When the District of Columbia is facing a budget deficit of $400 million or more, should it sign off on a $46 million tax abatement for a luxury hotel in the hip Adams Morgan neighborhood? The debate has raged on the Columbia Heights listserv for several weeks.
The D.C. Council approved the abatement just before the end of its 2010 session. Ward 1’s Jim Graham, the force behind it, said the abatement “is good news for our neighborhood and the city. It will bring substantial new daytime commerce to Adams Morgan. It will provide $7 million in new tax revenue. It will provide hundreds of construction and hotel jobs to Ward 1 and city residents.” The agreement also preserves the historic First Church of Christ Scientist.
Graham stresses that the abatement will not kick in “until the hotel is completed and a certificate of occupancy is issued,” and the builders are required to meet local hiring requirements.
But Washington Examiner columnist Harry Jaffe rejects the plan.
“For 20 years, the hotel owners will not have to pay a dime in real estate taxes. How do I get that? By crying broke and threatening to walk away like developer Brian Friedman,” Jaffe wrote. “He kept pleading that he couldn't line up financing for his swanky hotel, which he says will have 174 rooms, a pool, restaurant and health club.”
At-Large Councilmember David Catania, the closest thing to a deficit hawk in D.C. government, agrees. He said of the deal, “This is $46 million to a private developer where we are being asked with a gun to our head to take it or leave it or an apocalypse happens. It is a false choice.”
Jaffe also wonders why an affordable housing builder got a break of just $104,000, and the Central Union Mission an exemption of $508,000, when a hotel developer got so much.
“I used to have a similar kind of anti-tax break visceral response on this kind of stuff,” Layman wrote, until he came to realize “that I was looking at the issue globally -- e.g., ‘Marriott is rich’ -- rather than on the basis of specific projects, and in terms of D.C. and individual commercial districts.”
Layman said supermarkets and retailers “expect tax breaks (and lower rents) because they serve as anchors in commercial districts, and they spend money, usually weekly, on print and broadcast advertising, and this advertising draws customers to commercial districts, and the people in turn shop in other stores.” If they do not get these plums from one local government, they simply build somewhere else.
It makes sense to have a gut feeling, like Jaffe and Catania do and like Layman once did, that throwing discounts at wealthy businesses when the city has a huge budget gap and unemployment approaching 30 percent in some areas is obscene. But a closer examination shows that this issue, like most, is more complex than it seems at first glance.
Follow P.J. Orvetti on Twitter at @PJOinDC