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More than 10% of businesses not paying BID fees

But councilmembers decline to take punitive action


January 9, 2020

Edmonds Downtown Alliance (Ed!)

Should Edmonds business owners be penalized for not paying dues to a collective business district overseen by the City of Edmonds?

During one of the City Council's final meetings in 2019, City administration said that possibility should be considered, but councilmembers decided to punt, and took no action – for now.

"Currently, delinquent assessment fees are charged a delinquency fee of 12% per annum," said Economic Development and Community Services Director Patrick Doherty.

"We attempt collection, but there are some – a small minority – who refuse to pay. Even referring to collection agencies does not seem to yield payment."

It was seven years ago that Edmonds City Councilmembers Frank Yamamoto, Strom Peterson, Diane Buckshnis, and Kristiana Johnson were in the majority for creating a Business Improvement District (BID). Today, it's known as the Edmonds Downtown Alliance, or ED! (exclamation point theirs).

Business Improvement Districts are special assessment areas established under the Revised Code of Washington.

They provide a local funding mechanism where businesses assess themselves to fund programs related to activities such as beautification, marketing, security, parking, clean-up, or administration.

In other words, the BID does not market particular businesses, but markets the "Edmonds experience." Also marketing that "experience" is the City's lodging tax and Snohomish County Development funds.

Quarterly fees range from $30 to $150, depending on square-footage. New businesses are exempt for one year.

The vast majority of the more than 330 businesses in the BID pay their dues, Doherty said. The district includes retail, service, office-based, and other businesses centered on the downtown core (excluding the waterfront) on Fifth Avenue North and Fifth Avenue South, as well as from Dayton Street in the south to Bell Street in the north.

Since the BID's 2013 inception, Doherty said, there have been a small, but persistent minority of businesses that have become and/or remain delinquent in the payment of their BID assessment fees.

Doherty estimated that number at about 10%. "There are approximately 35 members who are currently in arrears, but several have only two to four payments outstanding." The total was $27,000, as of Dec. 17. One business had a delinquent payment of about $5,000; a couple were at $2,000 to $3,000; several were in the $200-300 range; and the rest were lower amounts.

'I refuse to pay'

One business member who doesn't pay is Brent Malgarin, owner of Elegant Gems on Fifth Avenue South.

"It is mandated taxation by the city to garner business owners' money to waste on pet projects of the Economic Development Department. I have been fighting this illegally formed, forced membership entity since I opened my business," said Malgarin, a long-time opponent of the BID.

"I refuse to pay. They do not care what they do to business owners, only how much money they can extort from them. They have taken in almost $1 million, with no benefit, only that of self-serving a few who just keep changing hats."

The City Finance Department has pursued direct appeals to some of these businesses, as well as resorting to collection agencies for others. Unfortunately, for a small minority of businesses, these tactics have not produced satisfactory results, with delinquent fees only adding up, Doherty said.

What to do?

Doherty mentioned that Auburn, as well as the City of Snohomish, have effective approaches of tying delinquent fees to the annual renewal of city business licenses. Auburn staff indicated that since that approach was implemented, they have had almost 100% compliance with fee assessment payment, he said.

The City of Edmonds' proposal would have authorized the City to suspend the annual renewal of business licenses if a business has delinquent BID fees.

Doherty's suggestions included clarifying what a delinquent fee is and when it is considered delinquent, and clarifying how a 12% per annum delinquency charge could be calculated and applied.

Doherty explained that upon approval and implementation of the proposed code amendments, the City would issue a notice of a 60-day amnesty period, during which any BID member with outstanding delinquent assessment fees would be granted a 50% discount on their delinquent fees.

This amnesty period is intended to provide an incentive to bring every BID member into compliance as the new delinquent payment provisions are implemented, he said.

Although City Council members decided not to take any action on the matter, the late payments are an issue that both business owners and the City – which has three new councilmembers and a fourth one coming this month after former Councilmember Mike Nelson won the mayoral race – will have to resolve in the near future.

Councilmembers might have been swayed by comments from business owners during the December meeting and by not wanting to penalize businesses.

Business owner Kyle Huffman, who said his assessment is paid in full, claimed that the formation of the BID was an insult to the Chamber of Commerce. He added that the BID's focus is downtown, and those businesses subsidize neighboring businesses outside the BID area, he said.

Huffman added that he does not feel he derives any benefit, and said it's insulting that any government organization thinks it can spend his business's money better for the benefit of his business.

Erika Barnett of Salish Sea Brewing Company and a Chamber of Commerce board member whose business is in good standing, told councilmembers that she fully supports the BID, but cautioned against punitive measures for businesses not in good standing.

"To take away someone's business license because they do not choose to fund basically a marketing campaign feels not very Edmonds-like to me," she said.

"In addition, we at the chamber have seen so many businesses that are confused as to all of the different ways in which you can contribute. There's the chamber, there's DEMA (Downtown Edmonds Merchants Association), there's Edmonds Alliance.

"We have limited funds, so when they're forced to pick one because they are being taxed to do so, it makes it such that they cannot choose to do the others."

Matthew Ulrich, also in good standing with the BID and owner of Allstate Insurance on Main Street, said he too opposed forcing business owners to pay their assessments or have their business licenses suspended.

"I've seen no benefit whatsoever," he said. "It's nice to have some green umbrellas, (but) extremely overpriced. I watch my money so closely, and every dollar spent in marketing is extremely important. To say that they can spend our money better than we can is extremely incorrect."


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