How Can a Win-Win Deal Smell Bad?

January 31, 1995

Auditors hired by the Columbia Association have a tall order in trying to answer some of the many questions raised by a proposed land deal between the association and the Rouse Co.

The largest of those mysteries is why the Columbia Association would spend $1 million for five industrial acres in East Columbia that it has not had appraised. The land would be converted into a recreational vehicle storage park so that residents could more easily comply with covenants prohibiting them from parking such vehicles in front of their homes.

But that only partly explains the association's willingness to go along with this deal, or why the Rouse Co. is sweetening the transaction by offering to put two lucrative commercial properties under the city's annual levy, allowing the association to reap $350,000 annually within several years.

Both sides, it seems, stand to gain from this cash-for-taxing rights swap; the Rouse Co. with $1 million and the association with an opportunity to more than make up for its investment over time. If the official estimates are sound, it may be a win-win situation all around.

But ethical questions circle this deal like buzzards. Is the Rouse Co. selling land for more than it may be worth? And should the association allow itself to be used in this way, even though it could ultimately turn a profit through rights it would not otherwise have? These questions may be outside the scope of an auditor; only the parties involved can provide adequate answers.

Some critics of the deal have raised eyebrows about whether the Rouse Co., having written the regulation that prohibits Columbia residents from parking recreational vehicles in front of their homes, would now turn a profit from the necessity it created.

It is quite unlikely, however, that the Rouse Co. planned this bonanza a quarter-century ago when it wrote the regulations, which are wholly in line with its aesthetic policy for Columbia. Better questions might be whether Columbia needs a storage park and whether the one proposed will be a boon or a financial drain on the association. An auditor should be able to answer that last question. If the land can be used as intended, there may be no need to throw a roadblock in front of this transaction. But the process has been peculiar and has cast another shadow on the governing of Columbia.

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