An executive sponsors council formed nearly two years ago delivered its final report and recommendation on “A Stronger Vancouver” to Vancouver City Council earlier this month. The recommendations include more than 60 projects and programs funded through a combination of revenue sources, including business taxes, a voted property tax levy lid lift and other taxes and fees.
In response to the revenue package, a coalition of representatives from various business organizations sent a letter to Mayor Anne McEnerny-Ogle, Vancouver City Manager Eric Holmes and the Vancouver City Council to express “directional support” regarding the many potential business tax hikes included in the executive sponsors council recommendation.
City Manager Eric Holmes said he is encouraged by the business community’s response to the recommendation.
“I thought that their letter was a very positive engagement from business organizations in Vancouver,” he said. “It is generally a letter of support. It identifies concerns and provides constructive suggestions. It’s very encouraging, and we’re at point where we can continue the conversation.”
The Stronger Vancouver Business Leaders Working Group is a cross-section of leaders from the Greater Vancouver Chamber of Commerce, Identity Clark County, Vancouver’s Downtown Association, Clark County Association of Realtors, Building Industry Association of Clark County, East Vancouver Business Association, Southwest Washington Contractors Association and others. The ad hoc group was formed three years ago and has been following the conversation closely.
Here is a breakdown of the revenue sources the executive sponsors council recommends, and the response from the Business Leaders Working Group:
Business & Occupation Tax
- Stronger Vancouver: A new phased-in tax on business’s gross revenues which would provide $5.5M from annual retail, wholesale, manufacturing and services taxed at a rate of $0.55 per $1,000 of annual gross revenue to fund infrastructure improvements to commercial districts; subarea/district plans; police and homeless services. The ESC recommendation points to the B&O tax as the “main source of business tax statutorily available for state and local governments in Washington State.”
- Working Group: Opposed to the B&O tax, phased out in Vancouver two decades ago, calling it “a regressive, unfair, anti-competitive tax on gross revenues.”
Business License Surcharge
- Stronger Vancouver: Creates annual revenue of $4.2M from a $70 increase to the current rate to fund infrastructure improvements to commercial districts; and programs improvements including traffic, bike and pedestrian safety; fire prevention; summer playground expansion; multilingual outreach; expanded community events; underserved youth; and expanded neighborhoods.
- Working Group: Approves the increase to this surcharge, commonly known as a “head tax” which is calculated by full-time employee equivalents (FTE). It was originally proposed by business leaders in 2005. Strongly preferred to B&O tax.
Property Tax
- Stronger Vancouver: A multi-year permanent levy lid lift would provide an annual revenue of $9.7M through a taxed rate of 0.44 per $1,000 of assessed value to fund infrastructure improvements to commercial districts; replacement and renovations of fire stations; park improvements; and rapid response rescue units.
- Working Group: Recommends property tax be “centerpiece” of revenue package, and to attempt to lift the 1% property tax revenue cap through a vote before implementing any “companion council-manic measures” to fund the recommendation.
Other Taxes and Fees: Utility, Sales, Internet Sales, Park Impact, Downtown Improvement Area, Admissions, Vehicle License Tab, Others
- Stronger Vancouver: A total of $10.7M annual revenue would fund fire sprinkler program; recreation fee reductions; Public Works Operations Center replacement, parks improvements; programs to address downtown district business needs; cultural, arts and heritage program; and infrastructure improvements to commercial districts.
- Working Group: Approves utilizing utility tax, park impact fees and internet sales proceeds; recommends setting aside a downtown improvement district tax and the 5% entertainment tax.
“Certain businesses have signaled their concern for facing as many as 5-6 different tax increases if the Stronger Vancouver package advanced exactly as it was shared at the last final executive sponsors meeting,” the letter states. In particular, the B&O tax continues to be a sticking point.
Tom Mears, chairman of The Holland Inc. and Identity Clark County, is a participant in the business leaders working group.
“The B&O tax applies to gross revenues, rather than profits, which is an antiquated approach to taxation that is almost non-existent nationwide,” he said. “Prior city leaders were wise to abandon the local B&O tax given our unique proximity to Portland (with no B&O or sales taxes) and given our desire to retain and attract more employers and jobs locally. Those reasons still hold today, and our economy and community are better as a result.”
Holmes also emphasized that the debate around funding centered on cultivating business competitiveness in a two-state metropolitan region, while providing adequate revenue to fund the vision for safety, service and economic vitality in Vancouver.
“How do we maintain our competitiveness to attract and grow businesses here? If you have a climate that is not conducive to growing business investment, we are working at cross purposes,” Holmes said.
City Councilor Ty Stober has a background in business and entrepreneurialism dating back to his days with Larsen Electronics (now a division of Pulse Engineering) in Vancouver. He “totally agrees” with the approach the executive sponsors council took with the revenue package, but feels the message and “excitement” around the recommendations have been inadequately conveyed. He says he wants to stop talking about taxes and start having a conversation about “our mutual vision.”
“I look at the city as a venture capital firm,” Stober said. “We make strategic investments to build and attract a competitive workforce and that competitive workforce combined with other strategic investments in infrastructure help to create an economic environment that lessens a business’s cost for delivering goods and services. If we make the strategic investments correctly the goal is a net positive ROI, a positive return on investment.”
Stronger Vancouver Business Leaders Working Group also recommends emphasizing a pay-as-you-go approach to funding, as well as phasing in the business license surcharge and park impact fees over three to four years.
“Business leaders want a safe, thriving community where they can operate successfully and live well,” Mears said. “We’ve expressed support for identifying and funding critically important projects utilizing broad-based tax tools where all who benefit share in the investment.”
The city council will learn more about the details of the Stronger Vancouver report in a series of workshops set through April and May. Workshops are open to the public and occur on Monday afternoons at Vancouver City Hall. They can also be viewed on Clark/Vancouver Television at www.cvtv.org. A deep dive into the rationale behind the recommended revenue package can be found in the Stronger Vancouver report at www.strongervancouver.org. Comments from the public will be taken throughout the summer. Following the workshops and public feedback period, Vancouver City Council will consider action on a final program and funding package.
