Pandemic's impact on business license revenues not as bad as feared

Feb. 28—Decatur officials' fear that the pandemic would slash business revenue and, along with it, the revenue the city receives from business license fees, appears to have been unwarranted.

Already, revenue from those fees exceeds the amount budgeted, and it's still rising.

Through Tuesday, according to Finance Manager Kyle Demeester, the city had collected $5.23 million in business license fees, which is $608,405 above the fiscal 2021 budgeted amount. Second notices went out this past week and third notices are scheduled for mailing in March. Additionally, insurance company business license fees are just coming due, Demeester said.

Demeester said new business licenses would also add to the final revenue numbers, so it's still possible the city will reach the same level as fiscal 2020's $6.34 million in business license revenue. Business license fees are based on business income from the previous calendar year, so the fiscal 2020 fees were unaffected by the coronavirus pandemic, which hit the area last March.

Officials feared the license fees for calendar year 2020 business receipts would be severely depressed because for most of 2020, businesses weathered either a state-ordered shutdown or consumers' concerns about COVID-19.

"We've already exceeded our budgeted revenue," Demeester said. "When we set the original budget, it is a zero-based budget meaning revenues equal expenditures. I anticipate additional revenue to continue. We're doing well."

Business license fees are a percentage based on a business' gross receipts — revenue before expenses — from the previous calendar year and vary depending on the kind and size of the business. For example, retail merchants and restaurants pay a minimum of $75 if gross receipts are less than $10,000. If gross receipts for the year exceed $100,000, they owe $300 plus one-tenth of 1% of gross receipts above $100,000. Manufacturers owe a minimum of $250 and, if their gross receipts exceed $100 million for the year, they owe $6,000 plus one-thirtieth of 1% of gross receipts exceeding $10 million.

The business license taxes for calendar year 2020 receipts were due in January, except the license tax for insurance companies was due in February.

The last budget presented by former Chief Financial Officer John Andrzejewski and approved by the outgoing City Council was about $3.7 million less than fiscal 2020 at roughly $65 million.

The approved budget projected business license fee revenue to be down 27% at $4.62 million, Demeester said.

"There was a mindset that we thought the pandemic would have an effect on gross receipts," said Demeester, who has been offered a promotion to the CFO position. Andrzejewski retired in January.

City leaders, pleased business license revenues are much better than expected, praised Andrzejewski for his last budget.

"John did a good job of creating a conservative budget with a very realistic approach," Councilman Billy Jackson said.

Mayor Tab Bowling called Andrzejewski's conservative approach "very wise."

Economy 'resilient'

Council President Jacob Ladner said the business license numbers are great news, and he said local businesses have weathered the storm better than in other parts of the nation.

"The local economy has been amazing," Ladner said. "We thought the pandemic would have a negative impact but, as a whole, it's been very resilient."

Ladner said Decatur residents did their part in helping the city by shopping local and eating takeout to keep most restaurants open.

"We lost a few, but most of the businesses are surviving," Ladner said.

Ladner said Demeester gave the council a heads up earlier this month that business license revenues were trending in the right direction.

"We want to be cautious, but Kyle had said we were doing well. That's why we went ahead with the paving," Ladner said.

The City Council on Feb. 15 approved $1.26 million in additional paving. The city has finished $1.3 million in paving that was already in the budget.

However, Jackson said the council and mayor shouldn't get too excited about the numbers and start spending at will.

"We still have to be very, very cautious," Jackson said. "We do know that businesses are being adversely impacted by the coronavirus pandemic. Regardless of the good news, we have to stay fiscally conservative. We're not out of the woods yet."

Bowling said he agreed with Jackson on the conservative fiscal approach, and said they're already being flooded with funding requests from city departments and others. For example, Decatur Fire & Rescue recently requested additional pay for paramedics.

Ladner said the previous City Council president, Paige Bibbee, and Councilman Carlton McMasters requested the city improve its public tennis courts.

"They say we lost some state tournaments because of the condition of our tennis courts," Ladner said.

The city is building a fire station on Danville Road for $3.2 million, and plans are in the works to renovate Carrie Matthews Recreation Center, Bowling said.

"Carrie Matthews is definitely a priority," Bowling said. "We are thankful for the agreement in place for Decatur Youth Services to lease the old Boys and Girls Club on Sixth Street Northwest from the Housing Authority."

A consultant recently presented a $7 million streetscape plan for Sixth Avenue, from Hudson Memorial Bridge to Delano Park.

While they're looking for possible grants, Ladner and Bowling said the city may have to go to the bond market to fund the project meant to beautify this entrance into Decatur.

"It's a big plan and we have to be conservative with the time frame moving forward," Ladner said.

Bowling and Ladner agreed that the Point Mallard Ice Complex repairs are on hold. An inspection found the pipes used to create the ice were deteriorating and repair estimates were as high as $4 million.

"There's a great need for the City Council to establish some priorities with the way requests for the departments and other people are coming in," Bowling said.

— bayne.hughes@decaturdaily.com or 256-340-2432. Twitter @DD_BayneHughes.