The Act provides for a national capital and permanent seat of government to be established at a site along the Potomac River and empowered President Washington to appoint commissioners to oversee the project.

Congress passed the Residence Act as part of the Compromise of 1790 brokered among James Madison, Thomas Jefferson, and Alexander Hamilton.

Madison and Jefferson favored a southerly site for the capital on the Potomac River, but they lacked a majority to pass the measure through Congress.

Meanwhile, Hamilton was pushing for Congress to pass the Assumption Bill, to allow the Federal government to assume debts accumulated by the states during the American Revolutionary War.

However, Congress did not remain in the city long, for in June 1783, a mob of angry soldiers converged upon Independence Hall demanding payment for their service during the war.

[4] The following day, Elbridge Gerry of Massachusetts motioned "that buildings for the use of Congress be erected on the banks of the Delaware near Trenton or of the Potomac, near Georgetown, provided a suitable district can be procured on one of the rivers as aforesaid, for a federal town".

[5] During the mid-1780s, numerous locations were offered by the states to serve as the nation's capital, but the Continental Congress could never agree on a site because of regional loyalties and tensions.

A key provision of Hamilton's plan involved the federal government assuming states' debts incurred during the American Revolutionary War.

Northern states had accumulated a massive debt during the war, amounting to 21.5 million dollars, and wanted the federal government to assume their burden.

The Southern states, whose citizens would effectively be forced to pay a portion of the debt if the federal government assumed it, balked at this proposal.

James Madison, then a representative from Virginia, led a group of legislators from the south in blocking the provision and preventing the plan from gaining approval.

Subsequently, a compromise was reached, in which the northern delegates would agree to the southerly Potomac River site, and in return, the federal government would assume debts accumulated by the states during the American Revolutionary War.

[17] Pennsylvania's congressional delegation attempted to undermine the plan by introducing legislation allocating funds for federal buildings and a house for the president in Philadelphia.

It suggested that Congress amend the Act to allow the capital to encompass areas to the south of the Eastern Branch, including Alexandria, Virginia.

However, consistent with language in the original Act, the amendment expressly prohibited the "erection of the public buildings otherwise than on the Maryland side of the river Potomac.

George Hadfield was hired in October 1795 as superintendent of construction but resigned three years later in May 1798 due to dissatisfaction with Thornton's plan and the quality of work done thus far.

[25] The original intention of the Residence Act was to use proceeds from selling lots in the District to cover the costs of constructing federal buildings in the capital.

[citation needed] In 1846, based on a petition to Congress by the residents of the Virginia portion of the District (Alexandria County) and the City of Alexandria, the area of 31 square miles (80 km2) which was ceded by Virginia was returned,[29] leaving 69 square miles (179 km2) of territory originally ceded by Maryland as the current area of the District in its entirety.