Milwaukie staff propose business-license changes to fund economic development, council asks for revenue details

City staff on July 21 presented draft changes to Milwaukie's business license structure intended to give the city flexibility to spend license revenue on business-assistance programs as well as for revenue collection.

"We're gonna focus and drill down on the business registration conversation that we started a few months ago," Assistant Manager Joe Superleo said, explaining staff would use the work session to seek council feedback rather than read every quarterly tracker item.

Economic development coordinator Sierra Fox told the council staff proposes a code amendment to change the license language from "for revenue purposes only" to "for revenue and economic development purposes," and described four linked fee-policy proposals intended to respond to business feedback and peer-city benchmarking.

Those proposals include: lowering the home-based business base fee to $75 (from $175); exempting some COVID-certified businesses; exempting long-term rentals with two or fewer units; moving rental charges from a per-employee model to a per-unit model at $4 per unit (in addition to the base fee); and a targeted increase to the base fee for businesses with 20 or more employees (from $175 to $275) so larger employers make up some of the revenue deficit.

"We would lower the home based fee to $75," Fox said when presenting the staff recommendation and associated assumptions.

Staff warned that the proposed rental exemption for owners of two or fewer units would remove a substantial number of license payers. Fox said rental license receipts currently bring in about $85,000 and exempting roughly 350 small landlords would be a "substantial" revenue loss on the rental side; the shift to $4 per unit and the proposed tiered business increase are intended to offset some of that loss.

Councilors pressed staff for more precise numbers and modeling. Several members asked for a breakdown showing expected revenue losses from each exemption, expected revenue gains from the per-unit rental fee and the higher base fee for larger businesses, and what the "total pot" of business-license revenue is today.

"It would be helpful ... understanding for each of those the revenue we're expecting to lose, and for this the revenue that we're expecting to gain," one councilor said.

Staff said the city oes not consistently capture the home-based flag in current spreadsheets and that some estimates rely on survey proxies; staff committed to providing more detailed spreadsheets and examples (including large apartment complexes) when the policy returns to council.

Members also discussed administrative burden and compliance. Several councilors favored an "opt-in" approach for exemptions so property owners or businesses would request a reduction and provide documentation; staff cautioned this requires a verification SOP and some level of enforcement capacity.

On policy trade-offs, councilors debated whether to add additional tiers or a steeper fee for very large employers; some warned that aggressive feeing of large firms could harm regional competitiveness and the city's perception among potential employers.

Council direction and next steps

Council signaled preliminary support for the staff direction with follow-up conditions: staff should bring the refined fee schedule and sample budget impact calculations back to council (and include comparative figures and expenditure buckets), design verification procedures proportionate to expected revenue and administrative cost, and present the code-amendment hearing materials together with a fee-schedule update. Several members supported the opt-in exemption approach and the $75 home-based fee as a starting point.

Staff also noted they would coordinate with finance and the budget committee on whether to create a separate economic-development fund or to track and earmark funds within current accounts; several councilors advised avoiding creating new funds unless justified by transparency needs.

The item will return to the council as a hearing and as a packet item with detailed revenue modeling before any ordinance adoption.

Quotes and attributions in this article use council and staff remarks recorded during the July 21 work session.