Title
Approval of an Ordinance Amending Chapters 5.04 and 5.05 of the Olympia Municipal Code and the City’s B&O Tax Program
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Move to approve on second reading, an Ordinance amending Chapters 5.04 and 5.05 of the Olympia Municipal Code and the City’s B&O tax program.
Report
Issue:
Whether to approve on second reading, an Ordinance amending Chapters 5.04 and 5.05 of the Olympia Municipal Code and the City’s B&O tax program.
Staff Contact:
Mike Githens, Finance Director, 360.753.8465
Presenter(s):
None - Consent Calendar Item
Background and Analysis:
There were no changes between first and second reading. Throughout 2024, budget sustainability was a key topic of discussion. At the January 2025 City Council retreat, the discussion shifted towards priority-based budgeting and exploring various revenue options. The Finance Committee, as part of their 2025 Work Plan, requested additional research as it relates to budget sustainability.
In February 2025, the Finance Committee requested additional information related to B&O revenue options to enable Council to get a better understanding of who would be impacted. Staff provided the additional information requested during the March 17, 2025 Finance Committee Meeting. The Finance Committee recommended the City Council review the information.
At their May 2025 Study Session, the City Council reviewed B&O revenue options and held a robust discussion. Three options were considered: raising the retail tax rate from .001 to .002 (maximum allowed without a vote); raising the no-tax-due threshold from $20,000 to either $200,000 or $500,000; and introducing or eliminating B&O tax exemptions. On the topic of the rate and threshold changes, the Council deferred for further discussion during a summer Council meeting.
In an August 2025 Study Session, Council continued its discussion about the most appropriate changes to the B&O tax program, again reviewing the information presented in May.
In the September 15, 2025, Operating Budget Revenue discussion, the Finance Committee considered several options for additional B&O tax revenue, similar to those discussed in previous 2025 meetings. The same information was presented to the full City Council on September 30th. In addition, they heard feedback from the business community via a report from the Economic Development Director. Council decided to move the discussion forward with four options featuring a change in the $0 filing threshold and an increase in tax rates (not just the retailing category).
At their October 14 Study Session, the City Council received new information on the potential increased revenue from four different B&O scenarios:
• 1: $250k threshold, all rates to .0015 (+$1.5 M)
• 2: $500 threshold, all rates to .0015 (+$1.2 M)
• 3: $250k threshold, all rates (except retailing) to .002, retailing to .0015 (+$2.0 M)
• 4: $500k threshold, all rates (except retailing) to .002, retailing to .0015 (+1.7 M)
Expressed preferences were Scenario 4 (Mayor Payne, Mayor Pro Tem Huynh, Councilmember Green); Scenario 3 or 4, but leaning toward 3 (Councilmembers Gilman, Madrone, Vanderpool); Scenario 2 or 4 (Councilmember Cooper, as expressed by Mayor Payne). Council decided to move forward to consider and vote on Scenario 4.
Climate Analysis:
This agenda item is expected to result in no impact to greenhouse gas emissions.
Equity Analysis:
This agenda item is not expected to further impact known disparities in our community. Businesses engaging in retail trade within Olympia will pay higher B&O taxes, however businesses with smaller levels of total business activity in our jurisdiction will potentially owe no B&O tax on their annual filings.
Neighborhood/Community Interests (if known):
Members of the community may have an interest in this agenda item as it deals with City finances and fiscal governance.
Financial Impact:
There is no financial impact associated with this agenda item.
Options:
1. Move to approve on first reading, and forward to second reading, an Ordinance amending Chapters 5.04 and 5.05 of the Olympia Municipal Code and the City’s B&O tax program.
2. Direct staff to make changes to the ordinance for second reading.
3. Take other action.
Attachments:
Ordinance