White Paper: Rebuilding and Empowering Our Communities East of the River
It is no secret that the Wards 7 and 8 have lagged far behind the rest of the District in just about all economic indicators. “East of the River” neighborhoods suffer from a severe lack of investment and opportunity that, while disgraceful, rarely gets more than lip service from District officials.
Geographically, the highest poverty rates are in Wards 7 and 8, where it has been estimated by the D.C. Fiscal Policy Institute that one out of every three residents lives in poverty. While unemployment by Ward doesn’t have up-to-date statistics, fairly recent studies have estimated that Wards 7 and 8 have unemployment rates ranging from 15 to more than 20 percent. We also know that there is disproportionate unemployment among those with criminal records, with those individuals suffering an unemployment rate of 50 percent. Given that many of those with criminal records are also concentrated in high-unemployment and high-poverty areas, the compounding impact is clear.
What is less clear is how to approach economic development issues East of the River. Most proposals are variations on the same processes that led to gentrification elsewhere in the District, using tax breaks and other incentives to entice developers to build “mixed-use” developments that include “market-rate” housing and retail of various sorts.
This, so far, has been a recipe for displacement and rapid rises in the cost of living, particularly rents and property taxes. To the extent that this is the basic model in many EOTR developments (Skyland, St. Elizabeth’s East, Minnesota Avenue Metro station), we can expect the outcomes to be basically similar.
The question moving forward is how to rebuild communities inclusively, or at least to the extent that’s possible in the confines of a capitalist economy. Here are some of my ideas on how we can do that:
Leverage District Funds To Empower EOTR
Create a D.C. Public Bank
D.C. deposits most of its funds in commercial banks, the biggest sums often resting with the major Wall Street firms. Instead, the District should develop a D.C. Public Bank to keep its funds. This could easily put billions of dollars into an institution that by charter would be focused on infrastructure development, job creation and small business assistance. The bank does not lend out its own funds directly, but partners with local banks and credit unions to leverage their capital.
Through lower borrowing costs, dividend payments and economic growth, among other benefits, a D.C. Public Bank would create a vast reservoir of funds that could be directed toward goals like renovating and building public housing, creating and preserving other affordable housing units, as well as supporting homeownership programs.
The pioneer example, the Bank of North Dakota, has over the past 15 years contributed more to the state coffers than the much-discussed shale gas boom in that state. This gives some sense of its potential for the District. A public bank would be a key tool, controlled by the District to facilitate development opportunities that meet our stated goals.
Financing from the public bank could be the key piece of financing in housing developments with game-changing levels of affordability, an important new source of funds for cooperatives and small business ventures started by EOTR residents or at least aimed at serving and employing those already living there.
Rather than let our dollars go to enrich large multi-national banks and corporations, we can use them to support development projects that improve quality of life and empower communities to establish institutions that service their needs with a minimum of displacement.
Public banking is a tool that could easily leverage hundreds of millions of dollars into EOTR investments in small businesses, cooperatives and non-profits.
The District Opportunity to Purchase Act, an existing affordable housing tool, has never been used. It gives the District the chance to buy a building before it is sold or demolished if tenants are unable to obtain financing to exercise their TOPA (Tenant Opportunity to Purchase Act) rights. DOPA is an excellent tool for the District at-large because it allows D.C. to purchase buildings in rapidly gentrifying areas and maintain their affordability over time.
East of the River, this holds special importance, given that many of the rental units close to large-scale planned developments are strictly low-income. Obviously, the temptation will be (and in some cases already is) very high to turn many of these units over into more lucrative “market-rate” properties, displacing low-income tenants; for example, that is exactly what is planned for five buildings right across from the planned St. Elizabeth’s East development, where the owner plans to move out low-income tenants and replace them with luxury offices and condos.
Using DOPA judiciously will allow the District to prevent some of this not only in terms of preserving affordability, but also using DOPA to facilitate the type of projects that a public bank would facilitate that not only helps preserve affordability but can renovate and upgrade properties to better house and serve residents and the surrounding communities.
Broaden the Overall Tax Base to Create Empowerment Zones
For homeowners and small businesses, changing neighborhood dynamics mean higher property taxes that can often make staying in place unsustainable. In the areas immediately surrounding large-scale developments East of the River, we should establish empowerment zones with reduced property taxes for homeowners and small businesses, and reduced sales taxes for small businesses to help prevent them from being priced out. Along with this, there should be a sales tax credit for low-income households to facilitate their ability to patronize new businesses.
However, given the heavy reliance on property taxes, sales taxes and personal taxes, it will be important that we broaden the tax base to create true tax equity. Currently, the smallest slice of District taxes comes from the Corporate Franchise Tax. In fact, there are 3,003 businesses with over $5 million in sales that pay the minimum tax—$1,000! We need to stop this gaming of the system and make sure big businesses are paying their fair share. Further, those making more than $1 million in the District have a taxable income of $5 billion, according to the most recent IRS data; the year before, that number was $3 billion. With the rapid increase in wealth for the wealthiest residents, we need a new, higher tax bracket for those making over $1 million. By broadening our base, we can offer tax relief where it is most meaningful.
Let the Feds Walk Away from St. Elizabeth’s West
It seems clear that at the very least the new Homeland Security headquarters is on the chopping block if it isn’t already effectively dead. Either way, it was a bad idea for development EOTR. These sorts of developments that are cut off from the community are of dubious value to neighborhood development, as the Coast Guard headquarters has amply shown.
We need development at St. E’s West that actually is designed to bring something to the neighborhood. There seem to be two basic major ideas that could take place there, both proposed by previous mayors. One would be to move the University of the District of Columbia there. While there a number of issues involved, it would offer more opportunity to create research-oriented facilities around UDC. As I have proposed elsewhere, I believe the District should put in a substantial investment ($75-100 million) to endow the sustainability curriculum at UDC and attempt to leverage that to become the anchor institution of a cluster in key emerging fields. The size of the West campus site would allow for a research park tie-in to the relocation that could facilitate this effort.
The other idea would be to create a new hospital to replace United Medical Center on the West campus. While expensive, it has a number of benefits, from the plethora of transportation options that would make it more accessible to the closer proximity to both Unity Healthcare and other providers who serve the same population to the increase in consumer traffic that can help entice new investment. It seems likely that this project could go a long way toward reintegrating the West campus with the surrounding neighborhoods.
While there may be other ideas, it seems that the West campus can easily be used better by the District than the Federal government as it concerns development EOTR leveraging the public investment to reintegrate and revitalize the area as opposed to allowing it to remain closed off behind walls and security clearances.
Ultimately there is no silver bullet, but to lift up EOTR communities will need a range of policies and very significant investment. Outside-the-box ideas and aggressive use of existing tools can go a long way to promoting community-led efforts at economic development that can improve communities without displacing long-term residents.
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