Lynchburg leaders, businesses talk about tax cut proposal

“Tough call,” interesting but “tricky,” and “no guarantees” are among the phrases used by local business leaders and economic development experts to describe an unusual tax cut proposal now being entertained by Lynchburg City Council.

Councilman Turner Perrow has proposed implementing a one-time, across-the-board rebate on business license taxes to help local enterprises get through the recession. Councilman Michael Gillette has, in turn, pressed for some kind of cost-benefit analysis that can quantify the effect of such a step.

But coming up with such a calculation appears to be a difficult, if not impossible, task given the number of unknowns in the equation.

“It’s a really tough question because it’s so very complicated,” said Joseph Turek, dean of the school of business and economics for Lynchburg College. “… There’s no guarantee it’s going to produce new jobs. It will certainly increase profits for businesses, but there’s no guarantee those profits will be used to expand business or hire people. You just don’t know.”

“Basically, it’s murky.”

The difficulty of predicting what the business community would do with a rebate — and what, if any, lasting gains it would enjoy — was also noted by representatives of Region 2000 and the Lynchburg Regional Chamber of Commerce.

At the same time, officials with both groups said a tax cut would likely be of some benefit to local businesses, making it at least a worthwhile point of discussion.

“This may be an effective way to take some pressure off businesses,” said Rex Hammond, president of the chamber of commerce. “It’s an interesting concept. It would provide assistance to businesses and businesses are the ones that create jobs.”

Bryan David, director of Region 2000’s economic development council, said, “Anything that makes this region more competitive in terms of the cost of doing business is certainly worth looking at. Although it has to be looked at in terms of what the city can afford. It’s a tough call.”

Perrow, whose proposal will be discussed further during a meeting tonight, said he developed the rebate idea after he and Councilman Scott Garrett, who is running for the House of Delegates, met with a series of local business leaders to discuss the economy.

“The universal complaint among business people is that they’re just getting squeezed from every direction,” said Perrow, who is himself a small business owner. “It’s a bad economy, sales are down, margins are tightening up, expenses are up. I thought this was a way to ease that a little bit.”

Perrow has suggested that a few capital projects — a broad term that includes road construction, building repairs and downtown revitalization work — be deferred in order to pay for the rebates. He has not specified which projects should be postponed, believing it would be better to allow staff to evaluate conditions first and provide recommendations as to which endeavors could best be held over.

Perrow’s original proposal was to reallocate $1 million from the capital fund, which would allow the city to extend a rebate of slightly more than 14 percent to all business license taxpayers. Business license taxes, which are calculated based on a company’s gross annual revenues, bring in about $7 million a year for the city.

Several local business owners said they’d welcome the opportunity for any tax relief, even on a temporary basis.

“Anything at this point would be helpful,” said Jeanine Maxwell, co-owner of Sakina’s Spa on Boonsboro Road. “Especially in these times, until everyone gets back on their feet. We aren’t hurting like some other people are, but money is tight. We have to watch every penny.”

Steve Morris, a general contractor who has owned his own business in Lynchburg for 32 years, said he was expecting a tough winter season ahead. “There are no large projects on my drawing board right now,” he said. “Just little things. It (a rebate) would help. Every little bit would help.”

Morris added only a turnaround in the economy could ultimately save truly struggling businesses, but a tax cut could help more companies survive a little longer.

“I don’t think small businesses are going to go out and purchase new tools or equipment with it,” he said of the money. “I think it will just allow them to stay afloat a little longer … I think it will be used as a lifeline.”

Robin Cheek, owner of Farmers Seed & Supply Co. downtown, said she felt a tax cut would stimulate the economy, but added one caveat.

“Everybody would like to save a buck,” she said. “But I’d only want them to do it if they can without going into debt or running a deficit. If they can afford to do it. I don’t want to see the police cut or fire cut or schools cut.”

Perrow’s proposal sparked a heated debate among council earlier this month over whether the city could afford such a move and what the benefits would be.

Council will discuss the matter further during a 5 p.m. work session today. The work session will be followed by a 7:30 p.m. regular business meeting. Both meetings will take place in council chambers at City Hall, 900 Church St.