The Tukwila City Council passed a resolution to do a phased in increase business license fee as part of adopting the city’s 2019-20 budget during a Nov. 19 city council meeting. The increase will go into effect Jan. 1, 2019.
By doing a phased in increase, the new total cost for the business license fee will not go into full effect right away. It will be a gradual increase until 2020.
Currently, the business license fee in Tukwila is $70 per full-time employee, and $35 per part-time employee, according to the council agenda packet.
Once the increase goes into full effect in 2020, the new costs will be $112 per full-time employee and $56 per part-time employee, the packet continued.
Starting in 2019, a business that has full-time employees will be paying $91 per employee, and then for part-time employees it will be $45 per employee, it said in the packet.
The packet stated with the increase in the license fee, the city will generate an additional $1.5 million, which would go toward maintaining a stable budget.
To put this into perspective, the city compared the business license fees of Kirkland and Redmond, both cities do not have a B&O tax, just like Tukwila.
The agenda packet said in Kirkland, it costs $105 per full-time employee for a business license and then in Redmond it costs $112. By raising the city’s fee, it would be in line with the rates of other cities in similar situations to Tukwila.
Tukwila Mayor Allan Ekberg said it is important to note the city took proactive action by making reductions in spending last year.
“In 2018, I directed departments to underspend their budgets by 3 percent in order to save money. Additionally, I asked departments to reduce their 2019 and 2020 budgets by 3 percent, finding savings in supplies and services. Police and Fire were asked to reduce their budgets by 1.5 percent,” Ekberg explained.
This resulted in $1.8 million in savings per year, the agenda packet said.
Ekberg said the approach the city is taking to increase the business license fee will allow the city a sustainable budget for the upcoming biennium.
With the statewide change to destination based sales tax in Washington, the agenda packet said tax is charged to where an item is delivered and this caused Tukwila to lose significant sales tax revenue.
It also said, “in addition, people like to shop online which also reduces Tukwila’s sales tax generation. The state’s mitigation payments to the cites hard hit by destination based sales tax, called Streamline Sales Tax Mitigation payments, is ceasing in 2020. This act alone will reduce Tukwila’s revenue by $1.2 million a year starting in 2020.”
Ekberg added in an email that sales tax is not growing as rapidly as previously predicted either. The packet said more than one third of the city’s general funds come from the city’s portion of sales tax.
“The community continues to deserve and demand a high-level of service, whether it is infrastructure investments in our business district or quality parks in our neighborhoods. This approach will allow us a sustainable budget for the coming biennium and the ability to keep our commitment of providing high-quality services to our residents, businesses and guests,” Ekberg said.