Controversial Head Tax Passes After Weeks of Bruising Debate

After a weekend of negotiations between city council members and Mayor Jenny Durkan (and, according to council president Bruce Harrell, “conversations with Amazon, big business, small business, [and] homeless advocates”) the city council unanimously approved a new version of the controversial employee hours tax today, imposing a $275-per-employee tax on about 585 businesses with gross receipts of more than $20 million a year.  The $275 figure was a  “compromise” between the $500 tax passed out of committee last week by a slim majority of council members and the $250 tax proposed by Harrell and Durkan, which emphasized short-term shelter and garbage cleanup over permanent housing, and would have built just 250 new units of housing over five years. Durkan had threatened to veto the larger tax proposal, and as several council members noted on the dais this afternoon, the council majority was unable to convince one of their colleagues (such as council member Rob Johnson) to switch sides and give them a veto-proof majority. The $500 head tax proposal was the result of months of work by the city’s progressive revenue task force, which was appointed after a last year’s budget process and charged with coming up with a proposal to tax businesses to pay for homeless services and affordable housing. (Johnson, who was seen as a potential swing vote, cited the need for a process like the one the task force went through in voting against an early head tax proposal last year.) The task force issued their report in March.

The tax, which sunsets after five years (and which will no longer be replaced, as in previous versions of the legislation, with a business payroll tax), would raise about $47 million a year for new housing, rental subsidies, and supportive services. According to the spending plan the council also adopted this afternoon, that would be enough to build about 591 units of housing—288 for low-income people making between 30 and 60 percent of Seattle’s area median income and 303 permanent supportive housing units for formerly homeless people making between 0 and 30 percent of median. (The full spending plan is available here.) The plan also includes rental subsidies to get homeless people into “immediate housing,” funding for a total of about 250 new shelter beds and authorized encampments, more parking lots for people living in their cars, and sanitation facilities. The adopted spending plan, which allocates about two-thirds of the head tax revenues to housing, reverses the priorities in the spending plan proposed last week by Mayor Jenny Durkan and council president Bruce Harrell, which would have spent 70 percent of the revenues from the head tax in years 1 and 2 (and 60 percent in years 3 through 5) on short-term emergency shelter, garbage cleanup, and a new Navigation Team to coordinate the removal of unauthorized encampments and the people in them.

Prior to their vote for the tax, several council members expressed regret that they failed to come up with a compromise that could convince at least one of their colleagues to join them in a veto-proof majority in favor of a larger tax, such as the $350 compromise council member Lisa Herbold floated Friday. Council member Lorena Gonzalez, who was one of the co-chairs, along with Herbold, on the progressive revenue task force, said, “While I’m excited that we will be taking this vote… to reestablish a head tax… it’s regrettable that we were unable to find a path amongst our colleagues and with the mayor that they would be willing to support a higher taxation rate than $275.” Council member Mike O’Brien, who recently weathered hours of verbal abuse at an out-of-control forum on the head tax in Ballard, sounded grim as he conceded, “I’m settling for this level of service.”

Business leaders continued to grumble about the tax. The Downtown Seattle Association issued a statement decrying the tax as “bad economic policy [that] will negatively impact Seattle’s economy and city tax revenues,” and Amazon said in a statement that the “tax on jobs” makes the company “very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.”

The next battle for homeless advocates at city hall will be over the spending plan for the tax—a component of the plan that is in many ways more critical than the amount of money the tax produces. Durkan’s proposed spending plan, with its emphasis on emergency shelter, encampment removals, and tiny houses, would have largely backfilled spending on programs for which funding is about to run out (the plan contained a $15 million-$16 million annual line item to “continu[e] programs which had one-time funding in the 2018 budget, or insufficient funding, plus unspecified “new emergency, temporary, and enhanced shelters, navigation centers… and/or service and safe parking for vehicular living”), reducing the impact of the new revenues to whatever is left over once all the programs that are running out of money are funded. Although the council adopted the spending plan, that vote was narrow (5-4, along the same lines as Friday’s vote) and the actual implementation plan will have to be proposed by Durkan and adopted by the council as part of this year’s budget process.

Before the vote, council member Teresa Mosqueda said the new revenues from the head tax “are supposed to be in addition to” existing spending, not a replacement for it. Asked specifically about this concern at a press conference after the vote, Durkan pivoted to talking about the need to examine the council’s proposed spending plan itself, which she said would fund “a number of programs, such as shelter and supportive housing,” for which long-term funding is not secure. She did not answer the question about whether she would push for a spending plan that used new dollars to pay for existing funding commitments.

The insistence on funding existing shelter beds, from some of the four-member council minority as well as Mayor Durkan, is somewhat ironic. After all, it was the city council itself (with then-mayor Tim Burgess’ support) who adopted a spending plan for homeless service providers last year that eliminated funding for many basic shelters, on the grounds that they failed to demonstrate that they could move their clients into permanent housing quickly. The new standards for shelter providers, for example, withhold funding if those shelters fail to move 40 percent of their clients into housing within three months, a standard that few emergency shelters can meet, particularly those serving the clients who are hardest to house.

The emphasis in the Durkan/Harrell plan on funding shelters rather than housing also flies in the face of what virtually every expert, from the city’s homelessness consultant Barb Poppe to the city’s Human Services Department to a Seattle Metropolitan Chamber of Commerce-commissioned report to former All Home King County director Mark Putnam, which is that a solution to homelessness requires getting people into housing, not tents and “tiny houses” (which Putnam recently referred to as “glorified garden sheds.”) Asked why she supported a split that favored spending on shelters over housing, Durkan responded, “because I think the people of Seattle think that we’ve got to make a difference in homelessness tomorrow. We need to get  people off the streets and get them a safe place to live. None of this housing will come online for years.”

Mosqueda told me before the vote that she was “not interested” in a spending plan that funds temporary shelter “that evicts people in five years and fails to build the housing we need.” The problem in Seattle, Mosqueda argued, is not so much lack of mats on the floor as a lack of affordable housing, and providing more temporary shelter beds is only a “Band-Aid” that fails to address the larger affordability problem at the root of Seattle’s inability to move people from shelter to housing. In a memo released earlier today, Mosqueda staffer Michael Maddux wrote that in the Durkan/Harrell plan, “There does not seem to be increased capacity in funding to support short-term enhanced shelter, and with the draconian cuts to the housing component, no plan appears in place to provide permanent housing for people moved into the few new beds created (about 1,000) by the Mayor’s plan.”

One thing everyone on both sides agreed on is that homelessness is a regional, not a Seattle-only, problem. “Seattle can’t go it alone,” Durkan said during her press conference. “This is a regional crisis that demands a regional response.” That quote might have been lifted verbatim from any other number of press conferences by any number of Seattle officials, past or present. Seattle officials routinely implore “the region,” usually meaning King County, to step up and pay their fair share to address every challenging problem, whether it’s inadequate transit or inadequate funds for housing.  Whether that additional funding will materialize is uncertain. Durkan announced this morning that the state has come up with an additional $40 million for behavioral health services in 2018, and $18 million to $20 million a year after that, and that King County has said it will provide the city with $5.7 million to expand shelter and “safe alternatives for people living outdoors” in 2018. Little is currently known about what strings are attached to this funding or how it can be spent.

Beyond the $5.7 million announced this morning, the county has been parsimonious with its funding to address the crisis. (It did adopt a resolution today declaring May 14-20 “Affordable Housing Week” in King County,  “all county residents” are encouraged “to embrace affordable housing opportunities in their communities.”) Last week, King County Executive Dow Constantine suggested last week that the city needs to slow down and work on a regional approach through the massive “One Table” task force, which began meeting back in January. One Table was supposed to have finished up its meetings and announced its recommendations for a regional approach to addressing homelessness by now; instead, they have canceled their past two meetings and have been very quiet since April. One Table may ultimately come back with a recommendation for a countywide levy, or a sales tax to pay for housing and services (two of the only options available to local governments in Washington State), or it may not. Either way, Seattle is moving forward with what is at least an attempt to address the crisis of homelessness within its borders. Whether the scaled-back proposal adopted today makes a perceptible, measurable dent in homelessness, or whether it merely provides more fodder for anti-tax activists who insist that the city is wasting its money because the problem isn’t getting any better, will be clear soon enough.

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4 thoughts on “Controversial Head Tax Passes After Weeks of Bruising Debate

  1. Pingback: Head Tax Heads for Repeal. What Happened, and What Happens Now? | The C Is for crank

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  3. “Amazon said in a statement that the “tax on jobs” makes the company “very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.””

    Didn’t SDOT put in an Amazon stop in ST3 (without any public discussion/comment) that Sound Transit rubber stamped? If the city council wanted to troll Amazon, they would ask Sound Transit to study a possible switch of ST 3 from Ballard to downtown to Ballard to UW (to save the taxpayers money), since Amazon is threatening to leave/add no more new jobs to South Lake Union.

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