Huge Tax Hike Crushing Dreams Of Small Business Owners
by Glen Richardson
Art Activist: Paula Colette Conley, Owner and Director of Arts at Denver on Old South Gaylord, is looking for the easiest expenses to cut so she can stay in business.
Socked with huge tax hikes this summer, uncertainty is swirling among neighborhood business owners, many concerned they may not be able to afford their increased tax bill plus rising rents. Additionally, community advocates worry the hikes will increasingly destabilize many of the Valley’s established neighborhoods.
The median projected commercial property value increase in Denver is 20% as the residential property tax rate has been reduced under the Gallagher amendment to 7.2% for the property tax years 2017 and 2018. Commercial property taxes, unlike those for most residential properties, are passed on to tenants. When commercial buildings are sold for big profits as in Denver, property taxes increase. Plus a substantial bump in the value of one property can raise the cost of business for a company occupying another building — even if it’s across town.
The bottom line: while the average commercial property value shot up 20%, many individual property assessments plus increased rents are doubling, tripling, or quadrupling. That’s encouraging many business owners to unload properties, adding to the already ferocious upward price spiral.
Growing Tax Gap
Taxes on commercial spaces are from four to 10 times higher than residential. In Cherry Creek, for example, the owner of a $2.5 milli
Crafting Change: Dramatic property tax increase is among reasons Show of Hands Gallery is moving after 18 years in its current location, Owners Katie Friedland and Mandy Moscatelli firmly believe keeping gallery in Cherry Creek is vital to their success and are relocating later this month.
on home pays about $3,500 in taxes. The tax bill for a small one-story commercial building in the district is more than $33,000. That’s an enormous difference.
Most Denver leases stipulate that the landlord will pay the taxes and then bill the tenants for the expense. Usually the monthly rent bill includes base rent plus an estimated amount for taxes. Once the landlord receives the tax bill for the previous year, they reconcile it and either refund or collect the difference between the estimate and actual taxes due. In recent years, values and taxes have been going up so fast that there are never refunds, but only more taxes due.
Colorado properties are reassessed every odd year based on the prior two years sales. The last couple of years have seen huge appreciation gains throughout the Valley. Those gains are now flowing through as the latest assessed values. These increases are massive for a small business already facing the challenge of rent, red tape, parking and online competition.
Impact On Gaylord
On Old South Gaylord — the second ol
Cost Composition: Arts at Denver — ranked second among 93 Denver galleries — has seen cost of retail space increase 48% this year; 22% due to property tax increase plus a 26% jump in the rent.
dest shopping district in Denver — retail on the street is being replaced with home desig
Cozy Craft: Show of Hands will display one-of-a-kind art, unique gifts and handmade art in a smaller store beginning mid-July. Craft shop is relocating to mixed-use retail space between 2nd and 3rd Ave. at 250 Columbine St.
n, financial services and other monetarily productive businesses. Moreover, spaces along the street are turning over far more frequently.
Arts at Denver — ranked second among 93 art galleries in Denver last year — is one of the street’s most popular retail shops. The gallery exhibits only original paintings, specializing in representational work in impressionist, traditional and contemporary styles. Art lovers will find landscape, still life, animals and figurative works. Most of the permanent gallery artists are established painters with strong show, award and collector biographies.
Paula Colette Conley, Owner and Director of the Gallery, tells the Chronicle rent for her space has increased 48%; 22% of that increase is from the property tax plus a 26% jump in rent. Since she moved into the space nine years ago her rent has increased 105%. To cut costs and stay in business she is looking for the easiest expenses to cut.
Bulldozing Building: The new owner of this Old South Gaylord bike shop wants to bulldoze the building and build a two-story corporate headquarters for financial firm in this favorite Wash Park neighborhood.
“I ended my window washing service plus a few others like trash service. I’ve also eliminated or decreased some of my favored customer discounts. Plus, I also decreased my only employee’s hours a bit.” She notes, however, that Ray Lucero and his son Daniel who have been taking care of her windows since she opened are still cleaning them as a thank you for having employed them for so many years. “They are great guys she says,” and recommends them for anyone needing a window washing service.
Business Takeover?
Just as the historic district lures shoppers, the casual neighborhood where employees can take walks, find parking, have coffee and lunch is attracting businesses. That lure already has one Cherry Creek-based financial firm seeking to put down roots on Old South Gaylord’s historic street.
The new owner of a former bike shop along Old South Gaylord — near the corner of Gaylord and Tennessee — wants to bulldoze the historic building and build a new two-story structure. Martorello Holdings LLC paid $1.4 million for the lot that bike shop owner Brian Isakson paid $400,000 for in 1999.
The LLC is registered to Raphael Martorello, managing partner at LotusGroup Advisors, a Cherry Creek financial firm. According to a Lotus web post, “We are in the midst of building a new HQ in the heart of Denver’s favorite neighborhood. There will be an open floor plan, energy efficient construction, many spaces for collaboration, and improved parking over Cherry Creek. We plan to open our new doors in Q2/2019.”
Crunch In Creek
In the Cherry Creek North shopping district, Show of Hands Gallery is downsizing and relocating this month after 18 years in its current location. Why? Because they can no longer afford the space they are in.
“After six years of endless construction, a down sales market, and a dramatic increase in property taxes, which gets passed onto us, we can no longer afford to remain in the space we are in,” owners Katie Friedland and Mandy Moscatelli announced on their website.
Like most locally owned businesses, Show of Hands isn’t just a store; it’s a fun place where shoppers can find that unique gift or card for someone special. The products are not mass-produced, shipped from overseas, or the same item you see in every other store. Instead, items sold are made by Valley artists as well as craftsmen from across the USA. Mid-July the store is moving from the 6,384-sq.-ft. space at 210 Clayton St. to a cozy but much smaller 1300-sq.-ft. location at 250 Columbine, Suite 145.
Concerns Bubbling Up
Changing Landscape: Property tax boost is altering Valley neighborhoods. Along Old South Gaylord — the second oldest shopping district in Denver — spaces are turning over frequently and retail is being replaced by financially productive businesses.
In localities such as Congress Park, Capitol Hill, Cherry Creek, the Golden Triangle, Wash Park and so many more, concerns are bubbling up. Shoppers in these popular areas prize their walkability. They enjoy having easy access to a variety of restaurants, services and shops, especially those that are unique and locally owned. Many if not most of these smaller ventures likely cannot survive faced with higher and higher property tax rates plus rising rents.
When property taxes go up, homeowners can find other homeowners willing to fight for relief. Big businesses, too, can flex their muscles. But small businesses are often left behind, mainly because they are, well, small.
Neighborhood advocates offer this word of warning: “This tax increase will affect all property owners and their tenants and drastically alter neighborhoods where many owners are unable to absorb the huge increase in cost. This will lead to large transitions of neighborhoods throughout the metro area.”
