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Behind Capitol Hill small biz roundtable and Saturday’s March on Amazon, Seattle biz tax maneuverings swirl — UPDATE

With reporting by SCC Insight

UPDATE 12:45 PM: With Durkan’s surprise counter proposal defeated. the Herbold/Gonzalez legislation was approved out of committee Friday but now faces a battle in securing a crucial sixth supporter before Monday’s full council vote. With negotiations underway, Saturday’s activism won’t be a victory march but could end up as a show of power to help change the tally and leave the mayor’s hands tied on the so-called Amazon tax. UPDATEx2: Durkan has released a statement saying she “cannot support” the legislation passed Friday. The full statement is below.

Seattle City Council members Lisa Herbold and Lorena Gonzalez were slated to be on Capitol Hill Friday morning to talk with small businesses about the proposed tax on large employers. But the deals may have already been cut on the plan to raise revenue to help pay for homelessness services and housing — before any further roundtables and before any marches on Amazon.

District 3 rep Kshama Sawant and supporters are now framing Seattle’s push for an employee tax on large companies as another historical moment for the city akin to the $15/hour minimum wage fight. “This is a key moment in Seattle’s history,” a statement from the Affordable Housing Alliance reads. “We have a chance to make the richest man in the world pay to build union-built, publicly-owned, affordable housing. This would be an inspiration to the rest of the country as cities offer tax incentive after tax incentive to attract Amazon’s HQ2. Let’s turn this race to the bottom into a race to the top.”

UPDATE: Herbold and Gonzalez Friday morning at Elliott Bay Book Co. in a meeting with Hill business representatives on the mayor’s tax proposal: “We’re looking forward to learning more about”

Gonzalez and Herbold’s meeting with Hill business constituents, meanwhile, comes before a key council committee meeting Friday and in the wake of a Mayor Durkan-fired shot across the bow of the veto-able raft of five council members said to support the $75 million employee tax legislation.

Jenny Durkan, holding the power of the veto, and, apparently, the support of Amazon which would reportedly be willing to lift its construction embargo under her plan,  Thursday released her own version of a “head tax” plan that would require big companies to pay smaller amounts and subject the legislation to a five-year sunset clause. From the Seattle Times:

Rather than impose a so-called head tax of about $500 per employee, per year on for-profit companies that gross at least $20 million per year in Seattle, Durkan’s proposal would charge $250 per head, the mayor’s office said. Rather than be replaced by a 0.7 percent payroll tax in 2021, Durkan’s head tax would remain unchanged for five years and then would need to be renewed.

The Times reports that Durkan holds support from Council President Bruce Harrell and Council members Sally Bagshaw, Rob Johnson, and Debora Juarez for her plan.

Durkan’s plan would raise about $40 million per year, basically slicing the employee tax in half. All employee tax scenarios leave the city far short of the annual $400 million estimated to be required to reverse the tide of homelessness in Seattle.

Missing from the Durkan proposal is how her office would like the millions in revenue to be spent, though the mayor’s emphasis on housing over services has been a repeated theme of her young administration. One push close to the mayor’s office for how some of the money would be best spent will likely come from Capitol Hill business interests concerned about the vacuum left when funding and support dried up for homeless outreach teams staffed by downtown’s Metropolitan Improvement District.

The crew of outreach workers helped businesses deal with the day to day crises of homelessness, mental health, and addiction that arose along Broadway. Representatives from the city’s Seattle Human Services Department have heard from the Capitol Hill Chamber of Commerce about the need for a locally responsive team like the MID crews to help in areas of the city like Capitol Hill where homelessness and addiction problems are most concentrated.

UPDATE: At Friday’s meeting with Capitol Hill small business representatives, Herbold and Gonzalez said they, too, were just learning about the mayor’s proposal and were waiting to hear more — especially about the spending side. “We haven’t seen how this translates into a spending plan that makes an appreciable difference in the streets,” Gonzalez said, adding that will likely change during Friday’s committee meeting saying an amendment is expected to be proposed by one of the other council members that will represent the mayor’s proposals.

Herbold Friday acknowledged that Mayor Durkan has Amazon in her corner. “I don’t think that’s what should be driving the compromise,” she said. Herbold said that the data, research, and reality of Seattle streets has driven her work on the legislation. “It’s not really, for me, about where Amazon is at,” she said,

“As elected leaders we have to be responsive to a diverse array of interests and stakeholders,” Gonzalez said about one of the city’s largest employers. “The balance is how do we listen to Amazon… while also making sure that we don’t get put in a position where people think we’re giving into a special interest.”

“Does it matter to us that the temperature comes down that people are willing to agree to it?” Sure, Gonzalez said about the hope for compromise on the tax. “We didn’t do this because we wanted to kick the hornet’s nest and get stung to death.”

During the session, business reps said they were frustrated with inefficiency at City Hall and were concerned that revenue from the employee tax might also be wasted. Also, a representative from Central Co-op, one of the relatively few local businesses in the neighborhood large enough to likely be hit by the tax, said she was concerned the tax would damage existing charitable giving efforts. Herbold and Gonzalez said the City Council will be doing more to increase oversight of the city’s projects. “We’re upping our game on oversight,” Herbold said.

The council members were also asked how many homeless people, exactly, a new tax could help. “We don’t know,” Herbold said but said the hope is reach more than the estimated 40% that are able to be served with existing resources.

Gonzalez said they are prepared to commit to a key performance metric — reducing the number of people living on the streets in Seattle within five years.

Following the meeting, Herbold told CHS the 11th hour announcement of the mayor’s proposal was a surprise but that she still believes that a Monday final vote on the plan is realistic even with a new plan likely to be unveiled in full during Friday’s committee meeting. “It will certainly see the light of day,” Herbold said of the mayor’s proposal.

UPDATE x2: Here is Durkan’s proposed spending plan. Council members who have thus far supported the original plan from Herbold and Gonzalez are criticizing the lack of details in the spending framework, and the plan’s 30%/70% split of spending on housing vs. services — services including encampment clean-up. Around 80% of funds would go toward housing under the Herbold/Gonzalez plan. Durkan’s plan would also increase funding for rental subsidies, programs housing advocates say are severely challenged in an expensive housing marking like Seattle’s. The Durkan spending plan is below.

UPDATE x3: The mayor’s compromise plan has been voted down. Four council members — Harrell, Bagshaw, Johnson, and Juarez — supported the proposal.

UPDATE x4: The $500/employee tax from Herbold and Gonzalez passed out of committee in a noon hour vote, 5-4 leaving a weekend of marching and, likely, negotiating ahead before Monday’s full council vote. Without a sixth supporter, Mayor Durkan can yield her veto power, an outcome some see as the most likely and one that would move the process back to new start.

UPDATE x5: Here is Durkan’s statement on today’s vote:

I spent the morning with hundreds of women attending a career fair for women in the building trades. These women are dynamic and powerful and from some of our most disadvantaged communities. The apprenticeship programs and jobs they want provide strong wages, benefits, and careers. 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. Unfortunately, the bill that passed out of committee hurts workers by stopping these good jobs, so I cannot support it. “In recent weeks, I’ve heard from thousands of constituents, hundreds of businesses of all sizes, dozens of unions, and advocates. Seattle wants us to forge common ground on a proposal that builds more affordable housing and brings people off the streets and into safer spaces while continuing to support our small businesses, jobs, and economy. I will continue to work with Council and remain hopeful that Council will pass a bill that I can sign.

Original report: Thursday’s maneuvering doesn’t necessarily mean Herbold and Gonzalez must fully adopt the mayor’s plan. Their legislative negotiations — publicly — continue Friday with the committee session and, many at City Hall are hoping, a vote on the twin set of legislation: an ordinance that enacts the tax, and a resolution that lays out how to spend the money.

Still working with the $75 million framework, the committee Friday will consider a long slate of proposed amendments that could be used to shape a compromise that can survive City Hall.

So far, six amendments have been posted. One key element missing in the initial batch? An amendment to lower the per employee dollar amount closer to the target set by the mayor and sought by others on the council like President Harrell.

The proposals include Amendment 1, offered by Herbold, would remove the payroll tax that under the current bill would replace the employee-hours tax in 2021. So the EHT would continue on. Five years out, it would reduce the tax rate from $500 per full-time-employee annually to $180 to cover the long-term commitments in the spending plan: debt service on the 20 year bonds, operations and maintenance costs for new permanent supportive housing units to be built, and rental subsidies.

Amendment 2, offered by Bagshaw, allows companies to switch back and forth between methods for calculating the employee-hours tax; the current bill allows for switching only once. The previous head tax allowed for multiple switches. Amendment 5a, also offered by Bagshaw, provides exemptions to the head tax for hospitals and healthcare organizations that provide at least 25% of their services to clients covered by Medicare and Medicaid.

Amendment 6, also by Bagshaw, exempts from the head tax non-profit organizations that are exempted from having to register as a 501(c)(3). The current bill only exempts those that are actually registered as 501(c)(3)  nonprofits.

Amendment 9, offered by Kshama Sawant, meanwhile, takes a different tack. Her proposal doubles the tax rates: it changes the employee-hours tax from $500 per employee per year to $1000, and the payroll tax rate from 0.7% to 1.4%. That would raise the total annual revenues to $150 million, which was the recommendation from the Progressive Revenue Task Force. “We intend to vote no on that one,” Gonzalez said Friday with a laugh.

Other proposals to be wrestled with Friday include removing the guidance that 75% of the money should be spent on affordable housing and 20% on emergency homelessness response to allow a greater share to be spent on emergency homeless response in the first few years while new housing is being built.

The formation of an oversight committee to oversee expenditures and evaluate the performance of programs and services is also on the table. Under one proposal, the city would hire an independent economist to analyze and report on the impacts of the head tax. The city would also be required to ask the State Legislature to increase the funds in the State Housing Trust Fund.

A separate amendment, offered by Sawant, would call out explicitly that none of the head tax revenues shall be spent to fund removals of unsanctioned encampments — basically “sweep”-proofing the legislation.

Once Friday’s votes are wrapped up, the tax proposals could move to the full council for a final vote Monday though it’s a bit of a slog to get there.

Meanwhile, Sawant’s planned March on Amazon from Capitol Hill Saturday is still a go. We’ll know better whether it will be a celebration march soon.


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18 thoughts on “Behind Capitol Hill small biz roundtable and Saturday’s March on Amazon, Seattle biz tax maneuverings swirl — UPDATE

  1. We need to vote out Sawant next election.
    No head tax. Figure out how to better spend the tens of millions already allocated for homeless support. Increase housing density in other areas of Seattle.

    The number and types of homeless people is a chronic situation, not a crisis. It’s not going to be solved, but does need to be managed effectively so people can get the support that makes the most sense, which will vary a lot depending on why someone is homeless.

    My 2 cents

    • The proposed solutions all get shouted down by the very vocal minority that shows up in force to open houses. So the millions instead gets spent to continue mitigating the problem instead of attempting to solve it.

      The vocal minority has dominated the discussion for years and they’ve contributed nothing but tantrums while the problem perpetuates. It’s high time to show them the door and let the adults solve the problem.

      I hate to shut people, no matter how ignorant, out of discussions, but at some point, enough is enough.

  2. The $400 million figure referenced in this article comes from the McKinsey report, which apparently stated that $400 million would need to be spent annually throughout King County to effectively address homelessness. Why then do you refer to these proposals leaving the city far short of the $400 million needed to reverse the tide of homelessness. Even if you believe the $400 million figure, it is not Seattle’s job to raise those funds alone. King County and other municipalities must raise funds as well to reach the figure. And existing programs should be coordianted to better assure efficient spending.

  3. Amazon already spends many many millions annually on homeless initiatives. Let them and others continue to do so rather than giving it to the city to waste and mismanage.

    • How are you so certain that the city “wastes and mismanages” the money currently allocated to homelessness?

      • Wastes: Millions are spent to clear home homeless camps that return days later.

        Mismanages: Based on studies that have been done saying our city collects sufficient money but does not allocate spending in the right areas.

      • Well, two independent consultants came to that conclusion several years ago. They both concluded the the city was spending enough on the homeless situation, if they would invest it in programs that worked, instead of funding many in spite of their lack of meeting any goals. No oversight. Irresponsible leadership. And we are irresponsible for electing them.

    • Millions and millions? You mean on Mary’s Place, for homeless women and children? What about the thousands of single men in our communities, uninvited to the Amazon party (unqualified, except for maybe a warehouse job), who are camping alongside I-5 for many miles? Amazon has always helped themselves first, that was always Bezo’s aim: to dominate the market and enrich primarily himself for his big projects. Amazon should be at the city council’s table negotiating a fairer head tax, instead of threatening a city that has been very accommodating and generous to them.

      • How has the city been generous to Amazon? I mean, besides grateful for the millions and millions of dollars Amazon has pumped into the local economy, which Seattle has profited greatly from, what has Seattle done for Amazon, that Amazon hasn’t foot the bill for? (I’m not being snarky-seriously, what breaks has Amazon gotten? I just don’t know what Amazon should feel like they owe the city, for having caught any breaks from?)

  4. With so much attention and opinion on this issue we should be having a special election for the voters and not let the city council decide this. There is far to much at stake and in the hands of a bunch of raging lunatics. Sawant’s husband works for microsoft she is is the prime example of a bored housewife gone mad. DRAIN THE SAWANT!!!!!

    • Sawant’s current husband does not work for Microsoft. That was her ex-husband who filed for divorce in 2014, according to Wikipedia. Her current husband is Calvin Priest who is a Seattle Socialist Alternative organizer. He has been shown in the news addressing the city council supporting the head tax.

  5. “unqualified, except for maybe a warehouse job), who are camping alongside I-5 for many miles”

    Errr, hate to break the news to you, but those folks, who I see up close regularly, wouldn’t be able to get jobs at an Amazon warehouse.

    “[Sawant’s] current husband is Calvin Priest who is a Seattle Socialist Alternative organizer.”

    Yeah, her second husband used to work at the most elite private school for Brahmins in Seattle, the Bush School. A real “working man”.

    • I don’t agree with Councilwoman Sawant about this policy (or most things actually), but do we really need to engage in this kind of name-calling?

      • You mean, like “racist white millionaire Ballard NIMBY’s”?

        Slander is Sawant’s stock in trade. She better be willing to get as well as she gives.

  6. Sawant with her mouth will just make things worse.She needs to be voted out of office and move to Portland.