Kent’s business and occupation (B&O) warehouse square footage tax will double starting in 2019 to bring in about $3 million per year to help pay for parks maintenance and other capital improvement projects.
The City Council voted 5-2 on Tuesday night to approve the tax hike, initially proposed by Mayor Suzette Cooke in September. The hike to 6 cents per square foot per quarter from 3 cents will impact about 680 businesses, according to city documents.
“We as a council have pushed this conversation down the road year over year over year,” said Councilwoman and Mayor-elect Dana Ralph prior to her vote for the tax jump. “The word double is easy to make it very inflammatory but we are talking about moving from 3 cents to 6 cents. Bellevue is at 25 cents. North Bend is at 15 cents.
“There is a lot of conversation about not making this small business versus big business, chamber versus city but we are making it business versus quality of life. It’s important to a lot of businesses to locate in a community that’s vibrant and healthy and active and engaged. …It’s a very difficult conversation, but it is time for us to look at our city as a whole city and not parcel it up.”
Council members Bill Boyce, Dennis Higgins, Tina Budell and Les Thomas joined Ralph in favor of the tax hike. Jim Berrios and Brenda Fincher voted against it.
Businesses with gross receipts more than $250,000 pay the city B&O tax. Businesses with large square footage pay a square footage tax instead, if that rate is higher than the tax on gross receipts.
“Here’s what bothers me about this, we’re not asking businesses to chip in, we’re saying we’re going to double that tax,” said Berrios, a former Kent Chamber president. “That’s an insult. Why didn’t we consider a quarter or 50 percent increase? No, we are going to double it. …Some businesses have not yet recovered from the recession.”
Prior to the vote, eight people, most with chamber connections, testified against the tax jump. Five people spoke in favor of the tax hike in order to help fund a $60 million backlog in parks maintenance.
“The Kent Chamber of Commerce is opposed to the mayor’s proposal to increase the square footage tax,” said Chamber President Cindi Cameron, a senior loan officer with Fairway Independent Mortgage. “We don’t need to revisit the history of the B&O tax to know why this proposal is bad for business and bad for Kent. However, it is important to admit that an increase in the square footage tax is essentially an increase in the B&O tax.
“The city is asking the businesses to contribute more to the city operations and in this case to fund parks. The city was advised by its Financial Sustainability Task Force that parks were not among the top priorities for financial sustainability. …While parks are an important asset of the city, they are not a priority for funding at this time. We believe the best source of revenue for parks funding is property, which businesses pay, and a levy or specific taxing district for parks.”
Others from the business community talked about companies that might leave Kent or not come to the city if the tax hike goes through.
Certain audience members applauded after people testified either for or against the tax hike.
“Kent is at a crossroads and we really have to figure out where we want to go,” said Jennifer Ritchie, a member of the Kent Parks and Recreation Commission. “Do we want to basically tell people in Kent the environment isn’t worth it, we’d rather have businesses. The parks go into disrepair, that’s not one of your top five priorities and not as important as keeping businesses here that say they are going to leave. …This is the time when we figure out what kind of city are we and what are our priorities. I think parks fit in the priority of the top five list.”
In addition to funding parks, Cooke also proposed the tax hike because city leaders are facing a fiscal cliff, the loss in 2020 of the $4.7 million Kent receives each year from the state for the Panther Lake annexation in 2010. The city also could lose as soon as 2019 the estimated $5 million per year it gets from the state (streamlined sales tax mitigation) to help compensate for revenue lost when legislators changed the state in 2008 from an origin-based system for local retail sales tax to a destination-based system, gutting the tax revenue the city received from its large warehouse district.
Boyce, the council president, said he struggled whether to boost the B&O tax, which the city adopted in 2013 to help pay for street repairs.
“This goes against everything about me about raising taxes,” Boyce said. “It’s something I don’t like doing. But we have to find a way to make sure we are not going to one source over and over to try to bail us out for things we need in the city. But with that said, I will support this. Going forward, B&O will no longer be our first or second choice. We have to find other means and not continue to reach out to the businesses.”