With a sharply declining tax base and fiscal pressures looming in the coming years, West Virginia must look to bold, creative means to improve our economy, provide jobs, and increase our tax base. How do we utilize our existing resources to do this?
I posit that we can preserve our rich architectural history while simultaneously providing jobs for the hard working people of West Virginia.
Our state is dotted with beautiful structures of our industrial and agricultural past. Yet across the Mountain State, our very heritage is in danger. Every year, historic buildings are torn down in West Virginia, while many of the remaining ones are degrading past the point of preservation. However, I believe it’s possible not only to save our heritage and architecture, but also make it one piece in the larger puzzle of diversifying our economy and increasing jobs and taxes.
How do we do this? I’ll start with an example of a building our company rehabbed on the corner of Charleston’s Tennessee and Washington Street.
The Ort Building, acquired in 2003 for $80,000, is a three-story structure composed of 1890s red brick. After four years, $900,000, and the labor of roughly five workers, this 9,000 square foot building now holds seven small businesses and employs approximately 20 people.
If we assume an average salary of $40,000 per person filing single in 2015, that would mean an approximate total of $2,400 in state income taxes, $2,500 in Social Security, $600 Medicare and $5,800 in federal income taxes. When you account for the employer’s matching of Medicare and Social Security, this comes to a round total of $14,400 in taxes generated per person. Multiplied by 20 people, this building helps generate approximately $290,000 per year into the tax base, not taking into account itemized or standard deductions.
Further, if the businesses in the building generated a gross income of $2 million, at an average rate of 1 percent business and occupation taxes paid to the city of Charleston would be $20,000. Further still, the Ort Building’s real estate taxes per year were $800 when it lay dilapidating; after rehab, they are now $2,400 per year, going directly to the county.
Helping the tax base is fine and dandy. But after the building is rehabbed, how do you service the debt and see a return on investment?
Part of our model is to have small, communal offices that share a common bathroom, copy/fax machine, and kitchen. A major benefit of this model is that it hedges the risk; if a tenant leaves, we won’t be left with a whole empty floor. Another major benefit is that we have seen many companies that started in our small business incubator grow too big for the spaces and move to other, larger buildings — a good problem if you ask me.
We have little difficulty in renting the spaces out quickly. In a sense, the buildings become a business community with their own synchronicities. The tenants are the best marketers we could ask for.
Another key component of this model is buying the buildings at a relatively low cost; not usually a problem in blighted areas. This allows more funds to be expended on the quality of the renovations to provide a conducive environment for business innovation.
We are looking to complement large scale operations with a diverse base of innovative small business startups. This will help to diversify our economy while providing opportunities for entrepreneurs and those who are currently facing layoffs in other industries. The Governor’s Development Office and the Department of Commerce have made strides in attracting large successful businesses, such as the recent Procter and Gamble plant announcement in Berkeley County.
But what I am proposing is different. What I envision is large scale, small business startups, possibly owned and run by laid-off energy sector workers, as well as young entrepreneurs from within and without the Mountain State.
Now, the final question: How do we do finance these ideas?
Banks look to the bottom line, but public lenders should look to the intangible benefits not found on a balance sheet or income statement: Cleaner, safer and more vibrant downtowns (not to mention the accompanying tax base increase).
We must have a large fund public lender that is willing to tolerate high risks with low returns on investment — exactly the opposite of what traditional banks look for.
These are the times for bold thinking. Stay tuned.
Tighe Bullock is a law student at WVU, a two-term city councilman of Thurmond, a, small business owner, and a Democratic candidate for the House of Delegates, 32nd District.