Local Government Revenue Indicates Sluggish Recovery for Florida’s Businesses

By Benjamin Petersen and Matthew Laird

Revenue collected by Florida’s local governments has grown dramatically in the last few decades, raising the importance that Floridians have an accurate understanding of how our governments raise and spend taxdollars. Revenue collected by local governments from permits, fees, and licenses is of particular importance for Florida’s business and entrepreneurship community as this category includes revenue collected from businesses, in the form of occupational licenses, impact fees and building permit fees, among others. As with total revenues, revenue in this category has grown substantially since 1993 at both the municipal and county level, but has failed to return to its pre-recession peak in 2006.

At the municipal level, revenues from permits, fees, and licenses nearly doubled between 1993 and 2006, from $612,080,726 to $1,249,196,608. Following the recession, however, revenues from this category shrank by $229,342,042, reaching a low of $1,019,854,566 in 2010. All figures are adjusted for inflation in 2014 dollars. Recent years have seen a return to growth. As a percentage of total municipal revenue, permits, fees, and licenses reached a high of 4.705% in 2001 and a low of 3.208% in 1997. The share of total revenue from this category also fell during the recession, showing that business activity declined further than other taxable activities. As a share of total revenue, this category declines with a one year lag, and actually grew between 2007 and 2008. It is unclear if this lag is the result of continued growth in business activity during the early recession or a disproportionate decline in total revenues, driven by rapidly falling property tax revenues.

Municipal Revenue from Permits, Fees, and Licenses

municipal-cat-14

Figure 1. Trends in Municipal Revenue from Permits, Fees, and Licenses 1993 – 2014

(Revenue data from www.floridaopengov.org)

At the county level, growth followed a similar pattern between 1993 and 2006, when it reached its highest value of $652,647,672, and then declined during the recession. Recent growth in this category has been moderate compared to pre-recession levels, increasing by only $56,986,787 since 2008, less than the growth between 2004-2005 alone. As a percentage of total country revenues, this category is consistently lower than that of municipalities, averaging 1.44%.  The share of revenue from this category has surpassed its pre-recession levels, though still below its high of 1.59% set in 2001.

County Revenue from Permits, Fees, and Licenses

county-cat-14

Figure 2. Trends in County Revenue from Permits, Fees, and Licenses

(Revenue data from www.floridaopengov.org)

As the revenue collected from permits, fees, and licenses is primarily from businesses, it can serve as a snapshot of the level of business activity. The sluggish growth in tax revenues since the recession would likewise indicate sluggish growth in business activity in the State of Florida. This assessment matches that of a 2016 Pew Charitable Trusts Report, which shows that employment, State-wide, has declined 4.5% and personal incomes have increased at only 1.3% per year since 2007, both below the national average. In terms of business activity, the Kauffman Foundation find corroborating evidence, as nationwide, new business formation declined 30.6% between 2006 and 2010. In conjunction with a Tax Foundation report that newly established firms in Florida represented 3.2% less of total firms in 2012 compared to 2006, it is clear that the decline of revenue from permits, fees, and licenses tells a similar story to other assessments on business activity.  There is, however, grounds for cautious optimism as the 2016 Kauffman Index of Startup Activity ranks Florida as the second best on its measures of new business formation among large population States.

About DeVoe Moore Center

The DeVoe L. Moore Center is conducts economic research and policy analysis focused on state and local policy issues and is located in the College of Social Sciences and Public Policy at Florida State University in Tallahassee. As an educational institution the DMC provides professional research experience to undergraduate and master’s students through an extensive program of internships and independent study, preparing them for a future in public policy, economic development, public sector accountability and entrepreneurship.
This entry was posted in DeVoe Moore Center, Entrepreneurship, Fiscal Policy, Politics, Regulation, Tallahassee, Tax Policy, Uncategorized and tagged , , , , , , , , , , , , , , , , . Bookmark the permalink.

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