Bellingham approves tax credit for new businesses in downtown and other areas
Taking the first step toward implementing Bellingham Mayor Kim Lund’s recent executive order to help support businesses downtown, the City Council has approved a seven-year-tax reprieve for startups in the city center and expanded credits in its urban villages.
New businesses in the downtown pedestrian core won’t have to pay what’s called business and occupation taxes for seven years, under a measure approved unanimously Monday night.
Further, the City Council expanded a partial three-year business and occupation tax credit for businesses within designated urban villages to a full three years for urban villages, including Fairhaven and Barkley Village.
“Our intention here is to encourage activation,” Lund told the council’s Community and Economic Development Committee on Monday afternoon. “It’s to benefit existing businesses by bringing more pedestrian activity, it’s to improve the vibrancy of our urban villages and our downtown core and advance and build on the work that staff and the community have invested in the Downtown Forward initiative.”
Monday’s measure passed on first and second reading, with a final vote scheduled for July 27. It will take effect 15 days after final passage.
Commonly called the B&O tax, business and occupation taxes are levied on gross receipts, according to the state Department of Revenue.
A B&O tax waiver grew out of a recent survey of vacant storefronts in the city center, amid growing concern among merchants and others that customers are avoiding the downtown core. Ground-level vacancies were about 14%, a figure that is considered unhealthy.
A typical Bellingham business pays $500 to $1,000 annually to the city in B&O taxes, Deputy City Administrator Forrest Longman told the council.
Bigger benefits could be seen for both government and business from a jump-start in economic activity provided by the B&O tax incentive, Finance Director Andy Asbjornsen told the council committee.
“Really the economic increase that it can bring to downtown and the retail sales tax and just bringing more of that activity to downtown will help the overall economy even more,” he said.
City governments have limited ability to boost economic activity, Councilman Jace Cotton said.
“I think this reflects our commitment to make use of every tool that we have to increase vibrancy. And vibrancy begets vibrancy, so every little bit we can put into that effort is worthwhile in my mind, Cotton said.
Some critics of the proposal are asking why existing businesses aren’t getting a break, Councilwoman Hollie Huthman said.
“My answer to that is when you have a business, you’re part of an ecosystem. The more that downtown altogether thrives, the more your business thrives,” Huthman said. She owns The Shakedown nightclub and The Racket pinball lounge on State Street, just outside the designated tax-credit zone.
This story was originally published July 14, 2026 at 2:25 PM.
