Taxes on commercial property, like apartments, may increase -- and students could pay more rent -- if the State College Borough Council approves changing its current tax structure.

At its meeting tonight, council plans to discuss a council-appointed tax committee's recommendations, which include eliminating the business privilege tax and increasing property taxes.

Borough Finance Director Mike Groff said it is probable that some apartments may have rent increases, although it is difficult to make a blanket statement.

"The tax impact will vary greatly between business to business," he said, adding that it is too early for cost estimates. "But businesses tend to pass their increases on to their consumers."

Council member Jeff Kern, chairman of the tax study committee, said he predicts the effect will be minimal.

"When it comes down to the individual renter, I don't think it's going to mean that much in the way of dollars per month," he said.

The changes, recommended by the tax study committee, plan to replace the business privilege tax with a 2-mill prop-

erty tax increase, which would raise the tax rate from 7.3 to 9.3 mills. One mill equals $1 per $1,000 of taxable property value.

However, most homeowners are expected to pay less because the committee plans to offset the increase with a homestead exemption act, which would exclude the first $30,000 of assessed value.

"Really what we're saying here is that the owners of the rental properties have the ability to pay, and the people that own modest houses will pay a little less," Kern said.

One of the driving forces behind repealing the business privilege tax is that it's viewed as a disadvantage for attracting businesses to State College.

Although the business privilege tax rate on those businesses is relatively low, $1.50 for every $1,000 in revenue, Kern said neighboring townships do not operate with the tax, which increases competition for businesses and may be putting the borough at an economic disadvantage.

However, council member Elizabeth Goreham plans to propose keeping the levy and moving about $500,000 of its $900,000 total revenue toward business incentives.

"I don't think [repealing the tax] is enough to get businesses to locate here," she said. "I think we're going to have to recruit businesses."

She said the tax study's report shows that by 2006, the tax rate will increase to 11.2 mills, because of operating expenses.

"We're only going to shift the tax," she said. "We're going to have to rely more on property taxes."

By readjusting the tax structure, the committee hopes to address the narrowing tax base in State College. The borough relies on income taxes for about 40 percent of its revenue, yet with an increasing retiree population and student population using borough services, he said there isn't enough money being put back into the borough.

This makes it difficult to keep up with rising expenses -- one of the reasons the borough has already increased property taxes by 2.55 mills over the past three years, Groff said.

"We've been faced with increasing costs primarily in energy, health care and pension costs, and those will probably continue to increase," he said.

As a resident of State College, committee member Karen Burgos, the lone dissenter in the committee, said she feels as though making the tax adjustments is a risky change for homeowners and for council. She fears the borough will be unable to raise enough to replace the business privilege tax and property taxes will be raised more.

"I don't have any problem eliminating the [business privilege] tax; I just don't believe now is the time," she said. "I don't think the borough's finances are good enough for the next fiscal year to just give up almost a million dollars."

The borough is slated to act on the proposal at a public hearing Sept. 19.