A major hurdle for new businesses just got removed by the Bainbridge Island City Council.

The council approved an exemption for small local businesses Feb. 25, amending a law from 2015 that requires all structures in use on BI — including schools, homes, medical offices, retail, recreation and industrial facilities — to pay a one-time fee relative to the structure’s impact on traffic.

Going forward, new occupants in existing buildings or tenant spaces that are 5,000 square feet or less are exempt from paying Transportation Impact Fees, unless the space has been vacant for more than 12 consecutive months. The council also removed the stipulation that TIFs be calculated based on “peak travel hours” between 4-6 p.m.

Frank Giuliano, owner of Briny Bagels in Rolling Bay, said the change is a welcome respite from “a significant financial burden” that will allow his business to expand and scale up without paying high fees.

“Starting any business is a major financial and logistical challenge, so reducing barriers like these fees can make a significant difference for entrepreneurs,” Giuliano said. “I believe this update sends a positive message that Bainbridge Island values its local businesses and wants to foster a diverse, vibrant economy. By exempting smaller businesses from certain TIFs, the city is making it more feasible for new ventures—and existing ones looking to expand—to get off the ground.”

A TIF reflects the impact on transportation that an establishment’s services may create, based on how traffic fluctuates during certain times of day, like commuting hours. Any changes that require a building permit, such as replacement, expansion or new development, make an establishment subject to TIFs. Cities can impose TIFs to fund capital projects, such as road maintenance, bridges, parks and roundabouts.

BI first implemented TIFs in 2015 and issued a rate increase in 2023 that established a base rate of $5,000 per person or trip and a new fee calculation methodology. But TIFs for existing retail spaces were heavily influenced by prior use, creating inconsistent costs to the new occupant, Public Works director Chris Wierzbicki said at the meeting.

“If a new business replaced a high TIF generator, like a coffee shop or restaurant, they usually received a credit for that use and had no resultant fees assuming the new use generated a lower number of trips. However, if the previous use had a lower impact, the new business could face unexpectedly high costs,” Wierzbicki wrote in an email.

The council’s decision comes after Giuliano and Nicolas Ganea of Sauce Nouvelle on Winslow Way pushed back on the TIF structure last June. The two restaurant owners alerted city officials that the fees were a major hindrance to new businesses, and were disproportionate to the income and traffic generated by many establishments — particularly due to the seasonal fluctuations of foot traffic.

A 5,000-square-foot space can accommodate a variety of businesses: for example, a mid-sized clothing store, a small grocery store or a large coffee shop. Under the previous structure, each of those business types paid a different rate per development unit: $16,995 for a new “Apparel Store,” $119,705.63 for a new “Convenience Market,” or $102,924.38 for a new “Coffee/Donut Shop without Drive Thru.”

The actual sum each business paid would then be calculated based on the number of people taking trips to the business that would occur during their hours of operation. The “Coffee/Donut Shop” may see about 21 people per 1,000 square feet during peak travel hours, which comes out to about $16.38 per person. Crunching the numbers would create the TIF fee a new business owner would pay — in the “Coffee/Donut” business’ case, about $81,800.

Ganea recalled receiving a notice from the city in early 2024, a year into opening his restaurant, that he owed $19,000 in TIFs to the city by May 19. He was “very heated,” he said, “and was telling literally every customer.”

“When I got the email, my heart sank. I was like, ‘I don’t have this money — where did this come from?’” Ganea said. “I freaked out and told my business partner, ‘We’re going to go out of business.’”

Ganea asked others about TIFs, but few establishments had changed hands in recent years, and the fees were so high that other business owners found them hard to believe, he said. He talked to Giuliano, who shared his frustration. While opening Briny Bagels, Giuliano ran into about $23,000 in TIFs.

The two restaurateurs began pushing back with advice from legal professionals, and at the June 18 council meeting, the city reneged.

Despite the city’s update, Ganea said that he is unlikely to pursue further restaurant opportunities on BI. Sauce Nouvelle “continues to do well,” but between the TIFs, challenges finding a restaurant site, the unpredictable ebbs and flows of business, and the occasional cold shoulder from customers who disapprove of his off-island residence, “I’ve been soured by it,” Ganea said.

Poulsbo, on the other hand, “is always booming,” and Ganea looks forward to opening a bistro there.

“We recognize that Bainbridge has its limitations in terms of growth, which is why we are looking at expanding to other cities like Poulsbo,” Ganea said. “Our expansion is a reflection of our success, which is not something most restaurants experience at this level.”