Beach Council repeals planned increase in tools tax

VIRGINIA BEACH

To the delight of Stihl Inc., state manufacturing associations and a local taxpayer group, the City Council Tuesday repealed a near-doubling of its machinery and tools tax.

The move comes less than a month after Stihl, the city's largest manufacturer, called the mayor to say the increase could hamper future expansions of its corporate campus.

Council members emphasized that the tax affects more than Stihl, but Mayor Meyera Oberndorf acknowledged that the German manufacturer was the first to raise the issue to her.

The council unanimously repealed the increase, which would have started July 1.

Oberndorf said council members thought manufacturers had accepted the increase because that's what city staff told them. City Manager Jim Spore, after Tuesday's meeting, said officials got that impression after talking with the Hampton Roads Chamber of Commerce.

"The mistake was in knowledge," Oberndorf said.

Spore said Stihl was made aware of the tax increase before the budget was adopted on May 13. Still, Stihl officials didn't contact the mayor until three weeks ago.

In the company's first comments on the issue, an executive said Tuesday the firm learned of the tax from the Virginia Manufacturers Association.

Stihl, which employs roughly 1,840 people here, will pay roughly $550,000 on the tools tax this year. That's about 40 percent of what the city expects to collect from the levy. Had the increase been approved, Stihl's costs could have risen to about $1 million.

"We have worked hard to grow in Virginia Beach and are proud of that growth," Karl Angler, the company's vice president of finance, said in the statement.

"We do not intend to shift any of that growth to other countries, but these intentions are predicated on being cost competitive."

The council vote keeps the tax on machinery and tools at the current $1 per $100 of assessed value, rather than raise it to $1.90.

The added revenue, about $1.3 million, was to be spent on projects in the city's strategic growth areas. To compensate, the city will put less money into a program for economic incentive grants. That account will still have $6.7 million in it, a city official said.

Brett Vassey, president of the Virginia Manufacturers Association, said the repeal shows a commitment to investing in businesses that invest in new tools and machinery.

Vassey said about 100 firms pay the tax in Virginia Beach.

"This is a tax on our ability to compete," Vassey said. "It's a tax on technology, and we have to be able to invest in technology to stay competitive."

John Moss, chairman of the Virginia Beach Taxpayer Alliance and a candidate for mayor, also praised the council for repealing the increase, but he questioned how the tax passed in the first place.

"We're thanking for you for seeing the error of your ways," he told council members. "But you need to understand the process of how you got here."

Richard Quinn, (757) 222-5119, richard.quinn@pilotonline.com