Why Columbus Council delayed possible solution to resolve multimillion-dollar problem
Columbus city officials are considering changing how business owners pay taxes to make processing business licenses more efficient using automation.
However, this change could result in businesses being required to pay taxes only annually, removing an option to pay them quarterly.
Problems with revenue collection began in 2023 after the Columbus Council requested a finance department audit that found a backlog in processing business and alcohol licenses, costing the city millions of dollars. Estimates of the cost ranged from $2.5 million to $45.1 million.
Issues in the finance department have become potentially criminal. The Muscogee County Sheriff’s Office investigation of city officials involved in this problem has been assigned to Towaliga Circuit District Attorney Jonathan Adams.
Automation was among the recommendations made in an initial report presented in January to help solve the city’s longstanding problems with the business and alcohol licensing renewal process.
Implementing automation made the least progress of all the recommendations included in the initial report, Pamela Hefner, a manager from the Atlanta-based forensic accounting firm Acuitas, Inc., told councilors at a Nov. 19 meeting.
For now, only a pilot program for the online filing of mixed drinks and short-term rentals excise taxes has been launched using the software application, Energov, which some government agencies use to manage permitting, inspections and code enforcement.
To move forward with online renewals, which were on track to be in place by April next year, changes need to be made to the payment options available for businesses, Angelica Alexander, director of finance, told the council at a Dec. 10 meeting.
Alexander presented an ordinance that would have removed the option for businesses to pay the occupation tax quarterly.
“The quarterly payment option is just not conducive to an online process,” Alexander said. “Based on our research on additional municipalities, the quarterly payment option is really unique to Columbus. I haven’t found one yet that offers a quarterly payment option.”
Allowing some people to pay quarterly and in-person, while others pay annually online would put an additional burden on the staff to keep up with two different sets of forms, Alexander said.
Of the more than 8,000 businesses in Columbus, she said, less than 300 use the quarterly payment option.
Councilors, after raising concerns about how this move could create a hardship on small business owners and new businesses, tabled the ordinance. A move that ensured implementing online renewals would not be happening in 2025, despite the process being considered key in tackling the large backlog and avoiding another one in the future.
Why the council rejected the ordinance
Removing the option for quarterly payment, had the council gone on to approve it at a second reading later this month, would have gone into effect Jan. 1, 2025.
Councilor Toyia Tucker of District 4 raised concerns that this quick turnaround would create a hardship for businesses that use the quarterly payment option and would not be prepared to pay an annual bill in April.
With only a few weeks left in 2024, to tell business owners who have been using the quarterly payment option that they only have between January and April to prepare to make a full annual payment would be difficult for them, Tucker said.
“I just don’t want to hurt the small business owner and possibly put them on a path where they’re no longer a business owner,” she said.
There should be a longer transition period for a change like this, Tucker said.
Councilor Charmaine Crabb of District 5 raised concerns about how this would affect new business owners and potentially create a barrier for someone starting a business.
For a new business, trying to estimate what your annual income is going to be for the next year is hard when you live month-by-month, Crabb said. A new business could have a great January, she said, and then have nothing in February and March.
It can be unpredictable, Crabb said.
“We want to help these businesses succeed, stay here and stay open,” she said. “We don’t want to add additional burdens to them.”
Paying online would be a convenience, Aresha LeFlore, owner of Popbar Columbus, told the Ledger-Enquirer. But the new business owner believes paying the taxes annually would create a hardship for her.
“Right now, it’s very new,” LeFlore said. “You don’t know how much the expenses are going to be. You don’t know how much you’re going to pay your employees. You don’t know what the business will be like as far as any type of income.”
Questions about looking into alternatives
Councilors wanted the finance department to look into other options for automating the system without losing the option for quarterly payments.
“I’m all about efficiency and paying online,” Crabb said. “But we need to be business friendly also.”
When asked whether they looked into other systems that could be used, Alexander told the council that the research was looking into other municipalities rather than specific systems.
“Looking at the governments that have these different systems, none of them offer a quarterly option,” she said.
Crabb took issue with the idea that creating a process for online renewals would remove options for Columbus residents, she told the Ledger-Enquirer. She likened it to changes made by waste management requiring citizens to use new trash cans, even if some already owned trash cans that fit the same criteria.
“They’re trying to steer us down one path,” she said. “And they’re doing it again. There’s a pattern here, and I think our citizens should be able to pay their (occupation) tax the way they pay their income tax.”
People are allowed to pay their income tax quarterly, Crabb said, so they should also be able to pay their occupation taxes quarterly.
Automation is still key, questions on outsourcing
During the meeting, the council initially considered allowing the ordinance to move forward to a second reading with an amendment stating that individuals who were already paying quarterly could continue to do so in 2025. However, by the following year, annual payments would be required for everyone.
But concerns that annual payments could negatively impact new businesses led to the council voting to completely table the policy.
With this decision, the renewals won’t be going online with the current software system the city has, Alexander said during the council meeting.
“The software that we currently use is not just for the revenue decision of the finance department,” she said. “It’s also utilized by Inspections and Code and Planning and Engineering.”
So, when looking at other systems, departments will have to come together that would work for all of them, she said.
Alexander agreed to do more research on whether the current system could be changed to accommodate quarterly payments and whether other systems are available that offer an option for quarterly payments.
The council voted 6-2 to table removing the quarterly payments option . Councilors Glenn Davis of District 2 and Joanne Cogle of District 7 voted to move forward with the amendment allowing those paying quarterly another year of transition.
Davis voted against the motion to table it because he believed there was a plan to move forward with a transition for those paying quarterly while also looking into other ways to preserve quarterly payments. Digitizing the process is key, he said.
“It seems like now we’re pushing it off another year if we even get to that point,” Davis said. “We’ll still be one of the few (municipalities) that are not automated.”
Along with researching ways to automate the system, the city is also preparing to explore outsourcing the department. With so many moving parts in the finance department right now, Crabb told the Ledger-Enquirer, there shouldn’t be a rush to move forward with automation until the city knows the results of whether the department could be outsourced.
LeFlore believes online renewals could make things easier, but she urges decision-makers to consider potential challenges for citizens.
“There should not be any type of hardship caused by a new process,” she said.
