Business Licensing
Cities create a direct regulatory burden on free enterprise in a city by imposing a business license requirement. Business licenses are used both to raise revenue for a city and to regulate business activity by conditioning the grant of approval to operate on obtaining a license. Licenses can be revoked or not renewed if a business does not comply with regulations imposed by a city. For this metric we looked at a cross section of business license fees in each city using city fee schedules and inquiries to the city.
Each license type was scored and normalized individually and added together based on their respective weights to create the overall business license metric score which counted for 35% of the overall free enterprise category score. The following license fees were scored and weighted as noted:
- Home occupation license (20%) We measured the total cost to comply with all required fees for a new single-person home occupation license (for example, a piano teacher grossing $3000 a year). We included all required one-time fees.
- Small commercial license (20%) Total startup cost of all required fees and inspections for the city's least expensive type of license for a small commercial business (assuming four total employees, two part-time and two full-time).
- Large commercial license (25%) Highest total of all fees for a large commercial business. For this type of license, the most expensive was typically for a big-box retail store for which we assumed a Wal-Mart Supercenter of 200,001 square feet employing 580 employees (80% of which we calculated as full-time employees).
- Temporary firework stand (5%) The licensing costs for a seasonal or temporary business permit to operate a firework stand.
- Temporary christmas tree lot (5%) The licensing costs for a seasonal or temporary business permit to operate a christmas tree lot.
- Solicitor license (10%) Business licensing cost for a solicitor's license for two solicitors (we assumed a duration of four months where applicable).
- Good landlord program (2%) A binary score for whether a city regulates landlords or not through a "Good Landlord" program. Cities with this program charge a disproportionately higher business license fee on all landlords and then give a discount to any landlord that participates in the program. The program requires landlords to sign a contract with the city agreeing to do a number of things including in some cases denying tenancy to certain individuals. Under a system of free enterprise, regulatory fees should be as low as possible and always applied fairly, equally and proportionally to all businesses. This program attempts to impose direct regulations on all landlords by charging different license fees instead of placing such restrictions in city code. This is because such restrictions would be likely disallowed under state or federal law or politically unrealistic. Thus, cities instead imposed the regulations creatively through a disproportionate business license fee with an accompanying discount for compliance.
- Good landlord tenant restrictions (8%) A binary score for whether a city's "Good Landlord" program includes a provision requiring landlords to deny tenancy to certain individuals. Among other requirements, these programs often require landlords to refuse to rent to individuals who have certain criminal records. Under a system of free enterprise, such determinations are best left to the landlord to determine who they are comfortable doing business with and renting their property to. Governments should not dictate who may or may not enter into otherwise lawful business transactions with one another.
- Good landlord average disproportionate fees (5%) The average additional business licensing cost to a landlord that does not receive the discount for compliance with the provisions of a "Good Landlord" program.
Each measure for this metric was given an individual z-score and added together according to the weights to create the total business licensing metric score. This metric counted for 35% of the overall Free Enterprise category score.
To see a specific city's laws for this metric, click on its name in the right column, then find the row in the table below the Free Enterprise category.