Virginia Iacobucci loves running her small coffeehouse on Capitol Avenue.
But the poor economy and prospects of a 5 percent increase in city property taxes make her worry about her business.
"For a small business just starting out, it's very hard to have this tax imposed on you and for you to keep functioning," said Iacobucci, the owner of La Paloma Sabanera, which she bought and reopened in 2008.
Since she doesn't own the building, Iacobucci was prepared to pay a few hundred dollars in personal property taxes on her equipment, mostly modest kitchen appliances and furniture. When her tax bill arrived last July, she was stunned to find that she owed nearly $1,000.
That figure would go up under Mayor Eddie A. Perez's budget for 2010-11. Perez has proposed an increase of 3.85 mills, or 5 percent, bringing the city tax rate to 76.64 mills. That equals $76.64 for each $1,000 of assessed property value. The mayor has said the increase is necessary to maintain services and make up for declining revenue.
The city also is phasing in a revaluation on homes and commercial properties, meaning that residents and business owners face an additional tax increase. Under the revaluation phase-in, taxes increase 3.5 percent for homeowners annually. That's on top of the mayor's proposed 5 percent property tax hike, meaning residents could face an increase this summer of nearly 9 percent. There's no 3.5 percent limit for businesses, which could see even steeper increases.
Iacobucci fears that higher taxes will force her to rethink purchasing new equipment or prevent her from hiring more employees — things her business would need to grow.
"It's not sustainable," she said. "I can't pay $1,500 to $2,000 in taxes. I'm not that kind of business."
The proposed tax increases have left many city business owners feeling nervous.
Carlos Mouta, a developer who owns several apartment buildings in Hartford, estimated that he would pay $50,000 more in taxes if the budget is adopted in its current form.
"We just can't continue like this," Mouta said. "The city has to cut the budget or ask the state for more aid."
Even if taxes go up, he said, raising rent for his tenants isn't an option because it could drive them out. Mouta has instead settled on scaling back on maintenance.
"Most people are in Hartford because they love Hartford, but that's only going to last for so long," he said. "Some people aren't going to stick around anymore."
When taxes rise, small businesses shoulder the greatest burden because many refuse to raise the price of goods, said Pio Fusco, owner of Civic Center Shoe Repair on Pratt Street.
"The tax increase really cuts into us. I'm not happy, but what can we do to stop it?" he said.
Some store owners are already struggling, said Yvon Alexandre, who runs a nightclub and a grocery store in the city's North End, and the increase could cripple their businesses.
"I think it's unfair that the business owners and residents have to keep paying additional taxes. I've been hit significantly hard," Alexandre said. "Any increase is going to be negative."
But others say that city officials aren't solely to blame.
"That's the easy answer. Point the finger at city hall. Blame the mayor because he's in trouble anyway," said Marilyn Risi, executive director of Upper Albany Main Street Inc., which provides technical assistance to small-business owners in the North End. "You have to look at it across the board. We have a state that's in the same position as the city."
Risi said that although a tax hike would be devastating to some businesses, it would provide much-needed revenue.
"What else can they cut?" she asked.
Michael Moreau doesn't like the idea of an increase, but what makes him more frustrated is what he called a lack of services.
"Where is the tax money going? If we saw new sidewalks and streets, that would be one thing," he said. "I don't know how they could justify taxing [us] more."
If there's any good tax news for businesses, it's that the city is phasing out a surcharge on commercial properties — a 9 percent additional charge on the annual taxes a business pays.
Council President Pedro Segarra said he and others on the panel are gathering information from businesses about the impact of the proposed budget. So far, he said, council members appear to favor trying to lower the increase.
"It's too early to tell, but it seems there's not too much of an appetite for increasing taxes," Segarra said.
Joseph Bascetta, who owns Pelican Tattoo & Body Piercing on Park Street, said the rising cost of doing business concerns him. But in his 35 years as a business owner, he said, no tax increase has ever forced him out of the city.
"I've thought about leaving, but I'm still here," Bascetta said. "You just got to figure out how to survive."
Reprinted with permission of the Hartford Courant.
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