Photo by Mr. T in DC on Flickr.

Both Mayor Vincent Gray and Council Chair Kwame Brown may want to use tax increment financing to lure a high-end tenant like Bloomingdale’s to the Georgetown Park mall, the Current reported. That’s a foolish policy.

In tax increment financing (“TIF”), the city issues bonds for a particular project and gives the money to a private developer. A portion of the taxes from the project go towards paying off the bonds. In theory, the city pays back the bonds out of the extra property and/or sales taxes from the now-improved property.

DC has used TIFs in the past. For instance, it set up a $74 million TIF to help the Gallery Place development along. It used a $46 million TIF for the Madarin Oriental hotel. And a $7 million TIF helped pay for the Spy Museum. Each of these projects was successful and they even paid off the bonds ahead of schedule.

But TIFs only work when there’s an increment to be found. In other words, they work in areas that will likely see a big improvement in value, and thus tax revenue, from the public investment. If there’s no increment, then the only way to pay off the bonds is to cut into the taxes that would arise from the property without the public financing. In that case all you’ve really done is give free public money to a private developer.

According to the Current article, the argument goes that if there’s no TIF for the mall, then Vornado won’t be able to land Bloomingdale’s and will instead lease to a store like T.J. Maxx. So, the theory goes, the “increment” of having a Bloomingdale’s instead of a T.J. Maxx is enough to justify a TIF for the mall.

The twist with this proposal is that a part of the incremental tax proceeds (i.e. the difference in sales taxes that Bloomingdales would pay over T.J. Maxx) would be directed to tax breaks to attract retailers to less established retail districts in DC. Chairman Brown called this a potential “win-win.”

This is completely backwards.

If the District wants to get into the TIF game again, it should be directing the TIFs to those less established areas, not the mall. That’s where there will be an actual incremental increase in value. That’s where we’ll get much more bang for our buck. If Vornado, which owns the mall, can’t put together a package to attract Bloomingdale’s with its own resources, then so be it. Maybe that means they and their partners paid to much when they bought the mall at auction last year. That’s not our fault.

I don’t want a T.J. Maxx to move in to the mall, but using public funds to help attract one tenant over another is unacceptable. And it’s shameful that the Mayor and the Chairman are even thinking about such a ludicrous proposal.

Cross-posted at the Georgetown Metropolitan.

Topher Mathews has lived in the DC area since 1999. He created the Georgetown Metropolitan in 2008 to report on news and events for the neighborhood and to advocate for changes that will enhance its urban form and function. A native of Wilton, CT, he lives with his wife and daughter in Georgetown.