On Tuesday, the DC Council will vote on legislation that would give LivingSocial a $32.5 million tax break to encourage the daily-deal company to stay in the District. Keeping such a dynamic, large employer is a good thing, and it is important that the Council craft the legislation so that the interests of both LivingSocial and DC are met. DCFPI suggests several amendments to strengthen the bill:
Amend the bill to tie LivingSocial’s growth to job opportunities for DC residents.
Right now, LivingSocial could earn half of the $32.5 million tax break without hiring one new District resident. That’s not a great way to use tax dollars to incentivize job growth for our residents and our city. As well, the “new hire” requirements currently in the bill do not specify that jobs need to be added but a new hire can simply replace a vacant position.
Instead, the Council could amend the legislation so that the tax break truly incentivizes the company to hire District residents and add new positions. The Council should restructure the bill so that both the property tax and corporate income tax breaks are based on two elements: the percentage of LivingSocial employees that are DC residents and the number of new positions LivingSocial adds in the District. This approach would reward LivingSocial for maintaining what it is already doing in DC, but the company would be ineligible for the subsidy if employment falls below it current level of 1,000 employees or if fewer than 35 percent of employees are DC residents. This improvement to the bill would allow LivingSocial to claim the full $32.5 million in subsidies if it hits the projected target of 2,000 employees, including 50 percent DC residents.
Amend the bill so that if LivingSocial fails to meet requirements, DC has a money-back guarantee.
A clawback is the economic development equivalent of a money back guarantee. The bill currently requires LivingSocial to keep 1,000 employees and occupy a building of at least 200,000 square feet. But there is nothing in the deal that would enable the District to get back money it already paid if LivingSocial does not meet requirements down the road. The Council can improve the legislation by including a provision that either LivingSocial or any company that purchases LivingSocial should be required to repay a portion of the subsidies it receives if employment in DC falls below 1,000 employees, its current level, or if the company fails to occupy a building of at least 200,000 square feet.
If one of these violations occurs within the first five years of the abatement, LivingSocial should repay 100 percent of any subsidies they received. If one of these violations occurs between five and ten years of the abatement, LivingSocial should repay 50 percent of any subsidies they received.
Amend the bill so that LivingSocial will be a tech catalyst for young DC workers interested in IT.
The DC Council can improve the bill by stipulating specific community benefits. First, the Council can improve the legislation by setting a goal for the minimum number of individuals that will be trained in software development and computer science each year. The bill should incentivize LivingSocial to establish a product development apprenticeship program with one or more educational institutions in the District, such as UDC or the Community College of the District of Columbia. The bill should also outline yearly hiring goals for the Summer Youth Employment Program, each year during the abatement period.
Accountability is also critical. The legislation should also specify which District agency will be responsible for verifying that LivingSocial meets its job creation and residency requirements. For previous tax breaks, such as the property tax abatement awarded to CoStar, the Department of Employment Services was responsible for verifying that a company has hired the required number of DC residents and reporting that information to the Office of Tax and Revenue to determine the company’s tax liability.
In order for the Council to maximize the benefits to the District as well as to LivingSocial, it should make goals transparent, clear, and identifiable. If so, the Council will see that with a few critical amendments to the legislation, the deal can be redeemed in a way that provide real benefits to District residents while adequately protecting the city’s interests.
