A 5% Sarasota business tax increase wins approval of majority of the City Commission

Mayor calls for staff to do a better job of conveying to business owners how the revenue is used

Commissioner Hagen Brody. File photo

With Sarasota City Commissioner Hagen Brody proving to be the only board member this week to vote against it, a 5% increase in the city’s business tax was approved on the first reading, held July 3.

City Attorney Robert Fournier pointed out that a super-majority of the commission — four members — has to vote “Yes” under state law for the hike to go into effect. The second required reading is expected during the board’s regular meeting on July 17.

City staff members explained that the total estimated $1 million in business tax revenue for the 2018 fiscal year primarily will be used to pay for services — including police protection. Nonetheless, Brody told his colleagues he disapproved of the fact that the money essentially will be used to close the projected gap of $952,958 in the city’s FY18 General Fund budget. “This just sends the wrong message to small businesses.”

The General Fund derives the majority of its revenue from property taxes.

One of the options for balancing the FY18 budget, presented to the board during its June 20 workshop, “is cuts,” City Manager Tom Barwin replied. “Tell us where you want to cut.”

Commissioner Willie Shaw told his colleagues that he felt the tax increase of $2 to $10 per year “will not break any of the businesses we have here.”

(Tim Litchet, director of the city’s Neighborhood and Development Services Department, noted that one of the largest categories for the business tax is “Professions,” and its businesses would see their payment rise from $94.50 this year to $99.23. For another example, he said, restaurants with 16 to 30 seats would see their tax rise from $105.87 to $111.16.)

As for the General Fund revenue situation for FY18, Shaw said, “[We] will have to close that gap.”

“I think one of the major things [the city does] is creating the overall climate to be able to do well as a business in the city, which includes the police protection,” Vice Mayor Liz Alpert pointed out. Police officers’ salaries and those of other city employees are rising, along with the cost of city services, she added. “So I don’t think that it’s unjustified to ask the businesses in the city to pay extra.”

Kevin Cooper. Rachel Hackney photo

After several years of wage freezes necessitated by the Great Recession, Barwin noted, the commission over the past two years has authorized 3% salary adjustments “pretty much across the board.” Health and retirement costs also are going up, he reminded the board. “I don’t want to call this a managed cost-efficiency adjustment,” he said of the proposed tax increase, “but, in effect, that is a part of the rationale.”

Mayor Shelli Freeland Eddie pointed out during the July 3 discussion that staff needs to do a better job of conveying to business owners how the revenue from the tax is spent.

Barwin responded that staff could do that, with Litchet having explained earlier that his staff already was working with the city’s Information Technology personnel to make it possible to provide details on the city website.

Freeland Eddie also suggested that the application for a business license include documentation of the services owners receive for their payments. “As policymakers, we’re being asked to explain where the money’s going.”

She did win agreement from Shaw — who made the motion to approve the increase — and Alpert — who seconded the motion — for a friendly amendment: to have staff designate a portion of the tax proceeds received over the next two years for economic development, with the extra proviso that the specific uses of those funds will be itemized. That way, she said, the public will be able to see how the money was spent.

Only one speaker appeared before the board on July 3 to argue against the increase. Kevin Cooper, president and CEO of the Greater Sarasota Chamber of Commerce, pointed out that business owners in the city pay about 600% more to the city for their licenses than they do to Sarasota County. He argued that those business owners should be able to see what they are getting in the city for their money. Furthermore, property tax revenue, he added, should be paying for services, not the business tax revenue.

“You should be able to tell me what an additional 5% gets,” he said, drawing a round of applause from the audience.

Barwin noted that the city comprises only about 3% of the total area of the county, and it has about 13% of the population. Nonetheless, he said, the city makes up 17% of the county’s property tax base. “We provide a disproportionate share of the property tax revenues,” he said, along with about 30% of the annual Tourist Development Tax revenue. “So this city is really an economic lion,” Barwin pointed out, in terms of what it contributes to the county.

Collections and expenses

(From left) Joan Keim, Gretchen Schneider and Tim Litchet of the city’s Neighborhood and Development Services Department address the City Commission on May 15. File photo

Opening the July 3 presentation, Litchet of the Neighborhood and Development Services Department explained — as he did during the board’s May 15 session, from which the agenda item was continued — that state law allows municipalities to impose the tax and to raise it a maximum of 5% every two years. The increase staff has proposed, he continued, is expected to generate $46,877.40 more than the $937,548.04 the city received in 2016 from its business tax.

In regard to commission questions raised in May, he said, he had written a memo, dated June 21, explaining the services that Joan Keim, the city’s local business tax specialist, provides to businesses. Among those are the following:

  • She discusses zoning issues with new business owners, making sure they do not take inappropriate action predicated on incorrect information they might have received from property owners or businesses.
  • She provides information related to commercial recycling requirements.
  • She helps business owners understand and access the state’s Sunbiz system, with involves the filing of corporation documents and related materials.
  • She provides restaurateurs and owners of food businesses with information they need to know about compliance with Florida Department of Health regulations.
  • She tells business owners about the need for federal tax identification numbers.
  • She offers advice on how to contact Sarasota County staff to obtain the necessary county licenses.
  • She provides copies of Florida Trend’s Small Business magazine, which deals with business opportunities.
A chart shows details of the proposed 2018 General Fund budget for the City of Sarasota. Image courtesy City of Sarasota

(During his remarks, Cooper of the Greater Sarasota Chamber questioned why an extra $1 million per year would be going toward copies of the Florida Trend magazine and providing information about contacting county staff, citing those two of Litchet’s examples.)

The estimated cost of staff’s time spent assisting business owners is $195,962 per year, Litchet said, based on calculations by the city’s Finance Department. Add in the expense of two foot patrol officers from the Police Department, he said, and the total grows to $385,280.

Freeland Eddie replied that salaries the city pays to its employees should cover most of the staff functions Litchet listed in his June 21 memo. In May, she added, she “specifically requested numbers” showing how the tax revenue was spent on particular services. “I was told that because there’s no line item in the budget,” she continued, “no one could calculate for me how those funds are being spent.”

A section of the ordinance shows specific business tax increases. Image courtesy City of Sarasota

“The business tax brings in less than $1 million,” Barwin responded, “and it hasn’t been assigned to any single department of the General Fund. … It’s just one of the revenue sources that help us put the General Fund together to provide the services that our residents receive. … It’s the streets; it’s the parks; it’s the police.”

He also pointed out that the city’s expense for the Police Department will take about 51.6% of the General Fund revenue in the 2018 fiscal year.

When Freeland Eddie asked why staff was proposing the maximum increase of 5% for the tax, Finance Director Kelly Strickland responded, “We’re trying to close the [General Fund budget] gap.”

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