Ken Archer, a tech executive and Georgetown resident who is also a frequent Greater Greater Washington contributor, did some valuable reporting over at GGW yesterday that is worth a look.
He took a look at some of the development subsidies handed out by city officials in the past decade or so, to figure out whether they were valuable catalysts of development or corporate giveaways with little civic upside.
The answer is they’re more successful that not. In particular, the first wave of tax increment financing deals did better than anticipated, returning more money more quickly than expected.
Those instruments can be hard to understand, but they are essentially loans secured by the additional tax revenue — the “increment” — the loan will generate. And those increments have been substantial for the Spy Museum, Gallery Place, Mandarin Oriental, DC USA and other deals. That’s good because that means the tax dollars can more quickly start flooding into city coffers rather than repaying bondholders. Early repayment also opens up room under the city’s debt cap to do further financing.
But Archer offers some caveats: more recent TIFs have been approved after a less-than-rigorous analysis of whether they’re truly necessary to get projects off the ground and have been targeted at projects with less obvious benefits in kindling additional, non-subsidized developments.
For instance: A $2 million TIF handed in 2009 to a certain huge pharmacy chain to build a new store in a neighborhood that has seen plenty of unsubsidized development recently.
And keep in mind TIF financing is only one form of development incentive, one that’s become less common as the city’s started flirting with that debt cap. More common now are things like infrastructure assistance, tax abatements and exemptions, revenue bonds and other more specialized subsidies (like the package being discussed for LivingSocial).
The important thing, as Archer writes and the D.C. Fiscal Policy Institute and others have long said, is not that the city is handing “giveaways” to private business, it’s that those incentives are rigorously reviewed to make sure they’re in line with civic motives along with profit motives.