All Crestwood service businesses now will be permanently taxed for annual business-license fees based on square footage instead of the more costly system based on gross receipts that all other city businesses pay.
The Board of Aldermen was deadlocked 4-4 Oct. 9 and Mayor Roy Robinson broke the tie in favor of a permanent grandfather clause for service businesses to pay the cheaper annual fee.
Ward 1 Alderman Mac McGee, Ward 1 Alderman Richard Bland, Ward 2 Alderman Steve Knarr and Ward 4 Alderman John Foote voted “yes” to freezing service businesses’ annual fee rate. Board of Aldermen President Gregg Roby of Ward 3, Ward 2 Alderman Chris Pickel, Ward 3 Alderman Jerry Miguel and Ward 4 Alderman Steve Nieder voted “no” on the measure.
While aldermen in 2005 already eliminated the service-business classification from being given to any incoming businesses, Crestwood officials had received complaints in 2006 from several existing service businesses that they proposed to pay business-license fees through gross receipts.
Proposed business-license fee jumps for some service businesses ranged from some once paying $200 per year to paying more than $1,500 per year, according to city officials.
Other businesses saw proposed annual fee increases of $800 or $900.
Crestwood reportedly has close to 50 service businesses, including personal-service businesses like banks, financial institutions, tourism business and education providers.
Because of these complaints, aldermen had voted in 2006 and 2007 to extend the business-license fee based on square footage to service businesses for one more year. But in May, Robinson suggested the permanent grandfather clause.
After saying he would form a committee to review the proposed business-code changes, Robinson met Aug. 15 with the city’s Ways and Means Committee to discuss the proposal.
Pickel, who voted against the permanent grandfather clause, questioned during the Board of Aldermen’s Sept. 11 meeting why the Ways and Means Committee would study the proposal instead of the city’s business-license review board.
Pickel has said he was under the impression that he, Foote and Roby would be studying the proposal as part of their duties on the business-license review board.
At the Aug. 16 Ways and Means Committee meeting, Miguel — who also voted against the clause — 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.
Nieder said last week that he also was concerned with the notion that merchant businesses would be paying more while service businesses would now be protected.
City Attorney Robert Golterman respond-ed that the 2005 ballot did not include setting the tax rate for service businesses and that if the city would like to study a tax-rate increase for service businesses, it must be placed on a ballot for voters to decide.
“They haven’t escaped the tax increase,” Golterman said. “They just didn’t … the last election did not include them. So in order to raise the fees for these classifications, the board would have to put that issue to the voters.”
“So, but by grandfathering this, we al-ready provide that escape basically because a service-business classification would not exist anymore and they would have to be classified under gross receipts,” Nieder said. “Is that correct?”
“That is correct,” Golterman said.
“OK, so by grandfathering this, we are creating the escape of a tax increase as was actually, I think, originally intended by the taxpayers,” Nieder said. “That’s my opinion. But I think it would probably be supported. Fair statement?”
“I think that’s an accurate statement,” Golterman said. “Yes.”
Golterman reiterated that no new businesses would be eligible to apply as service businesses as that classification was eliminated in 2005 by the Board of Aldermen.
“The service-business classification was eliminated two years ago,” the city attorney said. “What this does is, and for each of the last two years, those businesses that were service-business classifications be-fore that category was eliminated have been grandfathered so that they did not experience a significant increase in their taxes.
“So all this is doing is basically making that grandfather permanent so that any service business that existed in 2005 will always be treated as a service business. But there have been no new service businesses classified in the city since that classification was eliminated two years ago, nor will there be ever again. Once 30 or 40 businesses leave or go out of business, eventually this category will go away.”
Nieder also questioned the rationale for approving a “special blessing” for service businesses when city officials had difficulty persuading these certain businesses to participate in discussions on the proposed business-license fees.
Robinson responded that while many of these businesses did not provide input to the business-license fee proposal, they were not required to do so.
“We’ve made, if I recall correctly in discussion, several or many attempts to bring in the businesses to help us through this situation and have their input,” Nieder said. “But none chose to participate. Is that a correct statement?”
“Pretty much so,” Robinson said. “It was hard to get them to come, yes.”
“OK, so I guess I have the question of why do we want to make this special blessing to a segregated group of businesses since they didn’t want to help us work through this situation?” Nieder said.
“Well, it wasn’t only them,” Robinson said. “It was people who were affected, too. This wasn’t just this group. It was for all businesses to participate. I don’t know who they contacted. But they said they couldn’t get them to come together to participate in it, so … And there is no requirement that a business come in to help you make a decision on what the business of the city is.”
“No, but it was an opportunity for them to make known what they think should be done,” Nieder said. “And they didn’t want to participate.”
“Well, they weren’t wanting to,” Robinson said. “They didn’t have the time to participate evidently.”