There are many signs in the city’s annual budget that can reflect the health of the local economy.
When revenue is up from collected property and sales taxes, as they have been the past couple of years, it’s seen as a positive.
Yet, when Mayor Lenny Curry’s budget team was putting together this year’s spending plan, there was one business-related factor that wasn’t up.
In fact, it was down significantly.
This year, the city’s local business tax was about $7.3 million. Next year, though, it was initially projected to only bring in $6.7 million, down about $600,000.
The tax, also known as an occupational license, is a self-reported levy businesses pay for operating in the county. Number of employees, equipment and seating capacity are a few factors that determine the amount due, according to a city website.
Florida statutes for decades have provided all counties the ability levy such a tax. In Northeast Florida, Clay and Nassau counties do not collect the fee, though St. Johns County does.
There have been plenty of job announcements the past year. Unemployment numbers have consistently ticked down. Gas tax, sales tax and property taxes all were up and are considered indicators of a healthy economy.
Why was the business tax down so much?
“That one kind of threw us for a loop,” said City Council Auditor Kirk Sherman.
After dropping to just more than $7 million in fiscal 2013-14, the figure shot up the next year by about $300,000. It was about $7.3 million again this year.
While some tailing off might be expected, the initial projection of $600,000 was odd, said Sherman.
Generally, it can be an enforcement issue or a hint of a downturn in business.
Tax Collector Michael Corrigan said he doesn’t think it’s the sign of a weak local business climate, based on a number of factors.
For example, smaller businesses could merge.
New businesses might not realize they have to pay the fee, which averages about $110 a year. Fines for late payment are $250, an amount that doesn’t generate strong enforcement efforts, he said.
When a business opens, the owner is not notified about the tax. However, all businesses that pay the tax receive an annual renewal notice.
But, Corrigan’s office has been partnering with other city departments to ensure people are in compliance.
When the fire marshals inspect businesses for safety, they now ask if the owner has the local business tax receipt. When business owners engage with the city’s planning department to acquire certificates of use, they’re asked the same question.
The Tax Collector’s Office had field inspectors until budget cuts about five years ago.
Still, said Corrigan, other factors like property taxes can better show the local economy’s health.
Council member Bill Gulliford said he is not so sure. “I am not convinced it’s not a decline in business activity,” he said.
Gulliford, who sells construction equipment, said it jives with trends he is seeing locally and nationally. Typically, he said, consumer-related factors like spending and property taxes lag behind business-related ones when it comes to economic warning signs.
“It’s worrisome,” he said. “We don’t need that as a city right now.”
Despite the projected drop initially, there was some positive news Thursday.
Based on the third quarter city financial projections recently released, Sherman and his office felt comfortable enough to advise the council Finance Committee it could raise the amount of those taxes collected by about $345,000.
This adjustment was based on this year’s third quarter revenue and expenses coming in, which were largely better than anticipated.
That would put the figure back at about $7 million.
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