Chestnut Hill Salon’s Business Tax Nearly Quadruples

Is this what Actual Value really means? And will it drive entrepreneurs out of town?

After opening the shop, trying to find a replacement for an employee who didn’t show up for work, dealing with customers and sales people, taking inventory, and styling a few heads herself, Wendy Feldman finally got to sit down in her basement office and open the day’s mail and finally got something to eat. She almost choked after opening the first letter. Instead she gulped hard and cried out, “One thousand two hundred and fifty one dollars? You’ve got to be kidding me!” That’s her new monthly Use and Occupancy tax bill from the City of Philadelphia.

You could hear the primal yells of small business owners throughout the city as they experienced the seismic sticker shock for years of mismanagement by the city and its schools. With no warning, they’re getting hit with a new monthly Use and Occupancy Tax bill that is two or three times higher than the previous month’s.

Wendy Feldman may have set a record for obscene increases.

Wendy Feldman owns Spa Elysium, a hair-styling salon in Chestnut Hill. Because she owns the property, she gets hit with the bill for the Use and Occupancy Tax, sometimes called the business tax. The bill for her property in July was $360. The August bill is almost four times higher. Primo Hoagies, which recently rented a space in the building, pays 35 percent of the bill. When I spoke with Wendy, she hadn’t hit them with their quadrupled bill yet. “He’s in for a shock,” she said as her scissors snipped at my hair. “Welcome to Philadelphia.”

And that is just the latest hit in City Hall’s steady assault on Philadelphia’s small businesses.

The Use and Occupancy bill is tied to the new AVI (Actual Value Initiative) real estate appraisals. Spa Elysium is on Bethlehem Pike just east of Germantown avenue and considered “off the hill,” where the pricey real estate sits. Wendy knew her place was ridiculously under-appraised at $238,000 and was expecting a hit. But when her AVI appraisal came in at $1.32 million, she was flabbergasted. “I just bought the property last year for $1.1 million,” she told me. “Wouldn’t that then be the ‘actual value’?”

That makes sense. Not much else about these new desperate taxes does. Up and down Chestnut Hill, the AVI assessments seem arbitrary with one property getting an assessment far below its sale price, while the property right next door is assessed above its purchase price. The A in AVI seems to stand for arbitrary.

The new Use and Occupancy taxes are tied to the AVI appraisals. So small business owners like Wendy Feldman will not only see their property taxes go way up at the end of the year, but the bloodletting continues every month with an unfair hike in the onerous, double dip tax known as Use and Occupancy. In fact, that’s what U & O should stand for from now on—Unfair and Onerous.

And here is the kicker; the AVI tax appraisal is for 2014 taxes, appeals and adjustments are still underway. So why are 2013 Use and Occupancy bills based on 2014 appraisals? The answer is simple: because the city really needs the money.

Wendy is going to appeal her appraisal and tax bills, but is concerned with the current climate of desperation in Philadelphia. In Friday’s Inquirer, Randi Weingarten, president of the American Federation of Teachers, called on Mayor Michael Nutter to push city council for another increase in the Use and Occupancy Tax. Wendy Feldman has one question for Mr. Weingarten: “How much do they want me to pay? When is enough, enough?”

There are too many small business owners, the people who give much and take little, who are asking that same question. They are also contemplating their next move.

Spa Elysium sits in the corner of Chestnut Hill, a few blocks to the east are Springfield and Flourtown in Montgomery County, a few blocks to the north is Lafayette Hill. The lower taxes and lower crime rate are alluring after Wendy watched the sales, property and business taxes go up, and feels more coming as the city’s union leaders demand their swill.

“My dream was to open a place in Chestnut Hill,” Wendy laments. “I love it here.” She’s just not sure how much more she can take. As she looks around at the stylist stations, hair products, scissors and blow dryers that make up her dream, she wonders aloud the most important question in the city’s current crisis. “Where will the city get their money if we all start leaving?”