City Budget Roundup, Part 1: Soda, Short-Term Rentals, and Legacy Businesses

I’m leaving town just in time for election day this year (one more year, and it’ll be a trend), but before I do, I wanted to give a quick rundown of what’s happening with the city budget—specifically, what changes council members have proposed to Mayor Jenny Durkan’s budget plan, which holds the line on homelessness spending and includes a couple of controversial funding swaps that reduce potential funding for programs targeting low-income communities. None of these proposals have been passed yet, and the council has not started publicly discussing the cuts it would make to the mayor’s budget to fund any of their proposed new spends; this is just a guide to what council members are thinking about as they move through the budget process.,

This list is by no means comprehensive—the list of the council’s proposed budget changes runs to dozens of pages. It’s just a list of items that caught my eye, and which could cue up budget changes or future legislation in the weeks and months ahead. The budget process wraps up right before Thanksgiving, but the discussions council members are having now could lead to additional new laws—or constrain the mayor’s ability to spend money the council allocates, via provisos that place conditions on that spending—well into the coming year.

Sweetened Beverage Tax 

As I reported on Twitter (and Daniel Beekman reported in the Times), council member Mike O’Brien has expressed frustration at Mayor Jenny Durkan for using higher-than-expected revenues from the sugar-sweetened beverage tax, which is supposed to pay for healthy food initiatives in neighborhoods that are most impacted by both the tax and health problems such as diabetes and obesity, to balance out the budget as a whole. In a bit of budgetary sleight-of-hand, Durkan’s plan takes away general-fund revenues that were paying for those programs and replaces them with the “extra” soda tax revenues, which flatlines spending on healthy-food initiatives (like food banks, Fresh Bucks, and school-lunch-related programs) aimed at reducing consumption of unhealthy food… like soda.

“The intent was pretty clear when we passed the legislation last year about how the funding would be spent,” O’Brien said last week. “What we saw in this year’s budget was [a proposal] that may have technically met the letter of it, but certainly not the spirit.”

O’Brien’s proposal would create a separate fund for soda-tax proceeds and stipulate that the city should use the money from the tax in accordance with the recommendations of the advisory board that was appointed for that purpose, rather than reallocating them among the programs the tax is supposed to fund, as Durkan’s budget also does. (See chart above). The idea is to protect the soda tax from being used to help pay for general budget needs in future years, and to ensure that the city follows the recommendations of its own soda tax advisory group.

Airbnb Tax

When the city passed a local tax on short-term rentals like Airbnbs, the legislation explicitly said that $5 million of the proceeds were to be spent on community-led equitable development projects through the city’s Equitable Development Initiative. This year, state legislators passed a statewide tax that replaced Seattle’s local legislation, but council members say the requirement didn’t go away. Nonetheless, Durkan’s budget proposal stripped the EDI of more than $1 million a year, redirecting those funds to pay for city staff and consultants, prompting council members including O’Brien, Lisa Herbold, and council president Bruce Harrell to propose two measures restoring the funding back to the promised $5 million level and creating a separate equitable development fund that would include “explicit restrictions” requiring that the first $5 million generated by the tax go toward EDI projects, not consultants or overhead.

“I think the mayor did this intentionally,” O’Brien said last week. “I don’t think she doesn’t like the equitable development initiative—I think she’s just struggling to make the budget balance—but this is a priority. We’ve seen with the sweetened beverage and the short-term rental tax that …  when we say we are going to impose a new revenue stream and here’s how we’re going to dedicate it, and then less than a year later someone says we’re going to dedicate it a different way, I think that is highly problematic on a much larger scale than just these programs.”

The council appeared likely to reject a separate, tangentially related proposal by council member Rob Johnson to exempt all short-term rental units that existed prior to September 2017, when the council first adopted rules regulating short-term rentals, from the new rule restricting the number of units any property owner could operate to a maximum of two. Currently, this exemption only applies to short-term rental units downtown and some units in Capitol Hill and First Hill; by providing the same exemption to short-term rentals across the city, Johnson said, the council could provide some certainty that the city would actually bring in $10.5 million in annual revenues, which is what the state projected and what Durkan assumed in her 2019 budget.

O’Brien, who drafted the original short-term rental regulations, suggested Durkan had jumped the gun by assuming the state’s projections were right before the legislation had even taken effect. “Typically, we try to be conservative when we have new revenue sources,” he said. Sally Bagshaw, who represents downtown and Belltown, said she had heard from constituents who bought downtown condos as retirement homes who told her their buildings have turned into 24/7 party hotels with few permanent residents. “The idea of opening this up just for budget reasons is disturbing,” Bagshaw said.”

Totem poles

Photograph by Rick Shu via Wikimedia Commons

As Crosscut has reported, local Native American leaders want the city to remove the totem poles erected in Victor Steinbrueck Park, because they have nothing to do with the Coast Salish people who have long populated the area in and around what is now Seattle. Other totem poles in Seattle, including the Tlinget pole in Pioneer Square, are similarly controversial. Council member Debora Juarez, a member of the Blackfeet Nation, is sponsoring an item that would direct the city’s Office of Arts and Culture to address the issue—not by simply removing the offending poles (which is controversial among some historic preservationists and Pike Place Market advocates) but by reviewing and making recommendations about all the Native American art on all city-owned land in Seattle. In response to Juarez’s proposal, budget chair Sally Bagshaw cautioned that she didn’t “want to get bogged down” in a massive study if the problem of offensive or inappropriate art could be addressed on a case by case basis “when they come to our attention. Otherwise,” Bagshaw continued, “I can imagine someone [stalling the process by] saying, ‘Well, we haven’t looked at our 6,000 acres of parks.'”

Legacy Businesses 

In announcing a proposed $170,000 add for the legacy business program—a plan to protect longstanding neighborhood businesses by providing cash assistance and incentives for landlords to keep renting to them—council member Lisa Herbold called it the policy for which she is willing to “fall on [her] sword” this year. Previous budgets have provided funding to study such a program, but Herbold’s proposal this year would actually get it off the ground, by providing startup and marketing costs for the program. “Much like landmarks are a bridge to our city’s culture and history because of their physical form, sometimes businesses as gathering places are also a bridge to our city’s history and culture,” Herbold said.

Support

Critics have said Herbold’s proposal, like similar programs in other cities, could prevent the development of badly needed housing by saving struggling businesses out of a misguided sense of nostalgia.

In response to a question from council member Teresa Mosqueda about whether the program might allow businesses to relocate or reopen in new developments, Herbold said yes, citing the Capitol Hill writers’ center Hugo House as an example. However, it’s worth noting that the Hugo House is a nonprofit, not a for-profit business, and it was “saved” not by government intervention but by the  private owners of the old house in which Hugo House was originally located, who promised to provide the organization with a new space when they redeveloped their property.

 

After Defeat of Head Tax, Council Scrambles for Plan B

City council budget committee chair Lisa Herbold made a risky gamble this week, and she lost. As a result, the council will pass a budget this coming Monday whose details were thrown together largely at the last minute, after a budget proposal that hinged on the passage of the controversial employee hours tax failed to secure a majority.

The gamble Herbold took was fairly straightforward, First, she proposed a version of the budget that incorporated revenues from the head tax—a $125-per-employee tax on businesses with more than $10 million in gross receipts, known as the HOMES tax. Second, she made sure that city council members’ top-priority projects would be on the chopping block without the tax, so that any council member who voted against the tax would risk losing funding for her favorite projects. Third, instead of coming up with a backup plan in collaboration with head tax opponents, she crafted a “Plan B” that included draconian cuts to council members’ priorities (including the criminal justice diversion program LEAD, housing for homeless Native Americans, and trash removal at homeless encampments), giving them an additional incentive to vote “yes” on the tax.

The problem was with step 4—the one where a majority of council members were supposed to fall in line and support the tax. That didn’t happen, for a number of reasons. First, some council members were simply dead set against passing the tax, or—to hear council members like Lorena Gonzalez tell it—opposed to passing it on a rushed timeline without an opportunity to do deeper analysis and look at other alternative revenue sources. (Council members have had less than three weeks to consider the proposal.) Second, several council members bristled at the way Herbold’s initial balancing package, in council member Debora Juarez’s words, “held hostage” so many important projects by putting them “in the head tax parking lot.” Juarez, in particular, was indignant about this forced tradeoff. And third, potentially persuadable council members may have been put off by the behavior of the head-tax supporters who showed up, many at Sawant’s behest, day after day, screaming invectives (“Shame!” “Their deaths are on your hands!” “Republican!”) at council members who didn’t fall in lockstep behind the proposal.

After the tax failed, it became clear that Herbold didn’t have a backup, and the council ended up canceling a scheduled budget meeting to hammer one out. The result was that the process that led to a final budget package was disorganized and chaotic, with some council members reportedly in the dark about budget amendments until less than an hour before they had to vote them up or down. (Many amendments weren’t available in hard-copy form until minutes before they were voted on.)

A few things stand out about the substance of the budget package that will go before the council on Monday. First, it includes aggressive cuts to incoming mayor Jenny Durkan’s budget. If the budget passes unchanged on Monday, the city’s first female mayor in nearly a century will have to reduce her budget 17 percent, the equivalent of five mayoral staffers. (This was one of the budget amendments that reportedly came through at the last minute). Much of the money that would have gone to the mayor’s office will now fund new contract management positions in the Human Services Department.

Council members who supported cutting the mayor’s budget, including Mike O’Brien, said they were merely bringing it down to the “baseline” level established under former mayor Mike McGinn. However, that characterization is misleading: McGinn had a skeleton staff because he became mayor during the worst economic recession in recent memory, and made the cut at a time when the city faced ongoing annual revenue shortfalls in the tens of millions. As the economy recovered and all city departments expanded back to pre-recession levels, McGinn’s successor, Ed Murray, staffed up too. While budget cuts during recessions are standard, I can recall no recent precedent for slashing the mayor’s budget so dramatically in the middle of an economic boom. Notably, the council did not propose any cuts to its own staff budget, which council members increased by 33 percent just last year.

Outgoing mayor Tim Burgess fired off a sassy response to the council’s cuts, saying that if the council, “in their wisdom[,] 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.” Should Durkan want to respond to the cuts more directly than Burgess did, she could take a hard look at the dozens of statements of legislative intent the council also adopted today, each of which constitutes a request for the mayor’s office to craft legislation or produce reports and analysis. Or the council could decide to dial back the cuts on its own; they still have until Monday to find cuts elsewhere if they don’t want to pick this fight with the new administration. Durkan, it’s worth noting, did quite well in several council members’ districts, including O’Brien’s (Northwest Seattle) and Herbold’s (West Seattle). Both council members are up for reelection in two years.

The cuts to Durkan’s office highlight another unusual aspect of today’s budget proposal: It shifts a significant amount of money into the city’s Human Services Department from other departments, primarily the Department of Finance and Administrative Services. Although intuitively, it makes sense to move funding for things like homeless encampment removals to the department that hands out contracts for homeless services, HSD was not necessarily clamoring for the change, and will need time to hire seven new employees and train them to do the work FAS has been doing. Durkan, meanwhile, presumably has her own ideas about how the department should be run, and who should run it (the current director is Catherine Lester).

Today’s budget debate also solidified the ideological fault lines on the council—and highlighted the need for someone to serve as de facto council leader. As budget chair and a council veteran (before her election in 2015, Herbold was a staffer for former council member Nick Licata for 17 years), Herbold had a chance to be that leader, by counting votes and dealing with both sides to come up with a best-case scenario for the council’s left wing as well as a viable Plan B that could win the support of a council majority. Instead, Herbold went for broke—proposing a budget that was, in essence, an ultimatum, and declining to work with council moderates like Rob Johnson on a backup plan. That gamble didn’t pay off, even with a reliable ally like Kirsten Harris-Talley temporarily on the council. Once the council equation shifts in November (when Teresa Mosqueda, who handily defeated Herbold-endorsed socialist Jon Grant, replaces Harris-Talley), she could find herself increasingly isolated—insufficiently socialist for Sawant (whose supporters yelled “Shame!” and “Republican!” as fervently at Herbold as they did at Johnson), insufficiently “moderate,” (which is to say, conventionally liberal) for the council’s new majority.

I’ll have more to say about the final budget package on Monday.

If you enjoy the work I do here at The C Is for Crank, please consider becoming a sustaining supporter of the site! For just $5, $10, or $20 a month (or whatever you can give), you can help keep this site going, and help me continue to dedicate the many hours it takes to bring you stories like this one every week. This site is funded entirely by contributions from readers, which pay for the substantial time I put into reporting and writing for this blog and on social media, as well as costs like transportation, phone bills, electronics, website maintenance, and other expenses associated with my reporting. Thank you for reading, and I’m truly grateful for your support.

Morning Crank: “Meets All Necessary Privacy Requirements”

Image via Hope to the End.

1.  Some little-picture observations about the proposed city budget, which interim mayor Tim Burgess released on Monday:

• The budget includes extremely sunny ridership projections for the South Lake Union and First Hill streetcars, assuming that farebox revenues from the two streetcars combined will be 25 percent higher than actual 2016 revenues, and 21 percent higher than the assumption that was used for the 2017 budget.

• The budget includes $343,000 to expand the city’s Our Best program, which is aimed at increasing mentors for young African American men and improving black male outcomes. As I’ve reported, this fix-boys-first focus can black girls, who face very different challenges than black boys, behind; programs like Our Best also tend to emphasize traditional gender roles, including a heteronormative family structure in which the man is the breadwinner and the wife stays at home.

• The phrase “African American/Black” occurs 10 times in the city budget itself. Nine of those 10 times, it precedes either “male” or “boys.”

• In addition to increasing funding for homelessness-related programs and services by $2 million, the budget for the city’s Human Services Department includes funding for new Homeless Management Information scan cards, which are just what they sound like—bar-coded scan cards identifying and tracking homeless people who use the city’s shelter system. According to the budget book, the cards will, “for a small investment, significantly decrease the burden on people using homeless services to provide information and decrease the burden on agencies to enter duplicative data while significantly increasing efficiencies in the homeless service delivery system by ensuring data quality.” The proposed new homeless scanning system, HSD assures readers, “meets all necessary privacy requirements and is used in homeless response systems around the

• In another nod to HSD’s renewed emphasis on “performance-based contracting” and “measurable outcomes,” the department’s budget also includes two new data analysis staffers.

• And in a nod to the fact that addressing homelessness was never going to be a short-term problem, the budget takes two positions that were created in 2017 to execute the city’s interim response to homelessness and makes them permanent.

 

“The Navigation Center is finding that mapping out a strategy to get them housed could take more than 60 days.”

 

2. Speaking of homelessness as a long-term problem: The first annual report on Pathways Home, the new city homelessness framework that emphasizes “rapid rehousing” and “performance-based contracting,” is out. Overall, the city gives itself high marks for moving people from unsanctioned to sanctioned encampments and for getting people into safer (if still precarious) living situations. HSD praises itself, in particular, for the work of its new Navigation Teams—groups of police and outreach workers who offer services and safer shelter or housing to people living in unsanctioned encampments that are about to be swept by the city—and for two new low-barrier shelters, the city-run Navigation Center and a new low-barrier shelter run by Compass Housing, which together provide 175 new shelter beds.

However, the number of people served by the city-run Navigation Center remains low. (The Compass facility just opened last month). Between July and September, according to the report, the center has seen just 105 people—and 30 percent of those left the program in the first 45 days it was open. The goal of the Navigation Center is to get hard-to-house and chronically homeless clients with complicated problems, including addiction, into long-term shelter, permanent housing, or treatment. When the center opened, HSD said it would aim to get people through the shelter and on to their next living situation within 60 days; the progress report released Monday, however, concedes that “[p]eople coming inside from being unsheltered have a big adjustment to make and multiple issues to address and many barriers to housing stability; the Navigation Center is finding that mapping out a strategy to get them housed could take more than 60 days.” Next year, the city will switch to a system that awards contracts to shelter providers based in part on how many of their shelter clients “exit shelter to permanent housing,” which could weigh against shelters like the Navigation Center that serve clients that are among the most challenging to house.

“There is an urgent need to provide unsheltered people with real time referrals to shelter and housing by using scan card technology in the field to link outreach workers and housing resources.”

 

The report also touts the Navigation Teams, praising the groups for getting people living in unsafe encampments into “safer alternative living spaces.” Overall ,64 percent of the people the Navigation Teams “engaged” accepted some kind of services (down from the 69 percent an SPD lieutenant described as “staggeringly high” back in May). Thirty-nine percent accepted alternative living arrangements (up from 32 percent), which include other (sanctioned) encampments; although the city tracks this number closely, HSD has told me it does not know how many people in that group actually got permanent housing, as opposed to a shelter bed or reassignment to another outdoor encampment.

In a nod to the budget line item adding funding for homeless scan cards, the Pathways Home report says “there is an urgent need to provide unsheltered people with real time referrals to shelter and housing by using scan card technology in the field to link outreach workers and housing resources.”

3. Eli Sanders, the Stranger writer-turned-speechwriter/deputy communications director for interim Mayor Tim Burgess, has said he plans to use what he sees and hears while embedded at the mayor’s office as material for a piece of “experiential journalism” when he returns to his job at the paper full-time in November. (Sanders will continue to host the Stranger’s political blog, “Blabbermouth,” one day a week.) On Monday, the city provided me with Sanders’ offer letter for the position, which consists primarily of writing Burgess’ speeches and public remarks, not taking media calls or dealing with external communications. Sanders, according to the letter, will make $55.598 per hour, plus a five percent bonus for his first 520 hours; after that point (which Sanders will likely never hit, given the short-term nature of his assignment), he will receive a ten percent bonus.

Doing the math: Sanders started his new job on September 19; the job will conclude on November 28, when a new mayor takes office. At 8 hours a day, and assuming he receives no pay for additional hours or other bonuses, Sanders will make $26,153.30 for his 56 full days of work for Burgess, which (if extrapolated out to the full year) would amount to a salary of $125,762.78. This places Sanders’ starting salary within the top third of mayoral staff salaries; only 16 of the 47 mayoral staffers make more than Burgess’ new hire.

Also Monday, I got a request to remove Sanders’ personal email information from his offer letter, which is a public record available to anyone. The ask was reasonable, and I removed the address, but I couldn’t help but note a certain irony in the request, as I told the staffer who asked for the redaction:

If you enjoy the work I do here at The C Is for Crank, please considerbecoming a sustaining supporter of the site! For just $5, $10, or $20 a month (or whatever you can give), you can help keep this site going, and help me continue to dedicate the many hours it takes to bring you stories like this one every week. This site is funded entirely by contributions from readers, which pay for the substantial time I put into reporting and writing for this blog and on social media, as well as costs like transportation, equipment, travel costs, website maintenance, and other expenses associated with my reporting. Thank you for reading, and I’m truly grateful for your support.

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