North Charleston City Council approved a large tax break Thursday night that will primarily benefit The Boeing Company, whose South Carolina operations are located in the city.
The city slashed in half the current top rate used to calculate annual fees for businesses with gross earnings of $250 million or more — there are just four North Charleston companies in that category — and created a new top-tier tailored for Boeing with a rate 99 percent lower than the current levy.
Business license fees on income up to $250 million were left unchanged, prompting a few council members to complain that small businesses got no tax relief.
“Small businesses are what drive America,” said Councilman Todd Olds, who after some discussion cast the lone vote opposing the fee changes. Councilman Dwight Stigler was absent, and all the other council members voted for the change.
Mayor Keith Summey said he had been negotiating with Boeing for months over the business license fee. He said Boeing delivered two $400,000 checks for prior-year fees after negotiations concluded.
Summey said it’s only fair to adjust the rates for future years to account for Boeing, because the aircraft manufacturer’s sales will be so large that the company will account for 10 percent of the city’s business license fees even after the rate reduction. Summey said small businesses will benefit from all the jobs that major employers like Boeing bring to the city.
Essentially, the deal was crafted so that Boeing will pay no more than roughly $1 million in yearly fees to the city as aircraft production ramps up.
“We tried to come up with what is fair for us and fair for them,” the mayor said.
Up to the first $250 million in revenue, Boeing will pay the same rates as other businesses. On sales over $7.5 billion, Boeing would pay a nominal fee. In between those amounts, the city cut its license fee in half — a move that alone would save Boeing $688,570 if production goals are met.
The list price for Boeing’s 787-8 Dreamliner, assembled in North Charleston, is $206.8 million. The company has said it plans to produce three of the passenger jets each month, which works out to just about $7.5 billion in potential annual sales.
In addition to Boeing, Daimler Vans Manufacturing, Select Health of South Carolina and Trident Regional Medical Center will benefit from the rate cut.
Councilman Ron Brinson said the business fee reduction for Boeing was in no way connected to the small property tax increase that City Council approved less than a month ago, as part of the city’s $99.9 million budget.
Summey also defended the property tax increase, saying it was needed for pending city expenses.
“And I have told you we will not need a tax increase for at least the next four years,” he told council members.
Boeing spokeswoman Candy Eslinger told The Post and Courier last week that “Even with the graduated rate, Boeing will continue to be one of the highest payers of business license fees in North Charleston, paying upwards of $1 million at full production, in future years as the graduated rate takes effect.”
The license fee reduction joins a long list of local and state incentives worth in excess of a billion dollars that were used to lure the aerospace giant to South Carolina and expand once here.
The business license fee is among the more complicated taxes. Businesses pay different rates based on the category of business they are in, and then pay different percentages of those rates on different amounts of their gross income.
For example, a manufacturer such as Boeing would, under current rules, pay a fee that starts at $1.90 for each $1,000 in gross income — but would only pay 10 percent of that amount on income above $250 million. Companies pay between 60 and 100 percent of the tax on income under $250 million.
The proposed fee cut would allow companies to pay just 5 percent of the tax owed, on gross income above $250 million, and just one-tenth of 1 percent on income over $7.5 billion.
Reach David Slade at 937-5552 or Twitter @DSladeNews.