Town, county disagree over business tax by james jacenich • staff writer
MONTEREY - If supervisors were to implement a business, professional and occupational license in Highland County, they wouldn't want to share the revenue with the town of Monterey.
That's what Highland supervisor Jerry Rexrode told the mayor and town council of Monterey at a joint work session Tuesday.
The other two members of the board agreed with Rexrode.
Mayor Janice Warner said she couldn't speak for the town council, but she was not willing to give up all the potential revenue generated by the proposed license. She added that discussions were in a preliminary stage and no final decision had been made.
"We've got to look at other sources of revenue instead of real estate," said Rexrode. He gave two purposes for a business license - to track the number of businesses operating in Highland County and to collect revenue. "We don't know who has a business and who doesn't," he said.
Chairman Robin Sullenberger explained the primary purpose of a business license would be to collect revenue for use by local government. Rexrode added the money would specifically go to the school system.
"If we go along with a tax, is the town going to take it?" Rexrode asked council members. "If we can't collect from the town, is it viable to collect in the county? You can't give a tax break in one place (possibly a tax-break for farmers) without making it up in another."
"We need money, too," responded Warner.
She asked how the county intended to enforce the license if it were implemented. Supervisors said enforcement would be through the state tax reporting system and would be monitored by the commissioner of revenue, as with the existing merchant's capital tax.
Warner also wanted to know how much money the license would generate and how much it would cost to administer the program. "I don't know that it would even be productive," she said.
Bobbie Griffin, commissioner of revenue, said, "You have to have merchant's capital or a business license. You can't have both." So money gained by the license would be lost from merchant's capital. Again, a precise idea of how that would affect the amount received is not known because the number of businesses is not known and the amount of the tax or license has not been set, but loss of one source could possibly cancel out the gain from the other, she explained.
Griffin researched tax schedules she received from the state and estimated 166 known businesses generate around $2,600 annually from merchant's capital. Merchant's capital is taxed at a rate of about 20 percent on the inventory left at the end of the year. If a license fee is charged instead of a tax, the maximum the county could charge is $30 by state law. At that rate the county would only get around $5,000 from a license.
Roberta Lambert, county administrator, said taxes collected from a business license could amount to $15,000 a year. Each business would be paying an average of $90 a year.
Lois White, county treasurer, said the 1 percent local sales tax earned the county $85,000 to $90,000 a year, which indicates annual sales in the county of at least $8 million.
Rexrode said with that much income it seemed businesses should be able to afford an additional business license fee or tax. But he was satisfied he had enough information to take a position, even if he wasn't ready to vote on it. If the county doesn't get it all, it probably wouldn't be worth doing, he said.
Councilman Sam Shell said the town had expenses of its own and could use at least some of the money generated from a license. He mentioned costs associated with the sewer plant upgrade and recent debt incurred for inflow and infiltration work completed late last year - two reasons for the town to be on the lookout for additional sources of revenue as well.
Town officials have authority to start a Monterey town business tax, but have not done so.
Councilman Francis Fenn reminded supervisors the town relied on income from sewer and water services to pay for town government; the town's real estate tax did not generate enough to support town government without sewer and water service and additional sources of revenue would also be in the best interests of Monterey.
Rexrode said a tax on meals and lodging was also a possibility, but not likely because of the negative effect it would have on the county's restaurants and inns.
Warner agreed, adding a meals and lodging tax could be enough to put some out of business."Restaurants have to struggle in the winter," said Warner. "If you tax them more, they can't continue."
"We can put (a tax increase) on real estate and you have no say in it," Rexrode told the town. He said, to counter the argument, the town could keep a portion of the business license revenue. If it did so, the county could make up for the loss to the county by increasing the real estate tax.
"Wind mills will be built by next year," said councilman Francis Fenn. "Let's wait and see what you get from that."
"I don't believe they will be built by then," said Rexrode.
Rexrode said the town took the county sticker money when that program was started in the 1970s. "That money was intended to pay for school buses," said Rexrode. He implied the town would also be likely to take the business license revenue generated by town businesses instead of giving it to the county.
"We think it's unreasonable for you to think that we aren't going to take a part of this tax," said Warner.
"This is all very preliminary," said Sullenberger. "I'll say that I have been skeptical from the beginning (about a business tax), but we have to explore it … Can we come up with enough things (other sources of revenue) to make this worthwhile?"
Supervisors tabled discussion of a business tax and pressed on with other items on their agenda.
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