The D.C. Council is poised to offer an $11 million tax incentive to a development project near Howard University, even though city financial officials have determined that the incentive is not necessary to move the project forward.
An expected vote on the deal on Tuesday will test the council’s willingness to rationalize and reform its long-standing practice of offering ducats to developers who are often also campaign donors.
The project in question is Howard Town Center, a $143 million residential and retail project on university-owned land on the northwest corner of Georgia Avenue and V Street NW.
Council members voted last year to require the Office of the Chief Financial Officer to analyze whether projects proposed for a tax exemption or abatement could be financed without one. The office has examined about a dozen incentive packages since the law went into effect, but this appears to be the first time it has said outright that a proposed incentive deal is unnecessary.
Nonetheless, the council’s Finance and Revenue Committee approved the deal unanimously Thursday, sending it to the full council.
Panel chairman Jack Evans (D-Ward 2) said the incentive is warranted because the project will be a “catalyst” for lower Georgia Avenue. “Any time someone wants to do housing and retail at Seventh and Florida,” he said, referring to a major intersection, “I’m all in.”
But the area is hardly depressed. Investors have snapped up nearby parcels as development along the thriving U Street corridor has moved steadily east.
“This is in the midst of one of the most rapidly developing parts of the city,” said Ed Lazere, executive director of the D.C. Fiscal Policy Institute, a liberal watchdog group that has pushed for more scrutiny of tax incentive offers.
The university’s partners are the Cohen Cos., based in Rockville, and CastleRock Partners, of McLean. They plan to tear down two buildings between Georgia Avenue and Eighth Street NW and construct 445 apartments with 74,000 square feet of retail space and 320 underground parking spaces.
The CFO’s report said the developers have other financing vehicles available, including tax credits reserved for projects with affordable housing. It also found that the developers calculated their financing based on lower-than-average rents for the area.
Council member Jim Graham (D-Ward 1), who represents the area and introduced the bill, said the developers assembled a “very clear case” for the incentive. “We don’t want to spend money where we don’t need to spend money,” he said, “but if it’s so critical to the development of lower Georgia Avenue, I’d hate to see it lost.”
Eric Siegel, a Cohen senior vice president, said that despite the booming neighborhood, the project was financially viable only with the tax break because of expensive requirements from the lender and the city.
After failing to persuade the U.S. Department of Housing and Urban Development to finance the project, Siegel said he has secured financing from Citi Community Capital, contingent on the project containing 88 units subsidized for renters earning less than 50 percent of the area median income.
He also said underground parking and a new grocery store coming in require building the entire project at once, rather than in phases. “You can’t build half the garage and then the other half of the garage, and half the retail and then the other half of the retail,” he said.
Despite owning acres of vacant land in one of the most rapidly developing neighborhoods in the region, Howard University has done little to build new housing or facilities for its students or staff in recent years.
Howard has been banking on the Town Center project to change that for a decade. Writing in support of the tax incentive this month, university Chief Financial Officer Robert M. Tarola called the project a “catalytic project for the Howard University community and surrounding neighborhoods.”