City of Renton moves step closer to new B&O tax

Renton administration officials presented the City Council with a preliminary plan to add a business and operations tax in hopes of raising nearly $6 million in revenue the city says it needs to meet its budget in the future.

Under the proposal, any business with gross receipts of more than $5 million annually would have to pay a 0.1 percent tax rate/ All governmental and non-profit business would be exempt.

A three-year, $1,000 per employee tax credit for new businesses with more than 50 employees was also part of the package to ease the burden on new businesses.

According to numbers provided by the City, the new tax would affect about 75 businesses within the city limits and should generate $5.7 million per year in revenue for city coffers.

According to previous reports from Administrative Service Administrator Iwen Wang, if the council does not make any changes to the city’s revenue streams, the city will face a $3.3 million budget deficit in 2016.

Because of several years worth of cuts to the city budget and staff that have already been made, Wang told the council that any further cuts would lead to “visible impact to service levels.”

In order to balance the budget in recent years, the city has cut a total of $28.7 million out of its budget since 2008. In the 2013-2014 biennium, the cuts totaled $7.7 million.

In April, the council authorized staff to look into saving money through a change from a city fire department to a fire authority district and to continue investigating the option of a B&O tax. In June, the council directed staff to develop legislation to go into effect Jan. 1.

Since then, the city has been meeting with stakeholders and working on the proposal, which City Administrator Jay Covington admitted is “universally disliked” but said the city is “trying to plug a hole” in the budget.

“This is a bad tax,” he said Monday. “Unfortunately, it is the bad tax we are saddled with.”

Covington went on to say that the city is working with the Chamber of Commerce and other businesses to find the “least worst way to implement this tax.” He also said discussions with the business community have shown that they like the level of service being provided by the city and understand the need for new revenue.

Most other local cities have some form of B&O tax. According to the city, Renton is the only city of its size in the county that does not have one in place.

According to the city’s numbers, Bellevue generates $27 million a year by taxing all businesses with gross receipts of more than $155,000 at a rate of 0.1496. Kent collects $5 million to $7 million per year with a 0.046 percent tax on manufacturing, retail, printing and processing for hire businesses and a 0.152 percent tax on everything else.

Among the exemptions the city is proposing, all governmental and non-profits from the tax, which according to Weng constitutes about 25-30 percent of employers in the city.

Chamber president Lynn Wallace reiterated the general opposition to the new tax.

“The business community doesn’t like the B&O tax,” she said Monday, but added that her members were appreciative that the city reached out to them.

“The process has been very open,” she said.

Wallace said the business community recognizes that the services the city provides and the quality of life in Renton are an attraction to other new business and “We want to keep that.”

However, Wallace said her members would like the city to find a way to balance the books without placing the entire burden on the business community.

Among the suggestion the city received from businesses was to lower the reporting burden from $5 million in gross receipts to $1 million to more evenly spread the tax among local businesses, as well as consider adding other revenue options, such as car tabs, so both residents and businesses would contribute.

Council members were cautious regarding the possibility of a new tax

The outreach continued this week with a pair of Chamber of Commerce forums on Wednesday. As of now, the plan is to present the next biennial budget to the council on Oct. 6, with a public hearing scheduled for Oct. 20.

The council is expected to vote on the budget and a possible B&O tax on Nov. 3.

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