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The District might grant one of its largest property tax subsidies to the Advisory Board Company in exchange for 1,000 jobs, a topic discussed at a D.C. Council hearing this Wednesday.
Virginia was also competing to host the “research, technology, and consulting firm” since the Advisory Board announced earlier this year that it would relocate its D.C. headquarters after its current lease at 2445 M St. NW ends in 2017. To persuade the company to remain in D.C., Mayor Muriel Bowser introduced a bill this past September that would provide a $60 million performance-based property tax abatement to the company in exchange for services. These services include hiring 1,000 additional District residents over a span of 10 years, between 2019 and 2029; leasing office space in Mount Vernon Square at 655 New York Ave. NW for 15 years; and signing a Community Benefits Agreement that will provide training to marginalized youth and 25,000 hours of community service to local nonprofits per year.
The subsidy would cover fiscal years 2021 to 2030, with the Advisory Board getting up to $6 million in tax breaks per year if it meets the agreed-upon targets.
Robert Musslewhite, chairman and CEO of the Advisory Board, agreed to the trade off and said at the Wednesday hearing that his firm will look to other cities to house its headquarters if the Council rejects the abatement request. The Advisory Board employs more than 3,500 people, 865 of whom are District residents.
“As a publicly traded company, we are obligated to make financially sound decisions, and this bill is an essential component of our ability to remain in D.C. given the attractive economics offered in other jurisdictions,” Musslewhite said at the Council meeting.
A few witnesses at the event said they doubt the Advisory Board will leave the District if the Council declines the company’s request, arguing that D.C. does not need to beg a company to stay. The same witnesses expressed their concerns about the costliness of property tax breaks.
“Memphis, Tenn. loses 14 percent in property tax base because of property tax abatement programs given to companies that threaten to relocate to neighboring states,” said Kasia Tarczynska, a research analyst at Good Jobs First.
According to research from the Lincoln Institute of Land Policy, tax incentives don’t necessarily promote economic development, especially if these subsidies are given to high-earning companies. The $2.4 billion publicly traded Advisory Board projects its 2015 revenue to reach $780 to $790 million.
Councilmember Elissa Silverman, who attended the hearing, said she is unsure the Advisory Board would do anything differently if the city granted the tax break, highlighting the company’s already philanthropic behavior.
“We don’t want to reward [a company] for something they’re going to do already,” Silverman said. “My concern is that we might be rewarding the Advisory Board for doing what they would have done already, which is hiring District residents.”
But Ward 2 Councilmember Jack Evans, who chairs the Committee on Finance and Revenue, said D.C. needs to compete with Maryland and Virginia, states that have offered previously District-based companies tax subsidies in the past, causing the city to lose jobs.
“Regionalism would be terrific, but Virginia doesn’t believe in that and neither does Maryland,” Evans said. “Now if the Advisory Board were to leave, in and of itself, it might not be the end of the world. But what if 13 other companies left as well?”
In 2004, CEB, which was formerly part of the Advisory Board and known as Corporate Executive Board, moved its D.C. headquarters to Arlington after Virginia offered the company tax incentives. Consequently, the District lost tens of millions of dollars in income tax and real estate revenue, according to Brian Kenner, the deputy mayor of Planning and Economic Development.
Councilmember David Grosso said at the meeting that he thinks the performance-based tax abatement is a low-risk exchange for the job growth the city will see if the Advisory Board stays in the city.
The few witnesses against the legislation said that if the bill must be passed, then it should be amended to include employee wage requirements and health insurance packages. But the Council spoke little on this request.
Of the 13 witnesses at the hearing, only two offered testimony that directly opposed the legislation; two of the councilmembers who attended the hearing appeared to mostly support the bill, while Silverman had reservations.*
“The District of Columbia is the only major city in the country that does not have a Fortune 500 company located here,” Evans said. “I think that’s telling, and I think that’s something to think about.”
*Update: This sentence has been amended to reflect that Councilmember Silverman does not “mostly support” the bill. A member of her staff writes in to clarify that the “councilmember is highly skeptical of the need for a tax abatement, especially given our strong local economy.” The story has also been updated to reflect that Corporate Executive Board is now known as CEB.