Aiken City Council Gets Earful on Spending, Fees

April 27, 2010

Investigative Reports

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The NerveJane Page Thompson
Citizen Reporter

In Aiken, general government spending has increased by 43 percent over the past six budget cycles, prompting taxpayers to ask City Council to hear what S.C. Policy Council President Ashley Landess had to say about business license fees. Those fees are based on a business’ gross income as mandated by the General Assembly.

The free market is the engine that drives a strong economy, Landess said Monday night. Aiken has increased its workforce by 17 percent and its economic development budget by 170 percent during the above time frame, she said.

“If your city government is growing by adding six jobs in the 2008-2009 cycle, has been investing in capital projects like indoor swimming pools and museums and increased spending on advertising when businesses are cutting back on marketing costs, putting off capital projects and laying off workers, which the 16 percent unemployment rate estimated by the SCPC for the city of Aiken indicates, then a tipping point is fast approaching where business can no longer afford to operate and pay its fees and taxes to maintain government’s rate of growth,” she said.

Her words were echoed by local business owner Katy Lipscomb. She told Council she rents a space in a large retail complex, absorbing the passed-on business license fees of utility companies, her landlord, the garbage collector, landscape and security companies. She also pays her own fees and taxes.

“Government needs to be mindful of the way it spends our money,” Lipscomb said. “Forcing a business’ fixed costs up through increased fees while sales volume is on the decline forces stores to close, as Aiken has seen in the increased number of vacant buildings in downtown and throughout the city.”

She said the city supports the Municipal Association’s lobbying efforts to keep taxes and fees high. At the same time, she added, businesses suffer so government can be guaranteed its 1 percent annual pay raise while many small businesses have lost too much revenue to afford a unilateral wage increase.

Spending Continues in Hard Times

Also on the council’s agenda was the appropriation of local-option sales tax capital improvement projects, including the Aiken Society for the Prevention from Cruelty to Animals (SPCA) for $1 million, the African-American History, Art and Culture Center for $350,000, Aiken County Family YMCA indoor swimming pool for $400,000 and a teen youth center for $500,000.

When a concerned citizen asked if the youth center property is worth $500,000, council attorney Gary Smith said that the city was not buying the land, but giving the tax benefit to the Y in exchange for the deed to the property. That response was met with jeers from the crowd.

An investigation revealed an appraised value based on closed comparables over the past two budget cycle would put the family Y property at an average value of $16,207 per acre. As the Aiken County school bond referendum evidence supports, teens are hard on the structures they use, so the likelihood of the center being in an appreciated state of value at the end of the lease-back period is unlikely.

So, it would appear the city is willing to pay $225,000 too much for the land.

But the city is looking to the greater good, believing that the health benefit will offset that expenditure over time, help decrease childhood obesity and provide a safe and structured environment for the area youth to learn, grow and become productive citizens.

Landess got council members thinking that they may need to consider further discussion on the issues with business license fees, but it was only after the city heard from J.B. Miller and James Yon that council members acknowledged a mounting problem.

Miller owns a building in the city limits. Because of the rental registry imposed by the city two years ago, he got a business license to run his building as a rental and the renter pays for a business license, as well. However, Miller pays a double rate for his license because his business address is his home, which is in the county.

Miller could avoid being charged this double rate by either filing an income tax return that states his address as the building in the city limits or he could rent a mailbox at the UPS store to get an address in the city. Or, as Mayor Fred Cavanaugh suggested, he could move his residence into the city.

When asked why there’s a double tax for people and businesses whose mailing addresses fall outside the city limits, officials had no explanation, only that they assumed that if the business was located outside the city the owner was not paying property tax to the city and the doubled fee helped make up for that.

But in Miller’s case he is not only paying property tax to the city, he and his tenant are paying three times for the right to do business in the city.

Along these same lines, Yon stated to council that he was threatened with arrest if he did not provide proof of a business license for his floral deliveries to residents in the city or patients at the hospital.

Yon has been working for months with the city to determine what and how the calculation of his business license fee should be. He asked who represented his concerns on council because he neither owns commercial nor residential property in the city.

Beyond raising the “taxation without representation issue,” Yon explained that the burden of determining city versus county versus other political subdivisions that may require similar licenses would be burdensome to his business. He was  also concerned that the city wants to charge him for forms and lists requested under the Freedom of Information Act (FOIA).

Considering a High Court Case

Beyond those localized concerns, it’s become clear that the implications of South Carolina’s business license fee structure could be fought the same way interstate sales tax collections were battled in the Supreme Court’s Quill decision.

That decision relieved the burden of businesses from requiring multiple political subdivision tax collection and protects Internet businesses — without connections in a state — from collecting sales taxes or maintaining business licenses in those areas.

If the logic behind Quill were applied within the state, then forcing businesses to maintain multiple licenses and keep geographic as well as accrual records would be a violation of the commerce clause and an unfair business practice, as well.

As these concerns came to light, each council member chimed in with questions and concerns except Don Wells, the lone small businessman on council. Most council members were open to the idea of a forum to investigate the fees charged and licensing process for businesses.

The mayor repeated several times that the city would look into doing all it can to help its businesses. He directed his staff to meet with those business owners present who needed specific issues clarified.

Other business persons testified before council about their concerns that income tax returns are required to be presented to the city along with the business license request.

Business owner Debbie Nix said her business return calculates work done all over the region, including Georgia, not just the city, so it does not give an accurate indication of gross income for her license. She and several other business owners felt this requirement to provide income tax returns is a violation of their privacy.

Landess’ presentation helped bring several mounting issues to light and provoked a supportive response from council.

Jane Page Thompson is an accredited land consultant and realtor from Aiken. She is active in her community and is involved in local political party grassroots development.