GIVING AWAY THE STATION:Tax Break for Union Station Would Cost City Tens of Millions in Revenue (Updated Analysis)| December 20th, 2010 | PDF of this report
The developers that manage Union Station are making a renewed effort to secure a permanent property tax break for all commercial businesses in the complex, including retail stores, eateries and bus lines that may operate out of its garage. The proposed exemption would cost the city at least $34 million over the next two decades. Legislation creating this tax break was tabled by the DC Council when the bill came up for a vote in September, due to concerns that the bustling shopping center did not need special tax treatment.
Now the developers are arguing that the tax break should be re-considered, because it would provide an injection of funds to District coffers. According to the bill, the developers of Union Station would provide a lump-sum payment of $11.5 million. They also argue that the District will gain $120 million in sales and other tax revenue over the next two decades due to a planned expansion.
While the numbers seem impressive, they are misleading for several reasons:
- The lump-sum tax payment is what Union Station owes under District law. The District started to impose a “possessory interest tax” on Union Station’s commercial activities in the mid-2000s, as part of an effort to treat businesses operating in federal buildings the same as those operating in commercial spaces. The retail managers at Union Station have not paid the tax bill, arguing that they should not be subject to the law. The proposed tax exemption would include a lump-sum payment of their back taxes, plus the legally obligated payments from 2012 to 2015, but then exempt the commercial businesses from the possessory interest tax starting in 2016.
- The projected growth in sales taxes is not tied to the tax abatement. The estimates of additional sales tax revenue are based on already-planned expansions at Union Station that appear to reflect untapped market potential there. The developers do not make the claim that the tax abatement is critical to their redevelopment. This means that the new sales tax revenue is likely to be generated with or without the tax break.
Read the entire analysis here.