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Annals of Bad Ideas: Subsidizing Gas Stations

Your elected officials at work: D.C. Council member Carol Schwartz has proposed the "The Retail Service Station Incentive Act of 2006," which would grant entrepreneurs some very lovely tax breaks if they would kindly open a gas station in the District of Columbia.

What? Government concocting a new and exciting way to subsidize the oil industry? Say it ain't so.

But it is: Not only Schwartz, but also council chairman Linda Cropp and council members Sharon Ambrose, Marion Barry, Kwame Brown, Vincent Gray, Kathy Patterson and David Catania--a majority of the council--are listed as supporters of the bill.

Why in heaven's name would an elected official offer to exempt the owner of a new gas station from the sales taxes due on the purchase of equipment and supplies used in the construction of a service station? And why would the city propose to add on a 7-year exemption from property taxes and license fees for a new station owner?

Well, there is a reason: The number of gas stations in Washington has been declining for some time, as development pressure makes land much more valuable for people who want to build housing or retail establishments rather than gas stations. Since 2002, according to AAA stats cited by Schwartz, the number of gas stations in the city has dropped by 35 percent, to 88 facilities.

But so what? It's not as if it's hard to find gasoline in the city, and certainly not in the surrounding suburbs. The District is nowhere near the situation that, for example, Manhattan finds itself in, where property values have shot up so high that there are virtually no gas stations left at all. (And even there, this does not exactly cause a hardship--there are plenty of stations in all surrounding areas.)

Schwartz maintains that the paucity of gas stations hurts the city financially: Fewer stations means the District collects less in the way of gas taxes, and that prevents the District from getting its full share of federal Highway Trust Fund dollars, because the District doesn't have the dollars for the required local match.

But is granting new tax breaks the best way to raise taxes? And wouldn't the denser and more valuable housing, retail or office development that takes the place of gas stations produce far more in the way of tax revenues for the District?

It's true that gas station owners are not the big bad ogres that the oil companies are taken for in a time of $3 gas. Station owners hardly share at all in the massive profits raked in by the oil companies. In fact, many gas station owners struggle to match even the flimsy profit margins that are more commonly associated with, say, supermarkets.

But a city is a place that thrives on dense development, and gas stations don't fit in a successful, vibrant city, certainly not in the downtown areas, and not in any great numbers in the neighborhoods. The council should devote its energies to expanding the tax base through residential and business development that encourage transit use and walking--not more cars.

By Marc Fisher |  June 14, 2006; 12:05 PM ET
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Comments

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How about requiring any new parking garage to have a gas station?

Posted by: Gasman | June 14, 2006 2:06 PM

Marc,

I think you nailed this one. I wonder how much these tax breaks would reduce the costs of owning and operating a filling station and whether there is enough competition that these cost savings would be passed on to drivers. Doesn't seem likely.

The only way I could see it make sense is if they required that the service station be built on the ground presently occupied by an embassy, chancery, church, or non-profit that is presently drawing city services but paying zero in taxes. Of course, the tax deadbeat organization would just move down the block and the net gain would be zero.

Posted by: Kalorama Kat | June 14, 2006 2:12 PM

Just get the government the hell out of the marketplace (except for controlling externalities).

Government virtually always makes things worse when they intervene in situations like this. And DC's government is the poster child for making things worse.

Posted by: JD | June 14, 2006 3:10 PM

Certainly won't encourage public transportation

Posted by: doodoobrown | June 14, 2006 4:30 PM

"How about requiring any new parking garage to have a gas station?"

I like this idea. Of course it would have to include the new ballpark. So then they could hang giant "Exxon" and "Mobil" signs on the stadium side of each of the new structures, and they'd blend right in with the beer and soda ads on the scoreboard. (And of course it would have to be named Exxon-Mobil Stadium.)

Posted by: Cosmo | June 14, 2006 5:52 PM

Make the new stations have a E85 pump and I'm all for the new business subsidy.

I might even drive into DC to fuel up.

Posted by: altfuel | June 14, 2006 8:29 PM

It's easy to be witty when this is abstract, but I live in a neighborhood without a gas station and it is very inconvenient. Off the top of my head, I can only think if one station in the whole of Ward 8 and that is more than 3 miles away from my house. Most often we use the Exxon on Rt 1 in Arlington. Is this tax break proposal a solution? Who knows, but its at least worth consideration.

Posted by: Chris | June 15, 2006 9:29 AM

You write "But is granting new tax breaks the best way to raise taxes?"

Wasn't that the economic rationale behind both the baseball stadium and the convention center, both of which you supported? At least I'll use a gas station.

Posted by: Taxpayer | June 15, 2006 1:56 PM

Check out the new Minnesota law that gives breaks to electrically charged hybrids.

It is also true that there are thousands of flex fuel, FFV vehicles that could use E85. Put them together.

If the stations provide alternative fuel subsidize them; otherwise good riddance.

Posted by: Dan | June 15, 2006 3:45 PM

We need RAIL NOW! "More Trains, Less Traffic". Light Rail on the beltway, and into our communities. High Speed Rail in the interstate corridors.

The U.S. Senate candidate on the ballot Nov 7, 2006 in Virginia is Gail for Rail Parker, businesswoman, U.S. Air Force officer (ret) executive civilian pentagon budget analyst(ret). Mother of three. Grandmother of four. A Winner for Virginia. Gail for RAil Parker.

Winning more support every day.

Posted by: Carey Campbell | June 15, 2006 3:56 PM

Chris, I guess you're just outta luck there in Ward 8. See Marc and the gang serve the gods of density. If you don't like density, move. That's what they'd say. Who needs conveniences like gas stations, churches, hardware stores, pharmacies, and so on? THERE'RE LUXURY CONDOS TO BE BUILT MAN, GET ON BOARD! When people say gas stations discourage the use of public transport, I gotta laugh. The problem is that property owners sold their lots to build .... what else but million dollar condos. I don't know about tax breaks, but I mean, we all saw this one a coming a million miles away when the gas stations started disappearing - 1999? 2000? - and water-it-and-it-will-grow ugly condos started sprouting. Perhaps our leaders ought to have done something about it THEN. But instead, they just encouraged it.

Posted by: Tme for bed | June 15, 2006 10:38 PM

"It's not as if it's hard to find gasoline in the city."

Posted by: Laughing laughing | June 15, 2006 10:57 PM

I can think of 4 gas stations within 1 mile of 14th and Florida, NW. I don't see that more gas stations are needed everywhere. I can also think of 2 gas stations I know of in this area that have serious brownfields issues. Those are only the ones I know of. If we're going to subsidize gas stations, I want concessions from them in return. Posting a bond for clean-up, the ability for local ANCs to enter into agreements with what the inevitably-attached convenience stores sell, and providing some level of community service are all things that come to mind. By their own admission, a lot of these stations actually make more off the convenience store than they do off the gas. And the convenience stores in many areas sell a lot of drug paraphernalia. How do you feel about people's illegal drug habit subsidizing your legal driving habit? I think it sucks.

Also, have any of you looked at the draft comp plan? In the "Near Northwest" (NN) element, the greatest land-usage by percentage is for transportation, at something over 30%. That's 30% of all land usage in NN devoted to roads and parking. This exceeds the next greatest percentage, housing, by something like 8%. Needless to say, commercial use and recreation use are further down the list... Is this what we want from the city we live in?

Not me. I'm intensely wary of doing ANYTHING that will support such a land-use contrary to my benefit. Put the money into public transportation, I say.

Posted by: Mark | June 16, 2006 10:11 AM

I can think of 4 gas stations within 1 mile of 14th and Florida, NW. I don't see that more gas stations are needed everywhere. I can also think of 2 gas stations I know of in this area that have serious brownfields issues. Those are only the ones I know of. If we're going to subsidize gas stations, I want concessions from them in return. Posting a bond for clean-up, the ability for local ANCs to enter into agreements with what the inevitably-attached convenience stores sell, and providing some level of community service are all things that come to mind. By their own admission, a lot of these stations actually make more off the convenience store than they do off the gas. And the convenience stores in many areas sell a lot of drug paraphernalia. How do you feel about people's illegal drug habit subsidizing your legal driving habit? I think it sucks.

Also, have any of you looked at the draft comp plan? In the "Near Northwest" (NN) element, the greatest land-usage by percentage is for transportation, at something over 30%. That's 30+% of all land usage in NN devoted to roads and parking. This exceeds the next greatest percentage, housing, by something like 8%. Needless to say, commercial use and recreation use are further down the list... Is this what we want from the city we live in?

Not me. I'm intensely wary of doing ANYTHING that will support such a land-use contrary to my benefit. Especially for any commercial demographic as damaging to residential quality of life as are gas stations.

Posted by: Mark | June 16, 2006 10:22 AM

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