It’s been a tough budget season in the District, and even the unanticipated revenue announced last month will not be enough to cover the all the critical priorities outlined by the DC Council in the FY 2012 budget. In times like this, when resources are strained and even the most basic of government functions — schools, police, and public health — are competing for limited dollars, it is all the more imperative that the District take a judicious and thoughtful approach to allocating its scarce resources.
So District leaders should be applauded for approving legislation to create a new process for evaluating proposed tax breaks to help the District responsibly determine how best to support economic development.
The Exemptions and Abatements Information Act, included as part of the 2012 Budget Support Act, does two major things. It requires that projects seeking city assistance be subject to a rigorous fiscal analysis by the Chief Financial Officer. It also requires reporting on the community benefits the project will provide, such as affordable housing units and/or jobs created. This will help our elected officials make better decisions by detailing whether projects need financial help from the District to be successful and what these projects will offer the city and its residents when completed.
Right now, policymakers and residents get little information about project finances or benefits when legislation to abate or exempt a property from taxes is placed before them for a vote.
Take, for example, a controversial abatement that was considered last year to give Union Station a tax break worth at least $34 million. The developers who manage Union Station sought to permanently exempt commercial businesses such as Starbucks and McDonald’s who operate at the shopping center from paying the possessory interest tax, which operates much like the property tax. The loss to the city, according to the Chief Financial Officer, would be at least $34 million over 20 years. Yet the legislation was not subject to a rigorous fiscal analysis to explain whether or why a bustling commercial center would need tax subsidies.
In the end, legislation for the Union Station tax break was tabled, in large part over doubts that a subsidy was warranted. That was the right decision.
Starting October 1, projects that seek tax exemptions or abatements assistance will be subject to much greater analysis. That’s good for all. Thanks to Mayor Gray and the DC Council for including this important law in the FY 2012 budget.
