Making Sense of the District’s Tax Abatement Dollars

The process for awarding property tax abatements in the District has, for a long time, lacked a coherent and systematic approach. This has resulted in a process which appears to amount to “first-come, first-serve” approval that fails to adequately consider the costs and benefits of proposed tax abatements or how such abatements fit within the context of the District’s overall budget outlook and economic development goals.

This paper outlines nine critical questions that the DC Council and the public ought to consider when weighing the merits of a given tax abatement proposal:

  1. How much subsidy is required, at this point in time, to enable a project to move forward?
  2. Have the developers sought private financing before seeking a public subsidy?
  3. How much will the abatement cost in terms of lost revenue?
  4. What are the community benefits of the abatement?
  5. Does this project address an economic development priority for the city?
  6. Are any costs of the abatement hidden?
  7. Does this abatement have a clawback provision?
  8. Is the cost of the abatement capped?
  9. Does an abatement have a sunset and subsequent review process?

Some of these questions were incorporated in the recently approved “Exemptions and Abatements Information Act.” The remaining questions represent an effort to advance the goal of increased transparency and accountability regarding property tax abatements even further.