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Safety Harbor’s downtown business
district is in trouble. It looks good, perhaps better than ever,
and boasts a greater variety of restaurants and new shops than it
has ever had before. The problem it faces, however, is larger than
any individual business and possibly beyond the control of local
government. In fact, the greatest concern is one that non-business
owners might consider a positive rather than the huge negative it
truly is. That negative is rapidly rising property values. The
problem is that the only way to realize the benefit of increased
valuation is to sell an appreciating property. To continue to own
it means an ever-growing tax bill. The city is proud that its
Community Redevelopment Agency (CRA) is collecting a rapidly
growing amount of money from the downtown district and that those
funds are to be spent within that same district. However, that
growing sum is coming not only from new construction, but from
increased valuations of exisiting property. Higher taxes mean
higher rents, meaning a business has to have greater sales and
greater profit margins to continue to be profitable — to even
remain in business.
Rising rents are responsibile for empty
storefronts and are likely to soon create more vacancies. Landlords
may be called greedy in some instances, but they are not solely to
blame. Florida’s Legislature is promising to deliver property
tax reform this month, but even before the special session began,
businesses were told to forget about one reform that is critically
important to business. That change is to stop valuing property
primarily by its “highest and best use” valuation for
taxing purposes. The example frequently cited is the small beach
motel that is paying a crushing property tax bill because the
property could be redeveloped as a multi-million dollar, high-rise
condominium. In Safety Harbor the problem is the small, 1,000-sq.
ft. retail space that is now valued for tax purposes at several
hundred thousand dollars. The landlord is paying an annual tax bill
— with no homestead exemption or other relief — of
several thousand dollars. Before even calculating any of the other
basics that determine a property’s rental value, the landlord
has to set a rent higher than many small businesses can afford. It
is simple math. A business has to have enough sales to cover its
costs and provide a profit or it won’t remain a business.
When customer traffic is difficult to increase and prices
can’t be raised, there are few options left. Paying higher
rent is not one of them.
It can be argued that there is a
deliberate policy at work. Higher property valuations will mean
existing businesses will be replaced by businesses that can afford
higher rents, which will of course be higher quality businesses.
Unfortunately, that not only isn’t necessarily the case, but
it is likely to destroy the very quaint character of downtown that
so many people profess to admire. A quirky little antique and
collectibles store is fun to browse, but it can’t remain in
business selling knick-knacks at flea market prices. A high-end
clothing store also is fun to browse, but it can’t remain in
business selling at Wal-Mart prices. Nor can a wine bar offering
quality vintages remain in business selling domestic beers at
convenience store prices.
The local business community is wrestling
with a host of problems. All of these are signs of a community in
transition — and a business community in trouble. Valuations
must more closely reflect what a property can earn, not just what
it will yield if sold.
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Front Page 
Op-Ed 
