The City of Tacoma is facing a $23.7 million deficit, and one of its proposals to close the revenue shortage is increasing the fees for business licenses.
The increased business license fees would impact most businesses in Tacoma, except the smallest. Tacoma City Council would have to approve the increase. The increase would provide $6.5 million for the general fund in the biennium budget.
For businesses that make less than $12,000 in annual gross income, the fee is currently $25. For businesses with a gross income between $12,000 and $250,000, the fee is $110. For businesses that make more than $250,000 in gross income, the fee is $250.
The proposed business license fees are:
- $25 will remain for businesses that have a gross yearly income of less than $12,000.
- $130 for businesses with a gross income between $12,000 and $250,000.
- $300 for businesses with a gross income between $250,000 and $1 million.
- $1,000 for businesses with a gross income between $1 million and $5 million.
- $1,500 for business with a gross income more than $5 million.
The ordinance, if approved by council, would go into effect Jan. 1.
Danielle Larson is the city’s tax and license manager. Larson said at the city’s Government Performance Finance Committee meeting in August that the fee increases for the business tiers of $12,000 to $250,000 and $250,001 to $1 million were equivalent to the inflation rate of 18% to 20%.
Larson said 90% of Tacoma’s businesses are small or moderately sized and have an annual gross income of less than $1 million.
Tacoma last increased its business license fees in 2017.
The city plans to do outreach with the Tacoma/Pierce County Chamber of Commerce and neighborhood business districts and through discussions during City Council meetings. The City Council plans to vote on the fee increase ordinance in September and October.
Chamber president and CEO Andrea Reay said told The News Tribune conversations have begun between the city and the chamber to get an understanding of why the city is proposing the fee increases and what else the city is doing to address the budget deficit. Reay said the business community can often be an afterthought but if included, they can help have a better policy. The chamber is focused on finding solutions and does not see the proposed fee increase as a done deal.
Reay said the business community loves consistency and predictability, and she would like to see future increases not be reactive.
Council member John Hines said at the committee meeting he would like to revisit the licensing every two years.
Kristen Wynne, president of Tacoma Business Council, said the business community feels it would be “tone deaf” if City Council passed the ordinance. She said businesses are suffering from property crime and that the Tacoma Police Department doesn’t have enough resources to address it. The Tacoma Business Council is focused on decreasing crime against businesses in Tacoma.
Wynne questioned what the city was doing to address her own budget since businesses already contribute a lot of money from sales and property taxes.
Reay said Tacoma businesses want to be competitive, and the city needs to consider if it costs more to own and operate a business in Tacoma, compared to other cities in the region.
Gig Harbor business license fees are $40, Ruston is $40 and Puyallup is $0 to $500. Business license fees in Seattle range from $59 to $2,613.
The business license fees are determined by a business’s annual gross income. During the committee meeting, several council members questioned what tier certain business owners would fall under.
Larson said for rental property owners, the fee would be determined by their annual gross rental income. For local franchises in Tacoma, which are organized as a separate entity from their parent company, like a McDonald’s or a Subway, the business license fee is based on the local franchise’s annual gross income determined.