Columbia First Federal Savings and Loan Association dealt a stinging blow to the District's business retention effort when it decided to move its corporate headquarters to Northern Virginia. The bank's move again illustrates that the costs of doing business in the city are liabilities to D.C.'s economic development program.

D.C. government officials said they were unaware of Columbia First's plans to move to Rosslyn. That's a familiar response. Other established firms have folded their tents in recent years and slipped across the Potomac without the knowledge of D.C. officials. Even if District officials had known of Columbia First's plans, it's doubtful that it would have made a difference. The District simply isn't in a position to change the equation in favor of Columbia First or many other firms.

The critical factor, in Columbia First's case at least, is business costs that are established and controlled by the private sector. According to Columbia First officials, the "driving force" in their decision to move was a lack of space at their downtown Washington location. The District didn't fare well in Columbia's comparison of office space costs in the area. Nor did the District fare better in a comparison of taxes, according to Columbia First.

Higher taxes are frequently cited as a drawback to doing business in the District, and some businesses have used taxes as an excuse to move out of the city. Businesses in the District began the last decade paying higher taxes than competitors in the suburbs on the same volume of business, Brimmer & Co. Inc., an economic and financial consulting firm, noted in a 1981 study for the D.C. government. During the intervening years, the study continued, the burden of taxation in the District rose more rapidly. "As a consequence, the already adverse impact of taxation on businesses in the District became even greater," Brimmer & Co. concluded.

The controversial gross receipts tax that the D.C government eventually repealed in the wake of vehement opposition in the business community tended to reinforce the image of the District as a high-tax jurisdiction. Now the gross receipts tax no longer applies, the assertion that business is taxed higher in the District than in neighboring jurisdictions is debatable.

Experts maintain that differences in the tax bases in Washington area jurisdictions make it difficult to make straight-line comparisons of business tax burdens. The results of a comparative study of local taxes for the Greater Washington Financial Institutions Association are both surprising and instructive. That study showed that District banks would have paid higher taxes in four of seven jurisdictions in Virginia and in all but one jurisdiction in Maryland.

Those findings aren't conclusive. Changes in banks' assets and profitability from one year to the next would produce a different set of findings, according to tax experts.

Thus, Columbia First isn't likely to gain very much in the way of tax savings by moving its headquarters and operations center to Virginia.

Like other financial institutions that have moved part of their operations to the suburbs it still must pay taxes on revenue, assets and employes in the District.

Columbia's decision to move its headquarters and operations center to Virginia where office space is cheaper reflects a trend that poses a dilemma for cities such as Washington and New York.

With advances in computer technology and telecommunications, companies have concluded it no longer is necessary to house data processing and other so-called backroom operations in expensive office space downtown.

Perpetual American Bank made the point in 1982 when it switched its charter and moved its headquarters and back office to Alexandria.

Since then, Hecht's has moved its headquarters to Ballston, Woodward & Lothrop Inc. has moved its operations center and part of its corporate staff to Alexandria and Washington Federal Savings and Loan has moved its operations center to Reston.

"We moved {the operations center} not so much because of taxes but because of the cost effectiveness of operating efficiencies," said Washington Federal's Chief Executive Officer William Sinclair. "We can rent space 50 percent less than in the city and we have the flexibility of free parking."

Shortly after being named the District's deputy mayor for economic development last year, Carol B. Thompson initiated an outreach program to determine how the District could improve its business retention effort.

In visits to nearly 200 businesses, said Thompson, "We didn't receive any major complaints about taxes or about people wanting to move out of the District."

Thompson's office also has proposed tax-relief proposals for business, including a recommendation that the council approved reducing the income tax surcharge from 5 percent to 2 1/4 percent.

It's apparent, however, that while the District can be responsive to business' concern about taxes, it hasn't been able to adjust the revolving door through which businesses come and go.

The real estate industry holds the key to that and only a space glut and/or radical changes in the city's business retention and economic development strategies will slow the flight to suburban office buildings.