Officals reluctant to impose fee schedule

By Meg Olson

“I’m just not ready to move on this yet,” said city council member Ken Ely, as city council weighed a proposed new business license fee structure against a weakening local economy.

“There is no totally even way to come up with a business license fee,” said International Motel and Café International owner Art Lawrenson. “You’re not going to make everyone happy. What you have not taken into account is the ability of a business to pay. If there is anyone in this town making money, maybe it’s the brokerages and good for them. In the last ten days I’ve laid off 11 employees.”

The new fee structure proposed by city staff would have decreased the business license fee paid by Lawrenson and other tavern owners from $500 a year to $300. Pastime Tavern owner Mary Lee Hill said even that was too much for floundering taverns who have lost up to 80 percent of their business as Canadians avoid long lines at the border. “It’s a $200 discount and right now $200 is a lot but a few hundred more would be much better.”

City manager Gary Tomsic said the city had chosen to review business license fees not to adjust cost and revenue, but to streamline a cumbersome system. “We’re trying to classify businesses by some sort of standard code, similar to one used in other cities,” he said. “The net effect on the city’s revenues is zero. It’s not a matter of generating revenue. Some fees are increase while others go down.”

The new system would cut 13 classes of license down to seven. All non-regulated businesses, including everything from hotels and travel agents to farms and fishing, would pay $75 a year. Under the existing system they are broken into classes by what kind of work they do, and fees vary from $25 to $100. Regulated businesses fall into four categories. The highest cost is to adult entertainment, which remains at $500. An added category charges $300 to employees of these businesses, such as strippers, and their managers.

Taverns and bars would pay $300 and restaurants, retailers, wholesalers and manufacturers regulated by federal and state alcohol, tobacco and firearms rules would pay $100, regardless of the size or type of their business. This is an increase for a convenience store selling beer, who used to pay $75, but a break for a big non-regulated manufacturing operation, which paid $300 under the old rules. Home occupations would continue to pay a $25 a year fee.

“We are trying to simplify the classification and make it easier,” said city finance director Meredith Riley.

Tomsic said staff had done an analysis comparing Blaine’s fees to those in other cities, in response to a council request for the information. “It’s kind of all over the board,” he said. “In some cities it’s very involved. In others it’s very simple. Our fees are higher than Lynden, Everson or Sumas, but they have different sources of revenue such as a gambling tax. They can afford to give a license away if they have a gambling tax.” Blaine discontinued its gambling tax in 1999, responding to pressure from local taverns hit by a dropping Canadian dollar. The tax had been three percent, was dropped to one percent in 1996 and eliminated altogether three years later. Riley said the city had lost an estimated $510,000 in revenue since 1996 from cutting the tax. Business license revenue in 2001 is estimated to come in at $56,000.

“The business license structure has gone from a regulatory thing to a money making venture,” he said. “To attract new businesses to town it’s time for Blaine city council to get these fees down where they should be. Put it back to $20 a year and stop using it as a revenue producing structure. It’s not right. It’s time for the city to take a little hit and adjust their budget. We’ve had to.” When asked by mayor Dieter Schugt whether he favored eliminating business license fees, as is the case in Sumas, but bringing in a gambling tax instead to make up the shortfall, Lawrenson gave an emphatic no. “The profit from pulltabs is non-existent anymore,” he said.

Council member Frank Bresnan agreed the city should stop making money from business licenses. “I remember when you guys went for the $500 fee. You were making a lot of money and the police showed up three times a night,” he said to Lawrenson. “I think we need to lower the fee structure, not shuffle it around. We should take this through our budget process and see what we can and can’t do.”

Tomsic said the city would face shrinking revenues as local sales dropped and there was only so low they could go before, like local businesses, they had to cut staff and services. “I think the city is operating at the bone,” he said. We have no dollars for our streets and no way of getting any. We can cut this and cut that but every time we do there are basic services not being provided. Businesses aren’t going to come to the community if we don’t have law enforcement and don’t fill our potholes.”
Schugt said, by his calculations, the city would have to raise property taxes by nine percent to raise the amount now generated by business license fees “if we want to shift the burden from businesses to property owners.”

Ely suggested evening out the business fee structure, making all businesses pay closer to the same amount. “Do we have the ability to flex it further and make it more equitable all around?” he asked. “There are a greater number of businesses like mine than there are taverns. I don’t want to pay more, really, but I’d be willing to share.” Ely is a local chiropractor. “You’re going to push one spot and it’ll pop out somewhere else,” Tomsic said. “If you want to lower the taverns, do it, but if you increase everybody else there will be a roomful of them.”

Council will have the item on their agenda again at the October 8 meeting..

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