In an Already Expensive Area for Conducting Business, it’s’ About to Get Even More Challenging

By Alex Guardiola, Director of Government Affairs and Public Policy

Move over blizzard of ’78 there is a new king’s tale that will monopolize the dinner table conversation for decades to come. 

All my life I have heard about how awful the blizzard was. I’ve seen the pictures of cars buried in snow on I-290 and heard about how the entire city was shut down for one full week. Well, COVID-19 just told the blizzard of ‘78 to hold its beer.

We’ve been here before

Over the past nine months, we have seen health and economic crises caused by the COVID-19 pandemic the likes which the country has not seen since the Spanish flu outbreak in 1918. It is estimated that about 500 million people or one-third of the world’s population became infected with this virus. The number of deaths was estimated to be at least 50 million worldwide with about 675,000 occurring in the United States. 

Currently, approximately 46.2 million across the globe have confirmed cases of COVID-19 and there have been 1.2 million deaths as a result. In the United States alone, there are 9.2 million confirmed cases and 230,000 deaths to date. With no vaccine readily available to the general population in the near future, these numbers are likely to increase. 

Life as we know it is changed

This health pandemic has had many long-lasting ripple effects that have changed the way we will conduct our everyday lives. Holidays, weddings and birthdays have all been changed in many drastic ways. 

People and companies are using platforms like Zoom, Webex, and others to conduct business as well as to  socially interact. To see their grandchildren, grandparents have had to learn how to login and navigate this new platform. Friends and family are watching live streams of weddings, bar and batmitzvahs, and baptisms on Facebook and YouTube and doing their best to celebrate these important milestones. But little else has been more effected than the way we now conduct business.

the great recession pales to that of Today’s Economic Crisis 

In 2008, the United States went through what is now known as the “Great Recession” which was inextricably linked to the “sub-prime mortgage lending crisis.” This economic downturn caused millions of citizens to lose their homes, jobs, and life savings spiraling our economic ecosystem out of control. Its ripple effect caused thousands of companies to close for good. The auto industry and Wall Street had to be bailed out in order to right the road and get the country’s economy back on track. While this was a dark time for our country, it may play second fiddle to what this current crisis has done and will continue to do to our economy.

While some businesses are surviving through creativity and maneuvering, how long can they continue to do  business this way? Many, have not been so lucky. 

DESPITE THEIR OWN CRISES, local businesses STEP UP to help

Our region’s manufacturing sector realized that they had an opportunity to play a large role in helping combat the spread of the virus. Many of them heard the call and pivoted from their normal production lines and began manufacturing Personal Protective Equipment (PPE).  This shift helped our hospitals to treat patients, allowed our first responders to continue to assist those in jeopardy, and provided our small businesses a way to re-open safely after months of being shut down.

One of the hardest hit sectors in our region is our hospitality industry. They were the first to close and will be last to reopen. In fact, places like the DCU Center are still not open and, since the start of the pandemic, have lost millions of dollars due to the cancellation of all of its programing. One in five restaurants have closed – for good. While the Paycheck Protection Program (PPP) helped some businesses stay afloat at the beginning of the shutdown, businesses continue to report to the Chamber that the funds received from the PPP have already been spent. If a second stimulus package does not come soon, they too will be forced to shutter their doors for good. These business owners feel the walls closing in on them. Not only are they concerned about meeting payroll every week, paying their rent or commercial mortgage, they are also  worried about their real estate tax bill from the City of Worcester.

It’s about to get worse, but the city council can help

If there was ever a year that Worcester city councilors should help small businesses by setting an equitable tax rate – this is it. Many of our brick and mortar businesses have seen historic losses in 2020, and there’s no end in sight. To make matters worse, many businesses face significant revenue losses along with a significant delay on a second stimulus deal, they are also about to get hit with rising labor costs. 

The unemployment assistance Trust Fund is projected to have a $5 billion deficit by the end of 2022. Unemployment assistance premiums are expected to increase $319 per employee in 2021, a 60% increase to employers. 

As if that’s not enough, despite the low use of benefits during the shutdown, healthcare premiums for small businesses will increase by an average of 7.9 percent. In dollars, that’s an annual increase of $8,808 for individual coverage and $24,084 for family coverage. 

The Paid Family and Medical Leave program will also take a toll. Estimates are that the program will cost employers $1 billion when fully implemented, offering 12 to 26 weeks of paid family leave and 20 weeks of paid medical leave. In addition to the cost of the program, employers are also facing the costs of filling these positions while their employees are out on leave. 

Moreover, the minimum wage is scheduled to increase by $0.75 to $13.50 for hourly workers (an added $1,560 per full-time minimum wage per worker next year) and $.060 to $5.55 for tipped employees effective January 1, 2021.

If we combine all of these costs with the $35.16 per $1,000 tax rate levied on the commercial-industrial taxpayers, there is little hope for many of the city’s small businesses. 

Worcester city councilors must take into account that even if a small business owner does not own their building, many have a triple net lease. This type of lease requires the tenant or lessee to pay all of the expenses of the property – including real estate taxes, building insurance, and maintenance. These payments are in addition to the monthly rent and utilities charges. 

THIS year is the year for change

Every year the Chamber argues that we must have a fair and equitable tax rate in order to compete with surrounding towns and municipalities who boast a single tax rate. 

On Nov. 9, the board of selectmen for the Town of Auburn voted to continue to narrow the tax gap between residents and businesses creating a more equitable distribution of the burden. While we must remain sensitive to residents and their own hardships in the short run, we can help the community by adding more businesses to our tax base thereby sharing the tax burden. A competitive tax rate is an important tool for attracting new businesses who are considering other communities as locations for their operations. 

Lastly, Chapter 65 of the Acts of 2020, more commonly known as the state’s “moratorium on evictions and foreclosures” ended on October 17, 2020. While some small businesses benefited from this moratorium, as residents did, others did not qualify. While the Federal moratorium is in place until the year’s end, it does not cover commercial buildings. This lack of coverage will undoubtedly cause many small businesses to be evicted or foreclosed on. 

If ever there was a year to strongly consider voting to narrow the tax gap between the residents and commercial-industrial taxpayers, this is the year.