Businesses fear effects of $1 tax rate

By Cheryl Chumley

Published: April 3, 2008

The $1 tax rate being discussed by Prince William supervisors for fiscal 2009 could leave some businesses seeing double-digit increases in their bills, and that's a scenario that begs reversing, said one board member.

"The difficulty is you don't have a [different] tax rate" for businesses versus residential, said Supervisor Wally Covington, R-Brentsville, and the result in this current market is that projected bill increases for homeowners are a pinch compared to the punch on commercial real estate.

The county's most recent figures show the $1 tax rate that's been advertised will lead to an estimated 8.5 percent increase in fiscal 2009 tax bills for the average homeowner. At the same time, business owners could see up to a 32 percent increase in their bills, said county finance director Chris Martino. The difference comes in values; while residential assessments are on the downswing to the tune of 15 percent, some commercial properties have headed in the opposite direction.

The percentage translates into an estimated $265 a year increase on residential tax bills. But it's difficult to put a dollar figure on that percentage for business, though, Martino said.

"It's really very, very difficult," he said. "Commercial property includes a complex array, with different values and different rates. There's retail, but under retail there's big box, corner store, a 7-Eleven. There's office space, but is it Class A office space, Class B or Class C. There's industrial … hotel … just a whole gamut, so you can't get to anything logically that compares."

Even without the hard and fast figures, Chairman Corey Stewart, R-At Large, sees the $1 rate as too high for business to absorb absent negative impact.

"That's a very large tax increase," he said. "The only thing we can do is work to cut spending a lot more … to get the rate down."

Previously, board members discussed a tax rate of 96.8 cents per $100 of assessed values for advertisement, which would allow for a 3.3 percent inflationary hike in bills, Stewart said. But an even lower rate would be better for business, he added.

"An actual flat tax would be 95 cents and that would still be a fairly substantial tax increase for business, but not nearly as much as $1," he said.

Others on the board, however, don't see the $1 rate as problematic to business.

"I don't see any negative impact from the $1 rate on business," said Supervisor Maureen Caddigan, R-Dumfries.

And John Jenkins, D-Neabsco, saw the issue as just another "cost of doing business … and [no] cause for concern."

Martino, reminded of the tax relief experienced by the business sector these past few years due to market conditions that depreciated commercial values,said that those reduced bills should "kind of offset the increases" that are now on the horizon.

Still, that's not good enough for businesses that have to operate above theory, in the dollars and cents language of accounting balance sheets, said associate broker John Walvius with Norman Realty.

"It's a substantial rate increase," he said, "and I think there is a very substantial concern as to whether the proper assessments have been made to the commercial property. The second thing, whatever we do in business, we have to be very competitive with neighboring jurisdictions."

Adding a double-digit increase onto business tax bills at this time could push the county's rate above and beyond what's affixed in other areas, Walvius went on, and "that's a very serious concern" that puts local commercial enterprises at a disadvantage.

The ability to compete regionally is a factor, agreed Richard Hendershot, chairman of the Prince William County Greater Manassas Chamber of Commerce. But the $1 rate under discussion by supervisors is not so outlandish as to put Prince William out of the league with surrounding communities, he continued.

"We're competitive … and still have one of the lowest rates in the area, and I look at other counties, they're raising rates, too," Hendershot said. "So I don't see [the rate] being an impact on whether or not businesses are moving to the county. With that being said, we would prefer the county to take a harder look at spending, and finding savings."

From Laurie Wieder, president of the Prince William Regional Chamber of Commerce, meanwhile, comes this point: Any increase to business should really be viewed as an increase to the taxpayer, as tax hikes on the former are often passed along as price hikes to the latter.

"The concern is when you raise the tax [on businesses], that makes it more difficult to provide for consumers," she said. "The increase is going to hit business hard and that has an impact on the consumer … it makes it more difficult for businesses to create jobs and to provide the goods and services that consumers want."

Businesses already have burdensome fees in the form of the Business, Professional and Occupational License tax, Wieder said. The BPOL tax is assessed on all businesses with gross receipts greater than $100,000 that are located in the county—as well as on all enterprises with addresses outside the county but that do business within Prince William borders, regardless of gross receipts collected—and a change in this assessment would be a welcome relief and possible offset to the 2009 tax increase, she said.

"Our chamber has advocated for changes in BPOL for a long time," Wieder said, adding that she had no "perfect solution" to the current fiscal climate for businesses. "But I do know when your taxes go up, it's going to be more difficult for businesses … and for consumers."

Staff writer Cheryl Chumley can be reached at 703-670-1907.