FIN 2017-07-05 Item 2A - Fees - Business License Fees

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City of Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM TO: Finance Committee FROM: Peggy McCarthy, Finance Director BY: Vicky Carlsen, Deputy Finance Director CC: Mayor Ekberg DATE: July 12, 2017 SUBJECT: Streamlining Business License Fee Calculation ISSUE Due to recent State legislation, the City will be required to partner with the State of Washington Department of Revenue Business License Services (BLS) for business license processing within the next few years. In order to ensure a smooth transition to the BLS system, it is important that the City's business license fee structure is better streamlined and easy to understand. The current method of using FTE (full -time equivalent) hours to calculate the business license fee is confusing and time consuming to applicants, resulting in significant staff time to correct calculation errors. The Administration recommends that the City change its structure to be on a per - employee basis in order to reduce confusion and better streamline the City's processes. BACKGROUND The State of Washington recently passed EHB 2005 requiring cities that issue business licenses partner with BLS and use its online system to obtain new or renewal business licenses. This bill was created to help simplify the process of licensing for businesses who apply for licenses from multiple jurisdictions. This bill requires cities to move to the State BLS system within the next five years.' The State would collect payment and process all applications and renewals for most jurisdictions. The City would be notified of pending applications and complete a formal review process prior to the State issuing the license. The City's current fee structure requires a calculation of employee hours times a multiplier ($0.034896) to arrive at the total license fee. The minimum fee for one full -time equivalent employee is currently $67, which is a combination of a $12 business license fee, plus a $55 revenue generating regulatory license (RGRL) fee. This complex calculation method causes frustration and confusion from business owners, and results in significant errors in the application process. Much of the confusion stems from how part time employees are calculated due to the multiplier described above. It appears that many employers cannot easily obtain information on the number of hours worked per employee. 1 This timeline may be funding dependent and the legislation is written so that if funding is not available to the Department of Revenue the timeline may slip accordingly. 1