Proposed City of Sarasota business tax increase to be reviewed during budget discussions, board decides

New Commissioner Hagen Brody joins two public speakers in opposing the hike, calling it a burden on business owners

(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. News Leader photo

With newly elected Commissioner Hagen Brody in the minority, the Sarasota City Commission this week voted 4-1 to continue until July 3 a discussion of whether it will implement a 5% increase in the city’s tax on businesses.

A second reading of the ordinance with any necessary adjustment could be held during the board’s regular meeting on July 17, City Attorney Robert Fournier pointed out.

Under the provisions of the City Charter, it will take four affirmative votes to increase the tax, city staff said.

During their May 15 session, board members requested details about how the city has been using the revenue, which totaled $937,548.04 in the 2016 fiscal year, according to a staff memo. Every two years since Jan. 1, 2007, the memo notes, the City Commission has approved a hike in the business tax fees. If the fees were increased, the memo says, the city would generate an extra $46,877.40.

Two speakers on May 15 — Kevin Cooper, president and CEO of the Greater Sarasota Chamber of Commerce; and Charles D. Bailey III, an attorney with the Williams Parker firm whose offices are in downtown Sarasota — urged the board not to implement the latest proposed increase.

Cooper pointed out that over the past decade, adding that 5% to each dollar of the tax has resulted in a 28% increase in payments for city business owners. “What other tax in the city has gone up 28% in 10 years?” he asked. “I would submit to you that you’d be hard-pressed to find one. … It is a disproportionate increase in taxes on businesses.”

Cooper added, “It’s a collective $1 million that you’re pulling out of businesses. … That’s a lot of money.”

When Brody asked whether staff had a specific need in mind for the additional $46,877.40 the latest hike would generate, Tim Litchet, director of the city’s Neighborhood and Development Services Department, explained that the money goes into the city’s General Fund and is utilized for a number of purposes, including extra police enforcement in downtown Sarasota.

City Manager Tom Barwin. Photo courtesy City of Sarasota

City Manager Tom Barwin likened the increase in the tax to an adjustment in the Consumer Price Index. The city’s labor and health care costs go up each year, Barwin added. The tax revenue, he continued, “is part of our $200-million financial picture that we put together every year.”

“Business owners would like to know: What am I getting for this extra 5%?” Mayor Shelli Freeland Eddie pointed out. As a city business owner herself, she added, “I pay city and county taxes, so I would like to know where the money’s going.”

Deputy City Manager Marlon Brown replied that the revenue helps pay not only for police protection but also for parks and recreation, landscaping and other city services the General Fund supports. “If this [revenue] goes away, obviously, it’s a huge subtraction from our General Fund, so you have to make it up somewhere.”

Litchet also explained that Joan Keim, the local business tax receipt specialist in his department, “is available to answer questions to businesses that are proposing to locate into the city, and she does it on a daily basis.” She even provides assistance with zoning issues, Litchet noted, as Realtors sometimes tell business owners they can open firms in certain districts when that is not true.

Furthermore, Litchet said, “We do get a lot of requests for different types of reports and what businesses are here.” Many marketing firm representatives speak with Keim, for example, to get help, Litchet added.

“I have no problem with the specialist here,” Cooper said of Keim, adding that he presumed she does not make $1 million a year. “If she does,” he told the board, “I need to talk to her representative and get on that program.”

“Obviously, I have some serious concerns about this tax,” Brody said. “We are going into budget [season],” he continued. I don’t think this is the appropriate time to address this. You know, it’s also symbolic to the small businesses. … The vast majority of businesses in this county are tiny: single owner; couple of employees.”
Brody added, “I do think it sends the wrong message to them, especially if we can’t even cite exactly what we want to use this money for.”

Vice Mayor Liz Alpert suggested the board continue the discussion until it has had the opportunity to hold sessions on the proposed city budget for the 2018 fiscal year. After serving on the commission the past couple of years, she indicated, she has learned much about city finances. “The businesses downtown demand — and they should — a lot of services,” she added.

The upcoming budget discussions “will be an eye-opener to you,” Brown told the commissioners.

Freeland Eddie said she would like to see future city budgets include a line item showing how the business tax revenue is spent, “so we can be able to say, with smiling faces, what we’ve been able to do with these funds.”

The past and questions for the present

During a presentation at the outset of the discussion, Gretchen Schneider, general manager of planning and development for the city, explained that in 1993, the Florida Legislature passed the Dudley bill, which allowed municipalities to undertake an equity study to review occupational licensing fees and recommend changes on the basis of an established formula. The bill also imposed a cap of 10% for any raises of those fees. Further, if any municipality undertook the opportunity afforded by the law, it could consider raising its business tax up to 5% every two years.

The ordinance as proposed includes these among its adjustments. Image courtesy City of Sarasota

In 1994, Schneider continued, the City of Sarasota established an Equity Study Commission comprising five city business owners. After that group completed its work, the City Commission in 1995 passed an ordinance that set a fee schedule based upon the committee’s recommendations.

The largest amount any business owner pays in the city, Schneider pointed out, is $94.50; that is the fee for the “Professional” category.

The city handles about 5,832 business tax receipts each year, she said. The average bill is $108.81.

Other than one time in the middle of the past decade, Litchet noted, the City Commission has raised the tax every two years.

Brody pointed to the $937,548.04 the tax generated last year. “I would assume that’s sufficient for your needs,” he told Litchet and Schneider.

Litchet and Barwin took that opportunity to talk about the revenue going into the city’s General Fund, which also contains ad valorem tax revenue.

Barwin also pointed out, “These records [linked to the business tax] are very helpful when we have complaints. We have something to dive into” if residents end up in disputes with businesses. “It’s an excellent set of records to have for our operations,” he stressed, “and the every-other-year adjustment [to the tax] helps us keep up with inflation.”

Mayor Shelli Freeland Eddie. File photo

When Freeland Eddie asked what percentage of the 2016 fiscal year business tax revenue went to operations and/or city employee salaries, versus projects and services, Schneider replied, “I don’t think we have that specifically broken down in that way.”

During his public remarks, Cooper of the Greater Sarasota Chamber told the commissioners he appreciates the fact that the city requires documentation showing that business owners who represent themselves as pharmacists and CPAs, for example, provide the necessary documentation to support those claims. “That’s a safety net protection for our citizens.” However, he continued, “I would submit to you that [the effort to collect those materials] probably costs less than 10% of what you charge overall.”

Cooper also pointed out that the state statute that authorizes the tax “lets you decrease it whenever you want.”

During his remarks, Bailey referenced a section of the City Charter, which gives the city authority to levy taxes “to provide sufficient revenues to carry on the governance of the city.”

His firm paid about $4,000 altogether in city business taxes last year, Bailey said. While he wants to do his part to enable the city to provide services for its businesses, he continued, he wanted to be certain the city was not charging more than necessary.

City Manager Barwin pointed out that the city has only 13% of the total population in the county; yet, the city generates substantial portions of county sales and gas tax revenue, along with about 30% of the annual Tourist Development Tax revenue.

Freeland Eddie suggested that figures illustrating his points might be sufficient for the commissioners to justify the business tax increases.