DATE: Wednesday, September 17, 1997         TAG: 9709170486

SECTION: LOCAL                   PAGE: B1   EDITION: FINAL 

SOURCE: BY JON GLASS, STAFF WRITER 

DATELINE: NORFOLK                           LENGTH:   74 lines

PORT OFFICIALS WARY ABOUT PLAN TO RAISE CIGARETTE TAX NORFOLK'S PROPOSAL COULD SEND SHIPPERS PACKING, THEY SAY.

There's more at stake than just angering smokers if the city raises the cigarette tax by a dime a pack, local shipping industry officials told the City Council Tuesday.

Such a tax hike could upset tobacco shippers and could threaten hundreds of jobs and billions of dollars in cargo now passing through the port of Hampton Roads, they said.

The council is considering raising the tax to generate money to improve neighborhoods, but those who spoke at a public hearing Tuesday said the city could wind up losing more than it gains.

Also speaking was a small but vocal group of smokers and retailers who urged the council not to increase the tax from its current 25 cents per pack.

The state port in Norfolk handles thousands of containers of tobacco yearly, worth billions of dollars, said Linwood Beckner, vice president of The Hipage Co. Inc., a customs broker and international freight forwarder. While the tax would not add to the cost of shipping, it could hurt the port's competitive edge, he said.

``Let's not offend the shippers of these goods,'' Beckner said. ``The ports of Baltimore and Richmond, as well as those in North Carolina, would welcome the tobacco shippers who are currently loyal to the port of Hampton Roads.''

Ronald H. Williams, administrative assistant of the Hampton Roads Maritime Association, said his group fears that Norfolk ``would be viewed as a non-tobacco friendly port'' and ``put this important commodity in jeopardy of being lost to our competitors.''

Among the nine people who spoke were several retailers. They said they would lose customers who would travel to neighboring cities that charge a lower tax.

``They won't hesitate to shop somewhere else so they can stretch their dollars further,'' said Brad Klavan, operator of Cape View Exxon in Norfolk. ``Why risk chasing these people from Norfolk?''

Council members didn't appear swayed by the arguments. Some said, however, that the council probably wouldn't raise the tax by more than 5 cents a pack.

A 5-cent hike would take the tax to 30 cents, only a few pennies more than what most neighboring cities charge. Hampton has the highest tax at 35 cents a pack. Elsewhere in the region, the tax is 30 cents in Portsmouth, 27 cents in Virginia Beach, 25 cents in Chesapeake and Newport News and 20 cents in Suffolk.

Norfolk Mayor Paul D. Fraim said he doubted that the tax increase would harm Norfolk's port.

``We have to be conscious of what they're saying, but I don't see that a couple of cents will make any difference,'' Fraim said. ``If it would make any difference, I think we would have heard from the producers themselves.''

The council said it would vote on the tax proposal in two weeks.

Vice Mayor Herbert M. Collins Sr. proposed the tax increase as a way to offset a 35 percent reduction in money going to neighborhoods in the 1997-98 budget. The cuts amounted to about $2.3 million.

Collins, himself a merchant who sells cigarettes, said after the hearing that he remained a staunch supporter of increasing the tax. He said he doubts people will travel elsewhere to buy, but added that if they do, ``I just suspect the city will make it up in gasoline taxes.''

Officials estimate that a 10-cent boost in the cigarette tax would generate $850,000 a year, while a 5-cent increase would bring in about $521,000. The money could be used to clean up neighborhood blight by demolishing dilapidated buildings.

However, officials note that revenue from the tax has been declining in recent years, as people quit because of health concerns or over steadily increasing prices. In fiscal year 1997, which ended June 30, the city collected $3.8 million from the tax, down from $4.5 million the year before.

Some smokers who spoke Tuesday said they were being unfairly singled out and suggested the city consider taxing beer sales.

That could be coming next: Councilman Paul R. Riddick recently proposed that, along with a cigarette tax increase, the council consider placing a 2-cent tax on beer sold for off-premises consumption. It was defeated 5-2, but could resurface when the council begins budget discussions in the spring. KEYWORDS: CIGARETTE TAX NORFOLK CITY COUNCIL

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