Posts about Jobs

For example, in Massachusetts, utilities work with local banks to provide 0% interest loans for homeowners and businesses for energy efficiency. This addresses a common and fundamental impediment to efficiency investments at scale: poor access to capital. The public sector's upfront incentives to the banks make the 0% loans possible, which then leverages significant investment capital from the private sector.

Virginia offers basic and straightforward rebates for commercial building energy audits. These audits identify where a building is inefficient (from HVAC to lighting to operations) and catalyze efficiency investments. Once a commercial building owner sees a facility's inefficiencies, and has information about what investments could pay for themselves in savings, they often make sustainable improvements without further incentives.

SEU isn't meeting its goals

DC residents and businesses pay a small percentage of their electric and gas bills to support DC SEU. As a result, DC SEU raised $17.5 million this year and will raise $20 million next year.

The Vermont Energy Investment Cooperation, or VEIC, won a competitive bid from the District to operate DC SEU. Their contract has been renewed each year, but so far, VEIC is struggling.

In fiscal year 2012, DC SEU met just 2 of 6 performance benchmarks the District set for things like reducing energy or increasing renewable energy generation. Their goal was to reduce citywide electricity use by 45,000 megawatt-hours, but they only saved 21,000.

DC SEU even fell behind on creating green jobs, which is one of its main goals. The organization hired just 41 people in 2012, well below their goal of 53.

DC SEU claims that it saved DC residents and businesses $2.8 million in annualized energy costs, but it received $14 million in funding last year. For a group intended to be a "market catalyst," this return on investment is disappointing.

It also counts spillover effects from its work, like customers who don't participate in their programs but are still working to reduce their energy use. This method of measurement may be an industry standard, but it doesn't really reflect DC SEU's effectiveness.

Is the SEU trying to do what it takes?

Nor does the organization's FY 2013 First Quarter report acknowledge any of DC SEU's past shortcomings or the need for any improvements. While the report calls for "strategic enhancements to [their] programming," there's little description of anything other DC SEU's existing efforts, like their programs to replace light bulbs and seal heating ducts.

If this is all the District wanted to do to improve energy efficiency, there was no need to create a new organization. It could have given the job to PEPCO and Washington Gas, which are perfectly capable of doing this kind of work. Meanwhile, DC SEU admits that natural gas consumption has actually increased due to their focus on replacing incandescent light bulbs with high-efficiency bulbs. The new bulbs give off less heat, which means that in the colder months, customers actually use more heating gas to hear their homes and businesses (but save energy in the summer on cooling.)

DC SEU wasn't even trying to balance the modest impact of the lighting upgrades with other programs to reduce heating loads. They spent just $700,000 of the $2 million allocated for natural gas-related programs. Whether this is simply poor management, misplaced priorities, or both, this is clearly not a good sign.

What can be done?

DC SEU needs help. They aren't meeting their goals and they aren't fulfilling their legal obligation to District ratepayers. Meanwhile, the District Department of the Environment (DDOE), which manages the organization, has done little oversight. A lot of the relevant staff has turned over at DDOE. Plus, that agency's main expertise is not in "big data" or the economics of financial leverage in the ways necessary to push the SEU toward bolder thinking and better results.

There's already a strong market for compact fluorescents (and an emerging one for the the even newer LED bulbs). The amount of savings from bulbs is small compared to commercial space, which uses a vastly disproportionate share of energy. With incentives to focus on the greatest possible value, the SEU could do more with, for instance, energy audits for commercial space.

Mayor Gray's sustainability plan puts forward an exciting and laudable vision for the District. It would be a shame if DC SEU doesn't play a key role in making it a reality.

While states like Vermont, Ohio, and Delaware have sustainable energy utilities, DC SEU is the only one that measures success in terms of both energy savings and economic development. In 2012, DC SEU served 18,795 households in 2012, 60% of which are low-income, and spent $5.2 million with locally-owned Certified Business Enterprises, or CBEs. DC SEU claims that its customers save almost $3 million annually in energy costs, while its efficiency measures produce lifetime economic benefits of almost $24 million.

However, not everyone is convinced of DC SEU's effectiveness. Employees of the utility's vaunted green jobs program, which was supposed to create 100 new jobs every year, say their work was unproductive and "meaningless." Perhaps more can be done to strengthen the training and future job placement aspects of the jobs offered through DC SEU, but one lone program can't be expected to squelch the District's persistent plague of unemployment.

Meanwhile, critics argue that DC SEU has accomplished little other than self-promotion. There certainly seems to be room for better cooperation between DC SEU and pre-existing community organizations promoting solar power installation. But there's always a learning curve when government takes over tasks previously in the purview of the private sector, no matter how poorly Pepco did at promoting efficiency, especially when Pepco owns the power lines and metering systems.

We'll be able to get a better understanding of what DC SEU has accomplished with newly available data on how much electricity, water, and gas buildings in the District consume. DC has assessed the energy and water use and carbon emissions of every District-owned building every year since 2009, but this is the first year that private owners of commercial buildings larger than 100,000 square feet are required to report their energy and water use to DDOE in compliance with new benchmarking regulation. Next year, the requirement will extend to all commercial and multifamily residential buildings larger than 50,000 square feet.

For the past two years, the DC SEU has provided a Benchmarking Help Center assist owners of large buildings assess and report energy and water use. They have fielded more questions about medical offices and small retail outlets in multifamily apartment buildings and condominiums than expected.

"We walk by these buildings every day, but we don't think about how they operate, how much energy or water they use or what's inside," says Help Center spokesperson John Andreoni. "Through the release of benchmarked and reported data, we'll gain access to this information."

This wealth of public data will increase transparency in the market and provide a more complete picture of DC buildings' energy, water, and carbon footprints than has ever been produced. As more efficiency measures are implemented, we'll be able to see how effective DC SEU actually is.

In most industries, it costs less per unit to produce greater quantities of a product. But with energy, the reverse is true. That's why investing in conservation at the consumer level is the most prudent way for governments to reduce energy use and save users money. Not only is efficiency more effective for ratepayers and taxpayers than building new power plants, even ones using renewable sources, it's also better for the environment.

Armed with more public data, DC SEU will have more information at hand to shrink the District's resource consumption and encourage building owners and managers to embrace energy efficiency. If it achieves measurable success, it will not only trim the city's environmental footprint, but keep costs low for all District ratepayers.

These goals seem lofty, and it's good to set aggressive goals. At companies I've worked, employees and managers regularly set and reviewed goals for each employee and division. The better places pushed everyone to set "stretch goals," ones which take some extra effort to meet. Managers shouldn't expect employees to achieve every piece of every goal; if they do, the goals are probably too conservative. But if they meet none, the goals are too tough or the employee not performing.

With education, no kids should fall short of proficiency or drop out, and almost everyone needs a college degree or vocational certification to get jobs in the modern economy. But we know that not everyone will. Nevertheless, it's critical that leaders aim high and push hard to get there.

The report cites a study by IFF on improving schools, which many, including Steve Glazerman, have criticized as fatally flawed. District education officials can give parents and potential parents the greatest confidence in the schools' future by moving beyond that study soon and finding better metrics for judging the performance of schools.

Transportation

The transportation section lays out some meaningful priorities but also sets a much lower bar. Its objectives:

• 84 new Capital Bikeshare stations in 2012
  
• 5 new miles of bike lanes by 2014
  
• Opening the first streetcar line in 2013

These are all extremely important priorities, but they just recite what DDOT is already doing in the short term, not stretch for the future.

Opening the streetcar line is a "stretch goal" on its own for DDOT, since there's still a lot to do to open the line by 2013—especially if "opening" the line means having enough cars to run a reasonable headway. Many people, including Councilmember Tommy Wells, fear that they will end up starting up the line with only 3 cars, force riders to wait too long, and give the streetcar an early reputation for uselessness. It would be nice if this goal mentioned the headways.

The other goals are more conservative. The plan notes that there is already federal funding (likely CMAQ) for the 84 CaBi stations, and even counts 37 that DDOT has already put in, meaning there are 47 to go. This is great, and very important, but not news.

Growing bike lane miles from 56 to 61 is also welcome, but not very significant, especially since Gabe Klein's 2010 DDOT Action Agenda set a goal of 80 miles of bike lanes by 2012. The One City plan specifies putting in the L Street cycle track, but why not include its M Street companion, without which we'll only have a one-way cycle track?

The fact that bike lanes are one of 3 transportation goals in the plan shows that they're a priority, and we shouldn't discount the fact that even one mile or a single block can be a lot of work, but if this wants to be an ambitious vision, it needs to aim higher.

The transportation goals are also very short-term. Each looks no farther out than 2014. It would be great to include higher numbers of CaBi stations, bike lane miles, cycletrack miles in particular, and streetcar lines a number of years out into the future. The education section and others set goals for dates like 2017; why not here?

The sutainability plan set a goal for 2032 of having 75% of trips use biking, walking and transit. It's now about half for commuting trips, and likely lower for other trips. To get there will require more aggressive progress on transportation than this plan sets out.

Economic Development

The mayor makes clear in this document his commitment to a technology innovation hub at St. Elizabeths, which we have discussed recently. That could be a real game changer for the District if it can succeed.

The plan isn't as clear on how to attract more technology jobs; it only cites recent efforts to give money to LivingSocial not to leave and to give a tax break to "tech companies." Ken Archer has argued that both miss the point, and won't create enough incentive for the really important jobs that innovate, create new value, and build "knock-on effects" for the long term.

Another good goal is one to reduce DC's dependence on government jobs. Today, 66% of jobs are in the private sector, and the plan targets 68% by 2013 and 70% by 2021. We should also think about what kind of private sector jobs those are. Government contractor jobs are okay, since if the federal government downsizes it will have to hire more contractors, but tracking and growing the percentage of jobs that aren't even in the government ecosystem, outside of defense contracting and lobbying and all of that, is even better.

The plan calls for a new task force to look at ways to streamline regulations and help businesses; this has the potential to do a lot of good if it gets good people who can think comprehensively about the biggest obstacles for businesses.

Housing

One of the relatively few disappointing pieces of the mayor's budget was the way it raided the Housing Production Trust Fund, which funds loans and other programs for building new affordable housing, to pay for Local Rent Supplement, another important program but one which just gives people money to offset rent. The plan reiterates this as if it were a good accomplishment.

A numerical goal calls for 900 new units of affordable housing by 2014, which DC needs. However, the plan also notes that 1,114 units are in the pipeline, which makes it sound like the goal is already probably in the bag, and if not, there's little the DC government can do at this point. This is another place that could use a stretch goal farther out into the future.

The plan calls for growing DC's population by 3%, about on par with the last year. We can compare this to the sustainability plan, which targets 250,000 new residents by 2032. 3% of our current population is about 18,000; add that number each year and we get 960,000, which beats the goal; with compounding, it's even more (1.09 million).

The question, though, is whether we can just add that many new residents each year without other policy changes. There is a lot of developable land in the pipeline, but it's finite. Without zoning changes to add housing opportunities, DC may have a harder time sustaining that growth.

And much more

There are many more goals in the plan, some excellent, some poor, some just vague. It's great that the Gray administration put together this plan, and set some ambitious goals in some very important areas. Just enumerating priorities matters as well, even when the goals are softer, but future plans would do well to set stretch goals and longer-term metrics for all areas.

Ken has argued that DC should take action to encourage a hub of technology companies in DC, but the deal DC worked out with LivingSocial doesn't ensure that the money pays for what DC needs. DC would benefit from attracting more highly skilled software engineering workers, who might work for LivingSocial now, and could then start their own companies in the future or staff ones that others start.

The tax break pays LivingSocial for hiring employees who live in DC, but doesn't distinguish between actual jobs creating technology, which help DC in the long run, and jobs answering phones for customer service, which don't. It also still gets credit if it hires people only to replace others who leave, generating no net growth in jobs.

DCFPI has pointed out that LivingSocial could move its product development operation out of DC and not have to pay back its subsidy. It could sell to another company outside DC and move, and not repay the benefits it's gotten. Or it could earn the benefits in a few years, then stop following through on its promises, and pay nothing back.

More jobs outside of government are absolutely in DC's best interest, especially in the long run. The panelists will discuss the LivingSocial deal, and what the District can and should do in the future to build up a tech community—not just react to whichever company comes hat in hand to officials first. What would you like them to talk about?

DC tech firms benefit from DC's investments in the creative class

The District didn't just suddenly become an attractive place for talented young people to live. That transformation took years of investments, often at the expense of other priorities. DC is still making these investments, and needs to keep funding them.

Buying more Circulator buses and streetcars and operating them on more routes is costly. Building more cycle tracks and multimodal streets requires money. Renovating more schools, extending library hours, and investing in mixed-use development projects like St. Elizabeths and Walter Reed is expensive but critical to attracting and retaining a world-class workforce of knowledge workers.

The payoff from these investments is that DC has experienced the largest domestic population growth of any state, and the fastest growth of creative class jobs of any large metropolitan area. Creative class workers are the knowledge workers in demand by many of the fastest-growing companies, including tech companies like LivingSocial.

That's why just over half of LivingSocial's employees already live in DC, whereas 30% of employees at other DC employers live in DC. LivingSocial isn't hiring them for charity, they're hiring because DC residents are excellent employees. This is a fact that's widely recognized, every DC tech company I know hires DC residents in at least half their positions.

One investment that would grow our workforce of knowledge workers to have LivingSocial grow further. DC could invest in LivingSocial's growth, but is instead offering $32.5 million for LivingSocial to simply stay in DC. They don't have to actually add any new positions to get this money.

That approach to attracting and retaining companies, known as location subsidies, is practiced by states who can't offer a 21st century workforce because they haven't invested in one.

Richard Florida, whose book The Rise of the Creative Class has shaped urban development strategies for a decade, opposes a location subsidy for LivingSocial for the same reason:

I am fan of high-tech companies and very much like what LivingSocial does. But they are already leveraging the enormous historic investments made in DC over decades to become an attractive city with extraordinary quality of place that attracts highly skilled creative class workers. They don't need the subsidy and our cities and states need to put a stake in the ground and stop this corporate welfare. I doubt they'll leave the region anyway. Where would they go?

The DC Council should demonstrate the same faith in DC's ability to attract companies for the right reasons—our 21st century workforce—as Florida does. They should require LivingSocial to add jobs, particularly product development jobs that attract creative class workers, in order to receive a subsidy.

Chicago required job growth in return for Groupon subsidy

Groupon, LivingSocial's primary competitor, did not a get location subsidy from Chicago. Instead, Chicago offered Groupon $3.5 million on the condition that Groupon add 250 new jobs.

If the LivingSocial subsidy were similarly structured, DC would see 2,321 new jobs at LivingSocial in return for its $32.5 million subsidy.

Furthermore, Chicago's subsidy to Groupon is in the form of income tax and training credits. That ensures that Chicago doesn't subsidize a company that is losing money and perhaps about to go bankrupt.

$15 million of the proposed LivingSocial subsidy is in the form of property tax credits, which it receives whether it makes money or not and could receive right before a bankruptcy.

Why should the DC Council give LivingSocial a far better deal than Chicago gave to Groupon? The DC Council should only provide income tax credits to LivingSocial, or at least limit an annual property tax credit to the size of its income tax credit.

Let the DC Council know that we can't afford location subsidies at the expense of crucial investments to build a city that attracts a 21st century workforce. LivingSocial should have to add jobs, particularly product development jobs, in order to receive a subsidy—just like Groupon did. This will ensure the continual contribution of LivingSocial's growth to DC's rise as a creative class hub.

How the current deal works

The $32.5 million tax deal being offered to LivingSocial would come from a $17.5 million income tax credit and a $15 million property tax credit. Both tax credits would be available beginning in 2016.

The income tax credit requires that DC residents make up 50% of any new employees hired the year previous to the credit, beginning in 2014, even if they are just replacing employees who turn over. If DC residents make up less than 40% of new employees, they still get a $9 million credit.

LivingSocial also would receive a $10,000 property tax credit for each new employee hired from 2010-2015. While this sounds like a requirement to hire 1,500 people to get the full $15 million credit, LivingSocial has already hired 1,000 employees since 2010, and is expected to hire at least another 100 through 2015 through turnover.

In other words, LivingSocial is guaranteed a large part of the property tax credit, even if they never hired another employee from today on.

The DC Council should make the following changes to this legislation to ensure that we are spending $32.5 million to build DC's tech sector, not just to retain a company.

Require hiring of DC residents in order to receive any subsidy

In the current deal, LivingSocial gets the full subsidy if 50% of its future hires are DC residents. It will collect most of the subsidy if it hires 40% District citizens.

It LivingSocial hires less than 40%, even 0%, of its future employees from DC, it still gets $18 million.

There should be a floor—say 35% of new employees—of DC residents hired below which no subsidy is given. Alternatively, LivingSocial could receive credits that scale based on the percent of new employees that live in DC.

Tie credits to new positions, not new employees

My company receives training subsidies from the states of Oklahoma and South Carolina that are tied to new headcount. That makes a lot of sense. DC should do the same thing.

Currently, the deal allows LivingSocial to count replacement employees toward its hiring count. This means that the company could actually shrink, and as long as 50% of the employees they hire to replace people who quit or are fired are DC residents, they will receive $28 million.

It makes no sense to give a company more subsidy the higher their turnover is. Turnover should not be rewarded; added positions should. DC residents currently comprise a little over half of LivingSocial's DC workforce. If their turnover is high, they could very easily receive most of the tax credit without employing any more DC citizens than they currently do.

There actually seems to be a lot of confusion on this point. Councilmember Michael Brown, whose chairs the Economic Development Committee, tweeted last week that the deal requires LivingSocial "to hire and retain a certain number of DC residents." After being corrected, he removed the tweet.

The mayor's description of the deal appears to be contributing to the confusion.

The proposed legislative package projects that LivingSocial will create and retain 2,000 jobs at the company. In order to claim all benefits included within the package, at least 50 percent of LivingSocial's new hires will have to be District residents. LivingSocial is estimated to generate $166 million in tax revenue to the District over the next 10 years.

The mayor estimates LivingSocial will pay $166 million in tax revenue, but that estimate appears to assume the company will create 2,000 jobs. But the deal doesn't require the company to grow at all. District officials have declined to provide the formula they used to reach this estimate.

Require product development to remain in DC, and any potential buyer to abide by commitments

After seeing our previous article, hearing from our readers, and sitting down with me, LivingSocial agreed to "codify our intent to maintain DC as our technology center." This is excellent news, and a sign that LivingSocial is committed to working with residents to make this a win-win deal.

This commitment needs to make it into the legislation, though. And any future buyer of LivingSocial needs to be bound by the same commitments during the tax abatement period (through 2025).

Otherwise, a company like Groupon could acquire LivingSocial in 2017, right after DC has given them significant tax credits, and move all product development jobs to Chicago where Groupon is based.

The lessons we have learned from previous subsidies is that they work when they are targeted to yield specific knock-on benefits, like development of a depressed part of town or a particular sector. The LivingSocial subsidy is an exciting opportunity to grow our tech sector, but the council has to ensure it's actually targeted to yield that benefit.

Ultimately, Gray's mayoralty will leave a lasting effect on the budget and city services, and residents, whether they voted for and endorsed Adrian Fenty (as I did) or Gray, should care a great deal about what the capable people in the administration, unconnected to the campaign or any campaign finance, are doing.

We've also yet to find out whether the mayor himself was part of any illegal activity or knew about it. Based on what we know thus far, it appears that Gray made some very poor choices about whom to trust early on. Since then, he's replaced most of these poor hires with better staff, who are better at sharing the administration's positive accomplishments, such as:

One City One Hire

The administration's program to help unemployed residents find jobs has now suc­cee­ded in getting employers to hire 3,000 unemployed District residents in the past year.

There are numerous obstacles to getting people into jobs, but employers' lack of trust in DC's jobless has been among the most intractable. One City One Hire officials work to restore this trust by personally vetting resumes of unemployed DC residents and asking employers to consider a couple of handpicked resumes for each opening.

Some feel that this is what the Department of Employment Services (DOES) was supposed to be doing all along. This is technically true. It's also true that DC Public Schools are supposed to be properly educating our children. We shouldn't withhold credit where credit is due when DCPS or DOES fulfills its mission.

Sector-specific economic development

Under previous administrations, the Deputy Mayor for Planning and Economic Development was concerned almost exclusively with real estate deals. Although targeted real estate deals are important, only Mayor Gray has really invested in developing other sectors that are strategically important to the city.

The Mayor's broader focus has produced new positions critical to the city's economy, even if the officers filling those positions often operate behind the scenes. For example, newly hired DMPED officials regularly meet with leaders of the technology, government contractor, and health care communities to align identify ways DC can support these strategically important sectors.

A newly reconstituted Workforce Investment Council, whose executive director Alison Gerber was recruited from the Aspen Institute, has made it clear that workforce development dollars must be targeted to high demand sectors. As a result, for the first time, workforce development in DC is no longer scattershot, with the Gray Administration targeting key sectors.

DOES has cut off funding to several training providers whose training wasn't aligned with these sectors. A new Workforce Intermediary will ensure that the needs of hospitality and construction employers are addressed by training providers.

Continued capital investments without raiding city's reserves

DC residents were aware of the many capital improvements made under former Mayor Fenty, but fewer were aware that Fenty drew down the "rainy day" fund of $700 million to pay for some of these improvements.

Mayor Gray has continued the pace of capital improvements, with renovations of Takoma Education Campus and Woodson, Cardozo and Anacostia High Schools. While maintaining the pace of the previous Administration, Mayor Gray has managed to replenish our reserve fund, bringing it up to $1.1 billion.

Sustainability plan

If you haven't seen the objectives Mayor Gray set for 2032 in his Sustainable DC plan, then you should take a look. These objectives should provide the basis for numerous DC government initiatives over the next two decades covering issues as diverse as our food supply and obesity, along with transportation, tree canopy, and waste.

For some these strategic plans and objectives may seem mere feel-good talk, but these objectives matter. Historically, DC government has looked to such comprehensive plans and small area plans in designing legislation and framing countless policy debates in subsequent years.

Cameras and parking

Study after study proves that traffic cameras save lives. Mayor Gray significantly expanded traffic cameras in this year's budget, a politically courageous move that will continue DC's trend of lower and lower traffic fatalities.

While the DC Council created visionary pilots in performance parking, the previous administration never made it much of a priority to adjust meter rates to manage curbside space effectively. The Gray administration has expanded performance parking and made it clear this is a priority.

Continued momentum in education reform, streetcars and bike lanes

Some predicted that education reform, the streetcar and bike lanes would stop under Mayor Gray. Let's be clear: that hasn't happened. Mayor Gray has increased the investment in streetcars, pledging $100 million in capital funds starting last year.

The pace of bike lane construction slowed a bit at first, but DDOT is now putting in bike lanes on many streets throughout the city, and is on track to build the L Street track this summer and M street soon after. He even vociferously defended Capital Bikeshare over Twitter to skeptical New York reporters.

Finally, Mayor Gray has continued the process of education reform, despite the fears of many DC residents. Teachers are still being evaluated and sometimes fired based on performance, not on seniority.

The Gray administration's education reforms have included important initiatives which haven't received the same attention and publicity accorded the teacher firings. The administration has already made strides toward improving our special education system and opened multiple Early Stages centers aimed at early identification of kids with special needs. These investments have reduced by 20% the number of children bused, at DC's expense, to non-public special education, saving significant money.

I'm not nominating Mayor Gray for sainthood, but residents need to reexamine the fairly widespread belief that the administration is not getting anything done. While Adrian Fenty was very good at getting press attention for his actions, this administration is acting more quietly.

We should condemn any illegal behavior from the campaign, but we must also give the mayor and his staff credit for the ways the administration is making DC greater for the long term.

Just for comparison, $32.5 million is about the cost of modernizing an elementary school like Stuart-Hobson ($33.6 million). It's also roughly equivalent to the cuts Mayor Gray is proposing to the Housing Production Trust Fund, our best vehicle for promoting affordable housing ($38 million).

Before supporting the tax break, DC residents deserve to know specific benefits that these LivingSocial tax breaks will yield, and that they are more important than modernizing an elementary school or increasing the supply of affordable housing.

The proposed tax breaks reduce LivingSocial's property and income tax from 2015-2020 on a sliding scale based on number of DC residents employed. At least half of their employees must be DC residents for the tax breaks to kick in at all.

The vast majority of LivingSocial's employees are not engineers. Half of them work in sales and many work in transitional jobs writing copy for the deals.

These are good jobs, but they're not tech jobs, and don't contribute to a tech hub. The people who fill these jobs wouldn't necessarily work in technology firms after LivingSocial.

There are two unique things that LivingSocial or another tech company can bring to the District, and these essential elements are part of all successful tech hubs.

1. Smart money: The executives are good at innovation, and will start investing in other innovative companies if their company goes public or is acquired.
   
2. Smart engineers: The companies recruit and train very capable software engineers.

A deal that will benefit DC residents must be structured to retain smart money and smart engineers in DC.

Smart money, i.e. venture capital, is regional and is not confined to a particular county. So keeping LivingSocial execs who cash out and become venture capitalists in DC instead of Arlington doesn't seem worth paying $32.5 million for.

Smart engineers are another story. Most of LivingSocial's engineering openings are not in DC. Why not structure the tax breaks to target software engineers? Their presence in DC contributes to a larger tech cluster when they leave to work for other innovative tech companies.

The competition for smart engineers is intense in all tech hubs around the country. Even if LivingSocial, which currently loses hundreds of millions of dollars per year, doesn't find an exit strategy, DC would still benefit by the presence of hundreds of smart engineers looking to join innovative startups.

Apparently LivingSocial executives have told Deputy Mayor Hoskins and his staff that Virginia officials are courting them and that they are considering options such as Arlington. That shouldn't be a surprise. All corporate executives try to negotiate subsidies for jurisdictions where they have offices.

At the Tysons Corner software company I co-founded, we are frequently telling local officials where we have branch offices (Norman, OK and Charleston, SC) that we might move. We have received over $100,000 in subsidies over the past 3 years as a result.

But these cities only allow us to spend the subsidies we received on training for local employees in new positions that we add. That makes a lot of sense, because if we do leave, we will leave behind smart engineers who will go looking for jobs with similar companies.

Those jurisdictions are selling their locales based on value, not based on price. Such targeted incentives are what help build a cluster of related firms.

Reducing the corporate tax payments of a company that primarily hires salespersons and copywriters, on the other hand, doesn't appear targeted to yield any specific return. By comparison, spending that $32.5 million to modernize an elementary school or increase the supply of affordable housing feels like a more responsible choice.

DC councilmembers, who will consider the proposed LivingSocial tax breaks, should ensure that the tax incentives will actually help make DC a tech hub. Corporate subsidies and tax credits can benefit the District as long as the subsidies are vetted in a transparent, rigorous process that demonstrates specific benefits to DC residents. A tax break for LivingSocial could do that, but as it's structured right now, it wouldn't.