Friday Question of the Day – Who Should the City Give Tax Breaks to?

Photo by PoPville flickr user AWard Tour

Thursday afternoon WBJ’s Michael Neibauer wrote a story titled, Tax break eyed for Capital City Diner:

Citing its economic and social impact on the surrounding community, [Ward 5 Council Member] Thomas has introduced legislation that would exempt Capital City Diner from property taxes through Jan. 1, 2016. The diner is assessed by the city at $320,340. The exemption amounts to a $5,000-plus annual tax break.

The article also quotes Ed Lazere of the D.C. Fiscal Policy Institute, who says:

“While the Capital City Diner is located in a neighborhood without many sit-down restaurant options, it is unclear why a restaurant that currently is operating needs a further incentive to continue its business,” Lazere said. “There are a number of restaurants that have opened in recent years on nearby H Street NE, none of which has received this kind of assistance to our knowledge.”

So the FQotD is a simple one – what businesses do you think should receive tax breaks? And how long should tax breaks given – 1 year, 5, years, 10 years? I know that developers also commonly receive tax breaks – who else does? Who else should? Do you know of any other restaurants that receive tax breaks?

65 Comment

  • gotryit

    No tax breaks. Leave it a fair playing field for all businesses and developers. Not just the well connected ones.

    • No tax breaks means no Whole Foods, no City Vista, no DCUSA. All the large scale development you’ve seen in DC in the last 10 years was the result of tax breaks or concessions offered to developers.

      It may not seem “fair”, but look at how nice Logan and CH have become. If you go to any of the bars or restaurants in those neighborhoods, you’re the beneficiary of tax breaks given to developers, who blazed the trail for craft beer bars and nice restaurants. You can’t have it both ways — you can’t have a developed DC and no tax breaks.

  • Economically speaking to give permanent tax breaks to incentives a business to come to area is a bad idea. But I believe giving a 2-5 year tax break to give them incentives to open in areas which they would not otherwise is a good idea.

  • “Without this tax relief and considering the current economy, Trinidad’s only sit-down restaurant may not succeed.”

    That’s why these guys should be given a break. I don’t mind seeing businesses fail on M, 18th, or U — but in Trinidad? Bless these bright eyed pioneers. They did what no one else would or will do anytime soon.

    If the business goes under, 15 employees will be out of work. Those jobs are effectively destroyed, gone from the economy. As long as this diner stays afloat, they’re generating revenue for DC. Help em ride out the storm.

    • How about running a restaurant that people in trinidad care to support financially or that has enough appeal to attract people across town to Benning Road?

      There’s always an excuse for poor business plans.

    • +1

      I totally agree. I am generally against tax breaks but I have personally seen the change this little diner has brought to that blighted area. The minor amount of the tax break is insignificant if it keeps this place open. It is one of the few establishments in that area where old and new residents really meet and mix on a day to day basis.

      As for everyone who thinks it’s better to let everybody take the bootstraps route, do you have any idea how hard it is to open a business in this city, and how hard it is to do it in an area like Trinidad? There are other forces at work here than just economics. For example, one of the Capital City Diner’s employees was shot while walking home from work a couple of months ago.

      Tax breaks are just another type of incentive to jumpstart revitalization in an area like this. Federal and State Governments do this all the time (eg, the egregious oil company tax breaks). Bladensburg Road has made enormous improvement in the last couple of years, and with the new apartments going up it’s about to really take off. If some minor tax breaks help one of the pioneers bridge the gap, I say it should be seriously considered.

      • “do you have any idea how hard it is to open a business in this city”

        Yes. Solution: make it easier to open a business in this city. Reduce the red-tape and ridiculous costs and wait times to get permits; speed up the inspection process, streamline approvals, make them less arbitrary; stop giving ANC’s the power to stymie someone’s business plans for months, even over a year; all of these things are what causes these silly tax breaks to be justified. Clean up the process, and the problem takes care of itself.

        The system as it is gives preference to those who are already wealthy and can afford to ride out the red-tape and endless delays. The rest of us who aren’t wealthy are forced to toss our entire savings (or take out loans) to stay afloat, paying a lease, paying taxes, paying for construction, paying lawyers, paying fees, etc, all while not making any money on our venture. By the time it opens, we’re down to very little to keep us afloat if we aren’t immediately successful (and most aren’t). This is probably what happened to the owners of the diner, and this is why requests for targeted tax breaks happen.


        • Best solution yet. This is what needs to be done at every level of the DC government. The thought of trying to open a business in DC with it’s retarded hoops to jump through and stupid ANC’s is enough to turn 99% of good business ideas away.

        • Yes, they need to fix the root cause. While they are fixing that ball of wax, however, they shouldn’t rule out doing something to help businesses like the Capital City Diner.

          As Librarinerd says below, singling out an individual businesses doesn’t seem right– specific legislation that makes it clear why the diner is eligible, and creates criteria for similar businesses to apply, would be a much better way to go.

  • I am generally skeptical of tax breaks, but helping Cap City succeed is completely justified.

  • D.C. is a high tax municipality that is not particularly private sector business friendly. But these are some positive reasons:

    1) When at sacrifice and great cost an historic property is being rescued, preserved, still utilized though not at its highest and best use and not razed.

    2) When a large private employer relocates within the city.

    3) When a particular area currently in urban blight with specific boundaries is enterprise zoned with incentives for private investment to set up shop and improve economic opportunities for a neighborhood where there’s currently little or none.

  • So helping the places you like succeed is worthy, but other places it’s not?

    These guys don’t pay much more than a lot of homeowners pay in property taxes, approx $5000. Where is my tax break? I see no reason why cap city should receive preferential treatment. Besides it reeks of corruption. I certainly hope that the owners of cap city have never once donated money to Harry Thomas. This special treatment for an individual business is very concerning.

    • For what it’s worth a quick search of the DC Office of Campaign finance showed no direct contributions from Matt Ashburn or Patrick Carl (the Diner’s owners) to Harry Thomas, or others on council.

    • ” Where is my tax break?”

      Hello Homestead exemption!

    • Concerning what? What is it concerning?

  • What was the property tax collected on the empty lot before the diner was hauled down here at great cost and successfully installed despite countless city obstacles?

  • The Burns family and all the businesses in our neighborhood.

  • $5000 is $13/day. Why don’t they just charge 50 cents more for pancakes to raise their revenue and stop looking for handouts?

  • These owners are crybabies. They came into the city crying about DCRA and then crying about their lack of a liquor license and now their crying about tax breaks.

    It’s never ending public spectacle of whinny-ness.

    And their business model sucks. I’ve been to the restaurant and it’s dirty and food is mediocre. Well guess what? There’s an extremely small demographic that gets jazzed about a cheap mediocre meal in a struggling neighborhood.

  • How about limited-term tax breaks for business owners already paying property or income tax in DC?

    So, if you live in DC, and want to open or expand a business in DC, you get a little 3-5 year “thanks for keeping it local” incentive.

  • A PoP post a few weeks ago talked about large, long term, tax abatement for a vacant building in NW to be repurposed as a boutique hotel. The problem was that city investment, in the form of tax breaks, seemed necessary to turn a valuable, vacant piece of property into one generating tax revenue. I think any tax break needs to clearly show that there is an economic benefit to the city.

    • The tax break before developing is absurd. The only break that should be granted is temporary relief from the blighted designation. And that should expire after a set time limit. If you don’t have the funds to fix up what you buy, don’t buy it in the first place. If you want to squat on property until its valuable, then you should pay for it. The city needs to stop rewarding these speculators while they hold the city and neighborhoods hostage by letting buildings and blocks rot.

      • +100

        That lot on which they are now building expensive condos that no one can afford on 14th and Chapin St NW is receiving a huge tax break. The city wants to know how to raise money without taxing residents? STOP GIVING JIM GRAHAM’S FRIENDS TAX BREAKS!

  • houseintherear

    If a property has been empty for one, two, five, ten, whatever chosen number of years, the city should start out a new business using that property with a tax break for a few years. The city will literally lose nothing doing this, and it’s the perfect incentive to get businesses to move here. What the MOTHER F is so hard to understand about this, dc?!!?!?!?!?

    • A lot of those properties are vacant because the landlords are asking above-market rents or sale prices. If the property is truly vacant, it should be taxed at the vacant rate to discourage this squatting.

      If they setup a targeted tax relief, it should be only for occupied properties, with the exception starting only upon the business opening to prevent the ‘coming soon’ loophole many developers are good at exploiting

  • i agree with a previous poster that a 2-5 year tax break is a great idea for small businesses, especially in shitty neighborhoods. the guys that own cap city also live in the area and hire in the area… who else would be more deserving of a break?
    if the district is so worried about getting theirs, how about we put meters up around all of the dc churches and make it a flat rate $5 to park on sundays, district registered vehicles excepted.

  • Poon. Give tax breaks to Poon. He deserves it. He often does mitzvot for old ladies, and he’s also working on a plan to once and for all rid this city of orphans and the infirmed.

    Tax breaks for Poon!

  • It’s totally and thoroughly sick that large businesses and corporations (defense contractors, etc.) get tax breaks for coming here where the local, small, individual businesses run by our own residents do not.

    That is one of the ways to make the rich, richer.

    Those are the entities that already have whole departments to avoid paying taxes.

    Shenanigans. Wrong.

  • Singling out a specific business for legislation rubs me the wrong way. What about a set of guidelines for businesses that could apply for tax breaks?

    • Agree – there needs to be standards in place to guide the awarding of tax incentives, otherwise the potential for tax breaks going to well-connected businesses is too high. Will they, or are they employing over x percentage of local workers? Are there specific barriers to entry that would prevent others from operating a business there? Is the business viable (serving a local need)… And then of course, how likely is it that the city will recoup the forgone tax revenue?

  • Make Kwame Brown pay their taxes for the next five years.

  • Why don’t you cut the personal DC tax rates so residents have more of their own money to spend on businesses of their choosing?

  • Residents who every morning on their way to work pick up all the beer bottles, etc., that magically accumulated overnight along their sidewalks and deposit them in the garbage cans at the ends of their blocks.

  • No tax breaks for religious institutions unless they are running a daily homeless shelter, soup kitchen, or tutoring service. With proof that these activities are actually happening for at least 8 hours a day.

  • The Homestead Act gave fallow land to settlers for free in return for six years of their labor to make it productive. It’s a useful model. Start up a business in tax-developed DCUSA = no tax break. Start up a business on an empty lot in an undeveloped neighborhood = tax break.

    Still all depends on DC govt. drastically reforming the entire licensing process.

  • I hope everyone that put forth an idea/view here also take a minute to fill out the city’s budget survey that POP highlighted the other day…

    While I’m sorta skeptical about the utility of the survey, it’s worth a shot… no matter your view.

  • Is anyone actually suprised that Ed “Tax the $h!t Out of Everyone” Lazere is against this?

    Diners were designed to be moveable. If they’re not welcome, they should go where they are welcome. And the neighborhood can finally get the Comfort One Shoe store it deserves.

  • Funny that the ginormous tax breaks given to developers in NW to build luxury condos and upscale retail in areas that already have luxury condos and upscale retail don’t merit a whimper but there’s outrage over giving a small business in Trinidad a tax break.

  • i think we should give no tax breaks.

    on the other hand, i also think we should drastically streamline the new business startup process. that way little guys without MASSIVE startup capitol will be able to compete.

    90% of the breaks go to big ass developers anyway. so in a sense (if you think of the reality we live in, not the one we want to live in) cap city really is deserving.

    Bit of an aside here. As for someone’s comment that “mediocre food in a struggling neighborhood” doesn’t excite anyone; I think it probably excites the people in said neighborhood (which is kind of to the point of this discussion).

  • Just like when I moved into Trinidad 10 years ago, I was given a 5 yr propoerty tax break for moving into a disadvantaged neighborhood. (If I remember it correctly, Trinidad, Ivy City, Congress Heights/Anacostia was designated by the city as disadvantaged neighborhoods in 2001.) Small businesses that move into these same neighborhoods should get the same tax break for 5 years.

    • Really! I didn’t know DC offered those breaks for people as well as businesses. I wonder if that was just a Williams-era program…

    • I think that there’s a citywide tax abatement program for people who make under a certain amount of money, that also lasts 5 years.

  • A vacant lot generated I am guessing $0.00 in sales tax revenue. DC forgoes $5K in property tax for quite a lot more in sales tax revenue that wouldn’t have existed before.
    Same for the hotel in Adams Morgan. What DC should do is look for areas that need redevelopment assistance and target small businesses over large chains. There should be a cap as to what is granted annually and then make projects compete – we’d likely benefit from better projects.

  • Who? Businesses/developments spending more than say….20 million dollars, and only after they’ve demonstrated a legit need.

    The larger the better. Yeah, yeah…I know, “big developers are greedy and want to eat your babies” but that 40 million dollar subsidy given to DCUSA diretly spawned more than a billion dollars in development, hundreds of new residences all paying property tax and created what…a thousand new and permanent jobs. That 40 million was paid back the first 6 months that DCUSA was open.

    Same for money spent on the SW Waterfront, Chinatown and yes, even the ballpark.

    You spend your subsidy dollars in a way that squeezes the absolute most development and job creation possible per penny and spending ~5-10K here and there on small businesses that are gasping for air, aren’t likely to survive and employ a couple people in low income, no benefit jobs isn’t the way to do it.

    And is 5K really going to break them? Thats 13 bucks a day, or one breakfast. If the line for them between staying in business and closing down is that razor thin, than they have other, larger problems.

    You folks ridicule the “quality” of jobs provided by a Walmart but Walmart pays better and actually offers benefits. Does this diner or other similar DC business? No.

    We need to take a chapter out of the Fairfax County Economic Development Manual. Even with FFX counties awesome schools and low taxes, they fight for each and every business they lure, spending hundreds of millions a year and they are incredibly succesful. They have 5 staffed offices in foreign nations around the world (India, London, Germany, Korea, Israel) who do nothing but incentivize foreign companies to open offices in Fairfax. What does DC do? We have an office of ~5 people who handout pointless sums of money to these diners and cupcake stores.

    DC is in depserate need of two things. Taxable income and a larger property tax base. You do that by attracting Fortune 1000 companies and the white collar incomes they produce. Not wasting valuable tax dollars throwing lifelines to crappy diners.

  • I’m generally against tax breaks like this, because I think they’re subject to capricious or corrupt administration, but let’s be honest: there are lots of places in DC that city planners/officials would like to see improved that will not attract businesses operating under sane/standard business-plan evaluation. Whether it’s because of a lack of viable/qualified labor, insufficient market in the immediate area, or whatever, so places are just dead zones. So if the city really wants to encourage businesses to set up shop in these areas and get the concomitant job creation, tax revenue, and “seeding” effect, then it probably needs to give the tax breaks or comparable sweeteners, at least for some period of time (3-5 years?). New businesses encourage new residents, which encourage new businesses, and so on … but it’s got to start somewhere. To avoid problems of legislating by case, I’d say that they should be limited to designated geographic areas that meet some criteria of under-development, be limited to no more than 5 years, and require proof of some achieved goals that are of interest to the District (i.e., employ at living wage at least 15 District residents) for their year-over-year continuation.

    It actually can work. There are blocks in Columbia Heights on which the city literally had to give away houses by lottery to people as recently as the late 1990s — houses that since have sold for north of 600k. That was years before the tax breaks to condo and other commercial developers. But look at the neighborhood now.

  • Give tax breaks to anyone who makes the city a better place and helps increase the overall size of the tax breaks. Many of the stores, restaurants, etc. that have received tax breaks have had a lot to do with the large increase in DC’s business and citizen populations. By paying property, income, and sales taxes, these new citizens, businesses, and visitors have contributed a lot to the city’s coffers.

  • My experience as a consultant to the District is that any application for a tax break is subjected to a detailed financial analysis. Real estate experts and analysts are hired and developers’ assumptions are challenged and corrected as needed.

    Tax breaks are a way for the District to invest its money, with the goal of getting a return on that investment. If granting $1 million in property tax abatement over 5 years ($200,000 per year) – an “investment” of $1 million with a 5-year term – results in annual new tax revenue from sales tax, payroll tax, business licensing, car tax on new residents, additional fees paid for use of Metro, etc. that total $500,000 per year, the investment is repaid in full in 2 years and the District gets a 250% return on its investment over those 5 years (more actually given the timing of the District’s investment, spread over 5 years). The return on the investment continues to grow even when the tax abatement expires.

    Just saying no to any tax abatement ignores the financial benefits that may come from the investment. As such, it is ignorant. Do the math, challenge the math, but don’t be ignorant.

    • Oops. 150% ROI, not 250%, but still much better than any non-Madoff investment in the stock market. This also does not include any other returns on the investment – like new jobs or providing goods or services needed in the area.

  • The businesses on H Street should get tax breaks until the streetcar is built or they reinstate the shuttle.

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