The Adams Morgan Hotel Tax Break: Is it Worth It?
The D.C. Council hands out dozens of long-term property tax abatements every year, and most slide from hearing to markup to vote with little public scrutiny. In fact, according to a new analysis by the D.C.-based nonprofit Good Jobs First, the District has some of the worst disclosure standards in the country for all kinds of government incentives, in contrast to the several states that have comprehensive public databases where they can be totted up and evaluated.
So it's refreshing to see a high-profile debate on the $46 million tax break that the Council is about to hand a partnership of Beztak Properties, Friedman Capital, Ian Schrager and Marriott for a 174-room, five-star hotel in Adams Morgan (and not just because it'll go right where I'm sitting at the moment). At first glance, seeing your hard-earned dollars subsidize a luxury hotel seems insane–but tax policy is a complicated thing, and it might generate a greater payoff in the future. The D.C. Fiscal Policy Institute has weighed in, the listserves have been burning up with discussion, and there's now an honest-to-god attack website. In advance of tonight's forum on the issue, here's a cheat sheet for the pros and cons.
Give them the money!
- Bringing in a hotel would activate a long-dead corner and create the foot traffic Adams Morgan desperately needs. In the words of Josh Gibson, founder of the Adams Morgan Business Improvement District: "Approval of this tax credit will allow for a truly transformational change to take place in our neighborhood. Currently, the Church of Christ, Scientist is a white elephant and a place of abandonment which creates a gap of dead space between two otherwise vibrant commercial corridors. More importantly, the hotel would generate 24-hour foot traffic and a ready customer base for our mom-and-pop restaurants and shops."
- According to the Chief Financial Officer, "it could be difficult for this project to attract sufficient private investment in the absence of additional financial support." The abatement is basically a financing tool, which the development group–which was required to show $50 million in cash or cash equivalents and $100 million in equity–can use as leverage to put together the funding they need to pull it off.
- The hotel will create jobs. The developers have agreed to comply with the District's First Source law for hiring construction workers, and though it doesn't apply to operating staff, employers often find that workers drawn from the surrounding community to be more reliable. UPDATE: The developers project 1,500 construction jobs and 565 permanent ones.
- According to Adams Morgan Main Street, the hotel will generate $7 million in non-property tax revenues annually, which is considerable when compared to the paltry $95,000 the City Paper and WPFW pay in rent building generates in taxes every year. Also, the $46 million "price tag" is subtracted not from the current D.C. budget, but rather from the total property taxes that the hotel would generate in the future. So if the hotel isn't built, the District won't get that $46 million anyway.
Hand over millions to a luxury hotel? Are you kidding?!
- Projected tax revenue from the hotel might be less than it appears at first, since building The Edition in Adams Morgan might cause another hotel to not get built somewhere else in the city, which would mean no net increase in capacity.
- What if the hotel isn't successful? As much as we love Adams Morgan, it's a little out of the way of things that rich people typically visit D.C. for. With a 1,175 rooms going in at the Marriott Marquis downtown, and several more boutique hotels in the pipeline around the city, it's not a sure bet.
- Just because the Church isn't being developed now doesn't mean that it couldn't be in the future, perhaps as housing, which could also strengthen the neighborhood's economic base.
- The Council reduced the amount of the abatement from $61 million to $46 million–and it's unclear where either of those numbers came from. This is the key question: How do we know that they couldn't make it happen with $20 million? They're not doing it on the cheap: According to the financial analysis, Schrager will be getting a "concept development fee" of $2.54 million.
See you tonight!