Tag: head tax

Six Things to Think About When Thinking About the Head Tax

This story originally appeared in the South Seattle Emerald.

Weeks of tense negotiations, heated yelling sessions, and a high-stakes game of chicken between the biggest employer in the city and the city council culminated in a unanimous city council vote to approve a $275-per-employee “head tax” on Monday afternoon. But what does the vote mean? Is Amazon’s threat to abandon the city off the table? And where does Seattle go from here?

We’ve put together a handy primer to answer these and other pressing questions about this latest effort to address the growing homelessness crisis in Seattle.

1. The $275-per-head tax the council passed Monday was not the tax a majority of the council wanted to pass. Last Friday, in fact, the council’s finance and neighborhoods committee (made up, on this occasion, of all nine council members) approved a much larger tax of $500 per employee, which would have raised around $75 million a year. That vote, however, was too narrow (at 5-4) to withstand a likely veto by Mayor Jenny Durkan, who offered up a $250 version of the tax as a counterproposal last week. The “compromise” most council members agreed to over the weekend raised the total size of the tax by just $25 per employee, enough for Durkan to cheerfully declare victory on Monday evening and for council members who wanted a larger tax, such as council member Mike O’Brien, to say that they had done everything they could.

2. The original $500 tax proposal didn’t come out of nowhere—it was recommended by the city’s Progressive Revenue Task Force, a group that was established after a group of council members failed to pass a smaller, but similar, business tax during the city council’s 2017 budget process. The task force was charged with coming up with a tax that would produce between $25 million and $75 million in revenues; they ended up proposing a $500-per-employee tax on businesses with more than $20 million in gross revenues after considering, and rejecting, lower tax levels that would apply to a larger number of businesses. By targeting the tax at businesses at the very top of the city’s revenue scale, the task force was attempting to respond to objections by smaller businesses (those with more than $5 million but less than $20 million in gross revenues) operate on narrow profit margins and shouldn’t really count as “big businesses.” The more businesses the task force exempted from the tax, the larger the tax had to be to yield the same revenues, which is how the task force arrived at $500

3. The head tax isn’t enough to address the problem. The tax, which sunsets after five years, would raise about $47 million a year for new housing, rental subsidies, and supportive services. Under the spending plan adopted by the council, 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 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, and more money for safe parking lots and sanitation stations.

A few hundred housing units is obviously far from adequate to house the more than 8,500 people who were homeless in Seattle at the beginning of 2017, when All Home did its most recent homeless census—a number that has likely only grown since then. In fact, a report commissioned by the Seattle Metropolitan Chamber of Commerce, by the consulting firm McKinsey & Co., concluded that the county needs an additional 14,000 units of affordable just to address the current needs of people experiencing homelessness in King County. Building that much housing and addressing the other needs of King County’s homeless population would cost the public and private sectors $410 million a year, the independent report concluded, and that’s only if the annual rate of people falling into homelessness does not increase. King County would need to spend between $164 million and $215 million a year to pay its “share” of that $410 million total.

Michael Maddux, a staffer for council member Teresa Mosqueda’s office, crunched the numbers in the report and determined that Seattle’s “share” of that countywide total would be somewhere between $59 million and $79 million. The $47 million in annual spending that the $275 head tax would provide falls short of the bottom end of that range.

4. The tax that passed Monday is just the beginning of the story. Although the national news crews packed up their cameras and left before the council could begin discussing how to spend the new revenues on Monday, the spending plan is in many ways more critical than the size of the tax. The plan Durkan proposed for her $250 tax would have focused the vast majority of its spending on emergency shelter, encampment removals, and other stopgap solutions, rather than housing, building just 250 units of new affordable housing over five years.

On Monday, the council approved a spending plan that took the opposite approach, emphasizing housing over temporary shelter. However, the real debate will come later this year, when Durkan proposes an implementation plan for the tax as part of the city’s annual budget process. (The spending plan adopted this week sets the council’s priorities, but is itself a nonbinding resolution.) That plan, and the budget process, will give proponents of the Durkan spending model another opportunity to attempt to recalibrate the spending balance in the tax proposal.

The city’s adopted Pathways Home plan, which directs the city to focus its homeless service spending on programs that get people off the streets and into “permanent housing” as quickly as possible, recommends that the city do the exact opposite of what Durkan recommended in her original spending plan. Last year, the city adopted a spending plan for homeless service providers that actually eliminated funding for a large number of basic shelter beds, on the grounds that those shelter providers failed to demonstrate that they could move their clients into permanent housing quickly. Pathways Home is controversial, in part, because it penalizes nonprofits that serve the hardest to house, but the “housing first” principles that underlie it are right in line with the McKinsey report that suggested a lack of housing is the fundamental problem underlying Seattle’s homelessness crisis.

5. Seattle has continued to insist that it won’t continue to “go it alone” on funding for homelessness, but King County has yet to step up and propose its own tax plan to supplement Seattle’s. Although Durkan announced Monday that King County will provide $5.7 million in one-time funding to help keep shelters and authorized encampments open in 2018, the county has been noticeably quiet about what it will do to fund housing and services on an ongoing basis. One Table,” a regional task force made up of elected officials, advocates, and business leaders from across King County, began meeting in January. So far, they have announced that Pearl Jam will hold two concerts in Seattle to raise at least $1 million for homelessness—and not much else. The group’s last two public meetings were canceled with minimal public notice, and the closest they have gotten to a set of recommendations is nine-page document, released quietly last month, that includes no cost estimates, no funding proposals, and no timeline for implementing any of the ideas on the list. That document no longer appears to be available on King County’s website.

6. Finally, the passage of the head tax is unlikely to end the vitriol that has accompanied the debate over homelessness in the past few months, exemplified by a recent town hall meeting at a church in Ballard where homeowners shouted down a panel of elected leaders and progressive revenue task force members with bellows of “BULLSHIT!” “FUCK YOU!” and “RESIGN NOW!”  The problem with any spending plan that fails to house enough people to make an appreciable dent in homelessness is that it leaves too many people on the streets, opening the city up to the predictable objection that “no matter how much money we give them, the problem keeps getting worse”  and the problem with any spending plan that takes a large number of people off the streets and stuffs them into new “tiny house” camps and shelters is that those people have nowhere to go and shelter becomes a way of warehousing people indefinitely.

Meanwhile, the problem with spending the amount that experts consider “enough” is that it tends to inspire fierce pushback from the business community. (According to Maddux’s report, a thorough response may require about $69 million per year from Seattle and $120 million from the rest of the county.)  Amazon threatened to stop construction on one of its downtown projects over the original $75 million head tax proposal, and said on Monday that the adopted $47 million tax “causes us to question our growth here” in Seattle. That kind of talk tends to send those who have benefited from the recent Amazon-fueled boom, such as homeowners who have seen the value of their properties skyrocket to an average of $820,000 over the last few years, into a tizzy. Amazon may not leave Seattle, or even slow its growth here—Fast Company, the business magazine, called the company’s latest statement “passive-aggressive and vaguely threatening”—but the possibility that the company, which just reported $1.6 billion in quarterly profits, might retaliate against the city remains a guillotine that the company is more than happy to hold over the heads of those who have benefited from its success.

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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Employee Hours Tax Passes Over Durkan, Amazon Objections, But Veto Looms

This story originally appeared at Seattle magazine.

With the city council poised to pass a proposed $500-per-employee “head tax” on Seattle’s 600 largest businesses, and Mayor Jenny Durkan equally prepared to veto the proposal in its current form, the question now is: What’s next?

With council members heading into a weekend of negotiations, it’s possible that both sides could emerge on Monday with a compromise solution that splits the difference between the tax that passed on Friday and the “compromise” version that Durkan and council president Bruce Harrell support, which would cut the council’s proposal in half. However, if the two sides fail to reach a compromise, the larger version of the head tax will almost certainly pass on Monday by a 5-4 majority, which is one vote shy of the 6-3 margin supporters need to override a mayoral veto.

In a statement Friday afternoon, Durkan made it clear that she would veto the tax in its current form, but said she still held out hope that the council “will pass a bill that I can sign.” However, Durkan’s ally Harrell, also made it clear on Friday that he would not support a compromise floated by council member Lisa Herbold to lower the tax to $350 per employee, indicating that he and Durkan may not be open to a proposal that merely closes the gap between what Durkan and the council majority want. It’s possible, in other words, that when Durkan says “a bill that I can sign,” she merely means a bill that cuts the tax to $250 per employee—the amount Amazon, which has threatened to stop construction on its Seattle headquarters if the tax passes in its original form, has said they are willing to accept. Amazon contributed $350,000 to a pro-Durkan PAC in last year’s mayoral election.

A quick backgrounder on the tax: Last year, at the end of its annual budget process, the council formed a task force to come up with a progressive tax to pay for housing and services for Seattle’s homeless population. After several months of meetings, and numerous compromises in response to objections from small and low-margin businesses, the task force came up with a plan that would generate about $75 million a year—a $500-per-employee annual tax on businesses with gross revenues above $20 million, a threshold that excludes companies with high gross revenues but tight margins, such as restaurants. The proposal also came with a spending plan that emphasized long-term affordable housing over short-term emergency shelter services, and a provision that would convert the head tax into a business payroll tax starting in 2021, with no sunset date.

On Thursday night, Mayor Durkan released her own “compromise” head-tax proposal, which would cut the recommended head tax in half, to $250 per employee, ditch the provision transitioning the head tax into a business payroll tax, and sunset the whole thing in five years unless the council voted proactively to renew it. On Friday, Harrell introduced a proposal identical to the Durkan plan, along with a spending plan that emphasizes shelter over permanent housing and would pay for just 250 new rental units over five years. The Durkan/Harrell plan also includes a four percent wage increase for social service workers (many of whom make just over $15 an hour) and funding for a second Navigation Team to remove tent encampments and refer their residents to services.

When a council vote is 5 to 4 and a veto hangs in the balance, talk inevitably turns to “swing votes”—that is, who can be swayed to join the council majority to make the bill veto-proof?

Right now, it appears unlikely that anyone in the council’s four-person minority will budge over the weekend to support the full $500 tax, or even Lisa Herbold’s proffered $350 compromise, but a lot can change in the course of two days. So perhaps there will be a compromise that convinces one of the council members who opposes the larger tax to join the council majority. (The opposite scenario—that one of the five members who voted for the original $500 tax will join the four-member minority that wants to cut it in half—seems highly unlikely, since all five council members have consistently supported the proposal that came out of the task force, and since they stand to gain more, politically speaking, by forcing Durkan into a veto fight than by switching sides and handing the mayor a bloodless victory.)

However: If, as seems more likely as of Friday afternoon, the vote remains 5-4, the question becomes what will happen in the 30 days after Durkan vetoes it.

Judging from council members’ past positions and their comments Friday, the most likely “swing vote” when the decision comes down to passing something or doing nothing appears to be council member Rob Johnson, who seemed more tentative in his position than either Debora Juarez (“If we tax jobs to build houses and the jobs leave because of the tax, then no houses get built”) or Sally Bagshaw, who said virtually nothing at Friday’s meeting but is typically not the first council member to make dramatic vote switches.

Last year, when the council was debating whether to include the head tax in the budget, Johnson argued that proponents needed to come up with a more detailed spending plan to justify such a substantial tax. They did exactly that—and Johnson voted instead for a hastily sketched-out proposal that some council members didn’t see for the first time until this morning. On Friday, the most enthusiastic comment Johnson managed to muster about Durkan’s proposal was that it “allows for us to continue that pay-as-you-go process that has been a hallmark of most of the affordable housing investments that we’ve made as a city.”  If tax proponents are looking for a swing vote to help them override Durkan’s veto (and there is precedent for this kind of vote-switching), Johnson may be their best bet.

The council will be in discussions all this weekend, and will meet again on Monday morning to discuss the proposal (and any compromises reached over the next two days). A final vote on the head tax is scheduled for 2:00 Monday in council chambers.

 

Morning Crank: To Think Otherwise is Really Idealistic

1. Council members expressed concern and some skepticism Wednesday at a committee discussion of Mayor Jenny Durkan’s plan to spend around $7 million in proceeds from the sale of a city-owned piece of property in South Lake Union on “tiny house” encampments and housing vouchers—so much concern and skepticism, in fact, that they decided to put off a decision on the tiny houses until mid-March, and could end up tabling the voucher program  as well.

Durkan’s proposal, called “Building a Bridge to Housing for All,” includes two one-time expenditures on homeless shelters and homeless prevention. The shelter funding, about $5.25 million, will initially be used to open a single “tiny house village” for chronically homeless women, but could ultimately be used to add as many as 10 new authorized encampments with a total of 500 tiny houses, across the city. According to city council staffer Alan Lee, each tiny house would cost about $10,500, a number that includes on-site security and 24/7 case management for residents (according to council staff, case management and other operating expenses for 500 tiny houses would cost the city about $500,000 a year.) Durkan has convened an “interdepartmental housing strategy” group to come up with a final proposal in June; Lee said at yesterday’s meeting that the numbers were intended to “give a very rough framework of what direction this money could go… whether or not that’s the strategy that comes out in June.” But it’s hardly going out on a limb to suggest that the strategy that comes out in June will include a heavy emphasis on tiny-house encampments;  Durkan even held her press conference announcing the Bridge to Housing program at the Seattle Vocational Institute, with two under-construction tiny housesas her backdrop.

The council’s finance committee agreed to hold off on the $5 million for a few weeks and vote on it, at the earliest, at the full council meeting on March 12. Meanwhile, they decided to move forward with the plan to spend $2 million on short-term housing assistance vouchers for a small number of people on the Seattle Housing Authority’s waiting list for federal Section 8 housing vouchers, which recipients use to rent housing on the private market. (Or not—although landlords aren’t allowed to discriminate against people who use Section 8 vouchers to pay their rent, it can be hard to find housing that fits the program criteria, including a maximum monthly rent of around $1,200 for a one-bedroom apartment in the Seattle area.) The assistance, which staffers estimated would work out to about $7,300 per household per year (about half that $1,200 maximum), would help just 150 of the 3,500 or so on the SHA waiting list for vouchers—those who make less than half the area median income and are at high risk of becoming homeless. (My earlier estimate, which worked out to a much lower per-month subsidy, was based on the assumption that the city planned to help 15 percent of those on the SHA waiting list, rather than 15 percent of a smaller subset of 1,000 wait-listed people in need of housing. The fact that the city’s estimates for monthly subsidies are higher reflects the fact that the $2 million it plans to spend will only help a relatively small number of people.)

Quite a few council members questioned the wisdom of moving forward with a housing assistance program without identifying a long-term funding source (the $2 million is a one-time windfall from the sale of city property), and some wondered whether the city should be spending its limited resources on people who aren’t actually homeless, instead of, say, the 536 people on SHA’s waiting list who are either actually homeless or unstably housed.

“What I’m concerned about,” council member Lorena Gonzalez said, addressing staff for the mayor’s office and SHA, “is that we’ve identified a gap in the system and are proposing to address that gap in the system in a short-term fashion with a finite amount of resources. … I guess I don’t have a level of confidence that in two years, we will have patched the gap in the system that you have identified. So if that gap still exists, then there will be an expectation created” that the city will continue to fund the program, even though the money has all been spent. To think otherwise, Gonzalez added pointedly, is “really idealistic.”

It’s unclear what the council will do next Tuesday. Of seven council members at the table, four—Gonzalez, Lisa Herbold, Teresa Mosqueda, and Mike O’Brien—abstained from voting to move the allocation of the $2 million (part of an ordinance meant to accompany a separate bill authorizing the sale of the property for a total of $11 million) onto next Tuesday’s full council agenda. Because abstentions aren’t “no” votes, the measure passed, with Bruce Harrell, Sally Bagshaw, and Rob Johnson voting “yes.”

2. The progressive revenue task force, which has been meeting for the past two months after the failure of a proposed employee hours tax, or “head tax,” last year, will hold its final meeting at 9am on March 1 in the Bertha Knight Landes Room at City Hall. The group is expected to propose a new version of the EHT rejected by the council during last year’s budget process, which would have required businesses with more than $10 million in gross receipts to pay an annual tax of $125 per employee. The task force held its penultimate meeting yesterday morning.

3. ICYMI: Thanks to the marvels of modern technology, I was able to watch two simultaneous committee hearings—a meeting of the council’s planning, land use, and zoning (PLUZ) committee, to take comment on the city’s plans to upzone and require affordable housing in Northeast Seattle’s District Four, and a public hearing/rally against cuts to homeless shelters the city made last year—online. For about three hours, I whiplashed between a barrage of testimony against shelter cuts by council member Sawant’s army of invited supporters (as usual, she advertised her hearing with a “PACK CITY HALL!” invitation, turning what was ostensibly a council committee hearing into a standard Sawant protest rally) and public comments on zoning changes that ranged from earnest (the upzone, one speaker said, will allow “more neighbors to share the amenities” she already enjoys) to entitled (“I choose to live in Seattle,” a Wallingford homeowner said. “I like it. Other people want to live in Seattle too, and they want to take my spot”) to ridiculous (“It seems the department of planning has specifically targeted Wallingford for destruction of neighborhood character.”) If you missed the opportunity to follow along in real time (or if you just want to relive the whiplash) I’ve gathered my tweets in a Twitter Moment.

If you enjoy the work I do here at The C Is for Crank, please consider becoming a sustaining supporter of the site or making a one-time contribution! 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 time I put into reporting and writing for this blog and on social media, as well as reporting-related and office expenses. Thank you for reading, and I’m truly grateful for your support.

Morning Crank: I Don’t Want That Rumor to Be Perpetuated

1. Sitting at the year’s first meeting of the Progressive Revenue task force Thursday morning, it was hard not to flash back to a press conference the previous day, when Mayor Jenny Durkan announced that the city would spend some of the $11 million it expects to receive from the sale of a city-owned property in South Lake Union (a different property than the “teardrop” site council members discussed as part of their budget deliberations last year). At that briefing, held in front of two “tiny houses” under construction at the Seattle Vocational Institute, Durkan said it would take time to build all the housing that will ultimately be funded by the $290 million 2016 housing levy, and that in the meantime, a $5.5 million investment in “bridge housing”—or, in the clunky title Durkan chose for the initiative, “building a bridge to housing for all”—would give people living on the street slightly better options. “In an ideal world, we would not need to be building tiny houses,” Durkan said. Then she acknowledged that state and federal support for affordable housing is about to fall off a cliff.

The rest of the money would pay for rental assistance for people on SHA’s Section 8 voucher waiting list—”we’re going to focus on the people who need that assistance the most,” Durkan said— design of a new fire station, and city expenses related to the land sale. The developer buying the property would also provide $2 million of a total $7.7 million payment toward affordable housing projects elsewhere, required as part of the city’s Mandatory Housing Affordability program, to build actual affordable housing.

The reason I was thinking about Durkan’s announcement Thursday morning is that it was basically a rounding error—what government staffers sometimes call “budget dust”— in the funding needed to actually address the city’s homelessness problem, which has been growing every year since at least 2013. According to task force co-chair Kirsten Harris-Talley, if every unit of affordable housing requires $160,000 in capital expenditures from the city (more on how advocates for a higher employee hours tax arrived at that number in a minute), and the city will need around 20,000 new units for very low-income people in the next 10 years, that means the city will need to spend around $3.2 billion over that time. As you can probably imagine, the city isn’t spending anywhere close to that right now—according to the presentation, the city spent just under $95 million from all sources on capital housing investments last year. At that rate, it would take more than 33 years to come up with $3.2 billion (and that’s assuming housing costs stayed flat).

Obviously, none of this is an exact science. The $160,000 figure is an estimate provided by council member Kshama Sawant’s office, of what the city would need to contribute if it ramped up its affordable housing production and was unable to find a significant amount of new funding from other sources to help pay for all the new units. (Currently, each new unit costs the city about $93,000 in capital costs, but the programs that pay for the difference between the city’s contribution and the total cost to build a new unit, about $311,000, are only committed to a certain number of units, requiring the city—theoretically—to pay more for each additional unit out of its own pockets.)

If Harris-Talley and Sawant’s figures are correct, that provides a ready-made argument for the employee hours tax (effectively a flat annual tax for each full-time employee on every business over a certain revenue threshold) that they’ve wanted to pass all along. Today, the task force looked at potential revenues from the so-called head tax at different levels and with different sizes of business exempt from the tax, which I’ve copied below. (Last year’s proposed head tax would have exempted businesses with less than $10 million in gross revenues, up from $5 million in the initial proposal; some businesses argued that basing the tax on gross revenues was unfair because it didn’t take into account thin profit margins in certain industries, like restaurants.)

If the city goes through a recession, of course, the amount it can expect to collect will shrink. However, recessions tend to actually lower rents; Downtown Emergency Service Center director and task force member Daniel Malone pointed out that during the last recession, the county’s annual point in time count of people living outdoors tends to stagnate or even decrease, as it did between 2010 and 2011, and between 2011 and 2012. That’s one of the paradoxes of a weakening economy: Although revenues from taxes that are less stable, like direct taxes on businesses, tend to decline, so do rents, making it possible for some people forced onto the street by an impossible housing market to actually find a place to live.

2. In a King County Board of Health discussion about the possibility of a Hepatitis A outbreak in Seattle yesterday (a nationwide outbreak, ongoing now, began in California and was widely blamed on lack of access to handwashing facilities for the state’s homeless population), King County Health Department Director Patty Hayes expressed concern about the city’s decision last year to cut funding for three downtown hygiene centers that provide restrooms, showers, and handwashing and laundry facilities for homeless people living and moving through downtown.

City council and Board of Health member Sally Bagshaw—a vocal proponent for cutting funding to the facilities as part of the city’s new “performance-based” approach to homeless service contracts—objected to Hayes’ characterization of the problem.

“I think that [problem with the closure of the hygiene centers] is more apparent than real,” Bagshaw said. “We’re putting huge investments into new 24/7 shelters …  I’m working with those 24-hours shelters to say, ‘Can you open these up for people who aren’t [staying] here tonight” to take showers, she said. “We opened up community centers [for people to shower]. There are more facilities open now than before. It’s just that the money’s being shifted. I don’t want that rumor to be perpetuated. There were some organizations that didn’t get funded” because the city went to a competitive process, Bagshaw said.

I covered the cuts to funding for hygiene centers, and the reason some advocates believe community centers and shelters are not an adequate substitute for public restrooms and dedicated hygiene facilities, here.

3. The Sightline Institute, a progressive think tank that researches and covers of housing, transportation, and environmental policy from a green, pro-transit, pro-housing perspective, just brought on a new (unpaid) fellow to cover “issues of infrastructure, technology and energy with a view towards sustainability.” His name: Daniel Malarkey.

If that name sounds familiar, it should. (If it doesn’t, you weren’t following Seattle politics in the early 2000s.) He was the finance director for the Seattle Monorail Project, the transportation agency that was going to build a monorail line from Ballard to downtown to West Seattle. That project was doomed to failure after Malarkey’s revenue projections overshot the mark by about 50 percent, and after the agency compounded the problem by trying to paper over the error. (The error Malarkey made was counting revenues from taxes on every single car in Seattle, when in reality, thanks to heavy lobbying from the auto industry, all new cars and cars brought to the city by people moving here from out of state were exempt from the monorail tax. The result was that Malarkey overestimated the monorail’s tax base by a third) When he resigned at the end of 2003, I wrote this. Interestingly, it looks like his three years consulting or working directly for the monorail agency aren’t on his official Sightline bio.

Anyway, it looks like he’ll be writing about autonomous cars.

Full disclosure: I have written several pieces for Sightline and often use their research in my reporting.

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Is the “Head Tax” Half-Baked—or Long Overdue?

A plan to tax businesses with gross receipts above $5 million to pay for homeless housing and services faced intense scrutiny from several skeptical city council members yesterday at the first budget briefing since council members Mike O’Brien and Kirsten Harris-Talley first floated the HOMES (Housing, Outreach and Mass-Entry Shelter) Act last week. (The proposal would resurrect the so-called “head tax,” a tax for each hour an employee works, that was repealed in 2009). Council member Rob Johnson called the proposal a “false choice” between a head tax and doing nothing, and council president Bruce Harrell took umbrage with council member Kshama Sawant’s suggestion that council members who oppose the head tax are “beholden to the Chamber of Commerce.” After the meeting, Johnson told me that his goal is “to stay focused on the outcomes” and figure out how much money service providers need first, rather than to “reverse engineer” a set of solutions based on a specific revenue source like the head tax.

So far, the proposal comes with a big number—$24 million a year—but few details. Here’s what we do know: The HOMES Act would impose a 4.8-cent tax on every hour worked by employees for companies with gross receipts of $5 million or more. The math works out to about $100 per employee, per year, and the council members estimate it will raise about $24 million annually, which would include $5 million for shelters, new authorized encampments, and safe lots for people living in cars and RVs; $18 million for new housing construction and long-term housing vouchers for people with very little to no income; and $1 million to expand the Law Enforcement Assisted Diversion program, a pre-arrest diversion program for low-level drug offenders, into the North Precinct. The number of new units the package could build depends on whether the city can rely on state subsidies through the housing trust fund, which cut the cost of construction dramatically, but O’Brien estimates the measure could permanently house 1,000 people over the next ten years.

The Seattle Chamber of Commerce and the Downtown Seattle Association condemned the proposal, calling it a “tax on jobs” that sends a hostile message to businesses hoping to expand or move here. (Amazon came up a lot in the initial press coverage of the proposal, but the tax would actually affect about 2,200 businesses, not just so-called big corporations) O’Brien calls that a false narrative; he says the tax represents a tiny fraction of the cost of doing business—”0.3 percent of your labor cost if you pay your workers $15 an hour”—and that if business groups had a better idea, they would have proposed it by now. “We’ve been dancing around this for years— they hate [the head tax], but they haven’t come up with anything better,” O’Brien says. “It’s the only business tax we have access to, and so there’s a question: Do they hate it because they would like a different business tax better, or do they hate it because they hate business taxes, and this is the one we’re going for, so they hate this one?”

DSA president Jon Scholes insists the downtown business group doesn’t just reflexively “hate” all business taxes; what they hate, he says, is being left out of the loop. Case in point: Scholes says O’Brien contacted him on Thursday to let the DSA know that he was “exploring” the idea of resurrecting the head tax; less than 24 hours later, O’Brien was calling a press conference to announce his plan. The move blindsided the business community, Scholes says. “This was not developed with the input of [O’Brien’s] colleagues on the council or other folks who care deeply about this issue,” Scholes says. “We’re not saying that there shouldn’t be new resources, but we think the resources that are going to go to this issue should be thoughtful and discussed out in the open, not decided behind closed doors and foisted upon businesses and the community.”

Seattle’s business community is unusually progressive by business-community standards—the DSA, for example, was a critical partner in making LEAD a reality, back when there was widespread skepticism about any program that would allow drug offenders to go free. Could the council risk losing business support for progressive ideas like LEAD if it alienates them by imposing taxes they hate? Council member Harris-Talley says she doubts it. “I am hard-pressed to think that the businesses that are in our community are going to set aside their values to have a pissing match with elected officials who want to find resources for solutions” to homelessness, Harris-Talley says. “They know it impacts their bottom line” to allow homelessness to get worse, she adds.

The tax, if it passes, will be based on businesses’ gross receipts, not their net profits, which business groups argue could penalize companies that have thin profit margins and create a perverse incentive for businesses to pay their workers less or avoiding growing past the $5 million threshold. (To get a sense of what businesses would be impacted, they include groups of restaurants, like those owned by Ethan Stowell and Tom Douglas, but not individual Subway franchises or your local dry cleaner.) “Five million in gross revenues—there’s going to be a lot of people wrapped into that,” Scholes says. “Let’s say you’re a business making $4.5 million. If you grow the business [above $5 million], you get to pay tax to the city because you created jobs.”

O’Brien says he’s open to other revenue alternatives, if the business community will help him come up with some. “If we can come up with something better in the next few months, I’m happy to change my support to something better and undo this,” O’Brien says. However, he isn’t willing to shuffle around existing funding for homeless services and hope a new spending scheme will make the numbers pencil out. “Historically, four percent of people in shelters have exited to permanent housing, and to get that number to 40 percent [without additional revenue] is ludicrous. The challenge isn’t that we have a bunch of affordable housing that we’re not using—it’s that there’s nowhere to put them.”