Whole Foods Tax Break Doesn’t Provide the Whole Story

Does a highly profitable, high-end supermarket chain really merit an $8 million tax break to encourage it to open a store in a development-rich area of the District?  That’s the question that will be posed to the DC Council when it considers a property tax abatement proposal, reported last week by the Washington Post, to bring a Whole Foods near Nationals Park.

The city should be investing in economic development to create jobs, attract businesses and residents, and revitalize neighborhoods.  However, the District’s elected leaders have adopted a slew of tax abatements in recent years with no process to differentiate the worthwhile projects from the not-so-worthwhile.  In the case of Whole Foods’ proposal, it’s perfectly reasonable to wonder why the project would need any subsidy in the first place, given the amount of development that has already been attracted to the area.  And it is perfectly reasonable to ask what benefits the developer will provide the city in return.

Proponents of this proposal need to explain why it makes sense for the District to continue putting money into an area that has seen tremendous public investments and is already on the cusp of development.   The recently released Unified Economic Development Budget (UEDB) illustrates that Ward 6, where the proposed Whole Foods would be located, received 39 percent of the District’s economic development expenditures in 2010.  That includes the baseball stadium and a number of nearby projects that were supposed to provide the stimulus for the area to develop. Why should the District invest more in the ballpark area, when areas such as Ward 7 have gotten less than 5 percent of economic development expenditures?

And why does this project require a special subsidy to move forward in the first place?  This Whole Foods already would qualify for a set of tax incentives for grocery store development, including a 10–year property tax break on the store itself.  Moreover, while some projects near Nationals Park have languished in the recession, this area is likely to be part of the emerging rebound, thanks in part to prior public investment by the District.  Finally, if a Whole Foods will revitalize this neighborhood as it did in Logan Circle, why won’t private market interests step up to make it happen?

What benefits will the developers behind Whole Foods provide the District in exchange for a taxpayer subsidy?  Last fall, the developer of a boutique luxury hotel in Adams Morgan committed that a majority of construction hours and permanent hotel jobs would be filled by DC residents, in return for a substantial tax break from the city.   The Whole Foods developer has made no such commitments.

Before passing yet another commercial property tax break, the Mayor and Council should take a moment to consider the sorts of questions we have raised here and in the past.  Passing Councilmember Michael Brown’s Exemptions and Abatements Information Requirements Act would be an important step toward helping the Council to ask the right questions about the Whole Foods project and other abatement proposals.  A careful consideration of the costs and benefits of the Whole Foods project will help the Council determine whether investment in the project would be worthwhile or wasteful, and give District residents greater confidence that their money is being spent wisely.