It took two and a half years, but Richmond now has a citywide technology zone.
The specific benefits of that zone, however, still remain in the works.
The Richmond City Council this week finally approved an amendment to the city code establishing a technology zone across the city.
First proposed by Councilmember Andreas Addison in October 2019, the zone lays the groundwork for Richmond to offer tax incentives and regulatory wiggle room to encourage technology-based businesses 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 was continued to the council’s March 14 meeting.
Both items had been continued and amended multiple times since Addison first proposed the program, which the state started allowing for smaller localities in 1995. The state program was expanded to include all localities in Virginia in 2002.
The back-and-forth with city administrators to fine tune Richmond’s program was prolonged over the course of the pandemic, and was held up in part by an update to the city’s economic development strategic plan, which details incentives that could be offered through the technology zone program. City staff has said that establishing the zone first would then enable the creation of the administrative program.
Similar to Enterprise Zones, the program allows tax incentives for up to 10 years such as reductions of permit fees, user fees and any type of gross receipts tax. It also allows regulatory flexibility through special zoning, permit process reform, exemption from ordinances and other incentives adopted by ordinance, as stated in the state code.
At a committee meeting last year, Addison called technology zones “an enabler of creating a 21st century economy.”
“It is making sure that we are acknowledging that they are separate and different types of business entities compared to other existing operations,” Addison said. “More importantly, it establishes Richmond as a place to open your technology business. You’re creating a service with technology and creating 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 that the council adopted Monday, Richmond’s technology zone program would mirror that of Norfolk, which adopted its zone in 2017.
Richmond’s program is targeted at startups and limited to businesses with $100,000 or less in annual revenue. Technology businesses would be defined as a business that makes money from “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 businesses that are certified as a qualified technology business from paying the city’s BPOL tax, or Business, Professional and Occupational License Tax, for two years, followed by a 50 percent exemption each year thereafter for three years. The five-year period goes beyond the two-year BPOL exemption currently offered for all new businesses that locate in the city.
Divested technology businesses would receive a prorated full exemption the first two years, and expanding businesses would receive a 50 percent exemption each year that a new jobs incentive threshold is met for up to five years within a 10-year period.
While not yet approved, the BPOL tax for technology businesses is proposed at 10 cents per $100 of gross receipts. 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 offer a full BPOL tax exemption over five years, as well as a five-year machinery and tools tax rebate. Henrico County is in the process of establishing its first technology zone specifically for Innsbrook.
At Monday’s meeting, councilmembers lauded Addison for his resilience in seeing the proposal through but also bemoaned the length of time that it took.
“The only thing that bums me out is that it took so long,” Kristen Nye said, after thanking Addison for his efforts and “thinking outside the box.”
“I don’t like to see legislation on our docket for two and a half years. I’m glad a compromise was reached with the administration, but we all know it shouldn’t take that long,” Nye said. “Hopefully, next time a good idea comes forward we can find resolution quicker than two-plus years.”
Describing Addison as having “the patience of Job,” Michael Jones said the process, while long, showed how the council and administration can work together.
“It was vetted; I know there were concerns with it initially,” Jones said. “For me what it shows is that the administration was willing to work with council, council was willing to work with the administration, to find the correct way to make things happen, because there are 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 businesses’ first $250,000 in gross taxable receipts from the city’s BPOL tax rate of up to 58 cents per $100. The increase follows similar moves made in recent years by Henrico and Chesterfield, whose thresholds now stand at $500,000 and $400,000, respectively.