good ol' socialist capitalism

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Donatelli Development, others request tax breaks for D.C. projects



http://washington.bizjournals.com/washington/stories/2009/05/18/daily75.html?surround=lfn

Thursday, May 21, 2009, 2:55pm EDT |
Modified: Thursday, May 21, 2009, 3:15pm

Donatelli Development, others request tax breaks for D.C. projects
Washington Business Journal - by Jonathan O'Connell Staff Reporter

If the D.C. Council approves abatements for developers, Highland Park is one property that would benefit. View Larger Donatelli Development was one of six property owners that came to the D.C. Council Thursday seeking what its executives call badly needed tax breaks in the recession.

President Chris Donatelli is requesting an estimated $8.5 million in commercial property tax abatements for his Highland Park development atop the Columbia Heights Metro station and his nearly completed Park Place development atop the Petworth station.

Donatelli originally planned condominiums for both projects but in the downturn has decided to offer both the 229-unit Highland Park, which is open and being actively marketed, and the 156-unit Park Place, which is nearly complete, as apartments.

He told the D.C. Council's finance and revenue committee that in building other projects in the city like the Ellington on U Street and Kenyon Square in Columbia Heights, "We have never before found it necessary to request a public subsidy or tax abatement." But he said that rents weren't what he had hoped for to this point. "We've realized lower rents than we expected on these units," he said.

A bill to give the Donatelli projects a lift was submitted by Councilman Jim Graham, D-Ward 1, and Councilwoman Muriel Bowser, D-Ward 4. If it were to pass and money were to be then appropriated separately, the city would provide 100 percent real property tax exemption for 10 years and a reduced relief for the following 10 years. Bowser, who has been pushing for improvements to Georgia Avenue, site of Park Place, said Donatelli had been a pioneer in entering the city's neighborhoods early and said the city needed to step in "because we recognize how important it is for these projects not only to move forward but to thrive."

Seeking the largest relief before the committee was the Union Station Redevelopment Corp., whose president, David Ball, charged that the city ought not to be seeking property taxes from sub leases in Union Station and requested $50 million in relief through 2024.

Vienna-based Metropolitan Development seeks $20.3 million in tax exemptions for a project in Shaw, part of Committee Chair Jack Evans's Ward 2. The new development, north of the Walter E. Washington Convention Center, would include 256 apartments, 15,000-square-feet of ground level retail and underground parking to replace the Kelsey Gardens housing complex.

Perseus Realty came seeking $138,000 in tax abatements so it can build 1 Hotel & Residences, touted as the first LEED-certified hotel in D.C. The 180-room hotel would be a five-star property at the corner of 22nd and M streets NW, at the site of the former Nigerian Embassy, and operated by Starwoord. Nonprofits the Studio Theatre and KIPP DC charter schools sought relief for their properties on 14th Street NW and on Douglass Road SE, respectively. All will require separate appropriations from the city to receive relief.

Ed Lazere, executive director of the D.C. Fiscal Policy Institute, opposed all of the abatements and suggested that the city ought to make larger choices about which property owners ought to receive breaks rather than picking them seemingly at random. Unlike subsidies like tax increment financing, "there is no application process for tax abatements and no required financial analysis by the [Chief Financial Officer].

Lazere said it wasn't fair to bail out one or two property owners in the recession when hundreds of other businesses and nonprofit organizations were in the same predicament. Developers like Perseus and Donatelli, he pointed out, knew the risks of beginning their projects before the downturn began. "We do not believe that a changed economic climate or the fact that some include affordable housing are sufficient reasons for tax abatement subsidies," he said.

But Evans said that even if the process could be improved, the worst thing the government can do in a recession is leave businesses to flounder. He said he planned to move all of the bills. "When a government pulls back in that type of environment it makes it much more dire circumstances than when the government steps up to the plate," he said.