By Jonathan O'Connell
Monday, September 20, 2010; 3
The landlord to the shops, restaurants and kiosks of Union Station is asking the D.C. Council to waive millions of dollars in taxes on the property, and the council plans an initial vote on the idea Tuesday.
The Union Station Redevelopment Corp., a nonprofit created by Congress to manage the station in 1981, leases all the retail space -- home to shops including Ann Taylor, Express and Victoria's Secret -- to a New York City developer, Ashkenazy Acquisition.
The District currently taxes the space at more than $1 million per year under a 2000 law that allows the city to tax commercial space within federally owned properties. But David S. Ball, president of the redevelopment corporation, said the taxes are holding back numerous improvement plans underway for Union Station, including reconfiguration of Columbus Circle, a connection to a planned streetcar line, a new bus terminal, added security measures and an expansion of the Metrorail station, which is the busiest in the system.
The legislation, submitted by Council members Jack Evans (D-Ward 2) and Tommy Wells (D-Ward 6), would require the corporation and Ashkenazy to make $11.5 million in payments to the city to cover the station's taxes through 2015 (including unpaid back taxes), but would then would waive any tax liability into perpetuity, at a cost of between $1.4 million and $2 million per year, according to city estimates. Through 2035, the District, which projects a budget deficit in its 2011 fiscal year, would forgo $33.5 million in payments. The Council would have to vote twice for passage of the bill to enact it; the first vote is expected Tuesday.
The tax, Ball said, "diminishes our ability to effectively work within the frame of what Congress intended this office to do" because it forces the station's sublessor, Ashkenazy, to make tax payments it did not expect, preventing the company from putting up capital for improvements.
Ashkenazy did not return requests for comment. But the argument that the developer, a private firm that touts commercial real estate holdings nationwide of more than $5 billion, cannot afford new investments makes the legislation "a poster child for what's wrong with economic development tax breaks in the city," said Ed Lazere of the D.C. Fiscal Policy Institute, which advocates for low- and moderate-income city residents.
"There is really no evidence to suggest that the tax break is needed in order for that company to survive," Lazere said. "Most people would look at Union Station and say it's doing fine and should be able to pay its taxes like anybody else."