District of Columbia

District of Columbia is the political equivalent of a city, a county, and a state all in one. That means it controls all types of tax revenues: property, income, sales, and others, often abating or diverting those taxes for the benefit of large urban and housing developments. Proposed programs like the 20-year Housing in Downtown Tax Abatement program are being launched as a part of the city’s post-pandemic economic development “Comeback Plan”. The program is an attempt at Downtown revitalization that would convert abandoned office buildings into housing, only about 15% of which are expected to be affordable.

Economic development subsidies in the District are most frequently given to selected recipients through programs such as Tax Increment Financing (TIF) and Payments in Lieu of Taxes (PILOTs), both of which involve the diversion of future property tax revenues. In two years, the District’s TIF expenditures more than doubled from $27 million in 2020 to $64 million 2022.

The Office of the Deputy Mayor for Planning and Economic Development (DMPED) manages all subsidies. Major discretionary deals that involve tax exemptions, abatements, PILOTs, and TIFs must be reviewed by the D.C. Council, and the Office the Chief Financial Officer (OCFO) must perform a fiscal analysis for those deals.

OCFO publishes annual Unified Economic Development Budgets (UEDB) that include some subsidy recipient data; however, the data is deficient – for deals that involve bonds (TIFs and PILOTs), UEDBs list “bondholders” as recipients rather than the companies or developers benefiting from the deals. For programs that do disclose recipient company names, only the subsidy amount and number of recipients  is provided each year. Separately, the DMPED reports some subsidy and job data in the Economic Development Return on Investment Accountability Reports, but those are cumbersome to use and seem to be incomplete.

Aggregate subsidy costs are included in the UEDBs and DC’s Tax Expenditure Reports. The District lists only two smaller programs under the GASB 77 rule.  Because the District’s school system is a part of the city’s government, it does not have its own GASB 77 note.

OFCO performs evaluations of abatements, credits, and exemptions every five years. A 2018 evaluation of economic development subsidies found that the Qualified High Technology Company (QHTC) tax break was expensive, poorly targeted, and ineffective in growing jobs and the economy. Consequently, the D.C. Council significantly reformed the program but did not sunset it or add transparency provisions. The public may never know who has benefited from this tax break. But what they should know is the program’s costs increased 46% from $23.3 million in 2020 to $34 million in 2022.

Last Updated October 2023.

For more information, contact Kasia Tarczynska at [email protected].