the proposal a giveaway made possible by the academys substantial political constituency inthe community.

You do not dispose of a school property at a time when real estate values are booming and you dont sell a $20 million property for 1.5million bucks, he added, estimating the current land value if it were subdivided.

Jerry Pasternak, special assistant to Montgomery County Executive Douglas M. Duncan (D), disagreed.

You cant value the property as if it was going to be developed residential or office buildings, Pasternak said. Its use is restricted toschool uses. When you limit the use like that, you eliminate the income-producing component of the land.

Duncan supports a deed restriction limiting the property to its current use and allowing the county future repurchase rights.

Since the Melvin J. Berman Hebrew Academy occupied the property, it has spent more than $10 million renovating the 200,000-square-foot building, academy spokeswoman Ilene France had said in a previous interview in March.

Some agree that the Berman Academy has been a good neighbor.

Instead of having an eyesore in the community, we have an asset, said David Polinsky, president of the Aspen Hill Civic Association, alocal group that supports the purchase offer.

At the time the school entered into the lease agreement, part of the incentive to the academy was that it would have the right to purchasethe property and, in return, the academy would invest a sizable amount of money in repairs, said James Dattaro, an attorney representingthe school. I think its somewhat unfair to look back and say the [$1.5 million purchase] price is low.

The lease agreement allows the academy to purchase the site, if the County Council approves.

Making the academy pay more for improvements it already paid for is unreasonable, Pasternak said.

Were following through on our commitment to the school, just as the school followed through on its commitment to the county andcommunity, he said.

The County Councils Management and Fiscal Policy Committee is scheduled to consider the issue on Oct. 17.

http://www.gazette.net/stories/092105/olnenew210629_31904.shtml


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TECHNICAL MEMORANDUM

TO: Councilmember Marilyn PraisnerChair, Management and Fiscal Policy CommitteeMontgomery County Council

FROM: Jacob SeskerZHA, Inc.

RE: Old Peary H.S./MJBHA

DATE: November 6, 2006

I NTRODUCTION

The Administration recommended that the County Council approve a pro-posed deed, thereby conveying the old Peary High School property to the BermanHebrew Academy. The Administration recommended that the County Councilapprove the sale, even though the sale and repurchase would be more expensivethan continuing the Lease until the earliest point at which the County could termi-nate the Lease.

County Council requested an objective review of the assumptions andmethodology used in the Administrations calculations. The Council essentiallywanted to know whether the Administrations assumptions were reasonable and inaccordance with industry standards, and whether the Administration took intoaccount the value of the lease and the underlying property.

Based upon the information available, the answer to the above questions

would be No. The Lease document was not interpreted consistently throughoutthe Analysis, nor was the interpretation in the Analysis consistent with a reasonablereading of the terms of that document. The comparisons made in the Analysis werenot apples-to-apples comparisons, and therefore were inaccurate representations of the relative quantitative merits of the Lease and Proposed Deed. The Analysisfailed to convey the qualitative merits of the Lease and the Proposed Deed, andfurthermore failed to take into account the value of maintaining ownership andcontrol over the property during the coming decades.


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TECH MEMOMs. Praisner November 6, 2006

In a fair and equitable sale, the value of the land would accurately reflect its

current market value. If the County, recognizing the scarcity of large availablesites for new school construction, would like to be able to re-purchase the propertyat some later date for use as a public school, then it would only be fair to discountthe sale price. However, it would not be reasonable for the County to discount thesale price without adequately protecting its ability to repurchase the premises atsome later date. As explained in this memorandum, it appears that the proposeddeed offers the Academy a low price and offers little or no protection to theCountys interests. As such, the information available would indicate that this is nota good business deal for the County.

A review of the Lease, the Proposed Deed, and the analysis prepared by theAdministration (hereafter, Analysis), as well as other supporting materials illus-trated the following:

The Analysis was not an apples-to-apples comparison. The Analysis was not consistent with the often confusing language of the

Lease and the Proposed Deed. Given that the Countys interests here are more than just financial and given

that the timeframes contemplated are fairly lengthy, a private-sector analysisof this proposed transaction would be more qualitative than quantitative innature.

Under the Proposed Deed, it may not be possible for the County to repur-chase the school for use as a public school at less than fair market value.

The Analysis performed by the Administration did not clearly convey to theCouncil that the proposed transaction was a sale of a rare asset probably wellbelow market value with no guarantee that said asset would be available forrepurchase should the County need to re-use it as a public school.

A sale under the proposed terms does not represent the best deal availableto the County.

Finally, it must be noted that any analysis of the Lease and Proposed Deednecessarily involves interpretation of legal documents. However, nothing hereinstated should be construed as legal advice. The County Council is ably representedby legal counsel and as appropriate should seek their interpretations of the Leaseand Proposed Deed.

B ACKGROUND ON THE L EASE

The Lease was executed on April 15, 1996. The Lease provided for a two-year renovation period following execution. The renovation period was not to be


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counted as part of the 25-year term of the Lease. Therefore, the term of the leasewould expire on April 15, 2023. 1

f: 60020/Peary Memo Numbers.xls/Timeline

Lease expires, County may use property for any use.

Five-years notice may be given of intent to terminate the lease if thepremises are needed for use as a public school, so long as that

termination is effective after 4/15/2023.

After termination, County might be able to use for any purpose,though such use may be subject to claims of bad faith, breach of

contract, etc.

2023 to 2038: Three Five-Year Extensions

Assumptions Timeline1998 to 2023: The 25-Year Lease Term

2038: Expiration Of Lease & Extensions

MJBHA can exercise each five-year extension by providing 12-months

notice.During this time, Lease may be terminated either (1) for violation

constituting default under Article XVI, or (2) with five-years notice if the premises are needed for a public school.

The Lease may only be terminated prior to 4/15/2023 for violationconstituting default under Article XVI.

The Lease also sets forth the conditions upon which the Academy may pur-chase the Premises from the County during the term of the Lease and any applica-ble extensions. The Lease also establishes a methodology for setting a baselineprice and adjusting that baseline for inflation.

I DENTIFICATION OF P OTENTIAL O UTCOMES

In analyzing these transactions, three potential outcomes merit evaluation:

1 The lease is to end April 15, 2023, which is the day after the end of Lease Year 2022. The calculations prepared by the Administration for the Council assumed that the leasecould not be terminated until 2028. This requires the conclusion that the 25-year lease isactually a 30-year lease. Furthermore, that interpretation is not consistent with theresponse memo (dated September 20, 2006), in which John Fisher, Associate CountyAttorney, stated: The County may terminate the lease upon five-years notice to the lessee,but the termination would not become effective until after the initial 25-year lease termexpires.


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1) Sale/Buyback : The County sells the property to the Academy, buying itback at the earliest possible date under the Proposed Deed (March 1,

2031).

2) Lease Termination : Council rejects this and other proposed sales, contin-ues the Lease, and then terminates the Lease at the earliest possible date(April 15, 2023).

3) Lease Continuation : Council rejects this and other proposed sales, contin-ues the Lease, and allows the Lease and all extensions to expire (not laterthan April 15, 2038).

A more detailed explanation of each of those outcomes, as well as the rele-vant language in the Lease, Proposed Deed, and supporting documentation is pro-vided below.

O UTCOME #1: S ALE /B UYBACK

The Academys non-assignable right to purchase the property from theCounty is established in Article III of the Lease. Under Article III, the Academymay purchase the property at any time during the original 25-year term and anysubsequent extension. That purchase would be subject to the approval of theCouncil and the Executive and subject to any restrictions, conditions or require-ments which the County Executive and the County Council may elect to attach tosuch a purchase.

According to the Lease, the parties expected that the price would reflect thevalue of the land at the time the Lease was executed, and would not include anyvalue for the improvements. The method in the Lease for establishing the purchaseprice reflects that expectation; the purchase price is to be established by appraisalsof the land performed shortly after execution of the Lease as adjusted periodicallyfor inflation. 2

Under the proposed Deed and Reservation of Rights to Re-purchase, cer-tain restrictions will apply to the Academys use of the property after the purchase.

2 Adjustment for inflation may, over the long term, prove to be fair to all parties. Over theshort term, that method produces results that can be disproportionately beneficial to oneparty. Such a method of adjustment fails to take into account various relevant economictrends. For example, since the execution of this Lease land values have risen much morequickly than overall inflation. Additionally, the portion of property values that is attributableto the value of the underlying land is increasing. In light of such trends, adjusting thebaseline price for inflation is likely to significantly understate the value of the land.


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The Academy must continue to permit Community Use of the facilities, as setforth in the deed.

The Academy may not materially alter the dimensions or character of theathletic fields without prior written approval.

Beginning on March 1, 2026, the County shall have the right to send writtennotice to the Academy of the Countys intention to repurchase the propertyfor use as a public school not earlier than five years after the date that suchnotice is sent. This right by the County will continue for 99 years. The repur-chase price would be the fair market value of the property if used as a pri-vate school.

Furthermore, the deed purports to restrict the use of the property to use as aprivate educational facility, and incidental uses related and accessory to use forprivate educational purposes. 3 However, this restriction on use is less than iron-cladin fact the restriction on use may be largely illusory.

Should the Academy wish to change the use of the property, all that theAcademy must do is first offer to sell the property to the County for the fair marketvalue of the property at that time. If the County were to decide not to repurchasethe property for fair market value, then the Academy would be released from thecovenant and would be free to proceed with the change in use. 4

O UTCOME #2: T ERMINATION OF LEASE

The earliest possible date that termination can occur (absent conduct consti-

tuting default) is April 15, 2023. The County may elect to terminate the Lease byproviding the Academy five-years advance written noticethus in order to termi-nate the Lease at the earliest possible date, written notice must be provided byApril 15, 2018 (see Article II, 2). This right of termination is subject to a signifi-cant limitationit may only be exercised in the event the leased premises areneeded by the County for public education purposes.

Financial obligations will arise under Article VIII of the Lease should theCounty elect to terminate. Under Article VIII, 4 et seq. , the County must reim-burse the Academy for a portion of approved Non-Elective and Qualified Electivecapital improvements completed by the Academy. Upon termination, reimburse-

ment for capital improvements is to be pro-rated for the remaining useful life of theimprovements. The cost of reimbursement under Article VIII is likely to be signifi-cant; however, reimbursement will be less expensive than building a new school.

3 See paragraph B of the Deed and Reservation of Rights to Repurchase. 4 To illustrate, this could lead to the following absurd result: the County sells the propertytoday to the Academy for $1.6 million, the Academy offers it back tomorrow for $16 million(hypothetical FMV), the County rejects the offer, the Academy is released from thecovenants in the deed and sells the property to a residential developer.


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County staff has indicated that there are no other restrictions on the use of

this property, so presumably the County would be able to use the property for anypolitically feasible purpose. 5 However, the Lease indicates that the requirement forthis type of termination is that the facilities are needed for use as a public school.Whether termination under this section would operate as a de facto limitation onthe Countys use of the property, and for how long, are legal questions.

O UTCOME #3: CONTINUATION OF LEASE

The Lease automatically expires at the end of the 25-year term and anyextension, without notice or demand from the County (see Article II, 2). The latestdate upon which the Lease would expire is April 15, 2038. Expiration is thereaftergoverned by Article XVII of the Lease.

Upon expiration the County has no obligation to reimburse the Academy forNon-Elective and Qualified Elective capital improvementsthose obligations onlyarise if the County terminates the lease prior to the expiration of the Lease and anyexercised extensions. All buildings, alterations, additions or improvements on thepremises then become property of the County (see Article XVII). It seems that theCounty could then use the Premises for any use whatsoever.

E VALUATION OF P OTENTIAL O UTCOMES

Each of the three outcomes described above can be evaluated on the basis of various criteria. The following are among the criteria that might be used in ananalysis of these potential outcomes:

Time : What is the earliest possible date the facility is available for re-use asa public school?

Financial Benefit : What revenue accrues to the County? Financial Cost : What is the cost to the County? Opportunity Cost : What opportunities are missed and at what cost?

The extent to which those or any other evaluation criteria should be consid-ered depends upon the policy objective. If the County Councils objective is to have

the flexibility to use the Premises for a public school when such a need arises in thecoming decades, then the calculation and weighting of the evaluation criteria mustreflect that objective.

5 Re-use by the County for a purpose other than public education may give rise to causes of action for bad faith or claims on the contractCounty Council might seek legal clarificationof the effect of any possible restrictions on the re-use of the property.


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O UTCOME #1: S ALE /B UYBACK

Under the sale/buyback scenario, it is unlikely that the County would be ableto use the property as a public school prior to March 1, 2031 . Furthermore, it isquite possible that the school will never be available for the Countys re-use as apublic educational facility. 6

A current sale would result in a current influx of capital. Using the methodol-ogy established in the Lease, the 2007 sale price would be between $1.6 millionand $1.7 million. Based upon the language of the Lease, it appears that the Countycould ask for a higher price than that obtained through the methodology set forth inthe Lease.

DateCPI for All Urban

ConsumersAppraisal

(Adjusted)

Dec-97 161.3 $1,335,000Dec-05 196.8 $1,628,816

f:/60020/Peary Memo Numbers.xls/Sale Price Under Lease

Sale Price Under Lease

The price in the table above assumes that the baseline price was establishedin December of 1997, and that the sale is consummated in 2006. Should the saleoccur in 2007, that price would be slightly higher.

The proposed deed, which is dated in 2005, cites a sale price of exactly$1,500,000. The Administrations Analysis (from 2006) cites a figure of $1,650,000. 7 It is not clear why the methodology established in the Lease was notfollowed in either instance. 8 In any event, it is worth noting a few things regardingthe method established in the Lease and the sale price that the method produced:

6 See Paragraph B of Proposed Deed. The proposed deed does not truly restrict the use of the property. The Academy could, at any point in time, force the County to decide between(a) paying the Academy fair market value for the property and (b) allowing the Academy touse the property for other purposes and/or sell the property to a developer who woulddevelop other uses on the property.7 The only explanatory reference to the $1.65 million number is a footnote in the figuresthat the Executive staff provided to the Council, which reads in its entirety: This is theactual amount, as per the agreement between the County and Berman Hebrew Academy. 8 A reasonable reading of the Lease indicates that the County may ask for a price that is ahigher price than that established under the methodology set forth in the Lease. Whetherthe County could accept a price that is lower than the price established under themethodology set forth in the Lease is a legal question. In any event, the $1.5 million figuremay have been below the value that would have been established using the methodology


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Since 1997, land values have increased much faster than inflation.

The portion of property value attributable to the land itself has increasedrapidly in recent years. The proposed sale price is low for 19.5 acres of residential land in

Montgomery County. This price is well below the current replacement cost, i.e., Montgomery

County could not buy the land, parking and athletic fields for this amount of money.

Once the Academy has purchased the Premises, it gains control over theCountys cost of repurchasing the Premises for use as a school. The cost to theCounty of repurchasing the Premises for use as a school will be either (1) fairmarket value of the property (all land and improvements) at a time chosen by theAcademy, or (2) fair market value of the property used as a private school (all landand improvements) not earlier than March 1, 2031.

In the first case, the sky is the limit. In the second case, the value wouldbe limited by its use as a school. The value for use as a school will include thevalue of the land and the value of the improvements.

The Analysis cites a present value cost of repurchasing the property in 2032of nearly $3.8 million. However, the earliest possible date that the property wouldbe available for repurchase under the proposed deed is March 1, 2031. Applyingthe methodology used in the Executives Analysis correctly, one arrives at a present

value cost of approximately $4.8 million, which is significantly higher than the $3.8million figure cited by the Administration, and yet still probably quite low. 9

established in the Lease, whereas the $1.65 million appears to be slightly above the priceestablished under the Lease. 9 This figure ($4.8 million) assumes a 5 percent discount rate, a 2007 value of $8.6 million,and an inflation rate of 2.5 percent. The Administration used a 2 percent inflation ratewhen calculating this figure, but used a 2.5 percent inflation rate when escalating the rent.This was changed to allow for an apples-to-apples comparison. The Administrationestablished a repurchase price for 2032, even though the Proposed Deed establishes a rightto repurchase in 2031. Furthermore, the Administration depreciated the 2032 repurchaseprice as though it were occurring in 2034.


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Lease YearValue as

School ($)Present Value

FactorPV as School

($)2007 8,600,000 1.00 8,600,000 2008 8,815,000 0.95 8,395,238 2009 9,035,375 0.91 8,195,351 2010 9,261,259 0.86 8,000,224 2011 9,492,791 0.82 7,809,743 2012 9,730,111 0.78 7,623,796 2013 9,973,363 0.75 7,442,277 2014 10,222,697 0.71 7,265,080 2015 10,478,265 0.68 7,092,102 2016 10,740,222 0.64 6,923,243 2017 11,008,727 0.61 6,758,403 2018 11,283,945 0.58 6,597,489 2019 11,566,044 0.56 6,440,406 2020 11,855,195 0.53 6,287,063 2021 12,151,575 0.51 6,137,371 2022 12,455,364 0.48 5,991,243 2023 12,766,748 0.46 5,848,595 2024 13,085,917 0.44 5,709,342 2025 13,413,065 0.42 5,573,406 2026 13,748,392 0.40 5,440,705 2027 14,092,101 0.38 5,311,165 2028 14,444,404 0.36 5,184,708 2029 14,805,514 0.34 5,061,263

2030 15,175,652 0.33 4,940,757 2031 15,555,043 0.31 4,823,120

f:60020/Peary Memo Numbers.xls/Repurchase Values_2.5%

Estimated Appraised Value of Land & Improvements UsingFramework of Executive's Methodology

The Administrations methodology does not accurately reflect the true cost of the Premises. By using the estimated cost of replacement for systems and addingthe estimated appraised value of the land in 2031 one would arrive at a figure inthe $6.6-million to $7.9-million range. That range is more accurate, but still veryconservative. Given the possibility that land values might be considerably higher atthat time, it is possible that those numbers could be low by an order of magnitude.

A problem with establishing value in 2031 based upon the market value (asestablished by appraisals) of the Premises in 1997 is that housing appraisals haveincreased at a rate many times the rate of inflation in recent years. 10 In fact, a2006 study by the Federal Reserve opined that even if land appreciation returns tothe slower pace seen before the recent housing boom, prices might rise more

10 e.g., see Washington Post, January 5, 2006: Housing Appraisals in Md. Rise 67%.


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quickly on average than they did before the boom. 11 Thus, the rate-of-inflationassumption may yield results that are less and less accurate as time progresses.

Beyond cost, additional factors must be considered in weighing thesale/buyback:

The County may forever lose the ability to use the property as a publicschool.

There are few other sites in the County appropriate for a new public school. The County may be forced to allow the Premises to be used for something

other than a private school. The County may lose the opportunity to participate in the redevelopment of

this site, or to see to it that that redevelopment of the site achieves otherpublic purposes (e.g., affordable housing).

If the Academy purchases the property at this low price, is released from thecovenant and promptly sells the property for a significant profit, there willlikely be a public perception that the County gave away a substantialresource and opportunity.

O UTCOME #2: LEASE TERMINATION

The Lease may not be terminated (other than for default) prior to April 15,2023. The Lease may only be terminated with five-years written notice, and only inthe event that the Premises are needed for use as a public school. Among thethree potential outcomes, this is the earliest date on which the County could usethe site for public education.

The net present value of rents received from April 15, 2007 until April 15,2023 would be approximately $912,175. 12

11 See The Wall Street Journal Online, June 22, 2006: Land Prices Increasingly DriveHousing Markets, Fed Study Says. 12 Assuming 2.5 percent inflation and assuming that current rent payments are asrepresented in the Administrations Analysis. This figure is different from theAdministrations figure. In the Administrations Analysis, the rent seems to have includedthe years 1998 to 2006 and 2023 to 2027, and seems to have been calculated in 1998dollars.


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Lease YearAnnual Rent

($) PV Factor

PV of

Annual Rent($)

PV of

CumulativeRent ($)

2007 67884 1 67884 678842008 69582 0.95 66269 1341532009 71322 0.91 64691 1988432010 73105 0.86 63150 2619942011 74932 0.82 61647 3236412012 76806 0.78 60179 3838202013 78726 0.75 58746 4425662014 80694 0.71 57348 4999142015 82711 0.68 55982 5558962016 84779 0.64 54649 610545

2017 86898 0.61 53348 6638932018 89071 0.58 52078 7159712019 91298 0.56 50838 7668092020 93580 0.53 49628 8164362021 95920 0.51 48446 8648822022 98318 0.48 47292 912175

f:/60020/Peary Memo Numbers.xls/Lease Income table

Lease Income Through April 15, 2023

Under this Lease, the established rents are very low. For example, assumingthat the facility is 210,000 square feet, the 2007 rent is approximately 32.3 persquare foot. As such, even when aggregated over 16 years, the total rent receivedis nominal. 13

In contrast to the relatively small rent payments, termination of the Leasetriggers significant financial obligations on the part of the County. If the Countyterminates the Lease, the County must repay the Academy for the amortized valueof systems replacement.

However, the cost of reimbursement is essentially the cost of the school, andthat cost will be less than the cost of buying land and building a new school. Thus,if the County is terminating the Lease in order to use the Premises for a publicschool, then the County is just buying the improvements (the County already ownsthe land) that it needs in order to operate the school.

In order for any capital improvement made by the Academy to be eligible forrepayment by the County, that improvement must have qualified under the termsset forth in the Lease and the Academy must have obtained prior approval from theCounty. As such, it was assumed that all improvements took place in 2017, which

13 That fact reflects the condition of the school at the time that the Academy entered intothe Lease, and presumably also reflects the Countys stated desire to re-use the facility as aschool in the future.


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will be nearly the end of the useful life of all improvements made in the RenovationPeriod, and more than five years before the end of the Lease. 14 The present value

cost of repayment for systems replacement is approximately $6 million.15

Lease YearYears Until

Termination

TotalReplacement

Cost ($)

Repaymentfor

Replacement($)

Present valuefactor

PV of amortizedrepayment

($)2007 15 10,195,761 2,548,940 1.00 2,548,940 2008 14 10,450,655 3,135,197 0.95 2,843,716 2009 13 10,711,921 3,749,172 0.91 3,238,676 2010 12 10,979,719 4,391,888 0.86 3,613,217 2011 11 11,254,212 5,064,396 0.82 3,968,086 2012 10 11,535,568 5,767,784 0.78 4,519,210 2013 9 11,823,957 6,503,176 0.75 4,852,770

2014 8 12,119,556 7,271,734 0.71 5,167,885 2015 7 12,422,545 8,074,654 0.68 5,465,244 2016 6 12,733,108 8,913,176 0.64 5,745,513 2017 5 13,051,436 9,788,577 0.61 6,009,337 2018 4 13,377,722 10,702,178 0.58 6,257,342 2019 3 13,712,165 11,655,340 0.56 6,490,130 2020 2 14,054,969 12,649,472 0.53 6,708,285 2021 1 14,406,343 13,686,026 0.51 6,912,373 2022 0 14,766,502 14,766,502 0.48 7,102,940

f:/60020/Peary Memo Numbers.xls/repay for replace

Reimbursement for Systems Replacement At 2.5%

Termination of the Lease may only occur if the Premises are needed for apublic school. Realistically, the need would have to be acute in order for this option

to be politically palatable. Though it is possible that other land uses will seem moreattractive than educational uses in 2023, political and legal considerations may pre-clude any use other than education for some time following the termination of theLease.

O UTCOME #3: LEASE CONTINUATION

Of course, the County may choose to reject this and all other attempts by theAcademy to exercise the option to purchase the property. Assuming that theAcademy would exercise all three of the five-year options under the Lease thelatest date that the County could use the property as a school would be April 15,

14 This method is different from the unnecessarily complicated method used in the Analysis.15 This figure assumes that the very high estimated replacement costs are accurate. TheAnalysis by the Administration assumes that the current cost of replacement would benearly $47 per square foot (in contrast to the 32 cents per square foot that the Academypays in rent), and that those costs inflate at 5.69 percent for five years, and thereafterinflated at 3 percent. For purposes of this table, a 2.5 percent inflation rate was assumed,rather than the higher rates assumed by the Executive.


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2038. 16 It should be noted that under this scenario, the County could use the prop-erty for anything, e.g., affordable housing or the development of a town center.

Assuming that inflation adjustments occur at an annual rate of 2.5 percent,the net present value of the cumulative rent received until April 15, 2038 would beapproximately $1,500,355.

The income received must be weighed against any financial costs directlyrelated to the expiration of the Lease. There is no financial cost to the County asso-ciated with allowing the Lease and all extensions to expire, i.e., the County has noobligation under the Lease to reimburse the Academy for improvements. 17 TheCounty would have the property free and clear.

Lease continuation would allow the County to maintain a civic use on thePremises until the existing Lease and all extensions expire, while also preservingthe Countys ownership of this land until a time when it can be developed to itshighest and best use and put back on the Countys tax roll. On the other hand,Lease continuation would not allow the County to use the facility to meet a need fora public school facility, unless and until the Academy chose to end its tenancy.Thus, it is possible that the County would be unable to meet the need for a newschool in 2026.

C ONCLUSION

To engage in a point-by-point evaluation of the methods and assumptionsincluded in the Administrations Analysis would be to miss the larger issues relevantto the Council with respect to this proposed sale.

The Proposed Deed raises questions as to whether that price (less than$85,000 per acre) is a reasonable price in todays economy and whether the termsof the Proposed Deed accurately reflect the Countys desire to re-use the Premisesfor a public school if a need for a public school arises. If the County would like tohave the flexibility to re-use the property as a public school in the future, this Pro-posed Deed does not provide that protection. If the price in the Proposed Deed isthis low in consideration of the purported use restriction and the potential for laterre-use by the County, perhaps the price should be adjusted upward.

16 It is possible that the Academy would choose not to exercise their options, making theproperty available in April of 2023, 2028 or 2033. The 2038 date is the latest date onwhich the Lease will expire, though the County cannot assume that it will expire prior tothat point, because the expiration is entirely dependent upon the actions of the Academy. 17 It is, of course, possible that the County might agree to share costs of replacement withthe Academy during the later years of the Lease, in order to encourage the Academy tocontinue to operate the school in a condition of good repair throug

response mc council 11-29-10

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