DATE: Wednesday, October 1, 1997            TAG: 9710010460

SECTION: LOCAL                   PAGE: B1   EDITION: FINAL 

SOURCE: BY JON GLASS, STAFF WRITER 

DATELINE: NORFOLK                           LENGTH:   79 lines

NORFOLK TO BOOST TAX ON CIGARETTES

Smokers here will have to pay another nickel a pack starting in December, with the additional tax money going to help neighborhoods combat blight.

Despite concerns of some smokers, small retailers and shipping industry officials, the City Council voted 5-2 Tuesday to increase the local tax on cigarettes to 30 cents a pack beginning Dec. 1.

The council plans to use the additional revenue - an estimated $305,000 in the remaining seven months of the fiscal year ending June 30 - to improve Norfolk's neighborhoods.

The money most likely will be used to clear blighted property, but also could be funneled into infrastructure improvements, such as street repairs, council members said.

Funding for neighborhoods in the city's capital budget was cut by $2.3 million, or 35 percent, in the budget adopted by the council in May.

``It means we can dedicate some things to the neighborhoods that we had to cut out because of budgetary constraints,'' said Vice Mayor Herbert M. Collins Sr., who proposed boosting the tax even though his family-owned grocery could lose cigarette sales as a result.

City officials estimate that the tax will generate an additional $521,000 during its first full year of implementation. They estimate that's enough to cover the cost of demolishing 35 to 65 blighted buildings.

Officials say they have identified a number of structures that contribute to blight citywide, but most of them in the neighborhoods of Park Place, Huntersville, Lamberts Point, Ocean View and Ballentine.

``I hate all taxes,'' said Councilman Mason C. Andrews, ``but our needs outweighed the hate. One of the highest priorities is in helping to improve the neighborhoods.''

The council initially had considered raising the tax by as much as 10 cents a pack, but settled for half that when the full amount could not pass, members said.

In a public hearing on the tax increase earlier this month, some representatives of the shipping industry had warned that raising the tax could jeopardize tobacco shipments that move through the port of Hampton Roads.

In 1995, tobacco was the No. 1 cargo moving through the port, with a total dollar value of $2.5 billion, according to port records. Hundreds of jobs are linked to the tobacco containers passing through the port, officials said.

While raising the cigarette tax has no effect on the cost of shipping, officials said they were concerned that the port would become known as ``non-tobacco friendly'' and send competitors to the ports of Richmond or Baltimore. Neither of those port cities has a tobacco tax, Keever said.

``We're certainly disappointed,'' Jeff Keever, executive vice president of the Hampton Roads Maritime Association, said of the tax increase in a telephone interview. ``It's too early to tell what kind of impact it will have, but we feel it's an adverse message the city is sending to the tobacco industry.''

Smokers and small retailers also appeared at the public hearing two weeks ago to protest the tax hike. The retailers said they'd lose business to neighboring cities where cigarettes are cheaper. Suffolk, for instance, has a 20-cents-a-pack tax. Virginia Beach charges 27 cents a pack. Portsmouth has a 30-cent tax. Chesapeake recently raised its tax to 25 cents per pack.

Council members said raising Norfolk's tax to 30 cents places the city in the middle of the pack and that the increase shouldn't harm the port or scare people away.

``I hardly think that anyone is going to drive any length of distance to save 50 cents,'' member W. Randy Wright said, referring to the additional tax on a carton of cigarettes.

As the cost of cigarettes has increased and people have become more health conscious, the tax revenue from the local tax has decreased, city records show. 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.

Council members Paul R. Riddick and Daun S. Hester voted against the tax increase.

``Smokers have been taking a pretty big hit, as has the tobacco industry,'' Riddick said. ``I think smokers have had all they can handle.''

Hester said: ``Yes, we need the revenue, and we have to find ways to generate it, but I think we need to find another way instead of putting more taxes on whatever we can find to tax.'' ILLUSTRATION: Graphic with color photo

5-cent increase: The council voted 5-2 to increase the local tax on

cigarettes to 30 cents a pack beginning Dec. 1. The increase will go

to combat blighted neighborhoods.

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