It took two and a half years, but now Richmond has a citywide tech zone.
The specific benefits of this area, however, are still under construction.
Richmond City Council finally approved an amendment to the city’s code this week establishing a tech zone across the city.
First proposed by council member Andreas Addison in October 2019, the zone lays the groundwork for Richmond to provide tax incentives and regulatory leeway to encourage tech companies to locate in the city.
What those incentives will look like has yet to be finalized, as a companion amendment that would create a technology-specific business license tax has been pursued until the March 14 board meeting.
Both elements have been continued and modified many times since Addison first proposed the program, which the state began licensing for small communities in 1995. The state program has expanded to include all locations in Virginia in 2002.
Discussions with city administrators to refine Richmond’s program have been prolonged during the pandemic and have been delayed in part by an update to the city’s strategic economic development plan, which details incentives that could be offered through technology. area program. City staff said establishing the zone first would then allow the administrative program to be created.
Similar to Enterprise Zones, the program allows tax incentives for up to 10 years such as reductions in permit fees, user fees and any type of gross receipts tax. It also allows for regulatory flexibility through special zoning, reform of the permitting process, exemption from ordinances, and other ordinance-enacted incentives as outlined in the state code.
At a committee meeting last year, Addison called tech zones “an enabler of creating a 21st century economy.”
“This is to make sure that we recognize that these are separate and different types of business entities compared to other existing operations,” Addison said. “Most importantly, it makes Richmond a place to open your tech business. You create a service with technology and create a transaction, and we want to make sure that you want to do that transaction here in the city of Richmond.
According to the amendment council passed on Monday, Richmond’s tech zone scheme would mirror that of Norfolk, which adopted its zone in 2017.
Richmond’s program is for startups and limited to businesses with $100,000 or less in annual revenue. Technology companies would be defined as a business that makes money through “innovative or advanced technology-based products, processes, or services” created and performed by that business. Examples include cybersecurity, biotechnology, advanced manufacturing, computers and electronics, e-commerce, data analytics, logistics, IT, and others.
It would exempt new companies certified as a qualified technology company from paying the city’s BPOL tax, or Business, Professional and Occupational License Tax, for two years, followed by a 50% waiver each year by the continued for three years. The five-year period goes beyond the two-year BPOL exemption currently offered to all new businesses setting up in the city.
Divested tech companies would receive a full prorated exemption for the first two years, and expanding companies would receive a 50% exemption each year when a new employment incentive threshold is reached for up to five years over a period of 10 years.
Although not yet approved, the BPOL tax for technology companies is proposed at 10 cents per $100 of gross revenue. The city’s current BPOL tax is 58 cents per $100 for professional services and 19 cents per $100 for contractors.
Chesterfield County has established five Technology Zones that provide full BPOL tax relief for five years, as well as a Machinery and Tool Tax Rebate for five years. Henrico County is establishing its first technology zone specifically for Innsbrook.
At Monday’s meeting, board members praised Addison for her resilience in seeing the proposal through, but also lamented the length of time it took.
“The only thing that bothers me is that it took so long,” Kristen Nye said, after thanking Addison for her efforts and “thinking outside the box.”
“I don’t like to see the legislation on our role for two and a half years. I’m glad a compromise has been found with the administration, but we all know it shouldn’t take that long,” Nye said. “Hopefully the next time a good idea comes along, we can find a solution faster than two plus years.”
Describing Addison as having “the patience of Job”, Michael Jones said the process, while lengthy, showed how the board and administration can work together.
“It has been verified; I know there were concerns about that initially,” Jones said. “To me, what it shows is that the administration was willing to work with the board, the board was willing to work with the administration, to find the right way to get things done, because there’s serious financial implications to this on both sides.”
Also Monday, the council approved another proposal from Addison and Mayor Levar Stoney increasing the city’s BPOL exemption threshold from $100,000 to $250,000 in annual revenue.
Affecting more than half of all businesses operating in the city, the change exempts the first $250,000 of businesses’ gross taxable revenue from the city’s BPOL tax rate of up to 58 cents per $100. The increase follows similar moves in recent years by Henrico and Chesterfield, whose thresholds now stand at $500,000 and $400,000, respectively.