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Articles
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| City officials struggle to sort out tax relief |
VOICE writes, "City officials struggle to sort out tax relief
BY ELIZABETH WIENER
D.C. Council members are vowing monetary relief for small businesses hit by soaring property-tax bills. They just need to figure out how to divvy up and deliver the $11 million they set aside last spring for commercial property-tax relief.
Last week, the council’s Committee on Finance and Revenue heard ideas on how best to target the money to small local firms. The funding became available at the start of the fiscal year Oct. 1, and despite a lack of consensus, the council hopes to find a way to distribute checks by the end of the calendar year, according to council aides.
A major stumbling block is that even $11 million won’t go far, spread among the District’s approximately 22,000 small businesses. “If we gave each an equal share, everybody gets $500, which is no help to anybody,” said Ward 2 Councilman Jack Evans, who pushed for the property-tax relief effort.
Another problem is setting up a new program, which will require new rules, a new bureaucracy and possibly new contractors. And the issue is complicated because many small-business owners rent their premises and absorb the property tax hit in a domino effect when their landlords pass it on."
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“There was no consensus on a strategy for equitable distribution of a relatively small amount of money to a potentially very large group of businesses in a way that would be impactful,” said Erik Moses, who heads the city Department of Small and Local Business Development. “Eleven million dollars is not enough to have a meaningful impact,” Moses told Evans’ committee last Wednesday.
A new plan that Moses offered seemed a nonstarter. He suggested using the $11 million to establish and fund a “hardship grant program” to be administered by his department and a program of loans and loan guarantees that would be contracted out to a loan manager.
Both would be targeted to small local businesses, but not specifically for property-tax relief. Council members said they did not oppose the grants or loan programs but said they did not want the $11 million set aside for property-tax relief used for other purposes.
Ward 6 Councilman Tommy Wells said he was frustrated by Moses’ proposal. “We stated specifically the money would go for property-tax relief. If we have people borrowing money [from the city] to pay their taxes, we’re functioning like the company store.”
Another proposal, contained in a draft bill by Evans, would distribute the $11 million through a “small-business property-tax relief grant program.” Grants would be limited to local businesses with annual gross income of less than $1 million that suffered “a substantial increase in property taxes,” defined as a jump of 50 percent or more in a single year.
Committee clerk Jeff Coudriet said the bill is a starting point for discussion and could easily be modified.
A third idea offered at the hearing would provide relief in the form of refundable tax credits. Michael Allen, a tax consultant who works with small businesses, said tax credits require no new bureaucracy or program and could put money “back in the pockets” of small entrepreneurs quickly.
Recipients would already be paying District taxes, Allen said, and a simple line item on tax forms could show precisely the amount of the property tax increase. “It’s quick and practical and fairly simple to administer,” Allen said.
Coudriet said later that the idea of a refundable tax credit seemed attractive and could be included in Evans’ property-tax relief bill.
Meanwhile, many small businesses are suffering the aftershock of the city’s real estate boom. Though assessment increases are widespread, perhaps worst hit are businesses on now-trendy commercial corridors like U and P streets NW and H Street NE.
One property-tax relief effort has been dubbed “the Ben’s Chili Bowl Bill,” and Ward 1 Councilman Jim Graham said the nickname is apt. “We still have pockets of businesses just being walloped, historic black businesses in historic districts that to this date haven’t gotten any relief,” Graham said.
Rick Lee, of Lee’s Flower & Card Shop at 10th and U streets NW, said his assessment almost doubled over the past year. He suggested a special tax rate for small-business owners or the kind of subsidies and incentives the city uses for luring big firms like Radio One.
Businesses on U Street “had to withstand riots, subway construction, drug dealing, crime. Now that the area is thriving, those same businesses that persevered are being taxed out of business because the property values have risen,” Lee testified.
Evans said city leaders have agreed the $11 million in property-tax relief will not be a one-time subsidy but will continue in future years. He noted the council has already approved significant tax relief for homeowners — caps on annual increases, a larger homestead deduction and a cut in rates — but not for commercial property because the cost to the city would be too great.
“The bad news,” he said, “is that the increase in commercial property taxes undermines our effort to revitalize commercial areas and threatens to make us victims of our own success.”
Separately last week, at-large member Kwame Brown said he wants to increase to $2 million proposed funding for a “micro-loan” program to help local businesses in commercial corridors that are “economically impacted” by road and infrastructure construction projects. He said the micro-loans would “complement” commercial property-tax relief.
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Posted on Oct 18, 2007 18:29pm.
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