Between sips of soda at Sal’s Pizza on Linden Street, Nick Noll recounted his time as a Scranton business owner.
His business, Keystone Granite and Marble, was on Diamond Avenue in Scranton but moved to Old Forge earlier this year as he saw deepening financial problems and grew tired of the business privilege tax.
“As soon as I moved to Old Forge I felt like I received a raise,” Mr. Noll said. “It no longer became a question of whether or not I should pay my taxes or take my family on vacation.”
Mr. Noll said the increase in the gross receipts tax proposed in the city’s revised recovery plan from 0.75 percent to 1 percent is “counterproductive” to bringing business back into the city.
“What’s 1 percent times nothing?” Mr. Noll said. “If there’s no business being done, then what can you tax?”
With the region topping the state in unemployment and the nation staggering along in a fragile recovery, Scranton businesses are loathe to consider the possibility of the mounting tax bill while their customers face a possible sales tax and out-of-town employees confront a commuter tax.
Peter Dauchert, general manager of Tom Hesser Auto Group, said he’ll get pinched twice with the commuter tax and possibly a loss of sales. He doesn’t think nonresidents should be liable for the city’s fiscal mess. The sales tax would be another burden in the fiercely competitive industry, adding $200 to a $20,000 vehicle.
“We are all selling the same widget and customers today are Internet shoppers and don’t have loyalty to a specific dealership,” Mr. Dauchert said. “I may question whether it’s worth it to go out of the county or out of the state to save $100. But people will do it.”
Hastening exodus
John Cognetti, president of Hinerfeld Commercial Realty headquartered in Scranton, has watched businesses leave the city over the past 30 years for a number of reasons. The provisions of the recovery plan won’t help the situation.
Perhaps the most onerous of taxes, he said, is the city’s gross receipts tax. Although a supporter of the city, Mr. Cognetti often has to assist clients in moving out.
“Most often, they are happy to leave,” he said.
The 1 percent additional sales tax, levied countywide, would have to be approved by the state Legislature and the county with revenue shared among municipalities.
The employees of businesses who do not live in Scranton would also take a hit with the imposition of the proposed 1 percent earned income tax, or commuter tax.
Parking, another issue for customers and employees of downtown businesses, costs $112.50 per month in city garages. A new tax on paid parking spaces takes effect this week.
Anti-business or fair?
City Councilman Frank Joyce, who helped negotiate the revised recovery plan with council President Janet Evans and Mayor Chris Doherty, said his goal was not to hurt businesses, but rather, spread the burden.
“We believe everyone should share the burden – not just property owners,” Mr. Joyce said. “It’s not as though we are the raising gross receipts tax above what it had been.”
Jon Chernes, an owner of Lavish Body & Home on Linden Street said he is most concerned about the combined impact of the array of taxes being discussed, rather than an individual tax.
“It’s always a struggle for small mom and pop shops when taxes are raised,” Mr. Chernes said. “It’s not just one thing that can bring disaster but everything all put together.”
Linda Hodgson, a co-owner of Jersey Style Subs on Spruce Street, said she gets the impression that city officials do not care about business owners.
“They got themselves into this mess and now it’s up to the poor workers to pull them out of it,” Ms. Hodgson said. “They’re grasping at straws.”
Business out, people in
Evidence of the city’s slow motion business exodus can be seen in the empty office buildings, some of which have been – or are in the process of being – converted into apartments and condos. Once one of the largest downtown office buildings, the Connell Building is now mostly apartments. The original Chamber of Commerce Building had been a hub of commercial activity. But now it is vacant and also slated to become apartments. Todd O’Malley and his law firm O’Malley & Langan, had been a tenant in that building, but became a property owner a few blocks away.
Lawyers have long been the bread-and-butter of downtown landlords. Needing to be near the courthouses and other government offices, attorneys had been a captive market. But with new technology, attorneys like Mr. O’Malley can file documents remotely.
His firm has two offices and he could have moved. But he feels close to the city. His firm pays the 1 percent business privilege tax for clients from Lackawanna County served from the Scranton office. But that’s not his biggest gripe about the city. The biggest challenge his firm, now on a corner of Franklin Avenue, is parking. The lack of parking was long a sore point among downtown businesses. Now, the city has a network of parking garages, but parking costs are $112.50 per month.
Shifting from tenant to property owner, Mr. O’Malley doesn’t find city property taxes bad at all.
“People get nervous when they hear about a 78 percent tax increase, not realizing that it’s a small portion of their total tax bill that will go up,” he said.
That 78 percent increase in property tax over a three-year period, proposed by the mayor in May, has since been slashed to 33 percent over three years in the new plan agreed to by the mayor and city council.
Downtown business and property owner Robert Knowles hopes the revised recovery plan doesn’t short-circuit the downtown renaissance.
“In the last 10 years, we’ve had optimism for the first time in a long time,” he said.
He’s willing to bear part of the burden, but only if the recovery plan offers a permanent solution to the city’s woes.
“I’m not willing to participate if this is anything short of a permanent fix,” he said.
Contact the writer: dfalchek@timesshamrock.com
