Many owners and managers of businesses in the District of Columbia regard the city as a costly and inefficient place to operate and may move out to escape the District's high taxes and soaring labor costs, according to a massive new survey of business attitudes here.
The survey found that many firms believe the sales advantages of a strong District market are outweighed by the liabilities of high rents and taxes, burdensome regulations, parking shortages, excessive workmen's compensation costs and an "antibusiness attitude" in the city government.
Lawrence P. Schumake III, the city's business and economic development director, said yesterday he did not dispute the findings, but he said the city is already working to correct many of the problems. "We know we have a problem retaining businesses due to high costs," he said. "We have been tracking this information as it came in and taking action on it."
City officials acknowledge that there has been a general exodus of businesses from the city for many years, especially since the 1968 riots, but there are no exact figures.
The $99,000 survey, financed by a grant from the U.S. Department of Commerce, was conducted by Brimmer & Co., an economic consulting firm headed by former Federal Reserve Board member Andrew F. Brimmer.
Omitting the law firms and trade associations that are the basis of much of downtown's prosperity, Brimmer researchers surveyed 246 firms of all sizes engaged in construction, manufacturing, wholesale and retail trade, transportation, insurance and communications in all areas of the city. The firms had total sales of over $1.1 billion in 1979 and a yearly payroll of $440 million for their 13,500 employes.
On the basis of extensive questionnaires and interviews, they concluded that:
At least 60 percent of the firms believe that business environment in the suburbs is better in terms of "labor costs, business property taxes, business income taxes and local governnment regulation."
About half the firms surveyed are "contemplating moving all or part of their business out of the District," with a potential loss of 2,300 jobs.
Sales and revenues are rising, but costs are rising faster. Utility fees and rents are going up in addition to costs that are "directly controlled by the government -- such as workmen's compensation and unemployment compensation costs."
Many managers expressed "a very poor opinion of the management of the District government" and cited a "lack of incentives for business and what businessmen felt was an antibusiness attitude on the part of the local government."
The number of firms saying the District is a "poor place to do business" was 2.5 times greater than those that said it is excellent. Only 17 percent said the city's business climate is improving.
The enterprises that are thinking about moving out, the survey found, are concentrated in the "manufacturing, construction and wholesale trade industries." Not needing the prestige of a city address or the lure of a downtown storefront, those businesses are attracted by the highways, more ample parking facilities and tax advantages of the suburbs.
In addition, the survey found, employers are attracted to the suburbs by a larger manpower pool, right-to-work laws and the "quality of labor."
In a broad sense the survey confirms, with masses of specific data, what business executives have been saying for some time. Businesses that were based in the District for years such as auto dealerships, concrete plants and insulation contractors have been moving out, taking jobs with them, and the high cost of doing business in the city may prompt others to follow.
Business taxes in the District are the highest of any jurisdiction from Richmond to Baltimore, and Mayor Marion Barry has repeatedly said that any further increases would be counterproductive.
Most businesses surveyed listed workmen's compensation costs as a major irritant. The costs of coverage are higher in the District than in any neighboring jurisdiction, and the gap is growing.
Benefits and premiums are higher in the District. In addition, the survey notes, so many disability claims have been filed against District employers that many insurers no longer write policies here and employers are forced into an assigned-risk pool. The City Council has enacted a bill to lower these costs, but a court challenge has prevented it from taking effect.
The survey recommended development of a "business retention strategy" based on direct assistance to businesses, prompt attention to requests for services and permits and regular contacts with businesses by government agencies.
Schumake said he is developing just such a program. Among the incentives under consideration, he said, are tax credits, a land bank for commercial enterprises and participation in a proposed federally sponsored program to allow tax incentives for new businesses in inner city zones.
He said his office has obtained commitments from seven District banks to lend businesses up to $120 million for new facilities and equipment. An immediate objective, for example, he said, is to provide aid to the wholesale food merchants on Florida Avenue NE. "to help them expand and stay in the District."