A tax incentive package that will give LivingSocial $32.5 million between 2015 and 2020 in return for the daily deals company remaining headquartered in the District was signed into law today by Mayor Vince Gray. Under the terms of the deal, LivingSocial’s investors will see their taxes from their returns on the company drop to 3 percent, a significant break from the District’s personal income tax rate of 8.25 percent.
The agreement with LivingSocial, which Gray said is “the result of nine months of work,” is designed to keep the company based in D.C. and expand its homegrown workforce as it continues to expand. LivingSocial, founded in 2007, currently has about 5,000 employees worldwide, about 1,000 of whom are based in Washington. But the company’s D.C. staff is spread across seven offices in Northwest D.C., and LivingSocial has not been shy about its desire to build a consolidated headquarters, a facility it estimates will need to be no smaller than 200,000 square feet.
At LivingSocial’s office at 1445 New York Avenue NW, Gray stood in the corner of a sprawling bullpen full of the company’s young employees, many of whom watched the signing ceremony, but many more whom remained hunched over their computers, typing out snappy ad copy or sifting through the company’s vast customer database. Gray, joined by LivingSocial CEO Tim O’Shaughnessy; Victor Hoskins, the deputy mayor for planning and economic development; and councilmembers Jack Evans (D-Ward 2) and Michael A. Brown (I-At Large), called the legislation a “seminal” piece of growing the District’s high-tech industry.
But hanging over the event, perhaps unbeknown to the scores of LivingSocial staffers, was The Washington Post’s new poll of Gray’s job performance, a survey that found that 54 percent of D.C. residents would like to see the embattled mayor step down. The Post poll also reported dismal numbers for Gray when it comes to business development and job growth, two issues that Gray made cornerstones of his 2010 campaign and his administration. Sixty-two percent of respondents to the Post survey said that Gray has been disappointing when it comes to attracting new jobs.
The growth of LivingSocial’s local payroll is a critical component of the tax break, though. In exchange for the $32.5 million incentive, LivingSocial has promised that at least 50 percent of all new hires will be District residents. That condition, and others, are a counterbalance to what Gray spokesman Pedro Ribeiro said was an incorrect perception captured by the Post.
“If you look at reinforcing business, this is a great example,” he said.
Not all observers of District politics were so sanguine about the tax break. Last month, the D.C. Fiscal Policy Institute worried that even though LivingSocial is planning on growing its Washington-based staff to 2,000 in the coming years, the requirement that the company draw half its new hires from the District is too vague.
“A new hire could include someone who is hired to replace someone who is leaving,” Ed Lazere, the institute’s executive director, told DCist before the D.C. Council passed the tax break in a unanimous vote.
As Gray prepared to sign the bill, Evans, who is rumored to be planning a run for mayor, was only complimentary toward the current mayor. “We are the envy of everyone,” Evans said after noting D.C. leads major U.S. cities in business development. He credited that trend to Gray and Hoskins, as well as the state of Maryland, which he thanked for raising its corporate income taxes to a level more on par with the District’s. All of LivingSocial’s local offices sit in Ward 2.
Brown, too, attempted to latch on to the tech sector, noting a generational gap between himself and his college-age sons. Noting that one of his sons does not call home as often as he would like, Brown recalled a recent incident in which his son’s phone number appeared briefly on the screen of his BlackBerry, only to be followed by a text message reading, “Oh, shit. I dialed the wrong number.”
Still, the Post poll lingered over the event. Jim Dinegar, the president and CEO of the Greater Washington Board of Trade, said after the signing ceremony that Gray’s administration is doing well by the business community.
“The poll is the poll, but it’s not an election,” Dinegar said. “[Gray] and his top team continue to get the job done well. We need him to ‘mayor’ the city.”
