City of Kent’s B&O tax revenues keep going up

Revenue from the city of Kent’s business and occupation (B&O) tax continues to go up as more and more businesses are brought into the system.

Kent has added 104 new accounts from January through August, Barbara Lopez, city financial planning manager, told the Kent City Council at its Tuesday workshop. Those accounts resulted in $662,000 in past due payments and will bring in an estimated $410,000 annually.

“Most are folks who didn’t realize we had a B&O,” Lopez said. “We found them in a variety of different ways or they found us.”

The B&O tax, which the city added in 2013 to help pay for street repairs, brought in more than $6 million last year and is estimated to break the $6 million mark again this year.

The first $700,000 of the tax revenue goes to cover staff costs. The funds in excess of a $4.7 million cap go to help pay down city debt in the capital improvement fund, although all money will go to streets starting in 2017.

But staffing this year will cost an estimated $530,000, saving about $170,000 in staff costs.

“These cost savings are largely due to the hiring and timing of new positions we got, so it’s not savings we are going to expect every year because we don’t anticipate having to hire those positions every year,” Lopez said.

The council last year approved four new positions to add to a two-person staff in an effort to boost tax revenues. The program has two field auditors, a desk auditor, a customer service specialist and by the end of the year will add a compliance officer. The compliance officer will follow up on business licenses to make sure if someone has a business license they also are filing B&O taxes, Lopez said.

“I am tickled pink,” Councilman Bill Boyce said in reaction to the new revenue numbers. “To think how we have evolved to where we were at eight months ago, we have made tremendous progress, and I want to say kudos to the team. We have a little ways to go but you are definitely moving in the right direction.”

The revenue numbers also impressed Council President Dana Ralph.

“We have come a long way since this whole plan was hatched and implemented very quickly,” Ralph said. “It was new to everybody and I am grateful for the progress we have made. And I am thankful the finance department brought forward their concerns (for more staff). Without that conversation, we wouldn’t have been able to say here’s the budget come fix this.”

The finance department had a budget of $300,000 for two field auditors when the city started up the B&O tax in January 2013. Finance department staff said the additional staff would bring in enough revenue to cover staffing as well as additional funds for street repairs.

“We talked about adding additional staff and what that would bring to the numbers, and you said it would make up the difference and you have,” Councilman Jim Berrios said.

Berrios, who owns the Golden Steer Steak and Rib House on the East Hill, came away pleased that more businesses are paying the tax.

“It is exciting to see the numbers are what you said and then some,” Berrios said. “The $170,000, if that is the savings at the end of the year, would go into the CIP (capital improvement fund). We want to try to collect as much as we can. I am one of those paying that money and it’s coming off the top. That’s why it’s up close and personal for me. So if there are people out there who haven’t paid, they need to pay their share.”

Lopez replied that’s the plan.

“Equity really is our focus,” Lopez said. “Every business paying its fair share and not a penny more and not a penny less.”