Business Friendly?

July 30, 2004 - Olympic Business Journal - August 2004

Business Friendly?

From B&O taxes to parking, professionals tell us what its really like to do business here

by Miranda Bryant

OBJ Contributing Writer

So how 'business friendly' are Jefferson and Clallam counties? One method of gauging the business climate is through the number of new business licenses issued by the state.

In Jefferson County, 222 business licenses were issued by the state from December 2003 through May 2004, according to Bob Sherby, owner of New Business Connection, producer of New Business Yellow PagesTM. In Clallam County, 317 were issued over the same time period.

"These (numbers) indicate a growing economy," Sherby said. However, that is not the only way to interpret the data. Some suggest that a difficult job market spurs entrepreneurial growth.

Neither Clallam County nor any of its cities require a separate business license from that required by the state of Washington, nor do they charge a separate business and occupation tax beyond that levied by the state. Likewise, Jefferson County does not charge a separate Business and Occupation (B&O) tax nor does it require an additional business license.

However, the City of Port Townsend charges both a B&O tax of between .0014 percent and .002 percent, and requires a separate business license.

State B&O taxes - which range from .00471 percent to .015 percent - are charged of all corporations, limited liability companies, partnerships, sole proprietors, and nonprofit organizations in Washington. While other states have an income tax that is based on business profits after expenses, the Washington B&O tax is calculated from gross income. 

Clallam County is growing

But B&O taxes aren't a large factor for businesses considering opening new in or relocating to Clallam County, according to Mona Gates, director of business development and marketing for the Clallam County Economic Development Council.

"They don't weigh very heavily," she said. "We're one of the fastest growing counties in the state."

As an analogy, Gates said a person driving an expensive sports utility vehicle recognizes that while it may cost more for a tank of gas than it would for a Ford Escort, that tank of gas only requires an additional $3 more at the pump. So while there is a B&O tax in Washington, the cost of doing business in this state is worth it, she explained, because there is no personal income tax.

Furthermore, Clallam County, with its key cities of Port Angeles and Sequim, is attracting businesses, in part, because of its low utility rates, said Gates.

Customers of Clallam County Public Utilities District are charged 6.2 cents per kilowatt hour; Port Angeles city customers, 4.75 cents per kilowatt hour. The national average is 8.4 cents, said Gates.

"It's kind of a big deal when you can save $3,000 to $4,000 a month in power," she added.

Two companies have recently announced intentions to relocate to Clallam County. Harbor Action Inc. said in mid-June that it will move from Aberdeen to Port Angeles. According to the website of KONP Radio, the firm manufactures a line of Boeing-designed and proprietary tooling, engine cradles, shipping dollies and airframe maintenance equipment for the airline industry.

In addition, Residential Media Associates Inc. announced in May that it plans to move its computer web-building company from Santa Clarita, Calif., to Port Angeles. The company specializes in developing websites that cater to the remodeling and construction trades. It is anticipated that the company will eventually employ 20 people.

The Peninsula Daily News quoted economic development and city leaders in saying that the company decided to move to Port Angeles for its technology infrastructure and its "hometown environment."

And it's just that hometown environment and quality of life - even more so than the economic climate - that is being marketed by the Clallam County Economic Development Council.

"It really comes down to 'Where do you want to live?'" Gates said.

The Clallam County EDC is changing the paradigm regarding business location decisions, she continued, by asking business owners to first decide where they want to live, and then suggesting they buy or create a business that will succeed in their preferred locale. And they believe Clallam County has just the characteristics that business owners desire - creative and innovative people and employees, and a clean and safe environment. It helps that the county is located near the Olympic Mountains and the saltwater of the Strait of Juan de Fuca.

The idea to market the area's quality of life for business recruitment arose in 2002, Gates said, when the EDC and leaders from the city, county, and Port of Port Angeles realized that their county had reached a 30-year unemployment low. In 1979, the average Clallam County wage was $29,000; in 2002, it was $27,000. The county has been hit hard by changes in the fishing and logging industries, which were booming in the 1970s.

But what seemed to have a future were those little electronic boxes called computers. The City of Port Angeles in 2003 entered into an agreement to allow fiber-optic communication links at one-tenth the cost of typical retail charges.

In April, Clallam County's unemployment rate fell to 5.8 percent - its second lowest position in 20 years. This allowed the county to drop its dubious title as a "rural and distressed area," a title given by the state to counties with a three-year average unemployment rate that is equal to or greater than 120 percent of the statewide average unemployment rate. Distressed area unemployment rates must be at least 8.5 percent.

"So we really had a modern day barn-raising," Gates said. "We're in a big growth spurt."

Westport Shipyard Inc. was part of the employment boost. The manufacturer of luxury motor yachts looked at Anacortes and Port Angeles before choosing the latter to augment its facilities in Westport and Hoquiam.

Cities considered for the Westport facility were limited due to the fact that it needed a location near the water, and one equipped with a heavy haulout large enough to handle a 164-foot yacht. Furthermore, Westport wanted to the buy the land on which it would build. A land purchase was not an option in Anacortes, but proved viable in Port Angeles.

"This is the most pleasant experience I've ever had in working with local government," said General Manager Lee Taubeneck, who has been in the marine trades industry for more than 30 years and has opened boat manufacturing facilities across the country.

The business hopes to boost employment at its waterfront shop from the current 95 employees to 200, and to add 15 to 20 employees to its 45-employee Port Angeles airport location, according to Taubeneck.

"There's just a lot of good people looking for jobs," he said.

Challenges in Jefferson County

The workforce in Jefferson County, however, is not considered to be as solid, according to a 2003 study for the Jefferson County Board of County Commissioners, conducted by Paul Sommers and Kursten Holabird from the Daniel J. Evans School of Public Affairs at the University of Washington.

"There was mixed comments on the availability of qualified workers," the report stated. "Some report that it is not a problem (Port Townsend Paper), yet others remarked that it is a major problem. Those that see it as a problem were predominantly from the higher technology companies."

Other challenges of operating a business in Jefferson County, according to the study's survey results, were lack of technical business expertise, high cost of marketing, inadequate infrastructure, and the lack of affordable gallery and performing spaces for artists.

Seen as opportunities in Jefferson County were the abundance of creativity and the appreciation for arts, a significant pool of community volunteers, and the quality of life.

Bob Sokol, who represents the Port of Port Townsend Commission at Economic Development Council meetings and a small business owner himself, said doing business in Jefferson County and the city of Port Townsend can be difficult.

"The biggest problem is getting things permitted," he said, citing a complaint that has long been lodged by many parties.

The city's business climate was cited earlier this year when Santa Maria Shipping Co. chose to locate its operations in Raymond, Wash., as opposed to Port Townsend. Company officials said the business would have provided 50 skilled labor jobs in the construction of 300-foot cargo ships with self-contained cranes.

Other factors for businesses in the city limits are complicated parking and signage ordinances, Sokol said.

Parking remains a constant concern for Joann Saul, owner of Public House Grills & Ales, Sentosa Sushi, Fins, and Dream City Catering. All of her businesses are based on or directly off of Port Townsend's busy Water Street. Downtown parking is at a premium, particularly during the busy summer tourist season.

"I think parking is horrible," Saul said. "It's very difficult for me to conduct business because of parking."

While customers seem resigned to parking some blocks away and walking to her restaurants, her employees have been resistant to using the shuttle bus between the park-and-ride and downtown. Consequently, employees are often leaving work every two hours to move their vehicles to avoid a parking ticket.

Saul acknowledges that due to the limited land mass of downtown Port Townsend, parking problems are not easily addressed. However, she believes the city shouldn't be allowing alternative uses of parking lots. While Saul finds the skateboard park a worthy endeavor, it is placed atop a good number of parking spaces at Monroe and Washington streets. And nearby at Quincy and Washington streets, additional parking will soon be eliminated through a planned city hall annex.

Choosing location

Location. Location. Location. This advice is heard frequently by entrepreneurs setting up shop. Steve St. Clair, owner of St. Clair Auto Supply, NAPA Auto Parts, says location can mean the success or failure of a company, or in his case how easy it was to construct a new commercial building.

Last year, St. Clair consolidated two stores into one new facility in Port Hadlock and closed his store in Port Townsend. He says the decision to build in Port Hadlock was one based on market, his business model, and the fact that Port Hadlock and surrounding communities had been designated as an Urban Growth Area. St. Clair said finding a property that was zoned commercial was a difficult one, but a little less so in Port Hadlock.

"As a business man I need to mitigate risk and you throw all that into the pot and you see where I lit," he said.

St. Clair has been in business for five years and has watched businesses come and go. He said when he first started out there were five automotive parts stores in Jefferson County, but today there are only two. He also noted that many auto repair businesses have opened and closed while some established auto repair businesses have struggled. St. Clair suggests that these are indicators of a tough business climate.

"I'm not bitter," he said. "It does, however, give me pause for concern."

St. Clair worries about the future of area schools and the quality of life for young families. He is concerned that a small, vocal anti-growth group could be sealing the fate of the business community that needs to expand.

"If we're not growing, we are dying," he said.

Many local business owners, attempting to keep business up, don't always express their viewpoints, he said, so the same anti-growth messages are read again and again in the newspapers.

"We don't get our voices heard for fear of retribution in the community," St. Clair said. Even with all of this said he still believes his store, which is up over last year, will succeed in Jefferson County.

"We're positioned better for the future," St. Clair said about being located in Port Hadlock, "a lot better than we were before."

Likewise, Fresh Press owner Albert Mendez and manager Denise Winter found a sense of community in Port Townsend.

The partners visited many cities in every state in the continental United States during their 15 years as theater professionals and chose Jefferson County to be the home of their first business.

"We saw a lot of independently owned and operated businesses here and it made it feel accessible to us," Winter said.

The couple was welcomed first by the many service people that they needed to employ to get their business running - everyone from their banker across the street to their carpenter to an adjacent business that also was in the process of opening its doors. In addition, they don't worry about customer parking as they enjoy a parking lot that is shared with three other businesses.

"Support from other business people is the best thing about opening a business here, and then the support of the community once our doors opened," Winter said. "All of those people made us feel very positive about what we were doing."

Copyright Olympic Business Journal 2004.