Wednesday, October 27, 2021
Oct. 27, 2021

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Vancouver won’t levy head tax on nonprofits

City eyes raising utility tax, business license fee

By , Columbian politics reporter

Bending to public backlash, the Vancouver City Council is walking back its head tax on nonprofit organizations and moving forward with a new proposal.

The council is considering a new funding mechanism to raise $6.1 million to pay for additional police officers and staff.

If a new plan isn’t agreed upon, a funding mechanism approved last year is set to go into effect Jan. 1, 2019. The previous plan taxes businesses per square foot and landlords per multifamily unit.

Vancouver Strong, an advisory group tasked with developing a sustainable funding plan for the city, proposed an alternative funding option earlier this year. The proposal recommended increasing the utility tax 2.2 percent in 2019 and 1.8 percent in 2020 to bring in $2.39 million and $2 million, respectively. The plan also expanded the city’s per-employee business fee by removing a cap on companies with more than 400 full-time employees. Nonprofits with four or more employees would also have had to pay the head tax.

City staff recommended a slightly different plan and increased the per-employee exemption to 20 or more employees for nonprofit organizations. Approximately 27 nonprofits would have been impacted by the proposal.

However, at the council’s Aug. 27 meeting, nonprofits turned up in full force asking the council to reconsider, citing disproportionate impacts on their organizations. In response, the council sent the recommendation back to city staff for further review in lieu of moving forward to a public hearing.

The city’s latest proposal unveiled during Monday’s workshop eliminates the head tax for all nonprofits and instead increases the annual business license fee from $125 to $200.

Concerns about ‘targeting’

Utility taxes would still increase 4 percent overall but with slightly different implementation. Rates would increase 2.4 percent in 2019 and 1.6 percent in 2020.

Councilor Ty Stober mentioned his concern at the moment — and in the new scenario developed by staff — is that PeaceHealth does not pay the same taxes as its competitors.

Raising the employee threshold even more to limit impact on smaller nonprofits while attempting to capture revenue from PeaceHealth would be considered targeting, however, and not recommended by the city’s legal department, according to Natasha Ramras, Vancouver’s chief financial officer.

“Our legal department is very uncomfortable raising the exemption to more than 20,” Ramras said. “The higher the threshold, the lower number of companies are subject to paying the license surcharge, thus creating an issue for the city with targeting … certain organizations.”

The rest of the council felt the new option was a fair compromise, and as Councilor Bart Hansen added, no other city in Washington taxes its nonprofits, and he would prefer Vancouver was not the first.

Councilor Linda Glover, who also serves as executive director for the nonprofit Gifts For Our Community, said although she supports the new proposal, she felt the original plan was just.

“You try very hard, trying to be as fair as you can and realize you do have a responsibility to fund services,” Glover said. “It is a burden to someone.”

Overall, the council agreed broadening the base to minimize the burden across the board was the best solution.

The new proposal returns to the council Sept. 24 for a first reading. A public hearing is tentatively scheduled for Oct. 1.

Columbian politics reporter