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.

 

Surprise Bidder Threatens Plans for Rainier Beach Food District

This story originally appeared on the South Seattle Emerald

Image result for richard conlinUPDATE: Conlin says he ahas withdrawn his bid for the Rainier Beach property, after conversations with the Rainier Beach Action Coalition about partnering on a development at the site.

Conlin says he and his business partner, Ben Rankin, “have been in discussions with RBAC and had much encouragement from city and other folks who said working with a good developer could have really helped the project. Our last communication from RBAC said that they supported our investment and looked forward to good negotiations on making the project work.” “Although RBAC is not in a position to provide any financial contribution towards a down payment right away, we would like to convey our support for the investment and look forward to developing a mutually acceptable partnership for the project.”

Conlin says the RBAC told him that they were unable to help out with a downpayment on the property themselves, but were interested in becoming partners on a development that would include the Food Innovation Hub. “While we felt that an agreement was likely, we ultimately had to respond to them by telling them we had decided not to make the payment, [because] there were too many uncertainties and possible risks around the community relationship, the potential upzone, and some physical attributes of the property,” including its irregular shape and wet soils that would likely require expensive support piles to develop.

Original story follows.

Years-long efforts to create a food innovation district—a network of food businesses and food-related activities aimed at creating living-wage jobs and preventing displacement in the Rainier Valley—saw a major setback last month when the Rainier Beach Action Coalition (RBAC) learned that another buyer outbid them on a property, next to the Rainier Beach light rail station, where they hoped to site the food innovation hub at the center of the district.

The food innovation hub, as the RBAC and its partners envisioned it, would have included a network of food-related uses to promote jobs and entrepreneurship in the food industry—not just jobs “busting suds” in restaurant kitchens, as Thomas puts it, but higher-paying positions like truck driver, food packer, chef, caterer, and accountant. According to the city of Seattle, which has been an intermittent partner on the project, the Rainier Beach station hub could have included classrooms, a co-packing facility for food startups, a food bank grocery store, tests kitchen, and a computer lab.

The winning bidder? Former Seattle City Councilmember Richard Conlin. As a council member from 1997 to 2013, Conlin was an outspoken advocate for improving access to food and food-industry employment through his Food Action Initiative, and is far better known as an environmentalist than as a developer—largely because he hasn’t been one until this project.

Conlin, whose firm is a joint venture with developer and former theater manager Ben Rankin, says he had no idea the Rainier Beach Action Coalition had made its own bid for the property, a 23,000-square-foot plot that currently houses a rent-to-own furniture shop and a Mexican grocery and restaurant. “We weren’t even aware that somebody else was competing for it,” Conlin says. “We just had this property come on the market and were informed about it and weren’t really aware of their intent.” The RBAC made its bid in collaboration with South East Effective Development, a community development nonprofit, and Forterra , an environmental preservation group that has recently begun investing in equitable development projects.

RBAC strategist Patrice Thomas says that if Conlin wanted to find out what the group’s intentions were, he had every opportunity to seek them out. “We shouldn’t have to reach out to him—he knows the process,” Thomas says. “There are multitudes of avenues by which he could have found anyone in the neighborhood to reach out to, to ask, ‘What’s up with the bid that was going on? I’m thinking of doing X Y Z.’ He did none of that. He chose not to speak with anybody.”

David Sauvion, RBAC co-founder and coordinator for the food innovation district, says “it was particularly harsh” to be unexpectedly outbid by Conlin “because we put all this time and effort into this, and now we have about 10 potential tenants who were talking to their boards, saying, ‘Things are progressing, we put in an offer,’ and having to go to their boards and say ‘there’s been another setback—they decided to go with another buyer’. It’s a terrible thing. You never want to be in that position.” The RBAC also received a significant grant to work on the food innovation district from the Kresge Foundation’s Fresh, Local, and Equitable initiative, and the food innovation district (and hub) was identified as a priority in the 2012 Rainier Beach Neighborhood Plan. Sauvion says the foundation is still supporting the initiative.

Conlin says he’s open to the idea of a food innovation hub in his development, but the vision he describes—low- to moderate-income apartments, marketed to artists and funded by low-income tax credits and tax-exempt bonds, built over “community-oriented” ground-floor uses—isn’t an obvious fit with the RBAC’s ground-up proposal focused on economic and food security. “I’d say we don’t really have a vision as yet—we’re just starting on this particular piece of property,” Conlin says. But, the Madrona resident adds, “We’re community-oriented developers. We’re not in this to make a ton of money. It is a for-profit [business] so we will make a little bit.”

Few of those in the negotiating and bidding process would talk on the record about what happened. Michelle Connor, executive vice president of Forterra, said only that her organization “made an offer that was not accepted by the sellers” and “received no information beyond that the sellers selected another offer.” The property owners, Jack and Peggy Solowoniuk, declined a request to talk about the deal; Jack Solowoniuk told me only that “the property is for sale and we have a backup offer” before hanging up on me. Another person involved in the process said on background that the owners, who don’t live in the neighborhood, probably didn’t care about what happened on the property once it was sold; their interest was in selling to the highest bidder.

“They don’t have a developer, like us, committed to their vision, who’s willing to leverage their financial capacity, because that’s what it takes,” says Tony To, director of the nonprofit developer Homesight. To says HomeSight would be interested in the Rainier Beach station project if they weren’t already overextended—HomeSight is all-in on another project, the Southeast Economic Opportunity Center at the Othello light rail station, one stop away.

Sauvion thinks the pending approval of Mayor Ed Murray’s mandatory housing affordability upzones around the Rainier Beach station, which will increase the height of any potential development from four to seven stories, may already be driving up land values in the area. That, in turn, enables complex agreements led by nonprofit coalitions without a lot of cash up front, to win in bidding wars. If the developments that result follow the typical pattern—mixed-income housing built above retail—they will fail to provide the kind of living-wage jobs and business opportunities the RBAC envisions.

“I really want to be clear: retail doesn’t work,” Sauvion says. “Retail doesn’t create good jobs.”

Rankin, Conlin’s partner, says that assuming he and Conlin do move forward with their project (their bid is not a final sale; it simply forecloses other bids on the property), “we do indeed hope and plan to incorporate the good work already done on a Rainier Beach food innovation district.”

Connor, the Forterra VP, says her group isn’t giving up on the food innovation hub, or pulling out as a partner on the project. “We stand ready to re-engage on behalf of RBAC should the property come back onto the market in the future.” And if it doesn’t? The RBAC and its partners say they’ve seen setbacks before, and are ready to roll up their sleeves and get back to work.

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