Should the District buy Living Social’s tax break deal?
Legislation before the DC Council right now would give daily-deal company $32.5 million in tax breaks for keeping its headquarters in the District. The deal is on a fast track, and District leaders need to make sure it is mutually beneficial to both LivingSocial and the District. One important way to do that is to make sure that as LivingSocial grows, the number of jobs for District residents grows as well.
As DCFPI testified last week, the legislation should be strengthened to directly tie the subsidy to more jobs for DC residents. For example, the legislation could stipulate that in order to receive this generous tax subsidy, LivingSocial should certify that at least 40 percent of its employees are DC residents. The current deal would allow LivingSocial to claim large tax breaks even if they hire no DC residents.The company also should be incentivized to grow the number of District residents it hires. The company has an ambitious growth plan, but right now Living Social can get most of the tax breaks without increasing the number of District residents hired.
Although the subsidy increases as the percentage of DC resident employees increases, there is no minimum requirement for the percentage of DC resident employees. Currently, the legislation would allow LivingSocial to claim $16.5 million in tax breaks — more than half of the full subsidy package — even if it does not hire a single District resident. The subsidy does require Living Social to hire new employees but this requirement can be met through turnover — with new employees replacing departing ones. In other words, it could result in no increase in employment in the District. Rather than tying the subsidy to new hires, it should be tied to the number of positions added, with the full subsidy available only once LivingSocial reaches 2,000 DC-based employees.
Beyond that, Mayor Gray and Living Social have made a good case that the company can be a catalyst to grow a dynamic, innovative high-tech sector, and the community benefits package in the legislation should reflect that role.
LivingSocial intends to offer a host of community benefits. Yet there are no verifiable benchmarks to go along with these commitments. The legislation should include specific figures for the planned benefits: the number of youth that will be hired as part of the Summer Youth Employment Program, the number of DC businesses in disrupted corridors that LivingSocial will work with, and the number of businesses and individuals that will receive technical training in software development and social media. Additionally, LivingSocial should enter into formal partnerships with District educational institutions, such as McKinley High School, the University of the District of Columbia, or the Community College of the District of Columbia, to ensure that DC students studying computer science and engineering can be put on a pathway towards employment with the company.
If the Gray Administration is willing to guarantee up to $32.5 million in subsidies to LivingSocial, LivingSocial should make some guarantees of their own. Guaranteeing DC resident employment and specific benchmarks for community benefits would be a great start.
