Union Station: Tax threatens retail

WASHINGTON (Map, News) - The caretakers of the Union Station shopping center are claiming that a D.C. tax imposed on some federally owned properties could torpedo the popular commercial hub.

Federal real estate is exempt from the District’s commercial property tax. But D.C. adopted legislation in 2004 to tax the “possessory interests” of federal sites — those areas leased to commercial entities for for-profit purposes — in the hopes of capturing some lost revenue.

While the tax affects about 186 businesses, no building is charged more than Union Station and its 100-plus stores. And the organization responsible for maintaining the historic facility says the levy is draining its resources.

The tax “will financially strangle the station, possibly destroying and certainly diminishing one of the District’s premier tourist venues,” David Ball, president of the Union Station Redevelopment Corp., wrote in a Dec. 12 letter to the D.C. Council.

The assessed value of Union Station’s commercial interests will soar from $41 million in 2007 to $158 million in 2008, according to the D.C. Office of Tax and Revenue. The station’s long-term lease holder, New York-based Ashkenazy Acquisition, has a $2.9 million tax bill coming in 2008, a 278 percent jump over last year.

That one bill adds up to 36 percent of all possessory interest taxes due citywide in 2008.

The District appears to be disproportionately taxing Union Station, said Ward 6 Councilman Tommy Wells, who has co-introduced legislation to freeze the tax citywide at 2007 levels while the chief financial officer analyzes the program. D.C., Wells said, “must be careful not to kill the golden goose.”

The redevelopment corporation receives $1 million a year, plus a 50 percent share of Union Station’s net profits. When the tax bill increases, Ball said, the corporation loses money it could spend on capital improvements and upkeep.

Complicating things: The nine-screen cineplex at the station is likely to close “in the near future” due to a lack of revenue, Ball told the council, requiring upward of $8 million in renovations to prepare it for new tenants.

Daniel Levy, outside counsel for Ashkenazy, said the “devastating” tax has thwarted his client’s ability to redevelop the property.

mneibauer@dcexaminer.com

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