Less than two weeks after news broke that DC faces a $175 million shortfall, the DC Council held a hearing to consider a $61 million tax break for a planned boutique hotel in Adams Morgan. DCFPI testified at the hearing, noting that while the hotel may be a promising addition to that neighborhood, the proposed 100-percent, 15-year property tax break raises a number of serious concerns.
Most important, there is no evidence that the hotel needs a subsidy of this size from DC to move forward. The 175-room luxury hotel, which would be built at the corner of Euclid and Champlain Streets NW, has been designed by Ian Schrager and will be operated by hotel conglomerate Marriott. It is part of Marriott plans to open boutique “Edition” hotels in cities around the world. The first of these opened in Waikiki Beach, and others will soon open in Istanbul, Barcelona, Bangkok and South Beach. Marriott appears to see economic opportunity in the District, as well.
That’s why it’s key to ask why this hotel needs a subsidy. The Mayor and DC Council have scrubbed the expenditure side of DC’s budget in recent years, looking for savings in the midst of a huge drop in tax collections. This has forced DC programs to justify every penny of expenses and have led to cuts down to the bone and “into the marrow,” according to Chairman Gray.
Yet our elected leaders rarely ask the same hard questions when it comes to tax incentives. Under other DC economic development programs, like Tax Increment Financing, the Chief Financial Officer takes a close look to assess how much assistance, if any, is warranted to move a project forward. There are no such rules for tax abatements.
There is a solution to this problem. The Council should approve the Exemptions and Abatements Information Act, which would apply to proposed tax abatements the same hard-edged analysis applied to most economic development programs. The Council has held a hearing on the bill but has not moved it forward. Meanwhile, many proposed tax abatements have come before the Council without the kind of information needed to assess them.
