In Burbank, Revolt Over Enhancement Tax : Economy: Merchants oppose levy to improve business district, saying it is ineffective and was imposed without consent.

The Burbank City Council headed off a local version of the Boston Tea Party last week, but animosity lingers over an assessment that small-business owners call a frivolous tax imposed without their consent.

At issue is an estimated $75,000 to be raised this year from merchants in an eight-block business improvement district extending from Magnolia Boulevard to Angeleno Avenue, between 1st and 3rd streets.

As a result of an ordinance passed last year at the urging of a downtown business group, the district requires nearly every merchant in the zone just south of the Media City Center mall to pay an assessment based on storefront size and location to support promotions and improvements. Big tenants like AMC Theaters or Market City Caffe pay the maximum of $2,500 annually, while smaller enterprises pay as little as $100.

But to merchants like Nancy Khodaverdian, paying nearly $600 annually cuts a large chunk from her profits. Khodaverdian said revenues don’t even cover rent on her tiny juice stand, Nena’s Orange Juice, on San Fernando Road. She is one of 34 local merchants resisting the business improvement district, which the City Council last week renewed for another year.

Many of the businesses refused to pay the assessment, prompting a cash flow crisis that stymied most promotional or improvement efforts in the district’s inaugural year, city and district officials say. Records show 21 businesses were delinquent as of mid-June, a 20% rate of recalcitrance that amounts to more than $5,000.

While some of the merchants like Khodaverdian say they can’t pay, others flatly refuse. Why, they ask, should they pay for expensive, ineffectual promotions that fail to deliver more business?

“A lot of things, had they participated and attended board meetings, they would have understood,” countered Marianne Shannon, executive director of the Downtown Burbank Stakeholders Assn., which controls the assessment money. “They’re not allowing it to succeed, either.”

Shannon and city officials acknowledge problems during the first year of operation, in which more than half the assessment funds paid for salaries, rent and other overhead, while promotional plans went awry. But Shannon, who was hired in April, said those problems have been alleviated.

“The overhead is kind of high,” acknowledged William Emmett, redevelopment analyst with the city’s Community Development Department. “It’s kind of unavoidable because you need someone to run the show. If you’re going to get anybody worth anything, you’re going to have to pay for it.”

This year, the district plans to spend about $27,000 in salaries, $13,000 in accounting, consultant and legal costs and $8,000 in office expenses. About $23,000 is earmarked for promotional campaigns and events, and $2,500 for physical improvements (banners) in the $74,753 budget.

Such priorities infuriate detractors, many of whom already pay for their own advertising.

“They haven’t done anything so far except put up [Christmas] lights,” complained one retailer who requested anonymity. “We haven’t seen anything that this organization has done. They just have an idea to increase the value of their buildings and increase the rent on ours.”

The improvement district is run by the Stakeholders Assn., composed of owners, merchants and other downtown interests. It sets a budget that is reviewed by an advisory board appointed by the City Council. The council must approve the plan.

But three of the seven advisory board members also are members of the Stakeholders Assn. Although it must show how it spent the money, the association does not submit detailed expense reports, Emmett said.

He said he hears “a lot of complaints” that merchants “don’t know where the money is going, but I don’t get many requests for information.”

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Because of their size, location and business volume, the district’s big tenants pay the overwhelming share of the assessments--which are capped at $2,500. They hold the power to abolish the district, which requires a vote bloc representing half the assessment revenues. At last week’s meeting, the City Council received 34 protesting votes from businesses, which represented a third of the total number but only 18% of the assessments, Emmett said.

Big tenants are unlikely to join the revolt, he added.

“They don’t care either way,” said Emmett. “As a goodwill gesture to the area they say, ‘Sure, we’ll pay for it.’ But they just go ahead and do their own advertising.”

Responding to the complaints of the 34 smaller businesses, the Burbank City Council last week lowered the threshold for exemptions. If a business is too small to generate $200 in assessments under the current formula, it now pays nothing. That level had been $100. The council also exempted many businesses that share a single storefront. The moves cut at least 15 merchants from the rolls and may quell some complaints, Shannon said.

Nonetheless, Shannon said she hopes to win over more detractors with elaborate promotions, like a massive street fair, in the coming year.