LITTLE ROCK — Little Rock would create a more business-friendly city if it offered free business licenses or at least reduced the amount it charges businesses for inventory, employees and other assessments, a review committee concluded.
A group of Little Rock business owners, led by City Director Stacy Hurst, spent the past year studying Little Rock’s methods of assessing business license fees.
Little Rock has too many types of licenses, according to a presentation Tuesday night to city directors, and some businesses are unfairly penalized by inventory fees because the city doesn’t take into account how much money the business actually makes.
Although some cities in other states charge business fees based on gross receipts or net income, Arkansas law prohibits that practice. The committee also decided that businesses would be hurt by an increase in fees based on the number of their employees.
To offset any reduction in business license fees, the committee suggested Little Rock explore the possibility of a higher sales tax, especially since a half-cent sales tax increase has been proposed for parks and zoo operations.
At 0.5 percent, Little Rock levies one of the lowest city sales taxes in the state. The business license committee’s recommendations did not specify a particular increase.
Eliminating or reducing business license fees “may not be something the city of Little Rock can or wants to do,” Hurst said, but she looks at the discussion as “tax reform.”
In 2009, business license fees generated $5.7 million - about 4.3 percent of Little Rock’s $135 million general fund budget. According to the statistics presented Tuesday, the average license fee for the 9,058 licenses billed in 2009 was $654. Inventory fees, however, averaged around $1,246 for 1,590 of those accounts.
The study also suggested combining some business license categories - there are about 230 now - and extending collections of delinquent accounts to three years.
Hurst, whose family owns a chain of floral shops, and other city directors asked for the study in 2008 after City Manager Bruce Moore proposed raising business license fees to help balance the 2009 budget. He later dropped the proposal.
Another major recommendation in the study also came out of budget talks: Landlords should be required to paybusiness fees for every rental unit they own.
At the moment, the city only requires business licenses for landlords who own four or more units. Landlords pay a $200 base fee for 4 units and $7 for each additional unit up to 100.
The committee suggests landlords who own one to three rental units pay an annual $35 license fee for each unit. The new license fee would raise an estimated $7,000 if everyone complied.
“We don’t think people will be running down to City Hall to sign up,” Moore said.
He expects to incorporate the rental license fee proposal into an ordinance that city directors will get in April.
The license requirement would also help the city track rental units that it tries to periodically inspect, Moore said.
“There are a lot of rental units out there that we’re not aware of,” he said.
Along with Hurst, review committee members included Lucas Hargraves of the Little Rock Regional Chamber of Commerce; Mike Jackson of Mountain Valley Spring Water; Steve Landers of Landers Toyota; Jack Murphy, a former city finance department director; and Garbo Hearne of Pyramid Art, Books and Custom Framing.
Arkansas, Pages 15 on 03/10/2010