After council punt on employee hours tax, what’s in the plan for Seattle’s 2018 budget — and what isn’t

Following last week’s dramatic and tumultuous implosion of a relatively small but hugely vital components of the city’s more than $6 billion proposed 2018 budget, the Seattle City Council will be voting on a highly amended budget Monday afternoon that includes notable cuts.

Last week, the City Council voted 5-4 against enacting a employee hours tax—also known as the “HOMES tax”, which would have  have taxed businesses earning more than five million in gross annual income—this figure was estimated to be around 2,200 businesses—roughly $100 per full-time employee annually, generating an estimated five million every year to fund affordable housing and other homeless services.

The tax—originally proposed by council members Mike O’Brien (District 6–Ballard) and Kirsten Harris-Talley (she is an appointed and temporary citywide member)—was pitched by chair of the budget committee, Lisa Herbold (District 1–West Seattle), as a continuous source of revenue that the City could immediately bond against to affordable housing and services.

With key elements for homelessness services and more in the budget structured around revenue from the employee hours tax, the proposal’s defeat left the council back at square one to address a $13 million dollar hole in the budget. Among the items that would’ve been funded by the tax was expansion of the Law Enforcement Assisted Diversion (LEAD) program and funds for establishing an emergency domestic violence center.

Among the items on the chopping block to make up for the funding shortfall is $290,000 to fund an expansion of the City’s Fresh Buck Program, $175,000 for the City’s Zero Youth Detention Initiative, $436,000 for four new employees at the Human Services Department, almost two million from the Seattle Department of Transportation  $150,000 for a pilot cleanup program of unsanctioned homeless encampments, and one million from the Mayor’s Office. (Notably, the council made no equivalent cuts to its own staff.)

Items originally tied to the passage of the HOMES tax such as a little over three million for homeless services (such as shelters, a Navigation Center, and other services) and LEAD expansion into North Seattle did not make it into the final package.

A discrepancy in proposed amendments to the 2018 budget from council members and limited available funds is driving the massive funding shortfall; City Council members made a total of $30 million in amendments to the original budget proposed  by interim Mayor Tim Burgess, which is part of the reason why Herbold says she opted to push for a revenue increase in the budget package.

Shortly after the council approved the cuts, the Mayor’s Office fired off a statement slamming the council for its action: “This misguided surprise illustrates the harm that can be caused when significant budget decisions are made on the fly without a thorough analysis of impacts. If in their wisdom, the Council believes these funds are needed for other purposes, and remembering that the Legislative Department’s budget is twice the size of the Mayor’s budget, then the funds should come proportionately from the Mayor’s Office and the Legislative Department,” Mayor Tim Burgess said in a statement.

In response, council member Harris-Talley issued said that the City Council “took a page out of former-council member Burgess’ playbook. He chaired the budget committee during the transition period and cut Mayor Mike McGinn’s staff before the mayor-elect took office.”

Mayor-Elect Jenny Durkan is staying out of this fight—for now. When contacted by CHS for comment on both the cuts to her future office, the budget drama and the employee head tax, a Durkan spokesperson provided the following statement: “Throughout the campaign, Mayor-elect Durkan expressed concerns about the revenue sources in the current proposal and its impact on small businesses. Once she takes office, the Mayor-elect is committed to working closely with the City Council to provide immediate and long-term solutions for people experiencing homelessness and those endangered of becoming homeless. In addition to the budget that is passed by the City Council, she’s already in contact with local, state, and federal officials to secure potential additional means and to address, as a regional issue, the affordability crisis.”

While the Durkan is reviewing the budget amendments, her top priority is working on this unprecedented transition period, according to a spokesperson.

Most of the council members who voted down the HOMES tax said last Tuesday that while they supported enacting a head tax next year, they wanted to dedicate more time to reviewing the proposal and bringing in stakeholder input. Council member Rob Johnson (District 4–Wallingford, University District) said that the tax as written didn’t spell out how the money would be spent; council member Sally Bagshaw (District 7–Queen Anne, Downtown) said “my concern about passing the head tax today is that we have not brought in that eleven hundred businesses that people so quickly dismiss and say that they can pay for it”; citywide council member Lorena Gonzalez called it a “mishmash of strategies” that lacked a framework for identifying where revenue investments should go.

In addition to those complaints, Council member Debora Juarez (District 5–North Seattle) blasted the budget last Tuesday as “holding hostage those programs that are important to our city and our districts” by tying them to the passage of the head tax.

“I don’t want a process for the sake of process,” she said. “The head tax demands the same attention and respect as we did with the sweetened beverage tax, the short term rental tax, and the income tax.”

“I would be the first to roll up my sleeves to work shoulder to shoulder with my colleagues to come up with legislation for a head tax that is clear, cogent, and sustainable,” Juarez added.

Council member Kshama Sawant (District 3–Central Seattle) torched her colleagues as selling out to business interest. “This a commitment to upholding corporate interests,” Sawant said of her colleagues stated opposition to the tax.

Notably, all four council members who voted for the head tax voted down a counter proposal from Bruce Harrell (District 2–Southeast Seattle) to dip into the city’s emergency “rainy day” fund to for a one-time $10 million allocation to make up the budget shortfall; both council members O’Brien and Sawant had proposed dipping into the rainy day fund back in 2015 for similar purposes.

Outside observers argued that Herbold’s political standing has taken a hit as a result of Tuesday’s vote and the rapid reshuffle. “This is high-stakes poker, and Herbold has gone all-in,” wrote Kevin Schofield of Seattle City Council Insight the day before last Tuesday’s vote. Veteran city hall reporter Erica C. Barnett called the strategy a “gamble” and wrote that “[Herbold] could find herself increasingly isolated—insufficiently socialist for Sawant … insufficiently ‘moderate,’ (which is to say, conventionally liberal) for the council’s new majority.”

In a statement Herbold said: “My balancing package was not a gambit it was a choice among two bad options: propose a budget without funding for important programs or propose a new revenue source.”

Another item of note that survived the budget reshuffle and cuts is a little over one million for establishing a safe consumption site in Seattle. Additionally, the council approved a proviso which requires weekly updates on the city’s cleanups of unsanctioned homeless encampments—commonly known as “sweeps”—and that the city strictly follow its own sweep rules.

Subscribe and support CHS Contributors -- $1/$5/$10 per month

5 thoughts on “After council punt on employee hours tax, what’s in the plan for Seattle’s 2018 budget — and what isn’t

  1. Meanwhile the city want to tax my $60 night Airbnb at $14 night which is almost 25% !

    That’s clearly equitable to the low income people who I generally rent to (mostly folks visiting uw for job interviews, hospital etc). Welcome to Seattle !

  2. That budget looks backwards to me… the biggest chunk spent shuffling homeless people around the city… the smallest part spent on public health care – which I would assume includes the mental health and addiction services that so many of those said people need to get off of the streets for good….

  3. A few numbers stood out to me:
    1. For the 4 new employees the city wants to hire into the Human Services Department, the cost is more than $100,000 per employee. I wonder if this is a typical cost across most city departments?
    2. The cost of the city’s Human Services Programs total about $250 per year for each of the >700,000 people who live in the city, though obviously some pay more of this cost than others.
    3. The budget “hole” is indeed “relatively small.” The $13 million cited is less than 1 quarter of 1 percent of the operating budget, 0.21%.

Leave a Reply