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Business owners have last chance to weigh in on license fee hikes

 

Last updated 10/27/2016 at Noon



The Mukilteo City Council put off a decision Monday on whether and how to raise business license fees, although their action on a related item suggested some kind of increase is a done deal.

Nevertheless, business owners have a chance to weigh in on the issue. But they have to take the time to show up.

The city has been looking at a possible increase for more than a year. The last time the council raised business license fees was 2004.

During a discussion on Sept. 26, the council directed staff to investigate other cities’ approaches to business license fees. Policy analyst Marko Liias returned Monday with information showing those approaches are diverse.

Among cities of similar size or demographics, Mukilteo has the highest base fee at $113.50. Mill Creek charges the lowest base fee at $25. The average base fee is $46.

However, Mukilteo and many other cities also tack on a per employee charge. At $0.0228 per employee hour, Mukilteo’s is the lowest among six cities that Liias chose to sample. Kirkland, by comparison, charges $0.052 per hour.

He said that, among the cities that charge per employee fees, annual rates range from as low as $5 per employee to as high as $67. Mukilteo, he reported, charges $47.42 per full-time employee.

In all, Liias said 245 cities in Washington impose some type of business license fee, comprising 87 percent of all cities in the state.

Based on direction gleaned from previous council discussions, Liias presented five options for a new business license fee structure; four of them would give the city’s smallest business owners a break by eliminating the per employee fee for businesses with 0-3 employees.

Two of the options would be revenue neutral, meaning the city would raise no more money despite changes in the fee structure.

The most expensive option would raise the base fee to $144.75 and the per employee fee to $0.0291. That would garner the city an estimated $119,000 in new income, Liias estimated.

Looking at the options that don’t add new revenue, councilmembers grappled with the question of why they’re even bothering with fee changes at all.

“What are we doing here?” Councilmember Scott Whelpley asked. “Are we doing this just because it’s been so long?”

Councilmember Ted Wheeler, a businessman himself, also questioned the point. He noted that Mukilteo’s $113 base rate was excessive when it was established in 2004, compared to the $25-$35 fees he paid to do business in other local cities.

“It was so much more than everybody else, it’s ridiculous,” Wheeler said.

He argued that other cities’ fees are finally rising to be comparable to Mukilteo’s, so he was hesitant to raise them here.

Wheeler said he understood that businesses have to pay their fair share, but he wanted business owners to have an opportunity to weigh in. If they don’t bother to show up when the council expects to revisit the issue at its Nov. 7 meeting, he said he would probably agree to some kind of increase.

Council President Bob Champion argued an increase could be justified based on use of city services.

“It seems to me, businesses have been benefiting for 12 years, not paying their share for services provided,” he said.

He also suggested any council action should include a clause that the issue be revisited at least on a bi-annual basis so that they never again allow the question to be ignored for a long period.

Councilmembers also looked at the kinds of services the city provides businesses compared to residents.

Councilmember Steve Schmalz said it would be helpful if staff could provide data showing what services businesses use. For example, he said the fire department needs a ladder truck only for large buildings where businesses are housed, so they should pay for that expensive piece of equipment.

On the other hand, Wheeler pointed out, businesses also pay into the EMS levy, but most emergency medical responses are to homes, not businesses.

Ultimately, councilmembers settled on the need for more revenue for the city’s street maintenance program (see related story).

“If we didn’t need the transportation program, I’d say leave it (the business license fees),” Schmalz said.

“But if we’re going to go down this road, I’d say divide up the cost. I would support raising the FTE (the per employee fee), but not the base.”

Despite the various options, and arguments by some councilmembers that they’ve talked long enough about the issue, the council voted 5-2 to table discussion.

Noting they’ve been discussing the issue for about two years, Whelpley said, “We can go over this over and over and over again.”

Councilmember Richard Emery agreed.

“It’s a challenge for all of us to raise taxes,” he said. “But we do have a task at hand, and are going to have to figure it out.”

Just not this week.

 

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