B&O tax is bad for business | Guest op
September 28, 2012 · Updated 3:47 PM
The Kent Chamber of Commerce is adamantly opposed to a business and occupation tax (B&O tax) in the city of Kent.
The imposition of such a tax is based on gross revenue versus the profitability of business. This taxing system is fundamentally flawed. Establishing such a tax will not only hinder growth of the business community in Kent, but will also put businesses that reside in Kent at an economic disadvantage with competitors outside the city.
However, the city of Kent on July 31 passed Resolution 1863, stating its intention to develop a new revenue source for street maintenance. "Determining that the city and its citizens need a new revenue source to maintain its streets in good repair. The City Council determined that those businesses in Kent contribute to the deterioration of its streets and should pay a greater share of cost to maintain and overlay those streets."The Kent Chamber of Commerce supports well maintained streets as they are a crucial contribution to economic development and growth. Poorly maintained roads constrain mobility, significantly raise vehicle operating costs and increases accident rates.
The economic and social importance of regular road maintenance is incredibly important for a viable city. Without regular maintenance, roads can rapidly fall into disrepair. If road defects are repaired promptly, the cost is usually modest. If defects are neglected, roads fail causing a costly reconstruction. We must preserve the streets of the city of Kent and look to the future financial health and sustainability of these public assets.
Because of the mandate of the City Council to use Kent businesses as a funding source despite our legitimate concerns, the Kent Chamber of Commerce is reluctantly willing to accept a B&O tax with the following conditions:
A B&O tax of no more than .09 percent on manufacturing and warehousing businesses and no more than .03 percent B&O tax on service and retail businesses with the first $250,000 exempt to protect small businesses from the harsh impact of a B&O tax. This scenario should raise approximately $5 million for the city road maintenance needs. The Kent Chamber used numbers to calculate revenue based on numbers that were provided to us by the city of Kent Finance Department.
The recommendation of the Kent Chamber of Commerce to tier the B&O tax in order to collect additional money from the warehouse and manufacturing industry is due to the higher damaging impact of large trucks on the roads.
The funds collected from a B&O tax must be designated for road maintenance, and be included as a line item in the future budgets of the city. The Kent Chamber's intention is to protect the businesses' investment of a B&O tax to be designated for street maintenance and to hold the city of Kent accountable in the spending of these funds.
The B&O tax should sunset in six years. At the end of the six years, the levy that is to be voted on by the public in the November election will be completed and the project list that has been presented by the citizen's committee should have been accomplished. This requirement of a closure date is key to the business community.
Finally, during those six years, the city of Kent must maintain street maintenance funding at a level equal to the sum of revenue from the combination of the levy lid lift (approximately $1.8), current levels of funding for street maintenance (approximately $1 million), B&O tax (approximately 5.0 million) and city of Kent efficiency savings (approx. 2.0 million). Diverting funds away from street maintenance is not acceptable.
The Kent Chamber of Commerce will actively work with the city and business community to lobby at the state and federal level to obtain additional funding to help with street maintenance and projects. If lobbying efforts are successful, we ask that the city reconsider the B&O tax rates and reduce them according to monies received from future funding sources.
We also ask that the city consider application of a Transportation Benefit District, implementation of recommendations from the efficiency study and economic factors; and if possible allow any B&O tax implemented to be reduced or eliminated before the six-year sunset period.
The Kent Chamber of Commerce has held numerous meetings regarding this issue and has explored multiple funding options for street maintenance. Our membership is strongly opposed to a B&O tax and/or a head tax, but in our desire to be a partner with the city of Kent, and our understanding that a B&O tax is inevitable the board of directors of the Kent Chamber of Commerce suggests the above conditions be adopted by the city as the most acceptable circumstances for the business community for imposition of the tax.
Andrea Keikkala is executive director of the Kent Chamber of Commerce. Reach her at 253-854-1770 or www.kentchamber.com.