"Two things are certain in life death and taxes."
~Defoe, Franklin and possibly Christopher Bullock, less notably Edward Ward~
Is anything more confusing than tax abatements? I first became aware of tax abatements in 2012, the year I started caring about what the local paper had to say. I didn't know what they were so I popped into Morrison Reeves Library and read through as many articles with the words tax abatement mentioned that the librarian could find. I still wasn't sure what they were but I saw that city council was voting them through on a regular basis for all sorts of businesses. Obviously I know what taxes are, I pay them. Abate is a middle school level word I knew too, but there's something about business and finance that can take familiar words and float them in a fog of unfamiliar context, at least for someone who was not and is not likely to be a business major.
Tax Abatements are a common economic tool wielded by communities across the United States. Locally businesses that add or retain jobs are given a period of time (usually 8-10 years) when they are not held to taxes that they would normally pay on real estate or improvements. Before anyone gets huffy, know that businesses still pay other taxes so it's not a 100% scott free thing. However, tax abatements are still controversial, especially for cities such as Philadelphia where they are facing serious budget deficits due to their shrinking tax base. If you follow the Philly news, you'll know their situation, though on a grander scale seems strikingly similar to Richmond's own struggle for healthy city finances. Philly's nonprofit hospital and nonprofit universities have gobbled up real estate and left a deficit where taxes were once collected many moons ago.
Is Richmond in the same, albeit smaller boat? Much real estate in our area is held, as in Philadelphia, by tax exempt properties including but not limited to religious institutions, university as well as health care facilities. In a March article concerning Reid's announced changes to their pediatric center, Town Board President, Ernie Hendricks, voiced concern about Richmond's tax revenue. Hendricks requested that the city in conjunction with Reid Hospital consider extracting a sum from Reid to in part make up for the city's lack of taxable properties. From the Pal-Item article, I gather that at least half of our tax revenue once came from privately owned medical businesses. Now those businesses are almost exclusively Reid's, and Reid is tax exempt and seems highly unlikely to pay any funds to make up for the city's losses. Reid CEO Craig Kinyon argued against paying any amount, citing their provision of jobs to the community, as well as community grants.
Now nobody loves taxes, but we all love smooth pavement (and sailing!). The forms are irritating to deal with- and a lot of people get nervous even if they have nothing to fear from the IRS, just as drivers who see a cop on their block all slow down in unison. No matter how you hate taxes they are certain in life and vital to the community. Without a healthy tax base you cannot have smooth roads, maintained infrastructure (sewage overflow alert used to be a permanent button on our city website!) or effective schools and libraries. If you do not have smooth roads, maintained infrastructure or effective schools, you end up quite desperate and companies are less likely to want to do business. It's one of those unhappy feedback loops I guess. And it's not really a good solution, when you only see fit to remove the public sewer overflow alert button. It doesn't stop the stench after a hard rain, just saying.
I wonder what the statistics are for home ownership in Richmond and the greater county? What is the dollar amount of tax revenue lost due to Reid's acquisitions? How have tax abatements contributed to our dearth of financial health? Have we been almost consistently too quick to abate? What are the real numbers behind our shrinking tax base?
Can we as a city and county, encourage home ownership in addition to working with sizable nonprofits in establishing PILOT funds to fix our cash problem? What other solutions, aside from grant seeking and belt tightening are we missing?
the Local Gal
Friendly Reminder: Did you file your taxes? ;)
Philadelphia Business: Can Improved Tax Collections Solve City Financial Crisis
Pal-Item: Reid Outlines Changes in Facilities