A yearlong drive to lure businesses to the District with federal tax incentives was caught in a lethal cross-fire yesterday as Republican leaders in Congress accused Democrats and the White House of pushing a $72 million tax break that would have substantially benefited Washington sports magnate Abe Pollin.
Announced in 1998 with support from the Washington business community, the "Rising Tide" initiative would have granted tax-exempt financing to companies that invest at least $25 million and hire 400 workers within the city's targeted economic development zone.
The measure was backed by a bipartisan group of local lawmakers, who tossed it at the last-minute this week into federal budget negotiations between Congress and the White House. The move, according to lawmakers, was supported by D.C. business leaders and Pollin, the owner of the Washington Wizards basketball team and a prominent Democratic donor who lobbied for the initiative.
A retroactive clause in the measure meant that Pollin would have been the only one initially qualified to receive the tax exemption, a break worth about $2 million a year over five years in reduced interest payments on his $200 million downtown MCI Center, which opened in late 1997.
Yesterday, House Ways and Means Committee Chairman Bill Archer (R-Tex.) blasted the tax break effort, which was first reported in the Wall Street Journal and the Washington Times. Archer, accusing budget-writers of intruding on his panel's powers, condemned what his spokesman called a "stealth provision" benefiting a Democratic donor.
"He thinks it's a misguided tax policy and is surprised that the White House that has railed relentlessly against 'tax cuts for the rich' would be pushing for something that would benefit one of the wealthiest individuals in this country," committee spokesman Trent Duffy said.
Later, after objections from other GOP leaders, including Senate Finance Committee Chairman William V. Roth Jr. (Del.), Senate Majority Leader Trent Lott (Miss.) told reporters the measure had been dropped. "My understanding is it's not going to be in the bill," he said. "I am not sure it was ever agreed to."
Supporters of the investment initiative decried the partisan tilt of those opposed to the measure, saying Pollin was singled out in a power play between GOP committee chiefs--with the District the loser.
"This is really mischaracterized as something for Abe Pollin," said Rep. Thomas M. Davis III (Va.), the measure's prime Republican backer. "This helps the city revitalization process, so they could start being competitive with other areas for using tax-exempt financing." He said Archer has resisted capital gains tax cuts proposed for the District and "has not been a friend of the city on these types of items."
Pollin, 75, is a prominent Democratic donor who has contributed $101,500 to national Democratic committees since 1993. The National Basketball Association owner also hosted a fund-raising brunch in May at his Virginia hunt country home that raised more than $500,000 for presidential candidate Bill Bradley, a former U.S. senator and onetime NBA star.
A spokesman for Pollin's company, Washington Sports Entertainment, L.P., said Pollin and his lobbyist, David S. Julyan, had no comment. But several lawmakers said Pollin was promised tax-free bond financing by the District when he first proposed the downtown arena, a promise that was wiped out during the city's fiscal crisis.
According to the Greater Washington Initiative, a corporate recruiting project launched by the Greater Washington Board of Trade, 20 to 30 companies would have been able to use the incentive. Its backers included Crestar Bank, MCI WorldCom Inc., Bell Atlantic, Washington Gas, Arthur Andersen Consulting and the D.C. Building Industry Association.
Congress's Joint Taxation Committee, which is charged with gauging the impact of revenue, estimated that the financing measure, combined with a wage tax credit proposed last year but not appended to the budget bill, would have generated $1 billion in private investment and 10,000 jobs in the District at a total cost of $238 million.