Proposal to Scale Back Tax Cuts Worries Hill Businesses

Posted April 22, 2008 at 4:20pm

For small businesses in the District, including those on Capitol Hill, it’s as if the city extended a gift and then retracted it.

Mayor Adrian Fenty (D) signed legislation earlier this year to slash commercial property taxes by more than half, which was projected to save small businesses $96 million next year.

But in the face of projections that the city will have a budget gap, Fenty is proposing scaling back the tax cut. And that possibility is worrisome to some Capitol Hill business owners, including Dennis Bourgault, co-owner of Chateau-Animaux, a pet store on Barracks Row.

Bourgault is scheduled to testify before the D.C. Council on Friday on behalf of Barracks Row Main Street and the Capitol Hill Association of Merchants and Professionals. He will speak in favor of keeping the cuts Fenty has already signed into law.

Fenty’s new idea is “a joke, basically,” Bourgault said. “The council’s plan gives real relief. These taxes keep going up and up and up, and the businesses can’t afford them. The mayor’s plan doesn’t do anything.”

The signed legislation lowers the property tax rate to $0.91 per $100 of assessed value from the current rate of $1.85. That would save Bourgault, who said his property on Eighth Street Southeast is valued at about $1.2 million, about $11,000 next year.

Under Fenty’s plan, which would cut the rate by only 15 cents next year, Bourgault would save roughly $1,500 — an amount, he said, that “doesn’t even cover my electricity bill.”

Bourgault said he paid about $22,000 in property taxes last year, which significantly hamstrung his business.

“What it means for me is we have to come up with basically $2,000 a month for taxes,” he said. “That money could go toward another part-time employee or health insurance or additional equipment for the business. But taxes keep going up.”

Ward 6 Councilmember Tommy Wells (D) backs the cuts Fenty originally endorsed and identifies with the business owners, according to his chief of staff, Charles Allen.

“Look no further than Dennis at Chateau- Animaux,” Allen said. “Business owners are facing a lot of pressures. They’re seeing their taxes double and increase significantly. Tommy worked … to pass the version that passed the council in January, so that’s where he stands.”

Bourgault and Allen said the property tax situation is one downside of economic development on Capitol Hill.

“Property values went up so rapidly,” Allen said. “Every business knows that their property will be growing in value, just as homeowners hope their value will grow over time.

“The area is booming, and that’s exciting, but when it happens so fast it makes it really hard for small businesses to keep their bottom line flexible.”

Fenty’s proposed measure would continue to decrease the commercial property-tax rate by 15 cents until it reaches $1.40 in fiscal 2011, by which point businesses will have saved $113 million, according to the administration — more than the council’s $96 million.

But councilmembers point out that that’s comparing three years’ worth of savings to one year’s — an argument Bourgault will echo when he goes to city hall Friday to weigh in on what has been one of the major disagreements between Fenty and the council.

“I don’t want to say it will be the biggest showdown,” Allen said, “but it will be a significant one.”