Local Commentary

Guest Commentary: Falls Church City’s Answer to Raising Taxes

“Eat Mor Chikin”

….and more beef, salmon, pasta. While washing it down with a nice craft beer or bottle of chardonnay. And please don’t forget desert. All in the City, of course. Which you can enjoy before or after that movie or concert at State Theatre.

There has been much discussion about the need for more “commercial” development in Falls Church as the alternative to having to raise taxes on residents in the City. Commercial development is indeed a “cash cow” for many jurisdictions, no pun intended. The property taxes, gross receipts taxes and other taxes paid by businesses are significant, with a relatively small cost to the City in service expenses.

However, with commercial office buildings experiencing historically high vacancy rates and millennials and their 21st century entrepreneurial employers figuring out ways to do more work with less office space by telecommuting and office sharing, the demand for new class A office space in non-Metro locations such as Falls Church is limited. The Silver Line expansion all but assured that, with master plans for tens of millions of square feet of future office space nearly on top of Metrorail. That’s not to say that Falls Church won’t see any new office development in the coming decade or two. But my guess is that without significant economic incentives and investment by the City, it probably won’t exceed what occurred in the last decade or two.

What’s the answer? For some, it is maximizing the retail, restaurant and hotel potential of Broad and Washington Streets. And indeed, restaurants and hotels are particularly attractive to the City coffers, given the additional meals and rooms tax generated by these establishments.

The challenge for the City, as I see it, is generating the demand for more retail and restaurants in Falls Church and making the necessary investment to encourage such development. A quick look at restaurant economics: A successful restaurant in the City needs to achieve $400-$500+ per square foot in sales. That’s $2.0 to $2.5 million for a 5,000 square foot restaurant. With a population of roughly 13,000, that works out to nearly $200 a year for every man, woman, child, baby and grandmother in Falls Church. On top of what they are already spending in all of the other restaurants in the City. Certainly, not every customer would be a resident of the City. But by the same token, not every resident of the City eats all of their restaurant meals in the City.

So, in my opinion, the other part of the answer is that the City – and current residents – could view new residential development as complimentary to commercial development rather than competitive with it. And continue to grow its population to include those millenials that don’t need as much office space as they used to, but may eat out more often than the typical traditional family of five. The City Council would likely immediately deny a proposed mixed use project with, say 200 apartments totaling 150,000 square feet and a ground floor restaurant of “only” 5,000 square feet, because it is only three percent commercial measured in terms of square feet. How about measuring it in terms of the market served? That 5,000 square foot restaurant would need to serve 10,000 customers spending an average of $250+ per year. Or 5,000 spending an average of $500 per year. By that measure, the 250+/- residents of those 200 apartments are a small fraction of what is needed to support just one new restaurant in the City.

The other option is for the City to pass a new regulation requiring every current resident to “Eat Mor Chikin,” or whatever their favorite dish is, at City restaurants. That would not only encourage more restaurant development, but perhaps increase demand for cardiologists, fitness clubs and pharmacies.

In full disclosure, I am an investor in Mad Fox Brewing Company. So take my “Drink Mor Beer” suggestion with the humor intended. But in all seriousness, Mad Fox will be looking forward to the opportunity to serve the new residents of the Tinner Hill, Harris Teeter and Northgate projects. We like “Mor Custumers.” And the City should too, as we approach $1 million in meals taxes paid to the City since our opening four years ago. As our master brewer, Bill Madden would say, “Cheers!”

 


Ed Novak is president of Nova-Habitat and Falls Church Chamber of Commerce board member.