NW Businesses Fear Skyrocketing Taxes Will Push Them Out

Prosperity Threatens Independent Owners

Ben's Chili Bowl is a symbol of the District's homegrown history as well as the recent resurgence of U Street NW.

But being an icon comes with a price tag. Because of rising real estate values, the restaurant's property taxes are going up 150 percent next year as its assessment rockets from $438,310 to $1.1 million. Ben's will have to sell 3,929 more chili dogs just to cover the additional taxes.

"You're a victim of your own success," said Nizam Ali, one of the Chili Bowl's owners. His family appealed an earlier assessment that would have increased taxes by 234 percent.

It's not just happening to Ben's. Down the street, Lee's Flower and Card Shop, where four generations from one family have served the neighborhood, will have its assessment rise by $400,000. And the New Vegas Lounge, the storied blues club at 14th and P streets NW that is now surrounded by Whole Foods Market and condominiums, is bracing for a 35 percent tax increase next year.

Some city business owners worry that rising taxes will do what riots, recessions, crime and crack did not: push them out. If they do go, they will take with them much of the eclectic character that has made such places as U Street a magnet for the new and affluent. And if the past is prologue, these longtime independent businesses could be replaced by those that can afford the higher taxes and rents: national chains such as Starbucks and the Gap.

"It's happening all over the city under the radar because these properties have been so undervalued," said Stanley Jackson, deputy mayor for planning and economic development, adding that the administration of Mayor Anthony A. Williams (D) is trying to ease the crunch. "We don't want to kill the golden goose."

D.C. Council members also are studying ways to protect longtime District businesses as well as the funky, independent shops that make city living attractive. But council members say it is difficult to figure out how to cushion some enterprises from the realities of the marketplace.

"How we deal with this question will say what kind of city we are," said Lawrence Guyot, a longtime civil rights activist. "We simply cannot let mathematics make the decision."

Unlike homes, commercial properties are not protected by a cap on tax increases. And the city's commercial tax rate is much higher, $1.85 per $100 of assessed value, vs. $0.96 for residential properties.

Scott Pomeroy, development officer for the MidCity Business Association, said businesses most in trouble did not anticipate the high overhead or have leases that will expire soon. Many businesses have been shielded somewhat from the run-up in values by 10-year leases, he said.

Even merchants who rent space for their storefronts are hurt by higher taxes because many leases include provisions that add property tax increases to the rent.

When Linda Welch, owner of Dogs by Day and Pet Essentials near 14th and S streets NW, first signed her lease in 1999, her share of the taxes was $5,200 a year. Next year, it will be more than $30,000. Her business is successful, so she is able to cope with the tax increases. But when her lease expires in three years and four months, she expects her rent to go up dramatically.