City seeks revenue replacement: Legislation removes business-license fees in the next fiscal year

Published 4:34 pm Thursday, January 1, 2015

The North Carolina General Assembly may have done businesses in North Carolina a favor when it removed from local governments the authority to levy business-license fees beginning with the 2015-2016 fiscal year, which begins July 1.

On May 29, 2014, the Legislature passed, and Gov. Pat McCrory signed, a law that affected business (or privilege) license taxes in North Carolina.

While the law will save businesses money, it does away with a revenue source for local governments, including the City of Washington.

As the city staff and the Washington City Council work on the city’s 2015-2016 fiscal year budget, they face a particular challenge — find a revenue source or sources to replace revenue that in past fiscal years has been generated by city-issued business licenses.

The new privilege license legislation mandated that only businesses physically located within a city or county were subject to the tax for the current 2014-2015 tax year. The legislation also repealed the authority of a city and county to levy future privilege license taxes beginning with the 2015-2016 tax year. As a result, this is the last fiscal year the privilege license tax will be levied, however, the tax collector remains empowered to collect delinquent taxes and audit prior year taxes beyond the next year.

During a recent City Council meeting, City Manager Brian Alligood said it would take an increase of 1.5 cents on the city’s property-tax rate to replace the revenue the city would lose when it no longer can impose business-license fees. Currently, the city’s property-tax rate is 50 cents per $100 valuation. A penny on the tax rate generates about $83,000 in revenue for the city, according to Matt Rauschenbach, the city’s assistant city manager and chief financial office.

The business-license fees used to bring in about $200,000 in revenue each year for the city, Rauschenbach noted. The amount fell to about $120,000 a few years ago after the city modified its fee schedule for business licenses, he said.

The city took in about $123,000 in such revenue during the 2013-2014 fiscal year, he noted.

During that recent meeting when the council was discussing setting goals for the city manager, council member William Pitt said one of the manager’s top goals should be finding a revenue source to replace the revenue generated by the business-license fees charged by the city. “We need a plan to fill in the lost revenue from the privilege-license tax if we don’t have one currently in place. That is something that will be coming to us before July of 2015 — to replace the dollar amounts we’re not going to have available to us because of the privilege-license tax being done away,” Pitt said.


About Mike Voss

Mike Voss is the contributing editor at the Washington Daily News. He has a daughter and four grandchildren. Except for nearly six years he worked at the Free Lance-Star in Fredericksburg, Va., in the early to mid-1990s, he has been at the Daily News since April 1986.
Journalism awards:
• Pulitzer Prize for Meritorious Public Service, 1990.
• Society of Professional Journalists: Sigma Delta Chi Award, Bronze Medallion.
• Associated Press Managing Editors’ Public Service Award.
• Investigative Reporters & Editors’ Award.
• North Carolina Press Association, First Place, Public Service Award, 1989.
• North Carolina Press Association, Second Place, Investigative Reporting, 1990.
All those were for the articles he and Betty Gray wrote about the city’s contaminated water system in 1989-1990.
• North Carolina Press Association, First Place, Investigative Reporting, 1991.
• North Carolina Press Association, Third Place, General News Reporting, 2005.
• North Carolina Press Association, Second Place, Lighter Columns, 2006.
Recently learned he will receive another award.
• North Carolina Press Association, First Place, Lighter Columns, 2010.
4. Lectured at or served on seminar panels at journalism schools at UNC-Chapel Hill, University of Maryland, Columbia University, Mary Washington University and Francis Marion University.

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