Seattle offers tax break if Russell Investments moves from Tacoma

Seattle Mayor Greg Nickels has offered a tax break to Russell Investments if the global financial company leaves Tacoma for Seattle.

While Nickels' office has not spoken publicly of incentives for Russell, Nickels pledged to tweak the city tax code in a June 2 letter obtained by The Seattle Times this week after a public-disclosure request.

In the letter to Craig Kinzer, a Seattle real-estate consultant working with Russell, Nickels said he would propose a new business-and-occupation (B&O) tax classification for "international investment management services" — meaning Russell. That would be modeled after a state tax break adopted in the 1990s to keep the company from moving out of the state.

Nickels' proposal means Russell would not have to pay Seattle's 0.415 percent B&O tax rate — the city's highest rate — for "services and other business activities."

Deputy Mayor Tim Ceis and city Finance Director Dwight Dively said Wednesday they did not know how much lower Russell's tax rate would be under the mayor's plan, which would require City Council approval.

But in his letter to Kinzer, Nickels estimated Russell would pay about $250,000 a year in B&O taxes once it fully relocated to Seattle.

That's more than the company would pay if it stays in Tacoma, which has promised to entirely phase out its B&O tax on Russell and other financial firms by 2013.

Started as a small Tacoma brokerage firm in 1936, Russell grew into an international leader in managing pension funds and other investments. The company has more than 1,800 employees worldwide and manages more than $136 billion in assets.

While it has long been a civic leader in Tacoma, the company's ties to the city have eroded in recent years with its acquisition by a Milwaukee insurance giant and the departure of several local executives.

Last year, Russell raised the possibility of leaving Tacoma as it searched for a new headquarters. In April, CEO Andrew Doman said the company had narrowed its choices to either Tacoma or Seattle.

The company has said it will announce a decision by October.

Tacoma officials have gone all out to keep Russell and its 900 local employees. Led by U.S. Rep. Norm Dicks, they have amassed an incentive package worth more than $148 million in local, state and federal money to help the firm build a new headquarters.

But Russell, which has offices from London to Tokyo, has been tempted by the space the recession has opened in Seattle.

Ceis said Nickels' letter to Kinzer came in response to Russell's questions about how its taxes would be calculated in Seattle.

"We're not giving anything away. We're just saying, 'Here is what we believe is a fair way to deal with you,' " Ceis said.

Nickels' letter also noted his proposal for Russell would "simplify" the company's B&O tax calculations by avoiding "complex apportionment issues." Dively said the city frequently has disputes with large companies that operate in multiple cities or states over what proportion of their business Seattle can tax.

"They were looking for certainty; we were looking for simplicity," Dively said.

There has been some political pressure on Seattle leaders to refrain from poaching Tacoma's most prized company. But Ceis said "we're not going make it hard for them" if Russell chooses to move to Seattle.

Councilmember Jean Godden, who chairs the council's Finance and Budget Committee, sounded receptive to the idea Wednesday.

"We'd love to have them in the neighborhood," she said of Russell.

Jim Brunner: 206-515-5628