F.C. Chamber of Commerce Gives City Officials Earful About Tax Plan

Transportation $ Scheme Assailed As Hurtful, Unfair

The transportation funding package passed by the Virginia state legislature and signed by the governor last spring was hailed for providing an array of programs aimed at raising money earmarked for transportation improvements.  For Northern Virginia, it included giving jurisdictions new ways to raise money that to be used locally.

But the warts on the plan, caused largely by Democratic compromises with anti-tax Republicans in Richmond, began becoming evident the moment the new laws went into effect July 1. Most immediately obvious were the incredibly exorbitant new fines against speeding and aggressive driving, potentially unconstitutional since it can be argued that the penalties, in these cases, do not match the crime.

Now, barely two months later, the next level of problems associated with the legislative package is hitting local jurisdictions, in particular their business communities.

 These come in the form of the permission given jurisdictions to raise the real estate tax on commercial properties by up to 25% over the residential tax rate. In the case of the City of Falls Church, for example, it means that the City Council can now legally raise the tax on commercial property from its current $1.01 per $100 of assessed valuation to above $1.25.

It was left to Falls Church’s Assistant City Manager Cindy Mester to come bearing this news to the first post-Labor Day meeting of the Greater Falls Church Chamber of Commerce’s Board of Directors Tuesday. While she and the City’s economic development chief Rick Goff were able to leave the room with their heads still intact on their shoulders, they left with plenty of notes they’d jotted down about the business community’s reaction to the new tax.

Mester made it clear that no jurisdiction in the region, including Falls Church, is seriously considering jumping the tax the full 25%, though she said that Arlington has given it some thought. Most, she intimated, are thinking of about a 10% jump.

In the case of Falls Church, she said, the money from that would go to a variety of transportation-related improvements, including road bed reconstruction, road realignment, sidewalk repairs, “pedestrian connectivity” measures and a public parking garage. If the tax rate were increased the full 25%, it would bring an additional $2.2 million a year to this purpose. If it were increased 10%, it would generate $894,794 a year.

But the discussion at the Chamber board meeting was engaged when one member reminded everyone that “this is a business tax,” adding, “this is something that will hit every small business and every one of their customers.”

Another board member, a developer, said that “by far, the highest operating cost of space is the property tax,” and he noted that for a typical 2,000-square-foot office or retail space assessed at $800,000 would see, if the jump was 25%, the equivalent to a sudden add-on of $200,000 in assessed value.

He added that this would be on top of a 100% increase in commercial assessments that have already taken place in Falls Church over the last five year. “You want to add this new increase on top of that?” he asked. “First of all, I would want to know where all that money has gone that has been already raised through the increased assessments to date. Where have those dollars gone?”

Another board member said that the Chamber should demand to know exactly what the City intended to do with the extra money, and not settle for a vague list. “Improvements on Route 7 do nothing for us,” he added.

“It will be the individual businesses who will pay for this increase, and then the consumers,” one noted. “Even a 10 cent increase on the dollar is quite significant.”

A small business owner chimed in, “When I get my tax bill, I think in terms of how many more coffee mugs or whatever I have to sell in order to pay it. This would eat up a very significant percentage of most business owners’ profits.”

When Mester suggested that the City might aim to make its tax increase comparable to surrounding jurisdictions in order to be seen as “bearing an equal burden,” one business owner protested.

“Fairfax County and Arlington are huge jurisdictions that are home to major national companies that can absorb a tax increase like this. Not so in Falls Church. Our business community is composed almost entirely of small businesses that would be placed at much greater risk, comparatively,” he said. “Suggesting Falls Church impose the same rate increase as other larger jurisdictions places our business community at a huge relative disadvantage.”

It was noted that Fortune 500 companies, like Exxon-Mobil, General Dynamics, Capital One and U.S. Air, buoy the strength of the business communities of Fairfax and Arlington, something that Falls Church simply doesn’t have.

“We, as a Chamber, would have to have a very clear indication of how the use of this tax increase would benefit our business community and not just residential neighborhoods or pass-through commuters,” another said.

Mester said that she would take the feedback from the board to a staff meeting at City Hall Friday morning where recommendations to the City Council would be hammered out.

The Council will mull the issue at work sessions on Oct. 15 and Nov. 5, and then bring it for a preliminary vote on Nov. 13 and a final vote on Nov. 26, so that all Northern Virginia jurisdictions can go forward with the overall transportation funding plan in unison. The tax would not go into effect until the following July 1, although other fees and taxes would go into effect on Jan. 1.