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Oak Harbor council reviews local B&O tax options to fund marina repairs; no vote taken
Summary
City finance staff outlined three thresholds for a local business-and-occupation tax to generate revenue for marina repairs and other capital needs. Councilmembers discussed restricting revenues to the marina, impact on manufacturing, vendor costs and how the proposed tax would interact with a possible port district; staff will return with more
Oak Harbor city staff presented options for a local business-and-occupation (B&O) tax at a Feb. 25 council workshop as one possible source to fund marina repairs, future parks or other capital needs. The presentation outlined threshold options and estimated revenue ranges; councilmembers asked for more detail on implementation costs, industry impacts and how a B&O tax would intersect with a proposed port district.
Deputy City Administrator and Finance Director David Goldman told the council the city reviewed three threshold options used in other Washington cities: an exemption for the first $5,000,000 of gross receipts (impacting a small number of businesses), a $1,000,000 exemption (affecting more businesses), and a $100,000 exemption (affecting many businesses). Goldman summarized staff estimates for potential annual revenue before exemptions and deductions: roughly $800,000 for the $5,000,000 threshold, about $1.3 million for a $1,000,000 threshold, and an incremental $500,000 for the $100,000 threshold option.
"The dredging and seawall fix will cost upwards of $20,000,000," Goldman said when council members asked about likely marina costs; he added that a larger marina modernization and resiliency package could add roughly $30 million more. Mayor Wright also described a broader, all-in estimate for a full rebuild: "It's a hundred and $50,000,000 to do it right," the mayor said during the discussion.
Councilmembers debated three recurring issues: whether council should restrict any new B&O revenue to marina work, how B&O rates would affect manufacturing or wholesale businesses, and how the timing of a B&O tax would interact with a possible port district ballot measure. Several councilmembers, including Councilmember Arms (a member of the Marina Advisory Committee), emphasized urgency. "We are one major storm away from losing our insurance," Arms said, arguing the city cannot wait for a port district process and that the marina faces immediate risk.
Other councilmembers expressed caution. Some favored a high-threshold option (the $5,000,000 exemption) to limit the number of businesses affected and focus the burden on the largest firms. Councilmember Eric Wieser suggested exempting manufacturing or using a lower-rate structure to avoid discouraging industrial development; staff checked the city's business data during the meeting and reported very few manufacturing businesses would be affected at the $5,000,000 threshold.
Goldman said implementation would require a vendor or software system, adjustments to staff processes and a short lead time to train personnel; staff recommended building about six months of lead time between council approval and the date the city actually begins collecting. Council asked staff to return with additional details before any formal action: an estimate of third-party vendor fees to administer the tax, a breakdown of affected businesses by industry and revenue, and a clear recommendation on whether to restrict proceeds to marina capital and whether the city should delay collection if a port district ballot measure advances.
No ordinance or resolution was passed at the workshop. Councilmembers discussed and in some cases expressed support for moving forward under certain parameters, but staff said they would come back with refined numbers, vendor-cost estimates and accounting approaches for how restricted revenue could be recorded.
If the council chooses a B&O tax, staff noted the city may account for proceeds as a committed fund balance (a council-level designation) so council control of the use of funds is preserved; alternatively the council could direct administration to assign the funds while it considers a formal restriction. The Council also asked staff to coordinate messaging with business stakeholders and return with an industry-by-industry impact analysis prior to any adoption vote.
The workshop ended without formal action; staff said they will prepare follow-up materials for a future council meeting.
