Who Pays For DC’s Business Tax Giveaways?

March 8, 2010

For the past year or so, the DC Fiscal Policy Institute has been alerting us to business tax breaks pending before the DC Council.

These aren’t across-the-board tax breaks that would benefit a broad sector of local businesses. They’re tailored for one or another developer or other commercial enterprise.

A few recent examples:

  • A $6.1 million property tax abatement, plus other incentives worth as much as $15 million to lure the CoStar Group–a global “real estate intelligence” company–to downtown D.C.
  • Twenty-year property tax abatements worth an estimated $8.5 million for mixed-use developments on top of two Metro stations.
  • A property tax abatement for a mixed-use project on H Street, NE., although the project could qualify for existing tax breaks for new supermarkets.
  • A 10-year property tax abatement and an exemption from sales taxes on construction materials for a hotel at Constitution Square, for a total price tag of $18.6 million. This although it would be the fourth hotel in the neighborhood and could get a share of $6 million in existing tax subsidies for the overall Constitution Square project.

I guess each of these has some purported justification. A mixed-use development at the Petworth Metro station will help revitalize the neighborhood. CoStar will hire a hundred D.C. residents. Or, to borrow from Council Finance Committee Chairman Jack Evans, the District has very few corporate headquarters. If we want them, “we’re going to have to pay for it.”

The “we,” my friends, is us. Because tax revenues the Council gives away must be made up by other tax revenues or by cutbacks in programs and services.

DCFPI warns that the District faces a $230 million shortfall for this fiscal year and a shortfall of about $600 million for Fiscal Year 2011. The main cause is a drop in tax revenues.

The Chief Financial Officer reports that Fiscal Year 2010 revenues will be $17.7 million less than he previously projected. The latest revenue estimate for Fiscal Year 2011 is now $49.4 million less.

The Fenty administration says it won’t raise taxes. The watchword again is “painful choices.” Not nearly so painful for the decision-makers as for the low-income residents who’ll probably again take a hit.

Meanwhile, the administration is offering a $19 million tax abatement, plus $5.5 million in relocation costs to bring Northrop Grumann’s corporate headquarters here. Council Chairman Vincent Gray and six other Councilmembers are on board with this.

Last year, the Council balanced the budget mainly by making spending cuts. But it did adopt some revenue raisers. It may do so again. And it should.

But I can’t help thinking, What good will it do to jack up a fee here, expand a tax there if the Council proceeds to give away more tax revenues so that big businesses can profit at our expense?

CORRECTION: An analysis presented this morning by the Council’s Budget Director shows that the Fiscal Year 2010 budget shortfall is “spending pressures,” i.e. projected agency spending over budget. Lower tax revenues are the second largest factor. The new projected budget shortfall for Fiscal Year 2011 is $605.4 million.


DC Will Cut Off Benefits To TANF Families

July 24, 2009

When I posted my summary of the Mayor’s proposals for TANF (Temporary Assistance for Needy Families), I wasn’t sure they included full family sanctions.

The language of the proposals left the door open for drastic benefits reductions, rather than total cutoffs. More importantly, the City Administrator assured DC Councilmembers–and all of us who were watching the budget hearing–that the proposals “in no way would…eliminate benefits for families.”

I’ve since learned that the Income Maintenance Administration, which administers TANF, does indeed intend to impose full family sanctions, though not before fall 2011. How many families might be affected remains to be determined.

With full family sanctions more than a year away, there’s time for the Council to take a careful look at who is being sanctioned and what actions have been taken to identify and resolve problems that may be hindering compliance.

This could–and I think should–be part of a broader examination of whether IMA has delivered on its promise to to improve “capacity building and services/supports that help move individuals beyond welfare capacity.”

DC Mayor Proposes Cuts In TANF Benefits

July 23, 2009

I’d just finished reading about the punitive aspects of TANF (Temporary Assistance for Needy Families) when Mayor Fenty released his proposals for closing the District of Columbia’s budget gap. And, sure enough, TANF recipients take a hit.

First off, the Mayor wants to take away the small benefits increase the City Council recently approved. This would leave a TANF family of three with a maximum of $428 per month–the same benefit it’s had since 2008. As I’ve written before, that’s less than 10% of what the family needs to live in D.C.

Second, the Mayor wants to initiate full family sanctions, i.e., total cut-offs of cash assistance when the parent fails to comply with work activity requirements. Or, if not full family sanctions, then something pretty close.

Now this could make sense in some cases if the cut-off affected only the parent. But, of course, it doesn’t. It denies support to the children too.

More importantly, the Mayor’s budget apparently assumes significant increases in sanctions. It proposes a $100 per month bonus for recipients who comply with their work activity requirements. Yet proposed funding for TANF is now $6.2 million less than what the City Council recently approved.

So how can program administrators avoid a cost overrun except by imposing severe sanctions on a significant number of recipients?

At the Council’s initial hearing on the proposals, the City Administrator said that the administration expects no savings from sanctions. Rather, it expects the sanctions to increase compliance and thus enable the District to cover more benefits with federal funds.

That may be the expectation, but I doubt it’s how a heightened emphasis on sanctions will work. More likely, the new policy, combined with the budget cut, will create incentives to find recipients in noncompliance, minimize efforts to resolve problems and get sanctions in place as quickly as possible.

The Administrator also said that the city would not eliminate benefits for families. Yet the proposals themselves say that “customers will have another 6 months to move to full participation” after a second-tier 50% benefit reduction has been imposed. So it seems pretty clear that those who don’t move will face full family sanctions–or such drastic benefits reductions that they might as well be total.

In 2002, the Urban Institute did an intensive study of the District’s TANF caseload. It found that many families under sanctions face “serious challenges” that “might hinder their ability to comply with work requirements or even to understand the system’s requirements.”

Shouldn’t we make very sure these families get the help they need before we cut their lifeline? And where are the reform proposals for that?