Everett Adjusts Business Tax Framework to Boost Revenue and Support Growth
The Everett City Council voted this week to overhaul the city’s business and occupation (BO) tax structure, introducing a more targeted approach that expands exemptions for small enterprises while increasing rates for several key industry groups.
Under the previous system, all businesses in Everett were subject to a flat 0.1% BO tax on annual gross receipts, with companies earning under $20,000 annually exempted entirely. The updated ordinance, marking the city’s first comprehensive review of its BO code in over 20 years, significantly raises the exemption threshold to $250,000. As a result, roughly 3,000 additional firms qualify for relief, bringing the total number of tax-exempt local businesses to approximately 6,500 out of an estimated 9,000.
The revisions also introduce sector-specific adjustments. Manufacturing businesses now face a 0.12% tax, up from 0.1%, while wholesale and service-oriented firms will pay 0.15%, a 50-basis-point increase. In contrast, the retail and restaurant segment sees a reduction to 0.075%, a move officials said reflects the sector’s tighter profit margins and its dominance among local firms, roughly 2,000 businesses are expected to benefit from the lower rate.
City projections indicate the overhaul will generate an additional $3.5 million annually. Historically, all BO tax collections flowed into the general fund, supporting core municipal operations such as police, fire, and park services, accounting for about 13% of that fund’s income. Going forward, however, newly collected revenue from the updated rates will be directed to a dedicated subfund focused on economic development initiatives, rather than general operations.
Mayor Cassie Franklin noted the strategic shift, emphasizing that the new funding stream is intended to advance specific growth objectives. A significant portion, between $2.5 million and $2.9 million each year, is earmarked for the proposed Outdoor Event Center, a downtown stadium envisioned to anchor events for the Everett AquaSox and potential United Soccer League expansion teams.
This week’s approval marks the city’s first tax increase explicitly linked to stadium financing. A fiscal advisory group had previously advised against dedicating new taxes to the project in 2024, but rising cost estimates, from an initial $82 million to $120 million, have accelerated efforts to secure dedicated revenue. Additional funding has already come from capital budgets, a state grant, and general fund loans, with repayment planned through an upcoming bond measure.
Beyond infrastructure, the city intends to deploy the new resources toward two new programs: a business support team to streamline permitting and regulatory processes, and a commercial district grant initiative. Each program is projected to receive between $300,000 and $500,000 annually, aimed at fostering local enterprise, enhancing public spaces, and promoting community events.
A unanimous council vote on Wednesday finalized new adjustments to the business occupancy tax, with the changes scheduled to take effect on January 1, 2027. Council member Paula Rhyne endorsed the measure, noting that it offers significant relief to smaller enterprises by exempting them from the levy. She highlighted that these specific rates have remained unchanged for two decades, a stark contrast to the trajectory in Everett.
Mayor Cassie Franklin addressed the public via a press release on Wednesday evening, describing the update as a sustainable method to reinvest in the community while providing tangible assistance to small firms. The mayor stated that the package aims to bolster the local economy, preserve existing progress, and generate future opportunities.
Although the tax revisions begin in early 2027, the city council must subsequently pass a budget amendment, expected during that same year, to direct the additional revenue toward designated municipal projects. New business support initiatives may become operational as early as the first quarter of 2027.