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D.C.’s Economic Progress is No Guarantee for the Future

Washington, D.C., is forecast to continue its remarkable growth in the years ahead—even without the arrival of Amazon HQ2—but the city must avoid regressive activities that could blunt its expansion, according to Brian Kenner, D.C.’s Deputy Mayor for Planning and Economic Development.

“Just because Washington is prosperous today … doesn’t mean that this newfound largesse is going to happen forever, because it won’t,” Kenner told Trustees at the Federal City Council (FC2) Spring Board Meeting at the Museum of the Bible on May 7. “We do need to be mindful of what got us here. What got us here is people find Washington attractive.”

The District’s economic transformation over the past decade has meant that development-recruitment activities are no longer a zero-sum game, said Kenner. For example, global giants Nestle and Gerber choosing to locate in Rosslyn are no longer black marks on Washington’s reputation.

“Ten or 15 years ago, that would have been seen as a loss for the District,” said Kenner, noting that D.C. has a better sense of itself and its importance today. “The reason why they came so close to Washington is because of Washington. Just because a company doesn’t come within our borders, as long as it’s coming close, it’s still being seen as a positive.”

Kenner said trade missions to Northern California and Silicon Valley to woo technology companies have affirmed his belief that D.C. is an attractive location for tech companies, as well. Yelp has committed to bringing 500 jobs to the District, and Uber currently has a 300-person D.C. office.

One of the positive aspects of private-sector growth is that those economic forces can be marshaled to increase investment in D.C. housing, noted Kenner. “The growth allows for increased housing at all levels, but particularly affordable housing,” he said.

But negative factors such as taxes on private industry and employer mandates could prove detrimental in the long term. Business leaders say one such tax is the newly proposed carbon tax that DC. Councilmember Mary Cheh plans to introduce in June.

Kevin Clinton, FC2’s Chief Operating Officer, and Yesim Sayin Taylor, Executive Director of the D.C. Policy Center, briefed trustees on the carbon tax and its likely impact on D.C. The tax would be levied on local users of electricity, natural gas and motor fuel. The conversation was , based on a draft bill not yet introduced which has been amended significantly since the meeting,

Clinton said the tax would be a fee of $20 per ton of carbon dioxide and would rise by $10 annually until it hits a $150 per ton fee. The tax is expected to raise $140 million in its first year and up to $600 million annually when it’s fully implemented in 2032. It would take some $6.5 billion out of the D.C. economy over the life of the tax. 

The government would redistribute the money raised through the tax through a formula: 5 percent for government administration; 75 percent for residential customer rebates; 20 percent for energy-efficiency investments; and 5 percent for small businesses.

“What you see is a carbon tax embedded within two redistribution strategies,” said Clinton. “One is a distribution from the business sector to the residential sector, and the other is a transfer to low-income individuals.”