Ronald Gart May 20 2022 Downtown DC's recovery: district government hopes incentives will help Seyfarth Shaw LLP | Real Estate - USA Ronald Gart Real Estate IntroductionBusiness growth fundTax abatementVitality FundIntroductionFoot traffic in the downtown DC area has not yet recovered to February 2020 levels. According to data from the Downtown Business Improvement District Corporation, released in March 2022, most office workers are still working remotely. Mid-March 2022 saw the high-water mark for office occupancy, at 41.56% of pre-pandemic levels; it is slightly less currently.The favourable news for downtown businesses is that the federal government (a large source of foot traffic in the city) is also starting to recall their workforce. The Labor Department, located close to Judiciary Square, has now officially reopened.Additionally, the district government anticipates employing certain incentives to push growth in DC. Last month, the Bowser administration announced the small medium business growth fund – a $5.4 million grant programme specifically designed to provide a helping hand to small businesses looking to open or expand their operations in the district. The fund is accepting applications until Friday 27 May 2022.The Mayor's Office has provided further details on the programme, which are set out below.Business growth fundThe fund consists of four different categories:retail;local manufacturing;small business investments projects; andtechnology advancements.Applicants can only apply for one category per application.RetailAwards up to $50,000 are available to support capital improvements, purchase of large equipment and retail expansion.Local manufacturingAwards up to $100,000 are granted to support capital improvements and purchase of large equipment on commercial property with a designated industrial use.Small business investments projectsAwards up to $600,000 are granted to support innovative projects that elevate the development of distressed and emerging neighbourhoods throughout the district.Technology advancementsAwards up to $200,000 are granted to support technology advancements such as:automation;artificial intelligence;machine learning;virtual reality;robotic process automations;augmented reality; andsystems and processes that allow businesses to scale.Tax abatement Tax abatement is also under consideration, as part of the fiscal year 2023 budget. The Tax Abatements for Housing In Downtown Act of 2022(1) is designed to spur residential development in the central business district, where currently, only 8% of the buildings are devoted to residential use. By way of comparison, 72% of the Capitol Riverfront is residential. The theory is that more housing in the area would mean more people and more foot traffic.The programme would offer $2.5 million annually in tax abatements, with a 3% annual increase. The abatements would begin in the fiscal year 2024 and last for 20 years. The total amount of money available for the programme is $70 million. The goal is to bring in 800 residential units, with 60 of them designated as affordable to households making 8% – 60% of the median family income.Vitality FundAnother proposal designed to entice businesses back to the city is an amendment to the Vitality Fund,(2) which would provide grants to businesses that:lease, own or agree to lease or acquire a physical office location of 7,000 square feet in the district (with a preference for the commercial business district);commit to at least a five-year lease and 50% on-site work; andparticipate in workforce development or commit to spending at least 5% of contracting with small business enterprise (SBE) eligible businesses.The current programme requires a commitment to leasing 20,000 square feet of office space, requires a 10-year lease, and mandates both participation in workforce development and an SBE commitment. The changes would open up the programme to more applicants.For further information on this topic, please contact Ron Gart at Seyfarth by telephone (+1 (212) 218-5616) or email ([email protected]). The Seyfarth website can be accessed at www.seyfarth.com.Endnotes (1) Title II, Subtitle II(E) of the Fiscal Year 2023 Budget Support Act of 2022.(2) Title II, Subtitle II(F) of the Fiscal Year 2023 Budget Support Act of 2022.