During its regular Tuesday meeting, the Edmonds City Council heard a staff presentation on business license fees and proposed changes aimed at making these more equitable and reflective of practices used in neighboring jurisdictions. Councilmembers also continued the discussion, started at last Friday’s retreat, to further examine budget and levy lift scenarios, examining some freshly reworked numbers.
City Clerk Scott Passey provided a detailed presentation on Edmonds’ current business license fee structure and application process. He explained that Edmonds has used a flat-rate business license fee since 1965, currently charging $125 for commercial licenses and $100 for home occupation licenses.
He pointed out that since 1965 the City of Edmonds administered business licenses in-house, charging a flat rate for business licenses. This changed in the wake of the 2017 decision by the state Legislature to require all cities with a local business license requirement to administer their license through the state’s business licensing service (BLS). This change was aimed at ensuring that all state business licenses are administered in a fair, uniform and predictable way.
“So we’ve been doing that since 2019,” Passey explained. “Businesses apply for their state license on the state website and can also apply for a city endorsement on the same website. So a business owner will go to the state site, they will apply and pay for their license in the BLS portal. The city then receives that information, they review the license for code and zoning compliance, and once the city approves the application, the license is issued by BLS.”
He went on to explain that Edmonds’ fees have been essentially flat for 16 years, since 2009. The commercial business license is $125, a home occupation license is $100, a non-resident commercial is $50, and the annual renewal fee is $50. He added that as of 2024 Edmonds has approved more than 4,000 license applications and received approximately $250,000 in revenues. And because the BLS administers licensing for so many cities throughout the state, the state has set rules that limit participating jurisdictions to updating codes and fees just once per year.
“We need to do that before October to ensure that any code or fee changes would be effective by Jan. 31, 2026,” Passey said, adding that since business license fees have been identified as an area of interest in the context of discussions about revenue-generating ideas.
“So the big elephant in the room is, why our business license practices have not changed for so long?” he said. “Part of the reason is that when we partnered with BLS in 2019, businesses began paying a handling fee to BLS on top of what they pay us from our own flat-fee business license structure, which from the start was designed to cover the administrative costs of the program. The rationale was that the city shouldn’t increase its fees because the handling fee represents a de facto increase to business owners.”
Passey then went on to compare Edmonds business license fee structure with those of neighboring jurisdictions, noting that other cities consider factors including number of employees, for-profit vs non-profit status, whether the business is home-based, and more.
He suggested that by introducing factors such as these, Edmonds could move from its present cost-recovery model to a revenue-generating model, but that this could introduce an additional workload, which might include enforcement.
“Switching to something else would signal a change, possibly significant, to our business community,” he explained. “We must remember that we presently don’t do active code enforcement, instead relying on voluntary compliance, so any changes we make to our code or fee may influence behavior. For example, let’s say we change to a variable-rate model and a business that reported 500 employees last year suddenly reports 10 employees, putting the city in the position to investigate. Additionally, we know that we are not going to fix our structural budget problem with business license fees alone, but it’s a piece of the puzzle that may make a difference.”
Councilmember Jenna Nand provided her personal perspective on these changes.
“As a small business owner, I found that the greatest barrier to voluntary registration is the requirement that business owners submit an architecturally accurate, skilled drawing of their floor plan,” she explained. “I’ve never been asked to do that in my 10 years as a business owner in any other jurisdiction, and I think that it’s overly burdensome to the small businesses that want to support the city and want to do the right thing and register voluntarily. I would encourage us to remove that option.”
She went on to add that she favors a tiered origination fee that would charge less for businesses with fewer than 10 employees out of concern that additional fees would impose a burden on Main Street retailers, restaurateurs and the mom-and-pop businesses that are already strained with the economic downturn. She pointed out that stores such as Safeway and TJ Maxx could probably afford to pay a little bit more, and that this could provide needed aid to the city in the current crisis.
She then moved to direct the city attorney to draft an ordinance to include options for a tiered origination fee for business licenses, and also remove the requirement that applicants submit a scale drawing of their business floor plan as part of the application.
After debating the pros and cons of a tiered origination fee structure, introducing an inflation adjustment, and involving the Economic Development Commission in future discussions, the council voted 5-2 to direct the city attorney to draft an ordinance with the following two key components:
1. Update the origination fees and license fee structures to reflect the 49.5% inflation rate difference from 2017 to current; and
2. Remove the requirements that applicants submit a scale drawing for business license purposes.
The remainder of the evening was devoted to continuing the budget scenario discussion begun at last Friday’s council retreat. This included the impact should a levy lift fail, the need to find additional cost savings, and an updated spreadsheet detailing where cuts could be imposed.
Mayor Mike Rosen’s presentation focused on three potential scenarios:
1. The current budget as approved, which assumed a $6 million levy lift
2. A budget that maintains city services and amenities
3. A scenario with no levy or a failed levy
Key highlights:
The budget reduction would total $8 million ($6 million levy plus $2 million in previously directed cuts)
Potential eliminations include:
– Miscellaneous legal services
– Human Services
– Cultural Services
– Certain memberships and professional services
– Stream Team and intergovernmental services
Cultural Services would be particularly impacted, potentially losing:
- Arts and Culture Program
- Public Art Management
- Creative District program
- Arts Commission support
Councilmembers emphasized this was a scenario discussion, not a final decision, and stressed the importance of:
- Not making hasty cuts
- Considering long-term tax base growth
- Understanding the potential community impact
- Addressing necessary cuts
- Exploring revenue generation options
Councilmember Eck in particular echoed these sentiments.
“I want to remind everyone that this discussion is being carried over from last week’s retreat,” she said. “We’re not acting hastily. We want to be thoughtful, and we’re just playing with scenarios at this point. We know that we will have to continue making cuts — we’ve made some pretty severe cuts already – and look at increasing revenues as well. But I want to assure everyone we are not going to be rash and make these changes overnight, and the things that we’re talking about may not even be what we end up with.”
The mayor noted the next step would be providing more specific details about potential departmental impacts.
“We will then take the comments that we have, and the next thing you’ll see from us is further details on the impacts,” Rosen said. “And as other councilmembers have pointed out, this is a process.”
In other council business, Acting Planning Director Mike Clugston was present for a brief public hearing on design review code updates. He explained that the correct design review code was missing from the council packet and proposed continuing the public hearing to May 27 so the correct document could be included. The council agreed and unanimously voted to continue the hearing to that date.
Business license fees should be reasonable and equal across all businesses. I think the city council is forgetting that if a business like Safeway is larger they will sell more goods and bring more tax revenue into the city. Looking at a business license as a form of revenue generation is completely outside of the scope of what city government should be doing. The city should be providing services at a reasonable cost to the citizens and businesses not looking for ways to make money off of them. In addition, just because we have seen inflation doesn’t mean we have to inflate the cost of everything. What the city council should be doing is looking at what it actually does cost to provide a business license and mark that cost up to match the actual labor the city puts into it. If that means the cost of a business license needs to be $500 annually then that is what the city should be charging every business. We are in the financial hole that we are in because we haven’t run the city correctly. Coming up with creative ways to bill a small business less because we want to save them money is long term financial suicide. Charge the correct amount to all businesses please.
Jim,
You bring up an interesting point about the cost of government vs. the price of government. Two different approaches towards fiscal responsibility. I’d like to hear the City Council debate this and then decide how to move forward with a fiscal recovery plan.
The Mayor and Council’s focus on marginal revenue increases is misdirected. If the Council wants to get support of taxpayers for additional tax levy lifts, it needs to show taxpayers it has their backs and is willing to tackle excessive services’ spending that cost more per resident than peer cities. The Council spent $300,000 to support RFA annexation and confuse voters (County election fees, illegal Loomis PR costs, legal fees to defend State PDC electioneering violations) and refused to spend any money for proper due diligence to determine how peer cities’ ‘best practices’ could allow the City to run a $12M fire/ems operation that would save $45 million in incremental RFA fire/ems taxes over 5 years. The Mayor and Council lost the trust of 5,109 taxpayers who voted against annexation and who now face an incremental $1,000-$2,000 in RFA taxes every year. How can the Council even think of proposing other tax levy lifts after burdening taxpayers with an unjustified $21M RFA annexation cost without demanding RFA efficiency and service improvements? Until the Council recruits a Citizen Oversight Committee to develop an appropriate Statement of Work and hire a legitimate, objective consultant to analyze peer cities’ ‘best practices’ that are providing efficient/modern fire/ems services for $12M/year, it has no right to ask for additional tax levy lifts. Please sign the Petition making that clear: https://www.ipetitions.com/petition/save-45-million-in-new-taxes
Given the foolish manner that city tax money was spent over the last 10 years, one wonders what the city will do with new tax revenue?? Can one fix foolishness?
…Just askin’
The answer isn’t hiring consultants. The city of Edmonds has lost many competent employees the last ten years. Rather than replace them with more competent employees they replaced them with employees that were dependent on hiring outside firms to tell them what to do or to do the work for the city. If I was to recommend one thing to the city is hire and pay higher wages to more competent employees that can make decisions without hiring outside firms. Here are a handful, off the top of my head, projects the city hired consultants and outside firms to handle. .. The waterfront connector, the new city park, outsourcing the fire department, the hiring of a new police chief, the potential purchase of the Burlington coat property on 99, the temporary police office on 99, the study of the homeless of edmonds, outside legal counsel, the study and creation of new positions in the city that do absolutely nothing for our city government or management. If you spend some time adding up the cost the city has paid to all of the outside consultants the last ten years you would still have a fire department, you wouldn’t be in debt, and you would be in a stronger financial situation. This new form of city government does not work. Look at the bank account.
Business license fees for Shoreline and Lynnwood are much cheaper than ours… Like another commenter said, not everything has to keep pace with inflation. I’m on the fence about this idea!