Charlottesville City Council agreed Monday night to expand eligibility for the city’s expiring business, professional and occupational license tax credit for technology companies from five to seven years.
The credit, established in 2001, expires Dec. 31, and Mayor Mike Signer said last month that he thought councilors should increase the value of the incentive.
The change made Monday night did not require a vote because the credit was before City Council for its first reading. The expansion will be added to the ordinance establishing the credit by city staff and will be before councilors for a formal vote in December.
The council was presented with three multi-part options to revise the incentive and two different options to add higher incentives to businesses that locate in specific parts of Charlottesville.
The first two options presented dealt either with the business, professional and occupational license tax or the business personal property tax. Under each, there were options for extending the five-year term of eligibility to either seven or 10 years.
Businesses currently in the program would have their eligibility extended to meet the new term.
Signer said his preference was to expand the existing credit to seven years and add a 10-year business personal property tax credit. Fostering tech companies in town, Signer said, will better prepare Charlottesville for the future economy.
“This is bigger than tech or even innovation,” he said. “It is building a creative economy … not necessarily a Fortune 100 company plopping down a satellite office.”
Councilor Kristin Szakos said she supported just the seven-year expansion but questioned whether Charlottesville needed an expanded credit.
“One of the things it is important to recognize when we are talking about this is that a lot of the localities that do have really robust credits like this might not have other reasons for tech companies to want to be there,” she said. “I don’t want to just throw money at people to incentivize them to stay when there are other things that we do that should make them stay.”
Option one extended the eligibility period for the credit to seven years and would cost the city an estimated $50,000 a year. The second iteration of option one would have extended the credit to 10 years at an estimated $90,000 a year.
The increased costs would be absorbed by existing city resources, a staff report said.
The current five-year business license credit has cost the city an average of $75,000 a year, a report showed.
The current credit, which offers up to a 50 percent reduction of business license taxes, allows for five years of eligibility.
Option two was made up of four separate possible reductions to business personal property tax, which is not covered by the current incentive.
Councilors were presented five-, seven- and 10-year terms of a credit worth 50 percent of business property tax. Those would have each cost an estimated $12,000 a year, documents show. A fourth iteration of option two would have allowed for a 100 percent reduction of the tax for a five-year term and would cost the city $24,000 a year.
The BPOL credit served 47 businesses last year and was worth an average of $2,200 per business, city staff said at October’s council meeting.
Charlottesville attorney Jeff Fogel said the credit could serve to further marginalize the working poor.
“The high-tech industry may be important, but it is another area where you are leaving people behind,” he said. “You have two societies going on in this city … and you are continuing to push people out.”
Councilors considered an addition to the credit that would have incentivized businesses to hire local workers. City staff contended that such a measure would be overly complicated to implement and provide limited benefit for local workers.
“In our experience, businesses tend to take the best available candidate,” said Chris Engel, Charlottesville’s economic development director. “To enter into a situation where you try to manipulate that or adjust that mechanism to accommodate that, we do not believe there is a practical incentive that would be large enough.”
Councilor Kathy Galvin asked that the idea be brought up in a separate measure before council later.
“I do think we need to be aggressively making sure that we have a pipeline from our local training programs to these jobs,” she said. “With that, I do want to have a serious discussion about whether a program can be designed to incentivize local tech companies to look at people from local training programs.”
