City Leaders Watch Business Licenses for COVID-19 Impact

(Source: Ken Hawkins via Flickr)

In a March presentation on how the city of Birmingham’s finances are faring one year into the pandemic, city finance director Lester Smith said business license filings were down about 500 in the first 2.5 months of the year compared to the same time last year.

“My concern is that differentiation between those numbers may be lost businesses, but we don’t know that yet, so we have to continue to monitor it,” Smith said late last month.

Municipal business licenses are usually due early each year and have been an anticipated gauge of the true economic impact of COVID-19.

“The overall concern is that in the municipalities that have seen a downturn in license renewals, is that you have lost some jobs and loss of business investment in your community,” Alabama League of Municipalities Executive Director Greg Cochran told Alabama Daily News. “Ensuring that businesses stayed healthy during the pandemic and stayed afloat financially was a difficult tight rope for a lot of them to maneuver down.”

There’s no statewide collection of business license data. Alabama Daily News reached out to some of the state’s largest cities about their 2021 licenses compared to 2020 and 2019. Several reported at least a slight decline.

Cochran said business loss has occurred mainly in the larger cities that also saw downturns in sales tax and lodging tax collections because of a halt on people visiting for events and business travel.

Rosemary Elebash, state director of the National Federation of Independent Businesses, said that when businesses were shut down or had their capacities limited in response to COVID-19, many were sitting on inventory and goods they could not sell.

They were stuck, she said.

“I suspect that if you dive deep, that you’re gonna see the business closures are either restaurants, because they were shuttered, and retail,” Elebash said. She said small, specialty retailers especially suffered.

Kyle Demeester, Decatur’s chief financial officer, said the city keeps a watchful eye on business licenses and citywide revenues.

“There is always a concern for businesses closing, COVID-19 related or not,” Demeester said. “We as a city want every business in our city to succeed, not just from a city financial perspective, but from a position of bettering the quality of life for our citizens of Decatur. We do all we can to provide as much assistance to our business owners as possible.”

As of early April, Decatur had issued 6,225 licenses. In all of 2020 and 2021, it issued 7,688 and 7,885, respectively.

Demeester noted that 1,050 of the 2020 licenses and 1,157 of the 2019 licenses came in after April.

He said the average business license brings in less than $300 in revenue.

“When creating our fiscal year 2021 budget, we took a very conservative approach,” he said. “With that being said, we have already exceeded budgeted revenues for business licenses – which is fantastic news.”

In Montgomery, total business licenses in the first three months of 2021 were 11,974, down slightly from 12,154 in 2020 but up a bit from 2019’s 11,855.

Mayor Steven Reed noted in a presentation to the city council earlier this month that, though licenses are down comparatively, 4.5% more revenue has been collected on those licenses, totaling about $31.2 million. According to the city, that’s because many of the businesses saw a positive growth rate during a pandemic year compared to the previous year. License fees are based on the company’s previous year’s gross sales. Grocery, home improvement and sporting goods sectors saw increases.

In Birmingham last month, Smith said the decline to about 12,500 total licenses represented about a $4.6 million revenue decline for the city to about $64.4 million.

While renewals are due early in the year, several municipalities noted that numbers can continue to increase as the year goes on.

Between Jan. 1 and April 14 this year, Tuscaloosa issued 7,041 business licenses. That compares to 7,505 and 8,072 during the same time periods in 2020 and 2019, respectively.

City spokesman Richard Rush said the data doesn’t paint the whole picture because some businesses renew later in the year after the deadline.

“That being said, there has been a trend nationally that would indicate that some of the drop leading into the 2021 calendar year is due to COVID-19,” Rush said.

In Florence, license inspector Chris Faust said licenses seem to be about on pace from last year. Earlier this year, 4,066 had been issued, compared to 4,116 in 2020 and 4,267 in 2019.

Cochran said some smaller cities saw some growth of existing businesses because people were staying and spending locally during the pandemic.

“We didn’t see growth as in new businesses opening, necessarily, but we did see growth in that people were staying closer to home,” Cochran said.

He also said larger cities are seeing an uptick in visits and conventions.

Elebash said federal aid, including the Paycheck Protection Program, was and continues to be vital to many businesses.

“It kept a lot of businesses open last year,” Elebash said.

Businesses can continue to apply for the latest round of PPP through the end of May.

“This is a long way from being over and businesses are still continuing to use the PPP and other grants,” she said.

Elebash said some businesses are using low-interest Small Business Administration loans to pay down debt.

Meanwhile, they’re thinking about changes in how they operate moving forward, including their supply chains and the amount of inventory they hold.

“But most importantly, they want to be debt free,” she said.

In Hoover, as of April 6, there were 6,365 license renewals and 429 new licenses.

That’s an increase from the first quarter of 2020’s 5,854 renewals and 349 new licenses and first quarter 2019’s 6,067 renewals and 240 new licenses.

Allan Rice, Hoover’s city administrator, said he thinks its pre-COVID momentum has helped the city and others of similar size and situation in weathering the pandemic. Besides being up in business licenses, Hoover has seen an increase in sales tax receipts and housing starts.

Rice said the city did see some closures, particularly in retail and service sectors, but COVID-19 hasn’t had the economy killing effect that was feared a year ago.

Earlier this month, 3,800 business licenses had been processed in Anniston, 277 of them new. In all of 2020, there were 4,898 and 539 of them new; in 2019 there were 5,304 and 788 were new.

Jackson Hodges, a spokesman for Anniston, said while more licenses will be added as the year goes on, uncertainty about COVID-19 and a new federal administration may have led to fewer, especially new ones.

He also said there now appears to be a “renewed optimism.”

“Everyone is excited for a return to form and we’re working diligently toward that,” Jackson said.

From January through March, Mobile issued 12,092 licenses renewals and 352 new licenses. That’s a decrease from 12,717 renewals and 586 new licenses in the first three months of 2020 and 12,878 renewals and 654 new licenses in the same quarter in 2019.