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Business tax for housing and homeless services advances out of City Council committee [Update]

The tax on employee hours and payroll could raise $75 million a year

A scattering of tents are visible under a curvy freeway bridge, leading to a dense urban center full of skyscrapers. EB Adventure Photography/Shutterstock

Update, May 14, 11:45 a.m.: After a weekend of negotiations, another “compromise” tax plan—closer in scope to a plan proposed by Jenny Durkan last week—has been reached. This one has a rate of $275 a head instead of $500, and expires in 2023 with an option to renew.

Unlike the previous Durkan compromise, which would have changed the spending priority to services, this plan devotes more of its revenue toward housing, according to the Stranger’s reporting on the issue—City Councilor Lorena González said this breaks down to more of a 60 to 40 split, with about 60 percent going to housing. City Council spokespeople told Curbed Seattle that it’s “too early to tell” what the spending details are.

The new plan, which would raise around $50 million in revenue, was introduced this morning, and be discussed and possibly voted on at this afternoon’s full council meeting.

Original article, May 11:

Friday afternoon, a proposal to tax around 3 percent of Seattle’s highest-earning businesses—the result of a task force convened after a similar effort last year—advanced out of special committee with a narrow five-to-four vote, not enough to prevent a possible veto from Mayor Jenny Durkan.

As the proposal stands, only businesses making $20 million a year or more in gross revenue would be subject to the tax, which includes Amazon but also Starbucks, Uwajimaya, and others. It would start in 2019 as an hours tax, where businesses affected would pay an additional 26 cents per hour for each employee working in Seattle—or about $500 a year per employee. It’s expected to raise around $75 million a year. Around 75 percent of that would go towards building affordable housing, according to city documents.

Another 20 percent or so would go to the city’s Housing and Human Services department to support various outreach programs, including tiny houses, emergency shelters, public health response, and workplace stability to reduce turnover in service providers. Around $3.5 million of that money will go toward “safety in place” measures for people who haven’t been able to find housing, including garbage disposal, portable bathrooms, and black water removal.

In the first five years of the tax, the goal is to have built more than 2,000 affordable housing units for people making 0 to 30 percent or 30 to 60 percent area median income (AMI), add 362 shelter beds, provide support for two additional encampments, and build 100 tiny homes. Other benchmarks for the first five years include a mobile health van, picking up 500,000 pounds of garbage, and creating five hygiene centers.

Eventually, by 2021, the hours tax would be eliminated and replaced with a 0.7 percent payroll tax, so those businesses would be paying more on higher-salary positions. Amendments that would have kept the tax as an hours tax for the duration failed.

A proposal from Durkan and City Council President Bruce Harrell would have cut the tax in half—resulting in about $40 million a year instead of $75 million—and retooled the spending priorities toward homelessness services and cleanup, building only about 250 housing units. That’s despite a recent report by firm McKinsey that found the region needs to spend around $400 million to solve the homelessness crisis—with about 80 percent of that money going toward affordable housing. With the report, which had been commissioned by the Seattle Chamber of Commerce (which is against the tax), hanging over council, Harrell and Durkan’s proposal failed with a four to five vote in a special committee meeting Friday.

Another amendment floated by City Councilor Kshama Sawant would have doubled the contribution and revenue. That proposal also failed. A third proposal would have lessened the tax in the first two years, which sponsor Lisa Herbold hoped would make it more likely to pass—it ended up failing after “no” votes from both councilors who thought the number was too high and those who thought it was too low. So the proposal basically came out of committee the same way it was introduced.

That doesn’t mean that the bill is done being workshopped. Some amendments discussed on Friday were tabled until Monday pending more information, like one that would exempt hospitals from the tax.

With no change yet to the original plan, though, Durkan seemed likely to veto—although a statement from the mayor’s office would not directly say whether that’s the case.

“Working together, we must do everything we can to support and create good family wage jobs—it’s why I support and would sign the alternative proposal offered today by Council President Harrell and supported by three other Councilmembers,” said Durkan in a statement. “Unfortunately, the bill that passed out of committee hurts workers by stopping these good jobs, so I cannot support it.”

“I will continue to work with Council and remain hopeful that Council will pass a bill that I can sign,” Durkan continued.

The measure, sponsored by City Councilors Mike O’Brien Lorena González, Herbold, and Teresa Mosqueda, emerged from months of pressure from housing advocacy groups and hand-wringing from Seattle business leaders.

O’Brien had initially introduced a head tax proposal during the 2017 city budget process. The measure ultimately failed, but the city council passed a resolution to pass legislation by the end of March 2018 to address the same funding need and convened a Progressive Revenue Task Force to make recommendations—eventually leading to this ordinance.

The ordinance heads to full council for a possible vote on Monday, May 14.