Many downtown business owners are pleased with the prospect that the business privilege tax might be a ghost of the past after the State College Borough Council voted earlier this month to repeal it.

Borough Manager Tom Fountaine said he was fairly sure that by Jan 1., 2006, the tax would be gone. On Oct. 3, council voted 5-2 against it, but the tax can't actually be repealed until the 2006 budget is set.

Katie Dawes, co-owner of Kitchen Kaboodle, 104 W. Beaver Ave., said the borough should be thanking the small businesses for being downtown rather than taxing them for it.

"They should be privileged to have us," said Dawes. "It's thinking in reverse."

Many businesses interviewed said they were for repealing the tax, even if it meant higher commercial rents. They said that is OK because most consider rents fair for being downtown. But to be taxed again for being a business downtown was unfair, they said.

Fountaine said to help cover losses from the tax, which generates about $900,000 a year for the borough's $15 million general fund, council approved a 1.8-mill property tax increase, or $1.80 per year for each $1,000 of assessed value.

Terry Losch, owner of Rapid Transit Sports, 115 S. Allen St., said he expects rent to go up, as it does every year.

"The good thing about that is that we can handle a rent increase," Losch said.

Penn State students, though, are also major tenants in downtown commercial properties, and they should also expect an increase in rent.

John Hanna, owner of Continental Real Estate Management, which owns such properties as Penn Tower, 255 E. Beaver Ave., said increases in rent would be higher for business tenants than students.

"It would not be proportional for Penn State students," Hanna said.

A.W. & Sons and GN Associates refused to comment.

One way businesses will offset increased property taxes is by the higher traffic of people downtown, which will increase their revenues.

Gary Moyer, owner of Moyer Jewelers, 100 E. College Ave., said that with the tax, business that do not need to be located downtown for students have no incentive to have an office in the area.

"An accountant with an office downtown will eat downtown and shop downtown, and so will his clients," Moyer said. "I want to see those offices filled."

He said these are the people who will walk by his storefront window and come in during the holiday season when they remember something they see.

Elaine Mider-Wilgus, co-owner of Webster's Bookstore, 128 S. Allen St., said the tax unfairly took money from gross revenue instead of net income.

"It ends up being a bottom line [loss] of your budget that you don't see the benefits of," Mider-Wilgus said.

She added that it was unfair to pay the tax when a large portion of her store's income is from worldwide online sales, which should not be included in a borough tax.

State College Downtown Improvement Director Teresa Sparacino said the tax has always been perceived as a "nuisance tax" whether its actual costs were high or not.

"I've seen developments that used 'No Business Privilege Tax' in their marketing," said Sparacino. "We want a level playing field."