Kent Mayor Ralph fights for right to raise sales tax

With the city of Kent contributing billions of dollars to the state economy from its warehouse and industrial valley, Mayor Dana Ralph says it’s time for the state Legislature to help provide more tax revenue to the city by allowing it to raise the sales tax.

“We have one of the most significant manufacturing and industrial centers in the entire country right here in the Kent Valley,” Ralph said during her State of the City business edition speech Thursday, March 6 at the Kent Chamber of Commerce luncheon at Green River College Kent Campus at Kent Station.

The Kent Valley includes the cities of Kent, Auburn, Tukwila and Renton.

Just the city of Kent, however, contributed an estimated $13.3 billion of direct economic impact to the state in 2023, according to a March 4 report by ECOnorthwest, which has a regional office in Seattle. Renton was next at an estimated $9.6 billion followed by Auburn at $1.9 billion and Tukwila at $954 million for a Kent Valley total of $25.9 billion of direct economic impact to the state.

Kent is loaded with businesses in its valley, many of them aerospace manufacturing; food and beverage manufacturing; warehouse and freight; grocery wholesalers; and beer, wine and spirits wholesalers.

The Kent Valley is an economic powerhouse with over 105 million square feet of industrial and warehouse space, 12,000 companies and 232,000 employees, Ralph said. Aerospace is the leading industry. Ralph said it provides 35,500 jobs in South King County and an economic impact of $13.6 billion from the cities of Kent, Renton, Auburn and Tukwila.

“Billions and billions of dollars are going to the state economy on the backs of Kent and Kent residents,” Ralph said.

In return, however, the city has missed out on an estimated $18 million per year in sales tax revenue from many of those businesses, Ralph said.

“The state adopted a model sales tax instead of going to the city where the product started. …the warehousing valley. …it now goes to the destination,” Ralph said. “We don’t get that sales tax.”

The Legislature in 2007 changed the state to a destination-based sales tax, taking away millions of dollars of tax revenue Kent had received from the many distribution and wholesale warehouses in the city. The change was done in part to simplify the collection of sales taxes on online purchases. But those streamlined sales tax mitigation funds have been smaller and smaller the last few years.

Because of the loss of origin-based sales taxes, city leaders helped persuade the Legislature in 2021 to provide an additional $12.1 million over five years in mitigation funds, but that will expire in 2026 when Kent gets its final $2 million. The city received as much as $5 million per year in the earlier years of streamlined sales tax mitigation.

Ralph said 25% of Kent’s area is industrial, and the city lacks many of the large commercial stores that produce sales tax revenue.

“We don’t have a Walmart or Costco,” Ralph said. “And we have just one car dealership (Bowen Scarff Ford), and how much sales tax do you pay on new car, it’s a lot.”

House bill proposal

That’s why Ralph and other city leaders are pushing for the Legislature this session to adopt House Bill 1532. The bill would allow Kent to enact a .03 sales tax (3 cents on every $10) to raise an estimated $12 million per year, according to bill documents.

Ralph spent March 5 in Olympia meeting with legislators in an effort to get the bill passed.

“It felt like I spent 15 hours down there,” Ralph said.

The bill is in the House Rules Committee, which means it needs the leadership of that committee to take the measure to the full House. If the House adopts the bill, it would go to the Senate for approval. The House Committee of Finance referred the measure to the Rules Committee.

“We are hopeful,” Ralph said. “This bill would be a game changer for Kent and finally be a long-term fix to the streamlined sales tax and help us fill that gap.”

Under the measure, the City Council could adopt the sales tax without going to voters.

Money to hire more police

Ralph, who is running this year for a third four-year term, said at the chamber meeting the city would use the sales tax revenue to hire as more police officers.

“We need 30 to 40 more officers to provide the level of service the community needs and is demanding,” Ralph said.

The mayor said public safety continues to be number one focus for herself, Police Chief Rafael Padilla and the council.

“Kent does not have the resources to hire the number of officers needed for a city our size,” Ralph said. “We have fewer officers per capita than many other cities.”

The city has budgeted for 170 officers, which includes hiring three this year, and is up to budget. That gives the city about 1.2 officers per 1,000 residents. The city’s population is 140,400. The national average is about 2.9 officers per 1,000 residents, according to the FBI.

Ralph and city leaders also lobbied hard in 2024 to get a sales tax measure passed to pay for more police, but the bill never got out of committee.

“I want the opportunity to raise our taxes because it means so much to our community,” Ralph said about the potential to hire more police officers.

B&O tax revenue

The council raised its city business and occupation (B&O) tax, as proposed by Ralph, to pay for the three new officers this year.

It was the loss of state revenue that led the council in 2013 to adopt a B&O tax. The measure included built-in increases to help compensate for the loss of state revenue, mainly the streamlined sales tax mitigation and annexation funds the city received when Panther Lake residents agreed to annex to Kent in 2010.

The B&O tax will bring in an estimated $24.4 million each in 2025 and 2026, up about $4.7 million from 2024, according to city budget documents. Much of that revenue comes from the industrial valley as the city has five types of B&O tax classifications – manufacturing, wholesaling, retailing, service/other and square footage.