Council studies potential revenue options including business, utility and vehicle fees

The Mill Creek City Council reviewed a staff matrix of potential revenue options on April 1 that included business and occupation taxes, utility taxes, brokered natural gas tax, regulatory business license fees, lodging and admissions taxes, gambling taxes, and a vehicle‑registration fee under a transportation benefit district.

The study session matters because council faces projected budget shortfalls in 2026 and staff said preliminary revenue choices would affect long‑range financial planning, annexation analyses and the city’s ability to maintain streets and other services.

Finance Director Irmina (presenting) grouped options into business and utility taxes, other excise taxes and other fees. She said a local business and occupation (B&O) tax applied at 0.2% to retail taxable sales — using the city’s 2024 retail taxable sales estimate of about $25.7 million — would generate roughly $40,000–$50,000 annually before additional administration costs (staff estimated an added 0.5 full‑time equivalent to manage compliance).

On utility taxes, staff explained state authority and common local practice: electrical, gas and telephone taxes are often capped at 6% unless voters approve higher rates; water, sewer, solid‑waste and stormwater taxes may have no statutory cap. Staff presented a peer comparison that implied Mill Creek could raise approximately $1.6 million to $2.6 million per year from utility taxes depending on rates and services included; staff’s per‑capita comparison ranged roughly $73–$120 per person for cities with utility tax programs.

A brokered natural gas use tax was described as a targeted option collected via the state Department of Revenue and estimated at under $10,000 annually for Mill Creek. Staff also highlighted regulatory business license fees (for activities requiring oversight, like mobile food vendors and short‑term rentals) with low revenue potential (<$5,000 annual estimate) and admissions and gambling taxes with modest revenue estimates.

The presentation covered lodging tax constraints: because Snohomish County imposed a countywide lodging tax before 1997, Mill Creek would be limited to the portion that credits against state sales tax rather than the additional local surtax; lodging tax revenues are typically restricted to tourism‑related uses and require an advisory committee if adopted.

A transportation benefit district (TBD) vehicle license fee was presented as another option: a locally adopted TBD could levy up to $50 per vehicle without voter approval (and higher amounts with voter approval). Staff estimated that a $50 vehicle fee applied to Mill Creek’s 14,730 registered vehicles would generate roughly $294,000–$736,000 per year depending on assumptions and exemptions.

Council conversation emphasized three themes: (1) tradeoffs among revenue stability and equity (property tax and utility tax seen as more stable than sales tax), (2) the need to study distributional impacts on renters vs. homeowners and multifamily residents, and (3) how revenue choices would interact with planned capital needs such as streets maintenance and annexation modeling. City Manager Martin Yamamoto noted any revenue decision would be balanced against long‑term budget priorities and implementation timing.

Ending: Staff said the presentation was informational; council asked for follow‑up analysis including per‑capita comparisons, tax‑mix breakdowns, draft packages for decision (e.g., utility tax with defined exclusions), and data on how property taxes are distributed between owners and tenants. No formal action was taken; staff will return with more detailed options.