Bainbridge lags behind in sales tax revenue

Bainbridge has been lower than the state average in sales tax per capita for several years. - Bill Asher
Bainbridge has been lower than the state average in sales tax per capita for several years.
— image credit: Bill Asher

It’s no secret that the City of Bainbridge Island has been short on money for a few years now.

The reasons for that are many: declining property tax revenue; real estate and building industry slumps; a lack of revenue diversity; and past spending decisions.

The spiraling economy provides an easy excuse. While the worsening situation has greatly impacted construction, the city has been at or below the middle of the pack for sales tax revenue per capita (total sales tax divided by the population) for years.

The state as a whole has seen a much greater reduction in sales tax per capita than Bainbridge over the last two years, according to figures gathered by the state Department of Revenue.

What this means is islanders don’t give their potential sales tax dollars from large retail items to Bainbridge businesses.

“We tend to think of this as a wealthy community but we spend our big bucks somewhere else,” said Bainbridge Finance Director Elray Konkel.

Bainbridge has built a retail economy that satisfies peoples’ day-to-day needs, primarily featuring a bevy of small, unique shops. Bainbridge isn’t void of large transactions that net high amounts of sales tax, most notably home sales. But homes aren’t selling as well as they were, and options for big-ticket retail items that can bring in hundreds or thousands of dollars in tax money in one fell swipe (of the card) are nowhere to be found.

But islanders have told the city over and over again that they don’t want to lose the rural feeling of the island in favor of a Walmart or Lowe’s. In recent years decision-makers have debated the potential of tourism to replace some of the lost dollars associated with the reluctance to allow large retail stores on Bainbridge, but that too has been met with skepticism from the public.

The sentiment against “big-box” retail goes back to the 1990s, when the city and its citizens were making decisions about the character of incorporated Bainbridge Island. The construction of McDonald’s restaurant on High School Road inflamed the community against an onset of chain stores. Since then, the city has made it tougher on big businesses, forcing them to set up shop in other Kitsap County cities, such as Bremerton or Poulsbo. This decision has left a void for those seeking the lowest prices, or individuals making big purchases.

“It is an issue, certainly,” said Chamber of Commerce Executive Director Kevin Dwyer. “I think if the city made it a little easier in some respects for businesses to come in here we might see more retail, more living-wage type companies.”

The city’s development regulations prevent larger retailers from building anywhere other than the Winslow/downtown core, or the three Neighborhood Service Centers (Lynwood Center, Island Center, Rolling Bay).

Planning Director Kathy Cook said large developments over 5,000 square feet are permitted in these areas under land use policies. Large retailers, however, would have a hard time getting through stringent development restrictions, which encourage smaller projects.

“The development regulations try to keep the retail scale consistent with a small, urban village,” Cook said.

The city hasn’t received any applications from large retailers in recent years, Cook said.

The island’s neighbor to the north, Poulsbo, appears to be the primary beneficiary of the lack of large retailers on the island. Poulsbo ranked 28th in the state last year in sales tax revenue per capita – ahead of Seattle, Spokane and Tacoma, among others.

Bainbridge lags behind other cities in the county such as Bremerton and Port Orchard in sales tax per capita, as well.

But islanders have spoken up many times, saying they prefer Bainbridge to stay rural, green and unique.

“I think there was a real philosophical feeling back then that we don’t want to be anywhere-USA,” Dwyer said. “And it still permeates the island.”

With that comes the realization that city government may not see the amount of tax revenue it requires to provide the large number of services it committed to over the last decade.

Recent years have seen massive city budget cuts, posing the question of what the city should and can provide its citizens. It’s come into question how much the council should allocate to arts and culture organizations, as opposed to more fundamental services such as road work, which has been unfunded for the past three years.

“The City Council is focused on setting strategic priorities, and doing a limited number of core basic services rather than trying to be all things for all purposes,” said City Councilor Barry Peters.

In the years prior to the economic collapse, the city enjoyed robust funding and spread it around to hundreds of different programs. Not only is the city now trying to weather the declining tax revenue from the economic decline, it is untangling itself from some of the funding decisions it made years ago.

“Some of the hole they’re in is self-induced in some respects,” Dwyer said.

But with the decision to stay away from big businesses with large footprints comes an opportunity to show off Bainbridge as a green getaway destination from Seattle and its mall-heavy suburbs.

The ferries unload hundreds of potential customers onto the island every day, and many believe this can offset the loss of dollars to neighboring communities with chain retailers.

“There’s every reason to believe that people can come here in greater numbers to enjoy what we enjoy,” Peters said.

The goal of this emerging industry is to entice visitors to stay over and spend their money not only in some of Bainbridge’s quirky shops, but also at its restaurants and hotels.

The ferry isn’t the only way visitors find the island. Citizens from Port Orchard and Poulsbo are drawn to Bainbridge for its natural beauty, evening out some of the money island residents spend in neighboring communities.

“Drive on the island from Suquamish and you immediately feel like you’re in a different place,” Dwyer said. “There’s just a certain different feel here that people wanted.”

And they intend to keep it.

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