Entrepreneurship in Charlotte: Strong Spirit, Serious Barriers
By Clint Bolick [Economic Liberty]
In many ways, Charlotte exemplifies the "new South": prosperous, progressive, probusiness. It's a growing city, and entrepreneurial opportunities are growing with it. But too often, government gets in the way through anachronistic and anticompetitive regulations, often enforced by bureaucrats who do not share the city's entrepreneurial spirit.
At a time when welfare reform emphasizes the transition from public assistance to work, it is vital that government makes sure that all Americans have the opportunity to earn an honest living, free from arbitrary or excessive government regulation. Unfortunately, regulatory barriers imposed by every level of government hamper the creation of new enterprises. Most of the restrictions on entry are erected at the state and local level, in the form of occupational and business licensing laws, fees, and zoning requirements. They inflict their greatest burden on people with the fewest skills and resources, disproportionately minorities and the poor.
Excessive regulation is often self-defeating: It drives businesses underground outside the reach of both taxation and regulation. Our analysis-focusing on the regulatory climate in general and on specific entry-level businesses in particular-reveals that although Charlotte is far from the most over-regulated city, too many barriers to entry-level entrepreneurship exist at both the state and local level.
Red Tape, Lots of It
Before any new business in Charlotte can get off the ground, it faces an often bewildering and arbitrary licensing system. The State issues licenses and permits for more than 600 businesses, occupations, and economic activities. Added to those are hundreds of "privilege licenses" issued by the City of Charlotte and Mecklenburg County for businesses ranging from "abattoirs" to wine sellers. Even yard sales require permit fees, and their numbers are limited. In a nation whose beacon is enterprise-and in a city that purports to value enterprise-operating a business should be considered a right, not a privilege. This study finds that the City's and State's licensing requirements can deter legitimate enterprises, particularly those started by those with limited skills or business experience.
In addition to the licensing process, annual license fees follow no rhyme nor reason. The result is regulatory cacophony where the fees bear no relation to profitability or services received: A large company requiring extensive City services and reaping a huge profit pays the same percentage of gross sales as a home-based entrepreneur who operates at a net loss.
Zoning and Other Business Regulations
A major recurring obstacle to entrepreneurship in urban areas is excessive regulation of private property. Zoning standards often are outmoded and the process for obtaining variances typically is cumbersome and arbitrary.
Charlotte zoning officials have outlawed home-based businesses that produce goods for sale, while placing capricious restrictions on home-based offices. Among these are limits on the area used for the home-based business to 25 percent or less of the first floor of the dwelling, and requirements that only residents may work there. The sum of the regulations is to severely constrict home-based businesses in most instances and to preclude them altogether in others. With the advent of modern communications technologies, home businesses provide valuable employment and entrepreneurial opportunities, particularly for single and stay-at-home parents, senior citizens, people with disabilities, and people with limited capital.
The Proposed Urban Corridor District
In Charlotte, a great deal of debate is taking place over the concept of "urban corridor districts," which illustrate both the potential benefits and risks inherent in community redevelopment proposals. The urban corridor district proposal provides that only 50 percent of the property owners would need to consent to the changes, even if the interests of non-consenting owners are at stake. Although urban corridor districts may be used as a means of ridding property owners of excess regulation, they also run the risk of conferring regulatory powers on some property owners at the expense of others.
The City's sign ordinance, comprising 41 pages, is a classic example of heavyhanded government regulation. The law regulates 37 different types of signs, from business and real estate signs to flags and bulletin boards. It requires permits from the Zoning Administrator for nearly all new and altered signs and creates a blizzard of confusing regulations. The ordinance orders that all nonconforming signs (which, to quote a Charlotte Observer editorial, include those that "swing or flutter, rise too high, occupy too much of a wall, crowd a shopping center parking lot, stand too close to the street, sit on roofs, or woo passersby with flashing lights or lots of changeable type") must be taken down or brought into compliance by the end of this year. Such onerous regulations thwart business profitability by placing decisions about advertising in the hands of bureaucrats. Such regulations ignore the fact that commercial speech is vital to free enterprise, and is protected by the First Amendment.
It is within the City's appropriate police power to reasonably regulate businesses in the interest of public health and safety. But when regulations exceed legitimate public health and safety objectives, they may unnecessarily impede entry into and conduct of legitimate business enterprises. This report examines Charlotte's regulation of entry-level businesses-that is, enterprises requiring relatively little capital or skill-because such activities particularly impact people outside the economic mainstream. Making certain that "boot-straps capitalism" is not excessively restricted is essential to ensuring upward economic mobility.
Under Charlotte's current law, taxi permit applicants must demonstrate "need and necessity" for the proposed new services, which existing companies typically contest. Application of this nebulous standard resulted in two recent applicants having to wait up to three years for approval, and two other applicants still awaiting approval. Other regulations, such as requirements that companies offer citywide round-the-clock service and maintain a 24-hour dispatch facility, make single-vehicle taxicab companies impossible. As a result, would-be entrepreneurs who lack the capital for such services must lease taxicabs from existing companies at costs as high as $75 per day. These regulations place ownership of taxicab companies outside the reach of small-scale entrepreneurs.
Jitneys are privately owned vehicles, usually vans, that operate along fixed routes for a flat fee like buses, but stop anywhere along the route like taxicabs. They represent lowcapital entrepreneurial opportunities as well as a way to meet urban transportation needs flexibly, efficiently, and without large public subsidies.
Charlotte does not prohibit jitneys, but subsidies to existing public transit services create a competitive disadvantage.
North Carolina imposes only modest training requirements when it comes to child care. Registered daycare home providers must be literate, have training in CPR and first aid, and submit to background checks. Administrators of large day care homes must have either a high school diploma or GED, and have certain minimal formal or practical day care training. These requirements seem carefully tailored to legitimate regulatory concerns, and do not seem to operate as a barrier to entrepreneurship.
Street vendors are a classic example of entry-level entrepreneurship. They can contribute greatly to the ambiance of the city. But they are few and far between in Charlotte. The City does not impose a firm limit on the number of street vendors. However, it has ceded control over pushcarts in the uptown Tryon Square area and for Carolina Panthers games to the Chamber of Commerce's Central Charlotte Association. It is extremely unusual to invest private entities with regulatory power over City streets-and over other people's livelihoods. The association's rules may contribute to the dearth of pushcarts in the downtown area.
In Charlotte, the dichotomy between oligopolistic residential trash collection and highly competitive commercial trash collection illustrates the benefits of open entry. Commercial trash collection (in contrast to residential trash collection that is largely collected by the City), is handled by a plethora of large and small trash haulers, which apparently are unregulated. The flourishing commercial trash hauling market, which provides more efficient services and greater entrepreneurial opportunities, is a model that could be applied in the residential trash collection area.
Occupational licensing in North Carolina takes place at the state level. There, boards that are comprised of members of the regulated industry have the machinery of government at their disposal, and an economic stake in stifling competition. As a result, entry into dozens of professions is strictly controlled with many entry restrictions imposed that have no correlation to protecting public health or safety, or to specialized practices for that matter. To the extent government licensing is deemed necessary for particular occupations-especially those entailing few risks and requiring comparatively little skill or capital-it should emphasize demonstrable competence and health and safety, and should not arbitrarily limit competition.
The governments of the State of North Carolina and the City of Charlotte have carefully cultivated a business-friendly environment that has reaped substantial dividends for their residents. However, State and City regulations, and the bureaucrats who administer them, often operate at cross-purposes with this proentrepreneurial philosophy. As with many excessive government regulations, the main victims are those who have the least knowledge and resources-the very people who most need access to business and employment opportunities.Through numerous human-face examples, this report demonstrates that ordinances aren't just meaningless words on pieces of paper-they can have profound impact on real people and their dreams for a better future for themselves and their families. The report concludes by offering recommendations on how Charlotte can match its spirit of economic liberty with its regulatory reality. These recommendations achieve the appropriate balance between public health and safety and the right to earn an honest living.