Report: D.C. lags in holding businesses accountable for subsidies

District of DeBonis

Report: D.C. lags in holding businesses accountable for subsidies

By Mike DeBonis, Washington Post, February 11

D.C. lags its neighbors in basic accountability for its economic development subsidies. (Good Jobs First)

The District government has recently taken some steps to make sure its economic development subsidies are well spent — requiring, for instance, a fiscal analysis for individual deals and a yearly report detailing their allocation — but it has a long way to go to match the accountability measures taken by other jurisdictions, a new report finds.

In a report commissioned by a local affiliate of the Laborers’ International Union of North America, nonprofit think tank Good Jobs First found “poor record-keeping, low standards, and lax enforcement on economic development deals in the District” — but says a few straightforward steps could bring the city in line with best practices in Maryland, Virginia and elsewhere.

“Many of these projects are sold to taxpayers on the claim of a net economic benefit to the District: residents get good jobs, which reduces the costs of safety-net programs, increases revenue from income, sales and property taxes, and spurs spending in the local economy,” says the report, written by analyst Thomas Cafcas. “But promises about job creation and economic impacts do not always translate into realized economic activity. Absent rigorous safeguards, there are numerous ways companies can skirt the good intentions of a job creation program and deliver less than adequate results.”

The few safeguards that are already in place aren’t exactly rigorous. Good Jobs First requested forms required under a 2011 law describing “community benefits provided or the progress made toward providing such benefits” by the recipients of subsidies. But the Office of the Chief Financial Officer said the forms were not required for some deals, and for those for which it had collected the forms, “submissions were difficult to read and reporting on tangible community benefits was very limited.”

To improve the District’s showing, the report finds, D.C. could adopt a real-time database of economic development subsidies, such as the one maintained by the Maryland Department of Business and Economic Development, that includes not only the amount and recipient of the subsidies but also on job creation, wages paid, and the status of the particular deal. And the annual reporting from the District, the report said, should not only examine where the subsidies are going but also the outcomes of those subsidies.

Furthermore, the report makes the case that if those outcomes aren’t meeting stated goals, then the District needs to get serious. Individuals who improperly claim tax breaks on their personal income tax returns are held to a higher standard, it argues, than companies who receive D.C. tax incentives.

“Companies receiving lucrative economic development subsidies should face serious consequences for taking tax credits they do not deserve, just like ordinary taxpayers,” the report says. “Failing to meet job creation, job quality, or First Source thresholds should result in a predetermined recapture from subsidies already given, rescission of future subsidies not yet awarded, and recalibration of subsidies going forward. The District has many precedents to draw upon from other states.”

Mike DeBonis covers local politics and government for The Washington Post. He also writes a blog and a political analysis column that runs on Fridays.

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