The Oak Harbor City Council adopted the city’s first business and occupation tax this week in order to help fund dredging and repair of the city-owned marina.
After months of debate over the issue, the council ultimately decided on Wednesday to set the B&O tax to affect only businesses that earn $4 million or more in gross receipts, which will likely only impact an estimated 29 businesses and raise about $880,000 a year. The tax is only on gross receipts above the $4 million threshold.
The measure passed in a 5-1 vote, with only Councilmember Chris Wiegenstein voting against it. Councilmember Jim Woessner was absent.
The city staff previously proposed that the B&O tax could help fund both the marina and a community center, but the discussions this week focused on only marina-related issues.
During the meeting, Deputy City Administrator and Finance Director David Goldman presented the council with seven scenarios to facilitate deliberation about funding the marina. The different options included other proposed funding mechanisms, such as lodging taxes, a utility tax and a new dredging fee, but the council’s decision was solely about the B&O tax.
That likely means more marina funding discussions are on the horizon.
Councilmembers Bryan Stucky and Barbara Armes, as well as Mayor Pro Tempore Tara Hizon, each initially expressed their support for an option that set the tax at a $5 million threshold while avoiding utility taxes, lodging taxes and breakwater fees.
Councilmember James Marrow said he was torn between this option and another one that didn’t include a B&O tax and proposed other funding options instead.
Hizon added that she doesn’t believe utility ratepayers or property owners within the city limits should have to shoulder the financial responsibility of the marina. She also highlighted the direct benefit that businesses receive from marina users.
“The financial hit a business might take from a B&O tax would pale in comparison to the financial hit that they would take if all of those boat owners weren’t there,” she said.
The marina, she added, has a need for a secure funding source due to economic and climate uncertainties. She pointed to the recent tsunami advisory as an example of a potential hazard in the future.
Stucky said he doesn’t see that the limited B&O tax would have much impact on the economy.
“I don’t believe that there would be a mass exodus of businesses, or a giant increase in cost or any increase in cost, to be frank,” he said.
Councilmember Eric Marshall had previously spoken against the B&O tax. This week, he said he still preferred alternative funding options for the marina project. He voiced support for an option without a B&O tax that includes a utility tax, a dredging fee and lodging taxes. He pointed out that utility rates would still be significantly below the 2022 level even with the proposed $2 a month utility tax.
Marshall emphasized the importance of investing in the marina now, so in the future the city could pursue the expansion of a port district, the creation of a new port district or the creation of a metropolitan park district as a long-term solution.
In noting that the B&O tax would likely pass by majority, Marshall pivoted to support a new scenario and ultimately voted for the tax.
“Let’s do what we had initially said that we were going to do and do a full dredge, a breakwater repair and renovation and put money away for the reserves. I mean, if we’re going to bite this bullet, if we’re going to make this difficult step, then let’s do it right,” he said.
In contrast to the others, Wiegenstein opposed all tax scenarios, advocating for community-led initiatives like a port district. He believed existing options are short-term fixes and he expressed concern about saddling future generations with funding issues.
The council tabled the discussion of scenarios to make the motion, which passed. The B&O tax will go into effect on Oct. 1.
“This whole deliberative process was intentional. And although the time and length of it was not desirable, the fact of the matter is, because it is such an unconventional way to fund a marina, the public needed to know that we did our due diligence,” Marrow said in closing.
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