Crestwood business-license fees under discussion

Staff suggested eliminating service-business classification


A proposal to tax new Crestwood service businesses based on gross receipts instead of square footage will be further discussed.

As proposed, existing service businesses would continue to be charged for business licenses based on square footage under a grandfather clause.

The Ways and Means Committee recently tabled recommending the move after Ward 3 Alderman Jerry Miguel and Ward 4 Alderman John Foote expressed a desire to see a comparison of Crestwood’s business-license structure with other cities. Committee members — Miguel, Foote and Mayor Roy Robinson — also requested to see a list of all of the city’s roughly 40 service businesses.

Personal-service businesses include banks, financial institutions, tourism businesses and education providers.

After some existing service businesses had complained of the proposed higher taxes, Robinson suggested to the administration at a May 8 Board of Aldermen meeting that he would like to see a “permanent grandfather” tax for them.

Aldermen then voted to extend a grandfather clause one more year for businesses formerly classified as service businesses.

In the spring of 2006, aldermen voted to accept changes proposed by former City Clerk Kimberly Cottle to the city’s business-license code, including the elimination of the service-business classification.

Because of complaints of dramatic fee hikes from owners of businesses that had previously been classified as service, aldermen included the grandfather provision to tax those businesses based on their square footage instead of gross receipts.

The city conducts its business-license review period in May and June.

Business-license fee jumps for some service businesses ranged from some once paying $200 per year to, as proposed, paying more than $1,500 per year, according to city officials. Other businesses saw proposed annual fee increases of $800 or $900.

Because of this, Robinson said he would like to reward the service businesses that have already been part of the city by freezing the business-license fee for them.

“That’s the reason we backed off before,” he said. “And basically, what the staff is saying is there will be no changes to what our previous policy is. We’re not reinventing the wheel. All we’re doing is saying leave the people, the businesses as they have always have been — except for the new ones that come in will fall into this new category.

“There won’t be any misunderstandings. Nobody’s going to be mad. Nobody’s going to be moody if we just keep things the same way they are and let the new businesses that come in fall under the new category.”

But Miguel questioned the impact of approving a grandfather provision for all service businesses because of a 2005 decision by voters to raise merchant businesses’ gross-receipts tax. In 2005, voters approved a license-fee hike for merchant businesses from $1 per $1,000 of gross receipts to $1.25 per $1,000 of gross receipts.

“In view of the fact that we increased the merchant-license revenue by 25 percent for all the other businesses in the city, I don’t know that I just want to unilaterally grandfather a select group,” he said. “So without really knowing the details, more detail, I’m really not comfortable making a decision on this.”

Foote also questioned what Crestwood’s business-license structure is compared to other cities and said he, without knowing that information, cannot make a fair recommendation.

“Are we sort of singling out these (service) businesses in such a way that we make a wrong move here and we stand to lose businesses?” Foote said. “We need to have fair treatment across our competitors so that we don’t cause any businesses hardship.”

But because some nearby cities like Fen-ton and Green Park do not have business-license fees, Robinson said he is concerned that not approving a permanent grandfather provision for all current Crestwood service business might result in some leaving the city.

“Some of the businesses were saying that they could move to Sunset Hills or to Kirkwood or Webster Groves or Fenton and be within a couple miles and save lots of money by doing so because they did look at that,” Robinson said.

“There are some discrepancies by businesses,” City Administrator Frank Myers said. “And you pointed out that in some of our real close suburbs, you can do business there virtually free or for less.”

“These are the things we need to know,” Miguel said. “We need to know how we’re taxing these people, what their situation is and what are our neighbors doing. We need some sort of comparative analysis. I mean, I just don’t have enough information to make a decision based on what’s in front of me now.”

In the city staff’s initial recommendation, Cottle wrote in an April 2006 memo to Myers that the city would be wise to eliminate the service-business classification not only because such businesses often pay less for business licenses, but also because the classification rarely is included in other Missouri cities and is difficult to define.

“I have researched the codes and definitions used by many Missouri municipalities,” Cottle wrote. “This special class is no longer used in any other municipal code I have found, nor do state definitions include such a special class.

“The list of service businesses is rather vague and also includes ‘other similar businesses or activities of business.’ Since the time when these classifications were adopted, professions and business practices have evolved to include more service-oriented businesses, which are not necessarily limited to one type of service. The unusual sub-classification ‘service business’ often makes it difficult to easily classify many of today’s businesses.

“Finally, service businesses pay the license tax on a different scale than all other Crestwood businesses, including service occupations. This special class pays much less than other service-oriented trades because their license tax is based on the value of the business’ personal property or the number of employees they have.”

Until last year’s revisions to the business code, it had been mostly unchanged since 1975.

Myers said in May that based on conversation with Cottle last year, he believes businesses were coming into the city and trying to take advantage of a business classification that was difficult to define.