Business and Taxes

Culpeper Star Exponent

Business Monday

April 28, 2014

Jim Charapich

The Culpeper Town Council met last Thursday on the Third Floor of Town Hall for a 2015 Budget work session. The session was entertaining considering that the Town budget will have increased over 30% during four years with no change in sight if approved (including the proposed 2015 Budget).

Early in the session, the Town Council agreed on a need to hire a consultant for $26,000 to help develop a strategic plan. The need was self-evident when hearing the economic impact of the policies from which the Town Manager is being asked to construct the 2015 Budget.

On the issue of BPOL - Thank you to former Town Manager / current Councilman Tom Huggard for proposing that BPOL be reduced by 33%. This is significant considering that this is a well-educated proposal. In like fashion, both Councilman Lochridge and Vice Mayor Michael Olinger recommended that the unfair BPOL tax be reduced by 20%,  a respectable reduction. Others suggested a 10% , 5%, or a meager 3% reduction amounting to less than $100,000 net against a more than $13 million budget. One candidate councilman proposed that the issue be studied. Why was this not done two years ago? Another comment was that we need to wait and see what the General Assembly will do to change the tax method. Where are the letters and digital communications to our General Assembly representatives asking for the issue to be resolved?

The Assistant Town Manager cited figures suggesting that the Town meals tax produces approximately $3 million in meals tax revenue. The boundary line adjusted (BLA) area produced approximately $1.2 million in revenues ($900,000 - meals tax) with a cost of services at approximately $400,000. This netted the Town over $800,000 in net revenue from the BLA. By Town Council actions, the Town appears to be divided into three commercial areas, the windfall revenue area of the BLA, the CRI footprint, and the areas south / west  of the CRI footprint. Given that the BLA area produces over $900,000 in meals tax revenue, and that there are likely another $600,000 in revenues from the areas south / west of the CRI footprint, that means that at least half of the meals are purchased from outside of the CRI downtown footprint.

It is perplexing that the Town Council could have a windfall of over $800,000 from the Boundary Line Adjustment and be very willing to invest $50,000 more (now potentially totaling $150,000) in the CRI footprint promotional efforts, with seemingly no regard to the competitive advantage that this creates against the South / West and BLA commercial parts of the Town. Is the Town using the windfall tax dollars from the BLA to promote business in other areas of the Town?

Finally, with the recognized $800,000 windfall from the BLA area, a reduction of 5% or 10% of the BPOL tax is less than $100,000. This is welcome, but hardly a significant reduction considering the $800,000 net windfall. When discussed by the Council in the work session, Department Heads in the Town did not offer budget concessions from their proposed increases for 2015.  The Town Manager was noted as the only department to offer some savings from his 2015 budget while some of the Town Council chuckled.

Unfortunately, this is not funny. The economy is not at a level that supports a continuation of policies leading to a 30% increase in the Town budget over four years (including 2015). Reduced Federal spending is impacting disposable income. Sequestration is impacting defense spending and thus defense contractor revenue. According to figures by Chmura Economics & Analytics, employment in Northern Virginia has slowed. This is significant considering that approximately 50% of the workforce in Culpeper are commuters.

Do we have a spending issue? Do we have a Town Council Issue? Perhaps Act Two will be better.

Do We Have A Fast Food Government?

Culpeper Star Exponent

Business Monday

April 21, 2014

Jim Charapich

Do we have a fast food local government when it comes to tax policy? When a Councilman made the motion to advertise for the meals tax increase in the Town of Culpeper from 5 percent to 6 percent in April 2013, he was supported by six other Councilmen; meaning that seven of the nine members of Council were in support. According to some, this is a luxury tax for those who want to eat out, supporting our local businesses. A Town Council candidate commented in the Candidates Forum on April 9th suggesting that 60% of the meals tax revenues were from visitors from out of Town.

According to an article on the National Association of Restaurants website - generally $1 out of $3 of food and beverage purchases are tourism related - that is 33%. Another article referred from the www.WVEC.com website suggested that 80% of the meals tax is paid by locals in Hampton Roads. Given that Culpeper does not have the Virginia Beach tourism influence of Hampton Roads, our local citizen purchases are likely higher than 80% for most restaurants. For example, these are mom’s and dad’s taking their children to and from church activities, soccer practice, or band practice. In today’s economy, there are a significant number of families with single parents or both spouses working. This leaves little time for the ideal (non-luxury) sit down and eat a home cooked meal family setting. Has adding the additional meals tax netted an impact on working families? Local customers, including older adults on fixed budgets, know exactly how much a meal will cost when they order. They often have a frequent favorite. When the price goes up, the result is that they simply change the order to purchase less to fit their budget; or, perhaps they are precluded from eating out at all.

When the Town Council negotiated to add the Boundary Line Adjustment Area into the Town, the Town received a significant boost in tax revenues from additional unfair BPOL taxes and meals taxes. They then turned around and added an additional percentage to the meals tax. What has been the result?

The Town has increased their budget by an average of 8% per year over the past four years with no apparent relief in the latest budget. In the April 1st, 2014 Finance Committee meeting minutes, budget items for the Town Manager to review included an $850,000 surplus. While the Town has enjoyed the increased revenues, the restaurants have not seen the same appreciation in growth of customers and revenues. The citizens of Culpeper have felt a hit to their non-luxury budget. It appears that windfalls from the new tax revenue area, increased revenue from an additional meals tax percentage, and unfair BPOL taxes have been as easy to levy as going to the drive thru window at a fast food restaurant.

This Thursday, April 24th, the Town Council will host a forum at 5 pm, with opportunity for public attendance. Please ask yourself whether you think it is important that this Town Council stop the fast food government approach to tax policy and instead that our representatives start finding savings to add to the reserves. Do you think it is important that accountability is taken for the economic development strategies that have not produced returns in sales growth that match the appetite for tax revenues? Business and Government are interconnected and there is a tipping point where both are exposed to diminishing returns. It is time for the Town to support business by reducing BPOL and consider the impact of the meals tax on older adults, working families, and business.

The Unfair BPOL Tax

Culpeper Star Exponent

Business Monday

Jim Charapich

April 14, 2014

Part-time citizens have opinions, full-time citizens are engaged participants in governmental decisions. This was paraphrased from comments at the LEAD VIRGINIA Class of 2014 Opening Session Luncheon in Williamsburg last week.

The Business Monday Column from last Monday met a small amount of criticism from candidates for Town Council who will face the ballot box on May 6, 2014. Though the facts were accurate, the response from a few of the candidates suggested that these comments should not have been expressed publicly. On the other hand, every business person with whom I spoke about the comments was appreciative that the subject of the unfair BPOL tax was addressed.

It appeared that all of the candidates in the Candidates Forum on April 9th conceded that the BPOL tax is an unfair tax. If the tax is clearly unfair, then why are we still talking about it and not taking action? Why was it not on the radar for reductions for the last budget and again for the 2015 budget. One candidate suggested that bringing public attention to the issue has damaged the possibility of addressing the issue. How could it be damaged more? Nothing was being done about it to begin with.

A Town Council candidate suggested that the town can only give a 5% reduction in BPOL this year because the town needs more reserves. With an average of 8% increases in the budget for the past 4 years, when will the town begin to reduce spending and gain the reserves from savings and not through unfair taxes? Why do the businesses need to find the money year after year to pay an admitted unfair BPOL tax based on gross receipts while this issue goes unresolved?

Sometimes candidates prefer that part-time citizens passively express an opinion. However, character, purpose, and resolve are at the foundation of engaged citizens. It is time for the issue of unfair BPOL tax to be resolved with a commitment for a specific, gradual, planned elimination of the tax. Why not begin now with a 2015 budgeted BPOL tax reduction of 20%?

Be An Informed Voter

Culpeper Star Exponent

Business Monday

Jim Charapich

April 7, 2014

In the beginning of the book Animal Farm by George Orwell, the Animals managing the farm posted a sign at the community center reading (paraphrased) “All people are considered equal.” After some time the hard work of those in the community became overlooked and those overseeing the community gained a sense of entitlement. Later in the story the sign was changed to read (paraphrased) “All people are considered equal, some people are more equal than others.”

In speaking to Councilman Ben Philips last week, I suggested that we need a Town Council that would address the unfair BPOL Tax - Business Professional and Occupancy License Tax. His response - “good luck with that”. This despite the commitment by the Town Council to seek ways to phase out and or eliminate the unfair tax during the Boundary Line Adjustment (BLA) agreement negotiations and reconfirmed by Mayor Coleman at the Town Council meeting in February 2013.  Mr. Phillips went on to suggest that the Town must wait for the General Assembly to change the law regarding the BPOL Tax. We have been waiting for the General Assembly to provide alternatives to the tax, and again this session they did not offer solutions to this method of unfair taxation.

Why should we bare the burden of inaction by the Town Council and the General Assembly which requires business to pay BPOL taxes on gross receipts whether they are profitable or not. The Town does have the authority to reduce or eliminate the tax which produces a mere $1,000,000 in the Town budget. It is time for the Town to feel the burden of figuring this out. To quote Mother Abigail in Stephen King's The Stand, "The trees are bending with the fruit of unrest, It is time".

In presenting the case for the Town Council to phase out the unfair BPOL tax at the Town Finance Committee budget review last Tuesday, I made the following points: 1) The Town Council made a commitment to find ways to phase out BPOL during the BLA negotiations. 2) The Town Mayor implied that the Town would consider lowering the BPOL for FY15 if the Boundary Line Adjustment Area (BLA) produced more than the budgeted $500,000 in additional revenues. 3) The BLA is projected to produce over $900,000 in FY14. 4) The Town had a surplus of over $800,000 in 2013 and over $320,000 in 2012. 5) The local economy faces challenges such as the negative ripple effect of reduction in forces and a $2,000,000 budget loss at the largest private employer in the Town due to lost Medicaid revenues to the Culpeper Regional Health System. 6) All of this added up begs the question - when will we say enough? The only response from Finance Committee Chairman - Councilman Billy Yowell was “so noted”.

We want our Town to be financially sound. We are proud that the Town finances appear to be in good shape. After my comments, I remained to listen to the councilman and department heads review the budget. When it was all said and done - the committee had found over $1,000,000 in savings. However, there was no evidence that this Town Council would reduce BPOL. Will this Town Council continue to impose an unfair tax, especially given the surpluses and savings? Have we allowed a culture of entitlement? When I see Town employees with special parking passes taking prime visitor parking spaces all day downtown, I wonder.

We cannot afford to choke the vitality of our business community with passive deference to the Town Budget and tax policy. Contact our Councilmen to phase out the unfair BPOL tax in this budget by a minimum of 20% - $200,000 and allow the businesses to keep their money to reinvest in their business. Register for the Candidates Forum Breakfast on April 9 at www.CulpeperChamber.com to hear about the issues from the candidates in order to be an informed voter. Most importantly, encourage your business friends and associates to vote on May 6th.