Community Renewal Good Stories - District of Columbia

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Wage Credits, EZ Bonds Capture Interest of DC Zone Businesses

District of Columbia, Enterprise Zone

In 1998 Congress authorized a special Enterprise Zone designation for the District of Columbia to help spur capital investment in the Nation's Capital. Since that time two incentives have captured the interest of businesses: the $3,000 employment tax credit and the authority to issue Enterprise Zone facility bonds of up to $15 million per project. How have these credits served the city? The numbers tell a powerful story. Survey results reveal that EZ incentives have helped thousands of large and small employers including retailers; residential and commercial developers; and owners and operators of maintenance companies, hotels, and restaurants. Some examples follow:

•  An accounting firm with 15 midsize clients documented total D.C. Zone employment tax credits of $1 million for tax years 1998 through 2001.
•  Nineteen firms involved in construction, janitorial, and other services have claimed total D.C. Zone employment tax credits of $3.2 million since 1998.
•  A District manufacturer cut its Federal taxes by $390,000 and a hotel partnership claimed EZ wage credits of more than $1.5 million during the same 3-year period.
•  In 2001 one of the District's largest hotel operators reported D.C. Zone employment credits of more than $1.1 million on wages of $8.6 million, or an operating cost reduction of nearly 13 percent.
•  The District has issued more than $113 million in D.C. Zone facility bonds to attract and retain 12 District employers, including the International Spy Museum, Premium Distributors, CVS Pharmacy, the Newseum, the National Association of REALTORS®, and the United Planning Organization.

The three success stories that follow illustrate the value of the D.C. Zone tax incentives.

International Spy Museum
The District is home to the world's first museum dedicated to espionage, and the International Spy Museum has been key to revitalizing the historically rich F Street corridor. Because of its location in the Enterprise Zone, the Malrite Company, the project developer, financed the restaurant and museum portions of the project with $15 million in tax-exempt Enterprise Zone facility bonds; the residential and office portions of the building were financed with developer equity. Using bond proceeds as opposed to conventional financing saved the Malrite Company an estimated $3 million over the life of the bonds.

14th and Irving Ventures
The District issued approximately $4.5 million in tax-exempt Enterprise Zone facility bonds to help finance new construction at 14th and Irving Streets, NW., by 14th and Irving Ventures, LLC. Bond proceeds refinanced the existing mortgage loan on the facility and financed constructing and equipping a CVS Pharmacy on the first floor and other new commercial space on the second floor. The project also involved new construction at the site, located in the Columbia Heights neighborhood on land acquired from the D.C.

Redevelopment Land Agency. Construction at the two-story site started in July 1999 and ended in July 2000. This project served as the pioneer development in the renaissance of this formerly riot-torn neighborhood. CVS and other major retail development will create substantial employment opportunities for local residents.

National Association of REALTORS® D.C. Headquarters
The recently completed District headquarters of the National Association of REALTORS®, located at 500 New Jersey Avenue, NW., has been nominated for awards in four categories by the District of Columbia Building Industry Association. Located on the site of a former gas station, this new state-of-the-art building features double-curtain glass walls that make thermal heat dissipation possible, a recyclable water system, and a photovoltaic solar array that produces voltage when exposed to radiant energy on the roof. The U.S. Environmental Protection Agency declared the new structure one of the most environmentally green commercial buildings in the city and in the Nation.

This $46 million project was financed with an owner's equity contribution of $15 million in tax-exempt Enterprise Zone facility bonds and $15 million in taxable bonds issued by the District of Columbia, both underwritten by SunTrust Bank. The building's design elements, while visually attractive and environmentally friendly, also comply with the new national Leadership in Energy and Environmental Design (LEED) standards adopted by the U.S. building industry. LEED standards promote the voluntary construction of high-performance, sustainable buildings.

The 12-story triangular-shaped structure includes 90,000 square feet of office and retail space, a 66-car underground parking garage, and a rooftop terrace with dramatic views of the U.S. Capitol.

In addition to the District's proactive business climate, the success of the Enterprise Zone is attributable to the use of HUD's tax incentive marketing tools, especially the Dun & Bradstreet CD-ROM. This CD contains spreadsheets with a wealth of information on every business located in the area, including number of employees, business owner contact information, and year of incorporation. The Enterprise Zone used this data to organize industry-specific workshops and seminars targeted to businesses that meet different industry profiles.

For more information on the District of Columbia Enterprise Zone, contact Director Michael Hodge at (202) 727-3770.