DC Progress

How Decreasing Property Taxes Can Spur on Development

CROBEY73 — Wed, 16 Dec 2009 17:14:54 +0000

A recent Washington Business Journal Article touched on the relationship between the economy and rising commercial vacancy rates in DC. This is a problem and it has a number of possible causes. But one of them is high taxes. As we have written about before, the DC market costs far more than others in the region. D.C. charges over $11,000 a year in property taxes for a 1,000 square foot downtown office. In Crystal City, about the same distance from the capital as downtown, Arlington County demands less than $3,000. If the DC government were to lower these property taxes in offices, the vacancy rate would come down at least a little and, just as importantly, the demand for these spaces would increase. Ultimately, an increased demand on office space would have the effect of also decreasing something called “the capitalization rate” (the ratio of annual net operating income produced by a building divided by its value). And decreases in capitalization rates ultimately spur on commercial real estate development. Property tax rate cuts alone won’t solve D.C.’s problems. But they can be a start. If DC wants this economy to pick back up, it can take steps such as lowering its property taxes; which will not only have the effect of attracting more businesses to DC, but also will help spur development.

Introduce Competition to Metro Bus to Improve DC Transit System

CROBEY73 — Tue, 15 Dec 2009 15:37:26 +0000

Recent articles have highlighted various problems and possible solutions for DC’s transportation system. A sound transit infrastructure is one of the key elements in building a solid economy. Almost all of the current proposals focus on changes within the Washington Metropolitan Area Transit Authority (WMATA). But these proposed changes may be misguided. As pointed out in a CATO Journal paper, perhaps one of the most important elements in improving local transportation infrastructure is deregulation. One possible way to implement deregulation of our city’s transportation system is to issue “travel subsidized fare cards” to passengers at highly discounted rates. Passengers could then use these fare cards at either private transportation resources or current city-sponsored transportation resources (including rail, bus, or any other entities which were willing to pay for the software necessary to read these cards and also face oversight of WMATA). At the same time, the city should also be open to innovative private sector transportation approaches (such as Bus Rapid Transit Systems). With this “travel subsidized fare card” system, the city would still be supporting transit infrastructure, but the users would determine the ultimate makeup of that infrastructure, while at the same time introducing competitive forces into this market. Moreover, such a system would place the power to decide which routes and providers received subsidies with the users, rather than with bureaucrats or politicians

Extend the DC Vouchers Program Through Local Funding

CROBEY73 — Tue, 08 Dec 2009 19:21:22 +0000

Kevin Chavous and Anthony Williams recently penned an op-ed in the Washington Post countering Rep. Jose Serrano’s arguments against the voucher program. As they currently stand, the Opportunity Scholarships are funded by the Federal Government. Rep. Serrano is against this. The answer lies somewhere in between the opposing sides. DC should continue with the vouchers. But as we have spoken about before, the vouchers should be universal AND paid for by the DC government. If all parents were given the opportunity to send their children to whatever schools they wanted via a universal voucher system, the quality of the schools would benefit.

DC Progress Releases Report on National’s Stadium Project Labor Agreement

CROBEY73 — Mon, 07 Dec 2009 21:20:19 +0000

DC Progress recently released a white paper which exposes the true costs of the Nationals Ballpark project labor agreement (PLA) (A project labor agreement is a negotiated settlement between a construction project’s owner and its designated general contractor(s), on the one hand, and a group of labor unions, usually a state or local building-trades council, on the other). Read the report by clicking here. In September of this year, DC Progress held a panel discussion on underemployment with top public policy thinkers in the city. One of the issues which surfaced during the panel discussion was the use of Project Labor Agreements to address problems of underemployment and unemployment. This report follows up on those issues and also shows what a catastrophic failure the PLA was for solving other labor problems here in DC. As we point out in the paper: “A bidding process that is open to all shops, union and nonunion, and that does not impose additional costs on contractors is the best way forward for future large scale public construction projects. Eliminating PLA’s will employ more DC resident hardhat workers, and at a time of high unemployment it seems foolish to promote a PLA policy that costs DC residents jobs while simultaneously increasing the tax burden.”

A Checklist for Prosperity

CROBEY73 — Sat, 28 Nov 2009 22:35:45 +0000

The Fenty administration wants to hand a major tax break to CoStar, a commercial real estate data firm. This is a bad idea. DC should not be in the business of picking economic winners and losers. For one, and as we have written in the past, DC is notoriously bad at such bets. For example the $5 million tax increment financing deal in 2007 brought a furniture store to DC, but now TIF is not bringing in the bucks. If the purpose of such policies is to improve the economy for the city, DC should not be focused on making bets about which business or industries ought to come in, but it should rather focus on specific fundamentals that will improve the economy for everyone. Thomas Donohue, President of the US Chamber of Commerce has written a checklist for urban prosperity which includes the following:

1. Cities must nurture a pool of skilled, dependable workers for businesses

2. Cities must work to improve their transportation infrastructure and the flow of goods, services, and people

3. Cities must work to eliminate frivolous lawsuits

4. Cities must take a hard look at taxes and regulations

DC is competing on a global scale for businesses. If it hopes to be successful it most not gamble myopically on specific businesses or industries, but rather must focus on improving the fundamentals such as those laid out by Donohue.

Eliminate DC’s Minimum Wage Law to Decrease Underemployment, and Unemployment

CROBEY73 — Mon, 09 Nov 2009 16:07:05 +0000

Jenny Reed of the DC Fiscal Policy Institute recently wrote about how available jobs in DC have remained constant over the past year, but unemployment has risen: “DC’s unemployment rate has quickly climbed to 11.4 percent in September. Some 37,500 DC residents are out of work and actively looking for a job but cannot find one. In just one year, the unemployment rate has risen from 7.4 percent to 11.4 percent, a 50 percent increase.” Reed later goes on to say that the District government could help ameliorate this problem by improving its workforce development programs; Whatever the merits of workforce development programs, almost by definition they will take time to show results while changes in regulation can have very quick consequences. Therefore, though DC should be open to trying new approaches. One such possible approach is to eliminate DC’s minimum wage law. According to the US Department of Labor, DC’s Minimum wage is $8.25 – a full $1 above the federal minimum wage law. If DC were to eliminate its minimum wage laws, it could increase employment rates, especially among low wage workers. Moreover decreasing the minimum wage may also have the added benefit of increasing workforce investment on the part of businesses – that’s because wages are costs to employers. If organizations, many of which operate on small margins, don’t have to pay as much for labor, they will have more money for jobs. Though perhaps not politically popular, because of the unique economic situation we are in, DC should be willing to experiment with new approaches, and decreasing the minimum wage by $1 seems like a good place to start.

Increase Citizen Activism to Prevent Mayor’s Recent Contract Problems

CROBEY73 — Mon, 02 Nov 2009 19:29:37 +0000

Mayor Fenty is coming under increasing fire for the apparent inappropriate contracts he has handed out through the Department of Housing Authority (DCHA). Critics claim that the mayor took money out of parks and recreation and then allocated it towards the DCHA. Since DCHA is a quasi government entity it does not have to get the usual council approval for disbursements over $1 million. It appears as if Fenty has used this loophole to award contracts to friends and political cronies. However, it is not clear Fenty has done anything illegal. Many mayors across the country, and indeed CEOs at business organizations, have the authority to reallocate funds as they deem fit. Moreover, adding on another agency or control to prevent future apparent acts of cronyism is likely to only create more bureaucracy. The real solution is to make legislators like Fenty responsible come election time. In other words, problems such as this are best solved via the political system where taxpayers wield the ultimate power.

Provide Online Tools to Enhance Budget Transparency

CROBEY73 — Thu, 22 Oct 2009 17:39:59 +0000

The DC budget process has been wracked by problems for decades. The DC Fiscal Policy Institute recently weighed in on possible ways to mitigate problems with the transparency of DC’s budget and budget process. Specifically, the author Jenny Reed argues that the budget itself ought to be restructured in a way to make it easier for third parties to read and scrutinize. But there are other, more effective online tools employed by the federal government, state, and local municipalities all over the country to improve accountability and transparency. These online tools include:

www.USAspending.gov: launched on December 13, 2007, and provides taxpayers with a tool to get comprehensive information on all federal grants and contracts over the amount of $25,000. Legislation to improve the website, the Strengthening Transparency and Accountability in Government Spending Act was introduced in June 2008.
www.Results.gov: Each year, federal agencies are evaluated based on several criteria: human capital, competitive sourcing, financial performance, E-governance, and budget/performance integration. A score for each area is assigned (red, yellow, or green). For scores in transition, momentum is tracked. Several agencies have gone to “full green.”
www.ExpectMore.gov: This evaluates each spending program of the federal government. A 25-question Program Assessment Rating Tool (PART) test is administered. Programs are rated as effective, moderately effective, adequate, ineffective, or results not demonstrated. To date, less than half of the 977 programs tested scored out as effective or moderately effective, demonstrating areas to cut waste, fraud, and abuse.

The DC Government has taken steps to improve the effectiveness of its budgeting process. It’s called performance based budgeting. But as we have written about before, the DC government has failed to follow through on its own mandates in this area. In addition to the federal government, states have also created sites like the ones above. If the DC Government is really serious about improving the accountability of its budget process, it should follow through on its own reforms, and enact online tools similar to those of the Federal Government and the states.

Eliminate Grants to Mitigate “Miracle Hands” Problem

CROBEY73 — Tue, 20 Oct 2009 13:54:47 +0000

A recent in-depth article in the Washington Post highlighted serious management problems with an HIV/AIDS organization in Washington DC. The non-profit organization called Miracle Hands receives all of its funding from the city government and is supposed to provide a variety of services to people living with HIV/AIDS. Over the course of the last five years it has received approximately $4.5 million from the city. Reported problems at Miracle Hands include its failure to get a business license, filthy facilities, and poor financial management systems. The private sector does a better job raising money to deal with AIDS. The recent AIDS Walk in May in New York brought in close to $100 million from private sources. And here at home, the AIDS Walk DC which took place October 3^rd , brought in close to $1 million. With these recent fundraising successes in both New York, and here in DC, there is absolutely no reason why Miracle Hands has to receive all its funding from the DC government. Instead, as we have written earlier, DC should not be forking over money to its non-profits, but rather it can take concrete steps to make them more competitive. If Miracle Hands had to raise money for even half of its funding, it would have been forced to be much more upfront and responsive about its operations to its donors. Also, as we have written about before, complete funding of non-profits also threatens the independence of these organizations.

Lower Entry Costs to Attract More Business

CROBEY73 — Wed, 14 Oct 2009 20:15:34 +0000

Last week, the Washington Post reported that the parking lot under the US Mall in Columbia Heights is losing about $100,000 a month. The problem began when the city decided to build the parking lot to lure Target into the city. In fact, it was necessary under city zoning codes. But the root of the problem is not the parking lot. The real problem is that the city shouldn’t be picking and choosing which industries or specific businesses come into the city at all. DC should not be in the business of making such predictions when it makes such bets using taxpayer money (such as it did when it used taxpayer money to build the parking lot of Target). Some economists call such investments “malinvestments” because they misallocate where capital would have gone if there was no outside interference. If DC wants the city to thrive it should lower the cost of doing business in the city by lowering the regulatory and tax burden across the board for all businesses.