Two D.C. council members have introduced legislation to exempt the retail center in Union Station from an estimated $2.7 million a year in local taxes. Instead, according to the bill co-sponsored by Jack Evans (D-Ward 2) and Tommy Wells (D-Ward 6), the shopping mall-which is located on federal property-would pay a lump sum of $253,000 a year. That’s an estimated $2.45 million a year tax break every year
Why should the McDonald’s or Ann Taylor in Union Station be taxed differently from the McDonald’s or Ann Taylor in the Mazza Gallerie or Dupont Circle?
Very simply, they shouldn’t be.
Taxing Union Station at the same rate as other retail spaces and eateries in the city is not only good fiscal policy for the District, but a matter of fairness. Government buildings are exempt from property taxes, but the District implemented a law in 2004 to put for-profit, commercial businesses that operate in these buildings on a level playing field with those in taxable spaces – by creating a property tax equivalent they must pay.
The possessory interest tax applies to approximately 200 businesses in the city housed in spaces such as the Ronald Reagan Building and International Trade Center, the Old Post Office Pavilion, and the Frank Reeves Center. This is an important source of revenue for the District because so much of the city’s real estate is tax-exempt and services in government buildings-such as food courts-are more and more being privatized. It also is a matter of tax fairness – the commercial enterprises in federal and other tax-exempt buildings should pay the same taxes as businesses in traditional commercial buildings.
Union Station is owned by the U.S. Department of Transportation and run by the nonprofit Union Station Redevelopment Corp. Yet the ground lease of Union Station was awarded to a for-profit real estate company, Ashkenazy Acquisition Corp., which purchased it for $160 million in January 2007. According to an Ashkenazy press release, Union Station is one of the most successful malls in the country, averaging sales per square foot of $800 a year, twice the national average.
Union Station representatives complained that retailers were targeted by city tax officials and being unfairly singled out. But by asking for this tax break, Union Station’s businesses would get a special tax status that other businesses don’t have. The possessory interest tax should be applied to Union Station, and the city should work with the Union Station Redevelopment Corporation to identify the proper entity to pay the tax.