DATE: Wednesday, July 9, 1997               TAG: 9707080297

SECTION: LOCAL                   PAGE: B3   EDITION: FINAL 

TYPE: Public Life 

SOURCE: BY BATTINTO BATTS JR., STAFF WRITER 

DATELINE: PORTSMOUTH                        LENGTH:   77 lines

USING BUSINESS TO FOOT THE BILL CITY SEEKS TO FUND IMPROVEMENTS WITHOUT RAISING REAL ESTATE OR PERSONAL PROPERTY TAXES.

Garbage no longer sits beside the street for weeks in Barbara Wright's neighborhood now that the city's refuse department makes more frequent pickups.

``The city seems to be improving services in many ways,'' Wright, a resident of Portsmouth since 1955, said. ``Trash pickup is one of them. They are right on the job, now. They used to be haphazard.''

Improving such vital services as garbage collection, law enforcement and education is a focal point in Portsmouth as city leaders seek to improve the quality of life for its residents.

The difficulty, though, is in finding ways to finance the improvements without raising real estate and personal property taxes.

So Portsmouth has made one of its major priorities the process of attracting and retaining businesses, which pay an array of taxes -including sales, cigarette, restaurant and food taxes -that can be used to meet neighborhood needs.

``The rule of thumb in the business is that residential development does not pay its way,'' City Manager Ronald W. Massie said. ``Thus, the commercial and industrial base of the community gets to be very important. Businesses pay more and consume less.''

The city's commercial tax base has eroded in recent years, and officials cannot rely on income from more than 50 percent of Portsmouth's property because it is either owned by the federal or state government or religious organizations and therefore is exempt from local taxation.

Real estate and personal property taxes from residents and businesses provide 34 percent of the city's general fund revenues.

But taxes associated specifically with business, such as sales, cigarette and restaurant food taxes, account for only 12 percent of the general fund revenues.

``I think it's about time somebody in Portsmouth woke up,'' Wright said. ``It costs more and more to run a city and provide the services that people want. I think the city is going to have to rely more on business for the money.''

City officials are encouraged by an increase in the number of applications for business licenses. In January 1997, for instance, there were 4,649 applications, compared to 4,446 applications in January 1996.

Deputy City Manager Johnna Whitaker is cautiously optimistic.

``You cannot just look at the numbers and make a determination without knowing the nature of the businesses,'' Whitaker, who oversees the city's budget, said. ``It could just be a bunch of computer or nail (manicure) businesses that people are opening in their homes.''

While the city welcomes such small firms, it realizes they can't generate the volume of additional tax revenue the city needs.

That's why Portsmouth has targeted land in blighted neighborhoods, such as Fairwood Homes, as sites for commercial redevelopment. Such land can be used to attract large firms that employ hundreds of people and pay thousands of dollars in taxes annually to the city.

But landing such businesses has been a problem for Portsmouth. The PortCentre Commerce Park, for instance, remains nearly half empty a decade after the park was established in an enterprise zone once called Newtown.

Many cities use tax breaks as incentives to attract businesses. That's something Portsmouth has had to be cautious about because it is so in need of revenue.

``Clearly that is a challenge,'' Economic Development Director Matthew James said. ``However, I think you can meet that challenge by analyzing which segments you want to attract and then focusing on financial situations in which the city can recover any upfront costs or investment they make within a five-year period.'' ILLUSTRATION: Graphic by Ken Wright/The Virginian-Pilot

Portsmouth

Taxes assessed property owners

Taxes assessed business owners

Top 10 commercial tax payers

For complete copy, see microfilm KEYWORDS: CITY TAXES PORTSMOUTH

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