Sally Cole’s “Business News and Notes” column in this edition of the News-Press reads like a list of casualties from a natural disaster. It opens with a list of no less than five businesses that have closed or are leaving Falls Church since Labor Day. Poor sales numbers and high rents are behind this, par for the course for almost any business. But it is exponentially harder for a small business, or a franchise, to handle such a squeeze than for a large retailer or corporation. This week’s sad news should serve to wake up some leaders in the community to the idea that simply because someone runs a business, no matter how big or small, it doesn’t mean he or she is a “fat cat” that can readily absorb any kind of new tax increase, regulation or other constraint. In fact, most small businesses operate on a very narrow profit margin.
Yes, there are new businesses opening, too. But in the case of Falls Church, they seem limited so far to banks and specialty businesses whose niche is a particular high-end product. This raises troubling questions about how the City expects to fill all the new office and retail spaces that are promised for the next waves of new, large-scale mixed use projects slated for its commercial corridors. It’s evident from the two new projects completed since the development boom began in 1991 that it has not been easy to bring the kind of quality retail everyone originally anticipated. In fact, the City Council has expressed its displeasure more than once at the news that it appears to be only banks who want to move into many of those slots.
Of course, there are highly-competitive retail centers that surround Falls Church, from Tysons to Bailey’s Crossroads to the Arlington Rt. 29 corridor and more. In that context, experts say Falls Church has to build a “critical mass” to become a desirable destination for vibrant and interesting retail. But there’s more: surrounding Falls Church are jurisdictions with much more business-friendly taxes and incentives. In fact, Falls Church has historically viewed things like its gross receipts (BPOL) tax, or its meals tax as proverbial “low hanging fruit” that can be plucked for extra revenue without much in the way of consequences.
As a result, Falls Church has a 4% meals tax, compared to Fairfax County’s 0%, and Falls Church has a BPOL tax rate of 52 cents for professional services, compared to 31cents for Fairfax and 36 cents for Arlington. This is particularly troubling since it is small and mid-sized professional legal, accounting and related types of firms that should be the ideal “fit” for Falls Church. Moreover Falls Church is also about to increase the commercial real estate tax rate and may even drive business away from its restaurants with a smoking ban, and it has nothing like the volumes of business incentives that Arlington County has developed. Forget about the lack of incentives to encourage business to come in, Falls Church’s current policies drive it away.