FIN 2018-10-16 Item 2C - Resolution - Business License Fees

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qP1 City f Tukwila Allan Ekberg, Mayor INFORU��U��U��U U��K�^��U� MATIONAL n��o�� o�o��n�nv��n��*~�n��n�u TO: Finance Committee FROM: Vicky Car|men'Deputy Finance Director CC: Mayor Ekberg DATE: October 10'2D18 SUBJECT: Proposed increase tobusiness license fee ISSUE The City Council iSbeing asked tVincrease the business license fee. BACKGROUND More than one-third of the CitV'S general fund revenues COnOeS from the Citv's portion of the ao|ea tax (leaa than 196 of the total sales tax rate). With the statewide change to destination - based eo|eo tax —vvhich nneeno sales tax is charged to vvhena the item is delivered —Tukvvi|a lost significant eo|eo tax navenuea, which continues to negatively affect the City today. In addition, many people prefer to Shop on|ine, skipping brick and nlOrt@[ opportunities, further reducing Tukvvi|m'o sales tax generation. Finally, the 8tote's mitigation payments to cities hard hit by destination -based ae|ea tax — called Streamlined Sales Tax Mitigation payments — is ceasing in 2020. This act alone will reduce Tukwi|a'o revenue by $1.2 million o year starting in 2020. The Administration instructed departments to achieve 8 3% uOderSpeOd in2O18' which the City is OO track to achieve. In @ddhiOn, during the development of the W18y0r'S proposed 2019/2020 budget, departments were directed to include @ 3% reduction in supplies and services; Fire and Police were given @ 1.596 goal. The result of this is 8ppFOXiDla1e|y $1.8 million in savings per year. Also included in the proposed bUdo8[ are new revenues to allow the City to continue to provide high level Of services to the Tukwila COmOluO|tv. New revenues include an increase in the Citv'S gambling tax and business license fees. The proposed new revenue equals the 8nnOUnt Of reductions identified above, and the goal was to propose b@|@OC9d approach to addressing the City'Sstructural budget challenges ofrevenues not growing 8Sfast aSexpenses. DISCUSSION The current business license fee io$7Oper full time employee or$35per part time employee. If the fee were raised to $112 per full time employee and $56 per port time ennp|oyee, an additional $1.5 million could be generated. In cornpahoon, the business license fee for the City of Kirkland is $105 per FTE and $112for Redmond —neitheruity has a 0&(]tax. Raising the City'sfee would bring itinline with these rates. City staff have been meeting with wahnuo nnennbara of the business oonnrnunhv regarding this proposal including but not limited tothe Seattle 8outhside Channber, Sobey Corporation, Baker Cnrnrnodideo, Great American Casino, BECU and Seattle Chocolates. Overwhelmingly the businesses mJnnnnunitv members were pleased that the approach to the budget problems included reductions. While no one likes higher fees, the business representatives City staff spoke with understood the reason for the increase and appreciated the outreach. 15