The City Council could have given both commercial and residential property owners a small tax break this year.
Instead, three lawmakers voted against a slight equalization of the city's two tax rates -- and gave homeowners a larger break.
Residential property owners will receive a nearly 5 percent decrease on their 2007 city tax bills, while business owners will pay 3.3 percent more.
Niagara Falls is one of two municipalities in the county -- the other is the Town of Niagara -- that charges separate tax rates for residential and commercial properties. They are called homestead and nonhomestead rates.
Efforts to move toward a single tax rate have slowed down.
Council Chairman Robert Anderson Jr. and Councilmen Lewis Rotella and Sam Fruscione, who voted last month against the annual shift toward equalizing the two rates, said they wanted to give residents a tax break for once.
Business owners are likely to wonder, at what cost?
The nonhomestead rate business owners will pay this year -- $33.41 per $1,000 of assessed valuation -- is double the rate for residential property owners at $16.64.
That disparity has been the trend since the city's dual tax rate was introduced in the mid-1980s after a 1983 countywide reassessment would have meant large tax increases for homeowners in the Falls.
Councilman Charles Walker, who voted for the equalization measure, said this year's increase for businesses is huge.
Business leaders also recognize the impact.
"The Niagara USA Chamber is very concerned that the Council has decided to shift an added tax burden to the businesses of Niagara Falls," said President Thomas J. Kraus. "It's certainly not the message you want to send to prospective businesses or existing businesses that are in favor of increased growth."
The city began to approve incremental shifts to bring the two rates closer in 1998, when the proposed 1999 nonhomestead tax rate was going to be 151 percent higher than the homestead rate.
The City Council -- chaired at that time by Vince Anello, then a Council member and now mayor -- unanimously approved a resolution that called for rates to be equalized by at least 10 percent of the difference each year. It stated that when the difference is less than 25 percent, the city would abolish the "two-tier" property tax system and introduce one rate again.
"The differential taxation scheme puts an unfair tax burden on the city's declining business sector . . . and puts the city at a competitive disadvantage with suburbs where differential taxation does not apply," the resolution states.
City Assessor Dominic Penale Jr. said the plan was to go back to one rate in eight years. The city has made progress, but often has opted for smaller shifts and hasn't met that goal.
"We could probably do it in [another] five or six years," Penale said. "But it's [the Council's] option."
Small- and large-business owners alike say they are paying attention to the two rates.
"Taxes go into what makes up what our customers pay," said Stephen Brady, spokesman for National Grid. "As a company, we're not particularly in favor of this structure. We would prefer a more equitable tax structure, which is the case with the huge majority of the communities we serve."
Commercial property taxes will rise by $1.09 per $1,000 of assessed valuation this year, a small number that could make a big difference for corporations along Buffalo Avenue, which pay millions of property tax dollars every year.
National Grid is the largest property taxpayer in the city, according to Penale, who said the company paid $52 million in taxes on its Falls properties in 2005.
Tricia Franke, a small-business owner in the Falls, pays a much smaller amount of property taxes on her Buffalo Avenue hair salon. But over the past 15 years, she said she has noticed the slowing of the nonhomestead tax rate as the Council has approved some equalization measures.
She maintains the dual tax rate is bad for business of all sizes, and it's part of the reason she recently sold her salon and is about to move to Myrtle Beach, S.C.
"It has everything to do with it," she said. "We thought this is how it is everywhere."
>Dual rate not universal
Franke said she looked at tax rates in other states and was shocked at first when friends who run salons in other cities didn't have to pay a separate commercial tax rate.
Terri Flood recently bought the LaSalle storefront from Franke and will continue operating it as a salon. This is her first commercial property purchase, and, while she said she is willing to work hard and pay her taxes, she wants the city to know she doesn't think the separate tax rate is fair.
"If they don't want their Main Street, empty they should take it easy on the businesses," Flood said. "Do you want your businesses empty or do you want them filled?"
Flood wants to see more infrastructure and parks improvements in LaSalle so she can see her tax dollars at work.
She also has a theory about why the Council decided to reduce the residential property tax rate in a year when the city's operating budget grew by 10 percent.
"They're trying to silence the residents," she said. "This is election year."
Rotella said the Council would approve the equalization measure next year, although he has said he would be in favor of shifting the tax every other year instead of annually.
The Council also voted in 2001 to slow down the equalization plan, citing similar concerns about giving homeowners temporary tax relief.
>Risk of lost business
North Tonawanda once had a dual tax structure, too, but not anymore. The city aligned its two rates with a shift in 1998, and abolished the two-tier system in 1999.
Although the difference between the two rates wasn't nearly as large as in Niagara Falls, North Tonawanda City Assessor Flora Carozzolo said it had begun to cause businesses to leave the city.
"As businesses moved out, the remaining businesses had to pick up the burden of the nonhomestead portion, causing the rate for businesses to increase even more," Carozzolo said. "This did not only penalize business but the homeowners that it was designed to benefit because businesses and jobs moved away."
Anderson said that this year's decision came after listening to many residents in difficult situations who convinced him that residents needed a tax break this year.
"How much can the people who live on fixed incomes take?" said Anderson, who added that he was asked by residents, "Do I have to give up my house because of this tax situation?"
Anello said he didn't know the Council was going to vote against the equalization for 2007, and is still in favor of abolishing the two-tier tax system.
"The year the tax rate is higher is when it's a tough decision to make," Anello said. "A commitment to equalize has been shared by every administration, but it's just a tough decision."