Chamber Leaders Urge F.C. to Cut Business Taxes
The City of Falls Church’s business community was struck this week by a report from the local Chamber of Commerce executive director Sally Cole that five small retail businesses and franchises have either closed, are moving out of the City, or are preparing to close next month. In addition to the five named by Cole, Offenbacher’s Patio, Fireplace and Recreation, a long-standing Falls Church retailer, is advertising in this week’s News-Press its plans to close.
The sudden post-Labor Day flurry of announcements has caught the Chamber and City officials off guard. All but Offenbacher’s are reported in Cole’s “Business News and Notes” column in this edition of the News-Press. A combination of poor income numbers and increased rents are given as the reasons in all cases.
Cole’s report of the decision of a long-time City-based family business, M & M Floors, to move out of Falls Church and relocate in Merrifield was particularly troubling for members of the local Chamber’s legislative committee.
Falls Church architect Paul Barkley, who heads the committee, has spearheaded efforts in recent years to get the City Council to change some of its business tax rates to prevent flight to surrounding jurisdictions. His particular concern, shared by the Chamber’s board of directors, has been with the Business and Professional Occupancy License (BPOL) tax, which is based on a business’ annual gross receipts.
A table of comparative tax rates, published earlier this year as part of the Arlington County budget report, shows that Falls Church’s BPOL tax rate is significantly higher in all categories than it is in Fairfax County and higher in a key category than the “professional services” category than in Arlington.
In a letter from Barkley, on behalf of the Chamber, to City Hall last April, he recounted the failure of a developer to close a deal with a law firm that was Falls Church’s largest for-profit employer in the late 1990s. The firm was looking for more office space and eventually had to move out of the City into Fairfax County.
“Today, a similar tenant who might wish to locate in the City, one occupying 60 or 70 thousand square feet, would have to weigh the advantage of a City of Falls Church address against against paying an additional $1 million in BPOL taxes over the life of an initial 10 year lease,” he wrote.
“That kind of calculation cannot be lost on a business considering a move here,” Barkley commended to the News-Press this week.
The Falls Church BPOL tax rate for “professional” businesses, such as attorneys, doctors and accountants, is 52 cents per $100 of gross receipts, compared to 31 cents for Fairfax and 36 cents for Arlington. “That’s a tax not on net profits, but gross receipts,” Barkley added.
Falls Church’s BPOL tax on “business services” is 36 cents, compared to 19 cents for Fairfax. On contractors, the Falls Church BPOL tax is 16 cents, compared to 11 cents for Fairfax. On retail, it is 19 cents compared to Fairfax’s 17 cents, and on repair services it is 36 cents on Falls Church compared to 19 cents in Fairfax.
Falls Church’s personal property tax rate is also higher than Fairfax, at $4.71 compared to $4.57. And the real estate tax rate is higher than both Fairfax and Arlington, at $1.01 in Falls Church compared to 89 cents in Fairfax and 81 cents in Arlington.
Moreover, Falls Church is joined by its surrounding jurisdictions in considering a further real estate tax increase on its commercial properties as now permitted under state law to help address transportation needs. Finally, the Falls Church City Council has held an initial discussion about a potential ban on smoking in its restaurants, which local owners contend will drive business away.
These competitive disadvantages are a particularly sensitive matter for Falls Church at a time when new mixed-use development projects are coming on line, and developers are looking for tenants for their office and retail spaces, Barkley pointed out.
Not only does Falls Church place itself at a competitive disadvantage for attracting new business because of its tax rates, but it also lacks any incentives to entice businesses, Barkley added. By contrast, Arlington County has a 45-page booklet entitled, “Think Arlington, Think Business: A Guide to Business Incentives.”
Based on that document, the local Chamber’s Legislative Committee drafted a two-page report on recommended business incentives for Falls Church that was adopted by the Chamber’s Board of Directors. That was back in October 2005, but none of the proposals has seen the light of day at City Hall.
The proposed incentives are in the areas of “public improvement incentives,” “zoning modification and waiver incentives,” “financing tools,” “transportation and commuting assistance” and the “utilization of Commonwealth of Virginia incentives.”
According to Cole’s report, Beyond the Garden Gate, a five-year business in the City, local franchises of the Chicken Out Rotisserie, Kentucky Fried Chicken, Pizza Hut and M & M Floors have either already closed or are planning to within a month. In the case of the Chicken Out franchise, it was finally confirmed that, after closing due to a fire in the spring, it will not reoccupy its premises. The news about Offenbacher’s is contained in that store’s ad in this week’s News-Press.