Monthly Archives: September 2017

A lot has changed in the economy over the past several decades with the explosion of technology.  The traditional work environment has transformed with more individuals able to stay connected and work from nearly anywhere in the world.  This evolution has made it easier than ever for people to start and own businesses, and conform their work to the flexibility of their own homes.

Home-based businesses (HBB) allow millions of Americans to earn a living or supplement their wages, while accommodating realities such as raising children, managing a disability, and/or stretching their current available resources.  That is why 52 percent of the over 28 million small businesses in the United States run their operations out of the convenience and comfort of a personal residence.

Many of these businesses are in our own neighborhoods.  They are real estate agents, accountants, and contractors.  Yet for most of these businesses, we have no idea they’re taking place in our own backyards.  Ostensibly, these businesses are operating with little to no visibility to the residents around them.

Although the nature of home-based businesses has vastly changed, the regulatory environment has not.

Many cities and counties across the country still retain the same zoning ordinances and land use requirements from a half century ago.  As a result, many jurisdictions promulgate a culture and regulatory environment which stifles home-based businesses.

Common restrictions include not being able to use a garage, backyard, or “accessory dwelling” unit for a HBB. Often there is a limit on the allowable square footage to be used within the home.  Prohibitions on signage or seeing any customers or employees.  In most jurisdictions, certain types of businesses such as salons or food-making businesses are altogether banned, or require extensive special use permits that take months and thousands of dollars to obtain.  Lots of cities limit a business’s hours of operations.  Many of these regulations are ambiguous, arbitrary and downright unenforceable.

After all, how is the government supposed to know if someone is using one room versus two rooms in their house for their business?  How would they be able to tell if an individual is selling items on eBay or answering business emails at 1:00 AM, after the accepted “hours of operation?”  The only conceivable way to consistently enforce these types of regulations is a frightening prospect indeed; with major Fourth Amendment questions and implications.

The Small Business Administration studied the issue in 2004 and determined more should be done by states and localities to eliminate burdens for HBB.  They highlighted several states that have passed state-level reforms.  Maryland for instance allows for a “no-impact” home occupation – eliminating licensure for thousands of businesses that pose no threat to the livability of surrounding homes.  Vermont, a small-business friendly state, has statutory protections for HBB, stating a person has the “right” to operate a business out of their home.  Even California has a special regulatory carve-out for home day cares; they void contractual agreements such as HOA CC&Rs that prohibit them.

Creating regulatory space for HBB is not only the right thing to do, it has immeasurable benefits.  Aside from providing a flexible environment for people with a variety of needs as well as creating safer neighborhoods by having watchful daytime eyes, these fledgling businesses are the petri dish of the economy.  They allow a measured approach to the risk of starting a business.  If the entire country disallowed people from having a business in their garage, giants such as Amazon, Apple, Disney, Google, Harley Davidson, Microsoft, and Nike, that employ hundreds of thousands of people, might not exist.

Just like our economy and ideas about the work environment, it’s time for the states and local counties and cities to change with the times.  Home based businesses are vital to the health, wealth, and happiness of millions of Americans.  Government should not be stifling their efforts, but doing everything they can to allow their growth.

Over the last several years, lobbyists for the movie industry have made multiple attempts to bring back special tax breaks for Hollywood studios in Arizona. After failing to resurrect the unpopular tax credit program that expired in 2010, they pivoted to a new subsidy: a taxpayer financed state film office.

Movie producers claimed a film office is needed because Hollywood studios didn’t know who to call when filming in Arizona if they needed access to state monuments, freeways, etc. This argument was obviously nonsense—movies have been filmed in AZ for decades at special locations without such an office, and securing film locations is an issue easily addressed by the private sector.

Thankfully, the legislature saw through their claims and rejected two separate proposals to fund a state film office and provide subsidies to the industry.

This should have been the end of the story, except last month the Arizona Commerce Authority announced a joint venture with a local film studio to provide taxpayer funding for a state film office, along with additional grants and discounts to moviemakers.

How the Commerce Authority is unilaterally funding a state film office with taxpayer money after the legislature rejected such an expenditure raises several questions:

Who at the ACA authorized such an expenditure? Where in statute does the ACA have the power to fund such a program? Does the ACA have a secret fund to pay for special interest projects the legislature rejects? If the ACA can fund a film office, what projects can’t it fund in the future?

The ACA’s untethered purse strings is a major issue that must be investigated. The good news is lawmakers will soon have an opportunity to get answers. The Commerce Authority is once again up for sunset review, and will have to go before the legislature in the Fall for reauthorization. Last time the ACA received only a 2-year renewal, specifically because of their lack of transparency and poor results.

They promised to do a better job and clean up their act, and we assume that they will make the same promises. Judging by their questionable actions, they must think that it is far easier to ask for forgiveness than ask for permission. Hopefully lawmakers won’t be duped again and will finally reign in this rogue agency.

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The Arizona Free Enterprise Club is a free market policy and advocacy group dedicated to promoting a strong and vibrant Arizona economy.