Lynnwood City Council reviews proposed amendments to business licensing codes

Economic Development Director David Kleitsch.

Two ordinances that would amend the city’s municipal codes regarding business licensing were the topic of conversation at the Lynnwood City Council’s Sept. 16 work session.

Recently, the Washington State Legislature began requiring cities that supply business licenses to partner with the Washington State Department of Revenue when issuing and renewing licenses. The new law also established a Business Licensing Service (BLS) program meant to be a convenient “one-stop system” for business owners to obtain licenses while improving customer service and achieving administrative efficiency, said the city’s Economic Development Director David Kleitsch.

“The whole concept of this is for administrative efficiency for both the state and local government to get to a more efficient process for customers,” he said.

According to Kleitsch, through the BLS program, the state will issue business licenses and collect the local fee before sending it to the cities. Additionally, an administrative cost will be collected by the state.

In May 2017, the city’s finance committee received a presentation from a team of University of Washington students that recommended the city join the BLS program. The city entered into the BLS program in April of this year. Lynnwood’s BLS system is scheduled to go live in November.

Additionally, the ordinance would remove many regulations that are outdated, redundant or inefficient. Regulations like the ones for dance halls and vending machines were too costly and not worth regulating, Kleitsch said.

However, Kleitsch said any business permits that require review by the Lynnwood Police Department — like pawn shops and massage parlors — will still fall under scrutiny of the police department.

Under the second proposed ordinance regarding the city’s fee schedule, businesses that are both based in the city and those that do not have a physical location will be charged the same fees. The ordinance also proposed exempting businesses that make $2,000 or less annually from requirements and fees, with the exception of those businesses that require special permits.

“We’ve advanced this in keeping with the objective to achieve the state mandate, establish a much more efficient system and achieve compliance,” he said. “At the end of the day, we just want folks to follow our rules and regulations in Lynnwood.”

During the discussion, some councilmembers said they thought the proposed ordinances required additional review by the city’s finance committee.

City Council Vice President Christine Frizzell said business license requirements and costs should be proportionate to the size of businesses. Frizzell suggested the city considering switching to a business and operations (B&O) tax instead of the current employee-based head taxes and fees.

Under the head tax, Frizzell gave the example that a small business with 10 employees that grosses $1 million a year would be taxed the same per employee as a larger business with the same number of employees that grosses $6 million.

“I’m wondering if we can look at this and possibly come up with something that’s a bit more equitable,” she said. “Especially with small businesses.”

Additionally, Frizzell said with the B&O tax it would be easier to verify employee hours, because they are reported on federal tax returns and with the State Department of Revenue.

To meet the BLS program’s November implementation deadline, Kleitsch advised the council to approve the ordinances on schedule and amend them at a later time.

“You’re not locking your fees in forever,” he said. “There would be time to make changes in the future and still move forward with this this year.”

The council is scheduled to vote on the two proposed ordinances at its Sept. 23 business meeting.

In other business, the council heard a proposal from city Senior Planner Ashley Winchell to remove Lynnwood Fire Station No. 1 — now the Lynnwood Civic Center Station 15 — from its list of public posting locations.

The city is required by state law to post locations for all ordinances, notices or other matters, like public hearings and land use applications. The list of posting locations also includes Lynnwood City Hall, the Lynnwood Library and the Lynnwood Recreation Center.

The list has not been updated since 1987. At that time, all of four posting locations had regular public hours. However, the Lynnwood Fire Station no longer has regular business hours since the creation of the South Snohomish County Regional Fire Authority.

Now, Lynnwood Fire Station No. 1 is only open to the public by appointment.

City staff is recommending the council remove Lynnwood Fire Station No. 1 and name the office of Lynnwood Development and Business Services as its replacement.

–Story and photo by Cody Sexton

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