By By MIKE VOSS; Contributing Editor
Washington’s City Council continues to search for a more-equitable way to impose fees it charges for business-privilege licenses.
It discussed several options Monday night, but the council took no action other than deciding it wanted to closely review the state law pertaining to fees for business-privilege licenses. The council wants to know exactly what it can and cannot do in regard to such fees.
City Manager James C. Smith reviewed several privilege-license options he had prepared. Those eight options include the existing method the city uses to charge privilege-license fees — a minimum of $50 to a maximum of $2,500 for businesses in the retail, wholesale and manufacturing categories and a minimum of $500 and a maximum of $500 for service businesses. Other options varied in minimum and maximum fees for the retail, wholesale, manufacturing and service categories. One option calls for a maximum of $1,000 for each category. Those options include a provision that calls for a business to pay 75 cents for each $1,000 of its annual gross receipts, but that business would pay no less than the minimum and no more than the maximum.
Smith recommended two of the options. One option would set the minimum fee for a retail, wholesale or manufacturing business at $50 if its gross receipts are less than $25,000 a year. It would set the maximum fee at $1,500 for any retail, wholesale or manufacturing business. The maximum fee for a service business would be $1,000. The option includes the provision for a business to pay 75 cents for each $1,000 of its annual gross receipts, but no less than the minimum and no more than the maximum.
That option, according to Smith’s analysis, would generate about $233,000 for the city if each business in the city paid its fee.
The other option Smith recommended would set the minimum fee a retail, wholesale or manufacturing business at $50 if its gross receipts are less than $25,000 a year. It would set the maximum fee at $1,750 for any retail, wholesale or manufacturing business. The maximum fee for a service business would be $500. The option includes the provision for a business to pay 75 cents for each $1,000 of its annual gross receipts, but no less than the minimum and no more than the maximum.
That option would generate about $223,000 for the city if each business paid its fee, according to Smith’s analysis.
The city’s current fee formula would generate about $275,000 if each business in the city pays its fee.
Mayor Judy Meier Jennette suggested the city consider “an across-the-board percentage” that would be charged to each business for its privilege license.
The council questioned why some businesses in the city that failed to report their gross receipts were charged the maximum fee.
That usually results in those businesses filing reports indicating their gross receipts, he said.
Smith said the city could do away with the fees, but he doesn’t recommend that happen.
Currently, a penny on the city’s property-tax rate generates about $50,000. Replacing $200,000 in revenue generated by the privilege-license fee with revenue generated by an increase in the property tax rate would require a 5-cent increase in the property-tax rate. Such an increase would raise the taxes on a $100,000 house by $50 a year.
He suggested the council review state law to determine exactly what the city can and cannot do when it comes to imposing fees for privilege licenses.
Earlier this month, the council decided to revisit its decision to increase the maximum fee for some business-privilege licenses. That move came earlier this month after several business owners and other spoke against the council’s June 23 decision to increase the maximum fee for some businesses from $500 a year to $2,500 a year.
During Monday’s meeting, Mayor Pro Tempore Doug Mercer said that some of the businesses complaining about the increase are among businesses in the city that reported gross receipts in excess of $10 million and saw their maximum fee increase to $2,500 are paying fees that are less than 1 percent of their gross receipts. The maximum fee of $2,500 paid by one such business, which he did not identify, came to .008 percent of its gross receipts, he said.