Do Not Wait Until Leaving Is the Only Option: A Five-Year Plan for Seattle Businesses
In the News: Seattle’s tax revenues have increased at a significantly faster pace than several of the economic measures that help support the city’s tax base. A recent analysis raises questions about the long-term effects of placing a growing share of that financial responsibility on Seattle businesses.
Commissioned by the Downtown Seattle Association and Seattle Metro Chamber and conducted by ECONorthwest, the analysis found that Seattle’s tax collections increased approximately 172% between 2013 and 2025. During that same period, the city’s population grew about 31%, employment increased roughly 23%, and inflation rose approximately 50%.
From a business and accounting perspective, the difference is significant. Tax revenue growth substantially exceeding employment, population and inflation means businesses should pay close attention to how the city’s changing tax structure may affect operating expenses, profitability, hiring and future investment decisions.
Source: Kiro 7 News
From a business and accounting perspective, Seattle’s tax growth raises a fundamental concern: how much additional cost can businesses absorb before they begin changing how—and where—they operate?
An economic analysis commissioned by the Downtown Seattle Association and Seattle Metro Chamber found that city tax collections increased 172% between 2013 and 2025, compared with population growth of 31%, employment growth of 23%, and approximately 50% inflation.
The issue is not simply that businesses are paying more. Employers are becoming increasingly important to Seattle’s revenue structure, with businesses projected to account for approximately 66% of city tax collections in 2026, compared with roughly 55% in 2016.
For an accountant or business consultant, taxes are not an abstract policy discussion. They are an operating expense. When taxes rise, that money has to come from somewhere. Businesses may absorb the expense through lower profits, increase prices, reduce hiring, eliminate positions, postpone equipment purchases, reduce expansion plans, or reconsider whether additional investment in Seattle makes financial sense.
That calculation becomes particularly important when businesses can operate elsewhere. A company considering another location does not evaluate taxes independently. It looks at the total cost of doing business—including payroll, wages, rent, insurance, utilities, regulations, taxes and compliance costs. As those expenses accumulate, neighboring communities can become financially more attractive for future hiring, expansion or relocation.
There is also a potential compounding effect. If higher operating costs discourage business growth, the city could experience slower job creation and fewer new investments. If existing employers reduce their footprint or leave, the remaining businesses may eventually be asked to support an even greater portion of the tax base.
That is where the long-term financial concern becomes significant. A government cannot indefinitely increase its dependence on businesses while simultaneously making those businesses increasingly expensive to operate.
Downtown Businesses Should Be Building a Five-Year Plan
For a business operating in the heart of Seattle, looking only at next year’s budget may no longer be enough. Owners should be developing a five-year financial plan that asks what their company could look like through 2031 under several different economic and tax scenarios.
That does not mean assuming Seattle will become unaffordable or that taxes will necessarily continue increasing at the same rate. It means acknowledging that a business making long-term commitments downtown should understand how sensitive its profitability is to changes in taxes, wages, occupancy costs, insurance, regulatory requirements and customer demand.
A five-year plan should begin with a realistic baseline. Take today’s revenue, payroll, rent, taxes, insurance, utilities and other operating expenses and project them forward. Then begin changing the assumptions.
What happens if total labor costs increase 4% or 5% annually? What happens if taxes and regulatory expenses continue rising? What if insurance increases substantially? What happens when the current lease expires and the landlord proposes different terms? What if downtown customer traffic increases—or declines? What if revenue grows only 2% annually while operating expenses increase 5%?
Those differences may appear manageable during a single year. Over five years, however, they compound.
A business generating a healthy profit today could find that margin substantially compressed several years from now even though sales have increased. Revenue growth alone does not necessarily mean a business is becoming more profitable. If expenses are growing faster than revenue, the company can become larger while simultaneously becoming financially weaker.
That is why owners should pay particular attention to profit margin rather than simply gross revenue.
Build More Than One Version of 2031
A five-year business plan should not contain only one forecast.
Management should create a base scenario representing reasonable expectations, a growth scenario showing what happens if Seattle’s economic environment improves, and a more conservative scenario that assumes higher costs and slower revenue growth.
Then stress-test the business.
What happens if revenue is 10% below expectations in 2028? What if payroll expenses are 15% higher than anticipated by 2030? What if another city tax or assessment materially increases the company’s operating costs? What if the business loses a major customer? What if downtown traffic changes enough to affect sales?
The purpose is not to predict Seattle’s future perfectly. Nobody can.
The purpose is to determine where the financial breaking points are before the business reaches them.
An owner should know approximately what annual revenue is required to cover fixed expenses, how much payroll the business can sustainably support, what minimum profit margin is acceptable, and how much cash should be maintained to survive an unexpected downturn.
Pay Attention to the Next Lease
For many downtown businesses, one of the most important five-year decisions may not be taxes at all. It may be the lease.
A business approaching a lease renewal should resist treating renewal as automatic. The expiration of a lease creates an opportunity to evaluate the entire economics of the location.
Management should calculate the true cost of occupying that space—not merely monthly rent. That includes common-area charges, parking, utilities, insurance requirements, local taxes, security expenses, employee transportation considerations and any additional costs associated with operating downtown.
Then compare those costs with the economic value the location provides.
Does being downtown generate customers?
Does the location help recruit employees?
Does proximity to clients matter?
Would customers follow the company elsewhere?
Could administrative employees work remotely or from a less expensive location?
Could the company maintain a smaller Seattle presence while moving back-office operations elsewhere?
These are business questions, not political ones. A downtown address can have substantial value for certain companies. For others, the economics may have changed considerably since the original lease was signed.
The five-year plan should put a dollar value on that difference.
Consider Expansion Separately From Relocation
Businesses also should not assume the choice is simply “stay in Seattle” or “leave Seattle.”
There are many possibilities between those extremes.
A company might keep its existing Seattle operation but place its next expansion somewhere else. It could maintain customer-facing operations downtown while moving administrative functions outside the city. A growing company could add its next 20 employees at another location rather than increasing downtown payroll. Warehousing, accounting, customer service or other functions might be placed where operating costs are lower.
This distinction matters because businesses often relocate gradually rather than suddenly.
A company may never announce that Seattle became too expensive. Instead, the next office opens somewhere else. The next department is located outside the city. The next ten employees are hired elsewhere. Eventually, what was once the company’s primary location becomes one of several smaller operations.
For Seattle policymakers, that type of incremental movement can be difficult to see immediately. For the individual business, however, it may simply be prudent financial planning.
Calculate the Cost of Employees Five Years From Now
Payroll deserves its own five-year projection because wages are only one component of the cost of employing someone.
Employers should model wages, payroll taxes, benefits, paid leave, workers’ compensation, insurance, retirement contributions, overtime and other employment-related costs. If the company expects to add employees during the next five years, management should calculate the fully burdened cost of those future positions rather than budgeting only for salaries.
For example, a company planning to grow from 25 employees to 35 employees should determine what those additional ten positions could realistically cost in 2031—not what they would cost to hire today.
That calculation can materially affect expansion decisions.
Management may determine that all ten positions remain financially justified. It may decide that technology can eliminate the need for several positions. It might outsource certain functions. Or it could determine that some future employees should be located outside Seattle.
The important point is that those decisions should come from financial modeling rather than surprise.
Protect Cash and Avoid Becoming Overextended
Businesses operating in a higher-cost environment should also reconsider how much cash they maintain.
When margins become tighter, businesses have less room for error. An unexpected tax bill, equipment failure, lawsuit, insurance increase, customer loss or economic slowdown becomes more difficult to absorb.
A five-year plan should therefore include cash reserves and working-capital targets.
Management should know how many months of essential operating expenses the company could cover if revenue suddenly declined. It should understand which expenses could be reduced quickly and which expenses are locked into contracts or long-term commitments.
This is particularly important before taking on additional debt, signing a long lease, purchasing expensive equipment or making another significant capital investment.
A business that can technically afford an expansion under today’s numbers may discover that the same investment becomes uncomfortable under the conservative five-year forecast.
That does not necessarily mean abandoning the investment. It means understanding the risk before signing the contract.
Establish Financial Triggers Before You Need Them
One of the most useful things an owner can include in a five-year plan is a series of predetermined financial triggers.
For example, management might decide that if labor costs exceed a certain percentage of revenue, staffing plans must be reviewed. If occupancy expenses reach a predetermined level, alternative locations should be evaluated. If operating margins fall below a certain threshold for several consecutive quarters, expansion spending could be temporarily suspended.
Similarly, if the company reaches a particular revenue or employment level, it might trigger consideration of a second location outside Seattle.
These thresholds remove some of the emotion from difficult decisions.
Instead of waiting until the company is under financial pressure and asking, “What do we do now?” management has already established the conditions that require action.
Do Not Wait Until Leaving Is the Only Option
Perhaps the greatest mistake a downtown business can make is waiting until the economics become unsustainable before evaluating alternatives.
Relocating a company, negotiating a lease, restructuring staffing, opening another location or moving departments takes time. These decisions can require months or even years of preparation.
That is why the five-year conversation should begin while the business is still healthy.
An owner can love Seattle, value a downtown presence and want to remain there while simultaneously evaluating alternatives. Contingency planning is not a declaration that the company intends to leave. It is responsible management.
The objective should be to preserve choices.
A Healthy Tax Base Requires Healthy Businesses
Seattle needs revenue to fund public services and infrastructure, but sustainable government revenue ultimately depends upon a sustainable private-sector economy. Businesses must be able to generate profits, employ people, invest capital and see a financial reason to remain and grow within the city.
For businesses already operating downtown, the question should therefore extend beyond, “Can we afford Seattle today?”
The more important question is:
“Based on reasonable assumptions about taxes, payroll, operating expenses and revenue, does this business still make financial sense here five years from now?”
If the answer is yes, management can invest with greater confidence.
If the numbers indicate increasing pressure, there is time to make adjustments.
And if the conservative projections eventually show that the company’s capital can produce a better return somewhere else, management has time to evaluate those options before circumstances make the decision for them.
That is what a five-year business plan is supposed to accomplish.
It is not a prediction of the future. It is a financial roadmap that allows a business to recognize change early enough to respond to it.
