Council Testimony: Qualified High Technology Company Program

Council Testimony

Testimony of Ruqiyyah Abu-Anbar

Director of Early Childhood Policy and Programs

DC Action for Children

 

Before the Committee on Finance and Revenue

Council of the District of Columbia

 

May 21, 2019

 

Thank you Chairperson Evans and members of the Committee on Finance and Revenue for the opportunity to address the Council. My name is Ruqiyyah Abu-Anbar, and I am the Director of Early Childhood Policy and Programs at DC Action for Children.

Since 1992, DC Action for Children has served as a leading voice working on behalf of DC children and families. Through research and advocacy for equitable policies, we work to ensure that all DC children have the opportunity to reach their full potential, regardless of their race/ethnicity, zip code or family’s income. We are also the home of DC KIDS COUNT, an online resource that tracks key indicators of child well-being in the District.

DC Action is part of the Birth-to-Three Policy Alliance which is committed to transforming how DC invests in infants, toddlers, and families starting prenatally through age three. Alongside our Policy Alliance partners, we applauded the Council’s unanimous passage of the Birth-to-Three for All Act last year and look forward to continuing to work with you to ensure full funding for that program.

We are pleased to contribute to the discussion about the Qualified High Technology Company (QHTC) tax incentive program through the fiscal year (FY) 2020 budget[1]. As researchers and advocates working on behalf of the District’s children, we know the difference that public funding can make in the lives of DC’s residents. In a city where access to opportunity has always been rife with systemic inequities, we have a responsibility to use our resources to dismantle barriers. This means regularly reviewing the ways that we spend our money and ensuring funds are used in the best interests of District residents.

As currently designed and implemented, the QHTC program is not an effective use of public funds and its reform would allow the District to fund important programs to support residents who face the greatest barriers to opportunity. According to the findings of the District’s Chief Financial Officer’s (CFO) 2018 review of the program[2], there are several elements of the program that are problematic:

  • Most QHTC recipients already existed in DC as a result of the program, meaning that the program did not draw new high-tech companies to the District as intended.
  • The QHTC program does not require subsidy recipients to carry out new or expanded services. As a result, some companies receive subsidies for activities they would have carried out anyway.
  • The program uses overly broad eligibility requirements and companies are able to self-certify to qualify for the program, meaning that subsidy recipients may not be the intended business type or may not meet the program’s eligibility requirements.
  • QHTC recipients can continue to receive the subsidy indefinitely, even without having taken any new actions to qualify or continue receiving the subsidy.
  • Many QHTC recipients were based outside of the District, again in contradiction to a key intent of the program: to attract high-tech businesses to the District.
  • Many recipients of large QHTC tax credits do not demonstrate proportionate economic benefits to the District.

Given these and other challenges with the program, the CFO found that the QHTC program results in millions of dollars in foregone revenue every fiscal year. We believe Councilmember Nadeau’s amendment to the FY 2020 Budget Support Act provides an opportunity to use these important dollars in a way that can make a measurable difference for children and families.[3]

If the Council passes this amendment, the District can reallocate these funds to important programs to support District residents and make steps toward racial equity in the District of Columbia. These include programs and activities that would benefit the District’s children, including reducing children’s exposure to lead by replacing lead water service lines, providing critical school-based mental health services through the Department of Behavioral Health, and expanding the District’s child care subsidy program under Birth-to-Three for All DC. The amendment would also make funding available for permanent supportive housing for individuals experiencing homelessness, homeless outreach, a program for expecting and parenting students, and other programs.

We thank you, Councilmember Nadeau, for introducing this amendment to the FY 2020 Budget Support Act (BSA), as well as Councilmembers Allen, Cheh, Evans, Gray, Grosso, Silverman, Robert White, and Trayon White for voting in support of the amendment in the first reading of the BSA.

Thank you for the opportunity to testify. I’m happy to answer any questions.

 

[1] B23-0209 - Fiscal Year 2020 Budget Support Act of 2019, available at http://lims.dccouncil.us/Legislation/B23-0209

[2] Office of Revenue Analysis, Review of Economic Development Tax Expenditures, Government of the District of Columbia, November 2018

[3] Amendment introduced by Councilmember Nadeau at the FY2020 BSA’s First Reading on May 14, 2019 available at http://lims.dccouncil.us/Download/42120/B23-0209-Amendments42.pdf

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