The annual fee businesses pay the city to operate in the corporate limits of Hot Springs will increase in 2022 and 2023, the first increase in the privilege or occupation fee since 2002.
The enabling ordinance the Hot Springs Board of Directors adopted last week raised the fee, which will increase 5% in 2022 and 2% in 2023. According to the 2021 budget the board adopted last week, the fee is projected to raise $750,000 for the general fund next year. The city said a 2% increase will raise an additional $15,000 a year.
The fee a business pays is based on the business sector assigned to it by the North American Industry Classification System.
"Our license fees are substantially below some of our peer cities," Finance Director/Treasurer Dorethea Yates told the board. "We don't want to do an increase in 2021. It's been a rough year for our businesses. We're asking for a 2% increase in 2022 and 2023."
The board adopted District 4 Director Carroll Weatherford's motion for a 5% increase to take effect in 2022. The motion passed 6-1, with District 5 Director Karen Garcia opposing the motion. Garcia also voted against the amended ordinance.
"That's not very much of an increase," Weatherford, referring to the 2% the city asked to take effect in 2022, told Yates. "I would say there's probably a lot of businesses that are not paying occupation taxes. You have these lawn care guys running up and down the street with a truck and trailer. And I guarantee 75% are not paying occupation tax."
The city code requires the city to publish the list of delinquent businesses every year. City Attorney Brian Albright told the board 106 citations were issued for nonpayment this year.
The ordinance changed the name of the fee to a business license.
"It's more of a modern term," Yates told the board.
The ordinance also changed the past-due date from March 31 to the last day of February. A 10% penalty will continue to be assessed for past-due accounts, but the ordinance assesses an additional 30% penalty for payments made after March 31. The new penalty schedule will take effect next year.
"The process to collect delinquent business license receivables is time-consuming and expensive, due to the requirement for publication," the finance department stated in its request for board action. "This additional penalty would serve as an incentive for timely payment and a method of defraying those expenses."
The fee for businesses that don't operate year-round will be prorated on a quarterly basis under the amendments the board ratified last week. The fee was prorated on a monthly basis under
the previous code.
Businesses could pay the fee in two installments, paying the initial installment in January and the balance in July, under the old code, but that option will no longer be available starting next year.
"We do not have any customers that take advantage of this, so the proposal is to remove this from the ordinance," the finance department said.
The ordinance assesses a $15 administrative fee for refunds. According to the amendment, a refund of more than $500 requires city manager approval. Refunds will be limited to one year of fees, and the city can't collect on more than three years of past-due payments beyond the current year.