LV’s business fees proposal gets revised
Las Vegas is planning to increase fees paid by businesses as part of an ongoing effort to fix projected budget shortfalls, but protests from those affected have persuaded city officials to scale back the proposal.
The biggest proposed change caused the biggest outcry. One provision would've tied the rate used to calculate annual business licensing renewal fees to changes in the Consumer Price Index and population growth.
State law allows that, said Mark Vincent, the city's finance head, but doing so "makes absolutely no sense" as it would grab an ever-increasing share of a business' sales. The language will be removed.
A hearing on the proposed fee changes is scheduled for 10 a.m. today in the Las Vegas City Council chambers, 400 Stewart Ave.
City estimates originally showed that the changes would generate an additional $1.4 million for city operations. With the revisions, that amount probably will be less than $1 million, Vincent said, although he hadn't made the new calculations.
There are two proposed ordinances. They include proposed increases to license fees to cover processing costs; new fees on temporary privileged licenses, such as those for gambling or liquor-related businesses; and a new requirement that those who lease out commercial property must have a business license, which is not required now.
The commercial property proposal has stirred up opposition, said Andy Gruber, an executive with the Cashman Co. and Red Rock Harley-Davidson, and not just because it would cost businesses money.
Landlords, he said, are already paying real estate taxes, while tenants already get business licenses.
Under the proposal, a restaurant in a strip mall would get a business license, as would the landlord renting the space. But a competing restaurant that owns its own land next door would have to shoulder only the costs of one business license.
"It's just wrong. It's too much. It has inherent inequities," Gruber said.
At the same time, some of the other increases probably need to be made, he added. City fees haven't increased in decades and are no longer covering the cost of processing and administration.
"They've been given a burden," he said of the Las Vegas City Council. "They want to do the right thing."
There's also concern that setting a flat rate for business license fees will hurt some businesses, even if it reduces costs for others.
Some businesses pay a flat annual fee that ranges from $50 to $1,200.
Others determine their license renewal fees by measuring gross sales. For example, a business with $540,000 to $600,000 in total sales every six months would owe the city $350, according to a chart in the municipal code that shows 26 different income groups.
Businesses grossing more than $1.2 million in a six-month period determine what they owe by multiplying sales by 0.00056. The proposal would scrap that chart and set a flat rate -- 0.00075 -- for businesses that use the gross sales calculation.
That simplifies things, Vincent said, but not everyone would like it.
"If we could come down to one tier that's a flat rate, that would be simple," he said. "Some people will benefit from that and some people will be hurt by it.
"That's a difficult one. I don't know that we have a solution for that."
Hopefully there is one, said Gruber. He pointed to car dealerships as a business class that would be hurt under the plan. Say a dealership grossed $70 million, he said, and owed $39,200 under the current system. With the new rules, that amount would increase to $52,500.
Gruber said $70 million is a lot of money, but "it's not profit -- it's sales."
"Their bottom line is next to nothing ... it'll cost them $13,000 at a time when they're losing money," he said.
And while the city has agreed to some changes, flat-rate business fees still could be indexed to the Consumer Price Index, and that could be contentious as well.
"We have a problem with institutionalizing a system where the tax perpetually goes up whether there's a need or not for that revenue to increase," said Cara Roberts, spokeswoman for the Las Vegas Chamber of Commerce.
"There's no language that speaks to fees decreasing. What happens if it overgenerates revenues? There's no way that it can go back down."
Contact reporter Alan Choate at achoate@reviewjournal.com or 702-229-6435.
CITY PROPOSALS
The city of Las Vegas has proposed changes to its business licensing structure in order to generate more revenue. The intent is to cover the costs of regulating businesses and provide funds to a cash-strapped city budget.
The proposals include:
Setting a flat rate of 0.00075 for businesses that pay a license fee based on their gross sales. Now, there is a tiered system of charges depending on the amount of sales, and those that gross more than $1.2 million use a rate of 0.00056.
Requiring those who rent out commercial property to get a business license.
Charging a $120 fee if a business doesn't fix licensing violations by the first reinspection, and $180 an hour for subsequent checks until all violations are fixed. There also would be a 10 percent administrative fee.
Increasing the fee for applications for a new business license, change of ownership or corporate officers, business location or name, or a charitable solicitations permit to $50, up from $30.
The initial fee for a license based on gross sales will be at least $100. Now there is no minimum.
Licenses that are delinquent for more than 15 days will be assessed a 25 percent penalty, up from 15 percent.
Licenses more than 30 days delinquent can be deemed expired, not just suspended. Licensees will have to pay a $50 reinstatement fee.
Applicants for a privileged business license would have to pay a $250 or $500 temporary license fee, depending on the type of business, as well as a $100 processing fee.
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