Happy Groundhog Day, District Dime readers!
In honor of this day, and this day’s hero’ Bill Murray’ we here at DCFPI are dedicated to breaking the irresponsible and costly cycle of approving property tax breaks to developers that give away millions in future city revenue without any fiscal analysis. Yesterday, Councilmember Michael Brown had his own Groundhog Day experience, re-introducing the Exemptions and Abatements Information Act, which was introduced initially in July 2009 but never passed by the Council. The bill would require fiscal analysis of any project that is seeking a tax abatement or exemption from the District. We hope it will be law by next Groundhog Day.
The recently released Unified Economic Development Budget sheds light on the magnitude of the issue. According to the city’s Chief Financial Officer, the Council authorized 17 tax abatements in 2010 with an estimated future cost of $166.1 million. That’s $166.1 million in future foregone revenue that was approved without any significant analysis or oversight!
The Abatements and Exemptions Information has gotten even better since 2009, such as new provisions requiring detail on the number of full-time and part-time jobs a development project would produce, along with the average wages, and an assessment by the CFO of the developer’s efforts to seek alternate financing. As the city’s fiscal woes continue to worsen, this bill marks an important first step in bringing increased transparency and accountability in ensuring that our hard-earned tax dollars are being well-spent.
So in honor of Groundhog Day, here’s the blog we wrote on July 16, 2009 when the bill was last introduced. We hope not to run it again next Groundhog Day.
By Elizabeth Williams, DCFPI Intern
New legislation introduced in the DC Council this week would put important limits on efforts of developers to get large tax breaks for their projects. This long-overdue bill would require developers to show why a tax subsidy from the city is needed — and what they’ll offer as community benefits in return.
It couldn’t come at a better time.
It’s a common practice for developers to ask the city for a tax break, but it’s becoming even more common as the stresses of the recession are slowing many projects down. So far this year, at least 16 pieces of legislation have been introduced to provide public subsidies for commercial developments. The tax-break seekers include a boutique hotel planned for the West End, brand-new housing above the bustling Columbia Heights Metro, and the tourist-trap mall in Union Station.
Under some of the District’s economic development programs — like Tax Increment Financing, or TIF — the city goes through a review process, including a “gap analysis” by the CFO, to determine whether the project would not be able to move forward “but for” the public subsidy. But no such process exists for tax abatements. Instead, developers can ask for property or sales tax breaks without having to prove why they really need it.
The Exemptions and Abatements Approval Requirements Act of 2009, introduced by Councilmember Michael Brown, would change that. It proposes several new rules before a project could receive a tax abatement. The DC Chief Financial Officer would calculate the true cost of the abatement in terms of lost revenue. The developer would have to spell out community benefits they will offer. And the developer would have to provide information to allow the city to assess the developer’s financial condition and to determine how much public subsidy — if any — is necessary to complete the project.
This level of oversight over the city’s tax base is desperately needed, especially during a time when falling revenues are forcing services to be slashed. Rather than routinely passing tax break legislation where numbers are barely more than characters on pages, lawmakers will be forced to consider the millions of dollars in revenue that may be unnecessarily lost. This bill takes fresh steps towards fiscal responsibility and transparency.
