Item Coversheet
Item #12.

Staff Report: 179-22


Mayor and City Council


Eric Holmes, City Manager




Ordinance amending Sections VMC 5.04.075, 5.04.090 and 5.04.095 to update the business license fee and surcharge
Key Points
  • The City currently relies on a business license surcharge (BLS) program to raise revenue to support, in part, investments in transportation capital and police services.
  • This rates under the BLS program for both the base license fee per location and the per employee surcharge have not been adjusted for inflation since inception in 2007.
  • Amending the BLS program to expand the tax base and increase the fee rate will:
    • Reduce taxes on approximately 17% of small businesses in the City.
    • Generate new, additional revenue phased in over 8 years to support expanded investments in transportation and police, the current focus of the BLS revenues.
    • Expand eligible uses of BLS revenues to include additional investments in economic development and major capital maintenance in the City’s parks system.
  • Simplifying the current BLS incentive program will clarify eligibility and ease administration without reducing the effectiveness of this incentive.
  • The ordinance directs policy development in 2023 of a small business incentive to recognize and retain small businesses with a sustained long-term investment in Vancouver.
  • Implementation of the new fee is planned for the second quarter of 2023 to allow system changes and broad notification and education.

Strategic Plan Alignment


Ensure high livability in Vancouver by investing in parks, public safety, transportation and creating new jobs

Present Situation

The City currently imposes business licensing requirements and associated fees on all businesses with gross revenues above $12,000 in the City. The City’s business license program is not a regulatory license, but rather a mechanism to gather data, support administrative functions associated with the licensing program and generate revenue for municipal purposes. The program currently includes two components:

  • A base business license fee of $200 per location, per year for all businesses (generates approximately $2 m. annually)
  • Business License Surcharge (BLS) (also known as “head tax”) that is a $90 annual fee per full time equivalent employee (FTE) employed by businesses with gross annual revenues over $12,000. (The surcharge generates $4.2 m annually).


Nonprofit organizations pay the base fee per location, but are exempt from the per employee surcharge; non-profit organizations that exist solely to raise funds for other purposes and provide no direct service delivery are exempt from all fees.


The BLS was originally adopted in 2007 to fund transportation investments at a rate of $50 per FTE per year. It was amended in 2016 to add $20 dedicated to additional transportation improvements and in 2017 to add another $20 dedicated to police funding. As of 2022, the total annual fee is $90 per FTE. The cap on the maximum number of FTEs the surcharge was lifted in 2020. Since inception, the fee has not been adjusted for inflation. As part of the City’s business relief pandemic response, the BLS was suspended in its entirety between Spring 2020 and March 2022 and remains suspended for businesses hardest hit by governor mandates associated with pandemic response through the end of 2022. In a “normal” year (pre-pandemic), the program generates approximately $6.2 m annually, distributed as follows: 22.7% to General Fund unrestricted revenue, 23.4% to Police and the remaining 53.9% to Transportation.  


The City of Vancouver implemented business license surcharge to fund transportation and augmented the base fee and the business license surcharge to fund a 30% increase in police staffing between 2016 and 2020.


The City’s tax system disproportionately relies on residential payers, since the City does not have a business and occupation tax within its city limits. Business license surcharge remains one of the major tools to engage businesses in shaping future livability of Vancouver. During the budget preparatory period, the City engaged business leadership to determine the increased array of services desired and the potential funding mechanism. This outreach included overall budget briefings and focused roundtable discussions with business leadership organizations (Chamber of Commerce, Columbia River Economic Development Council (CREDC) and Identity Clark County (ICC)) to explore business tax options.


The attached ordinance reflects the proposed license changes. The main components of the proposed changes include the following elements:

  •  An inflationary adjustment of the fee and surcharge in 2023;
  • Businesses making less than $2,000 in gross receipts will be required to obtain a business license, but will not owe a license fee, nor surcharge;
  • Implementing a new, reduced, license fee of $50, increasing annually by a $1, for small business owners that generate more than $2,000, but equal to or less than $50,000 per year;
  • Implementing a phased, gradual and predictable increase in employee surcharge from $105 per year to $245 per year by 2030. The surcharge will increase by $20 dollars annually through 2030. The proposed increases are outlined in the table below.
  • Updating the waiver language to eliminate the complexity embedded in VMC. Staff proposed to allow for a five-year waiver of the business license surcharge for any business that brings 200 or more new full time equivalent positions to the City earning at least 125% of the median income for the Metro area.
  • Updated definition of an employee from 2080 annual hours to 1664 per year.
  • Simplify receipts distribution to have 18% going to Parks, Public Safety and Wellness, 40% to Streets for new capacity building and the remaining 24% to Economic Development as seed funding for an Economic Development Revolving Fund.


The proposed increases are outlined in the table below:



Reduced fee

Annual License fee

Employee Surcharge


































These changes to the BLS program are forecasted to generate approximately $10.9 million in new revenue on full implementation by 2030 and represent an equitable approach to raising new revenue in the context of the overall tax landscape. The recommended uses of these funds address high priorities expressed by both our business community and the community at large. The total revenue from this source is forecasted to be $9 million in the 2023-24 biennium, with the following appropriation over the two-year period: $1.6 million to Parks for playground replacement, $1.6 million for Police, $3.6 million for new capacity building projects in Transportation and $2.2 million for Economic Development Funding to start creating a revolving fund for reinvesting into economic development at the City. 

  1. Updates Vancouver Municipal Code to allow for updated business fee and business license surcharge to generate new revenue to reinvest into the increase in high priority City services.
  2. Supports a more balanced overall revenue composition for the City’s general government services.
  3. Relies on gradual implementation of new taxes in support of predictable change in the business environment.
  4. Maintains current, simple program administration and simplifies business recruitment incentives.
  5. Reduces City tax burden on smallest business in Vancouver, representing 17% of total licensed businesses.

The resulting increase will impact the costs of doing business in Vancouver at a dynamic time in the overall economy. However, this increase is very modest in the context of other changes, such as minimum wage or workers compensation insurance changes.
Budget Impact
The additional revenues anticipated to be generated by the rate increase are incorporated into the 2023-2024 City Manager’s Recommended Budget. These are dedicated to Police, parks major maintenance and capital, new capacity building projects in Transportation and creation of an Economic Development Revolving fund.
Prior Council Review
2023-2024 City Manager’s Recommended Biennial Budget workshops on October 10, 2022, October 17, 2022, and November 7, 2022.
Action Requested

On November 21, 2022, subject to second reading and public hearing, approve the ordinance.


Natasha Ramras, Chief Financial Officer, 360-487-8484


Business License Ordinance