By Eric M. Weiss
Washington Post Staff Writer
Thursday, January 26, 2006

A bill introduced in the D.C. Council will attempt to help longtime small businesses cope with rising taxes.

The District's residential renaissance has been a magnet for retailers, who are busy transforming some of the city's historic shopping streets. But for longtime businesses that stuck it out during the lean years, the District's real estate boom has also brought skyrocketing property assessments and tax bills.

Owners of historically significant businesses such as Ben's Chili Bowl and Lee's Flower and Card Shop, both on gentrifying U Street NW, have been mailed eye-popping assessment notices. For Ben's, the tax assessment was scheduled to go up from $438,310 to $1.1 million. Lee's, where four generations have served the community, would see its assessment rise by $400,000.

But while their assessments and taxes are going up, their business is not doubling or tripling. Some business and community leaders have warned that rising taxes will eventually force longtime businesses out of town or to sell out to developers or chains.

"When everyone else gave up, they didn't," said D.C. Council Chairman Linda W. Cropp (D).

Soaring land values may be turning many business owners into paper millionaires, said council member Jim Graham (D-Ward 1), who represents U Street and other commercial corridors in Adams Morgan, Columbia Heights and Mount Pleasant. But few can tap their riches without selling out.

A bill introduced by Cropp and Graham would provide a 50 percent property tax credit to small retail or "arts-related" businesses in neighborhood historic districts. To qualify, businesses would have to show annual assessment increases of 100 percent or more in the previous two years.

"We don't think they should be threatened by rising property assessment," said Chris Knudson, spokesman for the D.C. Chamber of Commerce, referring to historic businesses such as Ben's.

Cropp and Graham argue that the value of keeping Ben's and other historically significant businesses in the city is worth more than the extra revenue.

"We don't want them to sell," Graham said. "We want them to continue their businesses and continue contributing to the quality of life in our neighborhoods."

Nizam Ali, a member of the family that owns Ben's, said they successfully appealed their assessment, resulting in it being cut by half. But he said it was still important for the bill to pass.

"Other small businesses are facing the same thing," he said.

Unlike homes, commercial properties are not protected by a cap on tax increases. Even merchants who rent space for their storefronts are affected by higher taxes because many leases include provisions adding property tax increases to the rent.

City tax officials say the assessments reflect the reality of the market. And if anything, the assessments undervalue properties because they are based on sales data from previous years, said Thomas Branham, the city's chief assessor.