Round three for business tax

Proposal tabled, third could emerge next month

Vancouver’s business tax proposal is back on the drawing table. Based on feedback from several business owners, the council directed the Finance Working Group to identify an alternative more favorable to businesses.

The council, at an Aug. 15 meeting, was considering a proposal that required a business with three to five employees pay a business license surcharge of $175, a business with six to 50 employees pay $1,250 and a business with more than 50 employees pay $3,750. This is the second such alternative presented by the Finance Working Group since it was formed 18 months ago. As designed, the surcharge would have contributed $2.8 million earmarked strictly for new capacity transportation projects.

Businesses currently pay $100 annually for its first two locations, plus $100 for each additional location. The fee increases to $125 in 2006, as decided by the council last year.

With the most recent proposal, which exempted businesses with one or two employees, nearly half of all Vancouver businesses, small companies lumped within the six-to-50-employees bracket felt unfairly targeted.

“We do recognize that there is a funding issue and we do wish to put in our fare share and try and rectify the issue that is before us,” said Eric Jones, owner of Little Italy’s Trattoria, at the meeting. “I am opposed to how out of balance this ordinance appears to be.”

Jones said the ordinance disproportionately hurts small businesses, particularly because it is for funding transportation. A company with a large workforce would pay a few dollars for each employee traveling on the city’s roads, while he would pay about $40 for each of his approximately 30 employees.

John White, president of J.D. White Co., agrees that the city could have done a better job stair-stepping the surcharge fees, but he is fully supportive of the city council finding a way for businesses to contribute more to support improving the area’s roadways. He was comfortable with the amount required for his 33 employees, but said the equality of the proposal was questionable for smaller businesses. But without the transportation projects the business license surcharge would fund, Vancouver will fall further behind in infrastructure development, which could impact economic development, he said.

“Businesses are attracted to a community invested in itself and supportive of infrastructure in the long term,” said White.

A company considering relocating to Vancouver would think more of the city’s decision to dedicate funds to new capacity transportation projects than how much it will cost them, said White.

Wilma Glynn, owner of Willie’s Café has 10 employees. She said the cutoff unfairly groups her business with larger restaurants generating much more revenue.

“It needs to be adjusted, it’s really way too high for us small businesses,” said Glynn. “I cannot afford this.”

Rather than voting on the ordinance, the council decided to send the issue back to city staff for further tweaking, including the possibility of altering the design of the stepped surcharge fees.

“I have no problem changing the tiers around,” said Mayor Royce Pollard at the meeting. “All we are going to do is change the crowd here next time.”

The council also asked the GVCC, who endorsed the entire tax package, to continue looking at the proposal and return with feedback from its members.

In particular, GVCC president John McKibbin said problems with definitions of employees and unequal distribution of fees were the areas of most concern to businesses.

“Some businesses were asked to pay an inordinately larger per-employee cost,” he said.

But not finding a compromise could cause more situations like the county is facing in Salmon Creek with a recently imposed development moratorium. He said he expects to seek input from members through meetings with the chamber’s public affairs committee and report back to the city. The council could take another look at the ordinance by the end of September.

Other elements of the funding package to increase revenue for public safety and transportation include an increase in the sales tax from 7.7 percent to 7.9 percent that would contribute an approximate $4.2 million in 2006 and a voter-approved property tax increase to add an estimated $4.3 million in 2007. The council passed the sales tax portion by a vote of 5 to 2, with Jeanne Stewart and Tim Leavitt dissenting.