AVI likely to take a big toll on small businesses

DAILY NEWS FILE PHOTO Lynn Rinaldi and husband, Corey Braver, are expecting the tax bill for their restaurant Paradiso to double.
DAILY NEWS FILE PHOTO Lynn Rinaldi and husband, Corey Braver, are expecting the tax bill for their restaurant Paradiso to double.
Posted: February 22, 2013

EAST PASSYUNK AVENUE was not always the vibrant South Philly commercial corridor it is today, with its chic boutiques, cafes and trendy restaurants. Just ask chef Lynn Rinaldi.

Rinaldi, 48, grew up on 12th Street near Tasker, not too far from the bustling strip where she and her husband own two restaurants, Izumi and Paradiso. And she could be hit particularly hard under the Actual Value Initiative, a new property-tax system based on market values.

The three-story building where Paradiso is situated, on Passyunk near Tasker Street, was assessed at $100,000 for 2013 and valued at $505,000 for 2014. Under a 1.25 percent tax rate, her $3,126 tax bill would jump to $6,312.

"People started to invest in the neighborhood, and now there are 30 restaurants along the strip," Rinaldi said. "And the payback is, eight years later I pay double taxes." Rinaldi said that she'll either have to charge more at her restaurant or trim employee hours.

Rinaldi is not alone. According to data from City Controller Alan Butkovitz, 73 percent of the 5,148 commercial properties that will see tax increases under AVI are properties between 1,000 and 10,000 square feet and include restaurants, funeral homes, auto-repair shops and small grocery stores. Roughly 34 percent, or 2,321, of those small properties will see tax increases of more than $1,000.

"It's going to be devastating for the small businesses," Butkovitz said. Some of the largest average spikes for small commercial properties are in areas including East Falls, West and East Oak Lane, and West and East Mount Airy.

Henry Cieplinski, who operates the business that his father started 68 years ago, the Cieplinski Funeral Home, on 2nd Street near Washington Avenue, in Queen Village, said that he doesn't know how he will deal with his new tax bill, which is likely to jump a whopping $3,300 to $6,961. His funeral home more than quadrupled in value.

Meanwhile, tax bills under AVI will drop for more than 4,700 commercial properties, and most large commercial properties are expected to see huge tax breaks, including 11 that will see cuts of $1 million or more.

City Finance Director Rob Dubow said that the Nutter administration was still analyzing AVI's impact on small commercial properties. The former system was plagued by terribly inaccurate assessments, some of which were outdated for years.

Some small-business owners feel that their pockets are getting picked a second year in a row under AVI.

To raise money for schools last year, Council increased the use-and-occupancy tax, which is 5.5 percent of the value of the business portion of a property.

Rinaldi's use-and-occupancy tax bill is $1,508, and that would also probably double under AVI.

When asked if he would seek to lower the use-and-occupancy tax, Mayor Nutter said that that conversation was "premature." Nutter, who will make his budget address to Council on March 14, wants to collect the same amount of property-tax revenue as last year.

To help the little guys, Councilwoman Maria Quinones-Sanchez said that she would like to exempt the first $1,000 from the use-and-occupancy tax for small businesses, and Councilman Bill Green has already proposed eliminating the $30,000 homestead exemption, a relief measure for homeowners.

"If we do a homestead, we have to increase the burden on businesses for our neighborhood, and we're seeing more housing growth than business growth," said Henry Pyatt, commercial-corridor manager for the Kensington Community Development Corp. "It's going to result in higher rates overall, and that may not be the best idea."


On Twitter: @Jan_Ransom

Blog: PhillyClout.com

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