The D.C. government is eyeing tens of millions of dollars worth of tax breaks for the private and nonprofit sectors to help rejuvenate the District’s sputtering economy and enliven up-and-coming neighborhoods.
The slate of tax break proposals comes as the District faces a $131 million shortfall in 2009 and $152 million gap in 2010, and some observers expect the numbers to worsen as the stock market crash translates into lower revenues from income and capital gains taxes.
“If [the tax breaks] indeed spur development, especially in tough economic times, it’s something we should look very closely at,” Ward 2 Councilman Jack Evans, chairman of the finance and revenue committee, said of several proposals coming to his committee.
The most generous would ease real estate taxes on new residential projects in NoMa, the emerging community north of Massachusetts Avenue. NoMa, home to XM Satellite Radio and the Bureau of Alcohol, Tobacco, Firearms and Explosives, currently comprises 2 million square feet of office space but only 652 residential units.
The goal of the tax abatement is to accelerate construction of up to 3,000 new units of housing, proponents said. The bill, co-introduced by Ward 5 Councilman Harry Thomas and Ward 6 Councilman Tommy Wells, caps the tax breaks at $5 million per year for 10 years.
“Without the additional tax support, they’re not going to be able to get those projects off the ground,” Thomas said Wednesday. “This will be the linchpin to bring the residents.”
But there’s no hard analysis to justify tax abatements, said Ed Lazere, executive director of the D.C. Fiscal Policy Institute, a District budget watchdog. It’s not a question of whether now is the right time, Lazere said, “but whether there is ever the right time.”
“Look at what’s going on in NoMa,” he said. “There is a ton of building going on; much of it is happening with no tax abatement needed. It’s already primed.”
Liz Price, executive director of the NoMa Business Improvement District, said the abatement plan would pay off — the District lays out $5 million a year and reaps nearly $30 million in new tax revenues.
“It will bring more tax revenue to the city sooner,” Price said. “There’s no downside to this.”
Other proposals
D.C. tax break proposals in addition to an abatement on real estate taxes for new residential projects in the “NoMa” community worth up to $50 million:
A real estate tax abatement for the Urban Institute: $15 million over 10 years.
A real estate tax abatement for the Pew Charitable Trusts: $5.6 million over four years.
A proposed income tax credit for rehabilitating “historically significant” buildings: $6 million through 2012.
