What does tax increment financing have to do with MCI Center and the Discovery Channel Store, a major tenant in the arena?
The answer is nothing, unless you believe, as some developers and housing activists do, that the store and the arena will never realize their full potential unless D.C. government officials help finance construction of a private development project next to MCI Center.
Thus the Downtown Housing Now Committee is pressing Mayor Anthony A. Williams to support the use of tax increment financing (TIF) in the development of the project being proposed for Gallery Place.
In short, the housing advocacy organization is urging Williams to approve what amounts to a subsidy for the project, which is being developed by Western Development Corp. and the John Akridge Cos.
TIF is basically an economic development strategy in which government helps finance a project by issuing bonds and pledging the anticipated increases in tax revenue from the project to repay the bonds.
So why would a housing advocacy group be asking the city to approve a TIF certification for the Gallery Place project?
The proposed 1.5 million-square-foot development would include a mix of retail stores, theaters and other entertainment activities, and -- you guessed it -- housing. The committee in fact negotiated a deal with developers to include at least 125 residential units in the Gallery Place project, though there may be as many as 165 units when the building is completed.
Indeed, the operative word is when. And, frustrated by the delay in getting a TIF certification for Gallery Place, the committee is pressing the mayor to jump-start the process, citing "problems" at the Discovery Channel Store.
"Unfortunately, the problems that the Discovery [Channel] Store is having can be partly blamed on the city in not moving quickly enough to develop the Gallery Place site . . .," Charles A. Docter, chairman of the Downtown Housing Now Committee, declared in a letter to Williams last week. "It is your turn to make this site work and thereby make the promise of the MCI Center become real by granting TIF financing to Gallery Place Associates now," Docter continued.
The committee obviously has a vested interest in wanting to see more housing built downtown. Its advocacy of housing development is nonetheless vital to achieving the city's goal of creating a "living" downtown.
But the committee is way off base in blaming District officials for any problems that the Discovery Channel Store may be having.
In the letter to Williams, Docter cited a Washington Business Journal article noting that the store has failed to generate as much business as its owner, Bethesda-based Discovery Communications, had anticipated.
That may be true, though officials at Discovery Communications denied in an interview last week that there's a problem.
But let's put this in the proper context and not cloud the issue with the TIF argument.
In the first place, the Discovery Channel Store has been open less than two years, not enough time to make a final judgment about its performance. Obviously more people visit the store when professional sporting events and other major attractions are booked at MCI Center.
But the Discovery Channel Store is not a retail destination in the sense that Hecht's department store downtown is, for example. Neither is the Discovery store located in the heart of a shopping district or in an area in which many tourists are likely to venture.
Company officials obviously considered all that beforehand and took a calculated risk, anticipating that the area around MCI Center would eventually be developed as forecast.
Indeed, officials were guided in their decision by the "promise of the neighborhood, close to the Mall" and the expectation that eventually more people will be employed in the area around Gallery Place, said Michela English, president of Discovery Enterprises Worldwide, which includes retail operations.
"We're pleased with customer traffic and sales," said English, adding that the company operates all of its business segments on a five-year planning cycle.
Neither English nor other officials would disclose sales figures, but more than 1.2 million people have visited the store since it opened 16 months ago, according to Donald Baer, senior vice president for public policy and communications at Discovery Communications.
In the final analysis, too much weight has been given to the assumption that MCI Center would be the magic bullet for development and commercial success around Gallery Place. Either a business is strong enough to make it on its own or it isn't.
And given the statements by officials at Discovery Communications, it's not only premature but also disingenuous to tie the TIF application for Gallery Place to speculation centering on the Discovery Channel Store.