THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, May 23, 1996 TAG: 9605230338
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TERRI WILLIAMS, STAFF WRITER
DATELINE: SUFFOLK LENGTH: 108 lines
There's something missing in the Suffolk budget for the first time in nine years - a special tax surcharge on downtown businesses.
Ironically, the people fighting hardest to get it back are those who have had to ante up.
Each year, at the request of the Downtown Suffolk Association, the city has tacked a 20-cent surcharge onto the central business district's $1.21 real estate tax rate.
The association is an independent group of about 200 downtown property owners and retailers, and the $32,000 raised annually by the surcharge has been used to improve facades and to try to attract businesses.
The city, which provided some matching funds to the association, has said that it is willing to invest in the area - but it wants to try a different method.
City officials worry that, instead of helping the district prosper, the tax is actually keeping business away.
So the City Council has proposed not renewing the tax surcharge when the next operating budget takes effect on July 1.
``It boils down to another layer of taxation,'' explained Assistant City Manager William E. Harrell, who heads the city's development efforts.
``The imposition of the tax is acting as a deterrent for new business,'' he said.
However, the city isn't talking about abandoning downtown. It has proposed giving the association $43,000 next year.
Although the debate is over taxes, theunderlying problem may rise from the varying visions for downtown by city officials and merchants.
City officials have discussed expanding the central business district to include companies and shops that are sprouting along the northern corridor on Main Street.
The expansion will help downtown because merchants will have more businesses to financially contribute to the DSA, city officials say.
But downtown merchants don't agree. They believe such an expansion will change downtown's character from urban to suburban.
``One thing that has been lacking is a downtown vision and a city-wide vision,'' said Bob Chisom, chairman of the DSA. ``All the players need to sit down at the table and discuss the future of downtown.''
City officials say that they will be drawing up a plan for downtown this summer when they meet with citizens, downtown officials and the Redevelopment and Housing Authority as part of the city's efforts to come up with a new Comprehensive Land Use Plan.
That effort will begin with community planning meetings in late summer.
Chisom said he hopes that when the city begins formalizing plans for downtown they won't overlook its value.
``A thriving downtown benefits city-wide because it generates revenue, taxes and takes the pressure off another borough to come up with additional revenue,'' Chisom said.
There are about 190 businesses downtown with 800 employees, Chisom said. In 1994, the central business district's real-estate value was $16.3 million. It dropped to $16.2 million in 1993, Chisolm said.
According to the Commissioner of Revenue's office, the city issued 135 business licenses in the downtown district in 1994, which generated gross business receipts of $28.5 million, providing about $87,310 in taxes for the city's coffers.
Last year the city issued 120 licenses, with $29.5 million in gross receipts and $89,861 in city revenue.
Harrell and Mayor S. Chris Jones say they don't discount the value of downtown; they only want to focus on different strategies for improving it.
City officials are counting on more partnerships with the private sector as well as targeting redevelopment dollars from the Redevelopment and Housing Authority.
They also say the city needs to beef up efforts to promote business in its enterprise zone - a 2,432-acre area that includes downtown, an industrial section and an older residential neighborhood.
An enterprise zone is an economically distressed area designated by the governor in which a package of state and local incentives are offered for 20 years. Suffolk's enterprise zone was created in 1990 and has helped six businesses to locate there.
Harrell said such a zone is attractive because it allows developers special tax breaks when they agree to rehabilitate buildings in the zone.
``With the enterprise zone, you have the benefit of lower taxation, which is an incentive to entrepreneurs,'' Harrell said.
Eugene Denison has sold dresses and shoes at his shop on Main Street for the past 42 years. He says business is good thanks to DSA's efforts to spur the creation of new businesses near his shop. Although Denison doesn't pay the tax (he rents the building that houses his shop), he's a member of DSA and supports it.
``I think it's a terrible mistake to get rid of it. The city keeps saying it's discouraging for businesses because of the tax, but that's not true,'' Denison said.
Denison said the city and DSA have been at odds for a number of years.
Several members complained about the city's willingness to tear down buildings to build parking lots.
``The last thing you do is tear down buildings and build parking lots,'' Denison said. ``A downtown functions by being compact. It's the heart of the city.''
The DSA, the city hopes, will ultimately become privately funded, drawing the bulk of its money from businesses outside the district, Harrell said.
Chisom worries about relying on voluntary contributions from outside businesses.
``Obviously, there's quite a distinction between a tax that has to be paid and a voluntary tax,'' Chisom said.
The city is not planning to end authorization for its other special tax district in Harbour View. There, property owners in a special commercial and industrial zone, are required to pay a 19-cent surcharge above the $1.03 real-estate tax rate to help defray infrastructure costs.
The city must pass the operating budget by June 30. ILLUSTRATION: Color photo by John H. Sheally II/The Virginian-Pilot
Eugene Denison
KEYWORDS: TAX SURCHARGE SUFFOLK CITY COUNCIL BUDGET by CNB