A little-noticed ‘ but disconcerting ‘ trend in DC this year has been the steady stream of businesses seeking special tax treatment from the District ‘ usually in the form of 10-year breaks from paying property taxes. Nearly 20 tax abatement proposals have been introduced in 2009 ‘ including two in the past month ‘ for projects ranging from housing developments to grocery stores to high technology commercial real estate companies.
Each time, the developers claim they cannot move their projects forward without a city subsidy. Yet no one in the District government takes a look to see if that is actually true. Considering that some of the projects seeking help are in strong real estate markets ‘ such as a boutique hotel in West End ‘more scrutiny is needed.
The newest tax abatement proposals are for a hotel in the massive Constitution Square development in NoMa and a large mixed-use project at 3rd and H Sts. NE, along the developing H Street Corridor. The H street development would include 210 condos or apartments, a 250-270 space garage, and 42,000 square feet of retail, mostly occupied by a grocery store.
But is it not entirely clear these developments actually need tax help to move forward. The H street development would already qualify for the District’s supermarket tax breaks ‘ a 10 year property tax abatement. And the Constitution Square development is already receiving $ 6 million in property tax breaks.
It is in the District’s financial interest to examine the economics behind each of these tax break requests ‘ to see whether a city subsidy is warranted and to assess what the city will get out of the deal. But it doesn’t happen because there are no rules requiring an analysis of whether or not the subsidy is needed when awarding this kind of selected tax break.
That could change, though, with the passage of “The Exemptions and Abatements Information Act of 2009″ introduced by Councilmember Michael Brown. This bill would require the Chief Financial Officer (CFO) to conduct a financial analysis of any tax abatement proposal, something that already occurs for some economic development programs, like tax increment financing. Introduced back in the summer, this bill has yet to have a hearing in front of the Committee on Finance and Revenue.
With a possible $300 million budget shortfall looming around the corner, the District should be taking steps to assess whether or not a subsidy is actually needed for any project seeking tax breaks.