Fee increase

Published 3:19 pm Saturday, August 9, 2008

By Staff
draws criticism
Business owners to air complaints
Contributing Editor
Washington’s City Council can expect to hear criticism about its decision to increase the city’s maximum fee for some business-privilege licenses when it meets Monday afternoon.
Several people are scheduled to discuss the increase during the public-appearances segment of the council’s meeting, usually conducted within about 15 minutes after the council begins its meeting at 4:30 p.m.
Some of those people are so upset with the increase — up to 500 percent in some cases — that they are contemplating not paying their fees.
That increase took effect July 1, the beginning of the new fiscal year. The increase was approved by the council on June 23 during a budget work session. Mayor Pro Tempore Doug Mercer suggested the city adjust some of its fees to bring them in line with fees charged by other cities and towns.
At that meeting, the council increased the maximum fee for a privilege license in three categories — manufacturing, retail and wholesale establishments that have gross receipts of more than $25,000 — from $500 to $2,500. The increase did not apply to service businesses.
The minimum fee for a privilege license issued by the city is $50. The fee a business is charged for a privilege license is based on gross receipts of that business.
After adjusting the maximum fee for the manufacturing, retail and wholesale categories, the council agreed to have the city manager and department heads look at adjusting the fees for other categories, with the city manager and department heads to present their recommendations to the council later. That presentation could come Monday.
Griffin said his company saw its fee increase from $500 to $2,500.
Skip Smith, president of XS Smith, which is located at the Beaufort County Industrial Park, said his company experienced the same increase.
Lesha Brooks with Brooks Boatworks, also located at the industrial park, said her company fared a little better. It’s fee increased from $500 to almost $2,000.
Brooks, Smith and Griffin each said the imposition of the increase during a recession makes it even more difficult for their companies to make a profit. The three business owners said they also fault the city for not providing them proper notification the fee was increasing and an explanation for the increase.
Brooks said she has a problem with the fee structure not being equitable.
Brooks said the increase poses the threat of some businesses laying off some of their employees in an economy where those businesses are being forced to cut back on production because of a lack of orders from customers.
Smith believes the council didn’t think through what its decision to increase the fee would fully mean to businesses and how those businesses would react.
Smith said it would have been more “palatable” to him if the city opted to increase the maximum fee by 100 percent, with that increase spread out in 20-percent increments over five years.
Councilman Archie Jennings said he’s willing to revisit the matter to try to determine if there’s a more-equitable way for the city to increase its maximum fee for a privilege license. Jennings said he’s willing to consider increasing the maximum fee in phases so that increase doesn’t take place at one time.
Jennings said the city’s reasoning behind the decision to increase the maximum fee was to avoid situations in which a large company like Wal-Mart is paying the same fee as a smaller company that makes much less money than the larger company.
There was another factor the city considered before it increased the maximum fee, he said.
Smith, Brooks and Griffin said they don’t have much faith in the survey the city performed while investigating privilege-license fees in other cities and towns. For example, they said, the city’s survey indicates that Wilson’s maximum fee is $7,500, but that research does not show that the $7,500 fee is for businesses with gross receipts of $10 million or more a year. They believe the city is not providing a full and fair comparison of its fees to fees charged by other cities and towns.
They said it would be cheaper for them to do business in places like Fayetteville or Carrboro. Fayetteville bases its fee schedule on a company’s work force. A company with five or less workers pays a $25 fee. A company with more than five workers pays a $50 fee, according to Brooks.
Brooks, Smith and Griffin also question why the service-related businesses are exempt from the increase. That exemption is not fair to the other business categories hit with the increase, they said.
Brooks, Griffin and Smith also said they believe the city opted to increase the maximum fee to generate revenue instead of raising the property-tax rate, which they contend would have been more equitable. They believe the city’s business community is being singled out to bear an inequitable share of tax burden. If the city needs more money, the best way to do that would be by way of an increase in the property-tax rate, Smith said, because it’s a fairer method.
At the council’s July 14 meeting, Gary Tomasulo, president of the Historic Downtown Washington Merchants Association, voiced his displeasure with the increase in some of the privilege-license fees.
Tomasulo asked the council to reconsider its decision to increase some of the fees.
At that same meeting, Tom Thompson, executive director of the Beaufort County Economic Development Commission, said he has received complaints about the increase from several manufacturers. Thompson told the council that at least one manufacturer was upset that it received no explanation for the increase.
The City Council meets in the Council Chambers on the second floor of the Municipal Building at 102 E. Second St.