By Tracy Record
West Seattle Blog editor
Though the details of a city “head tax” proposal haven’t been finalized yet, city councilmembers are trying to make the case for it, and that’s why two of them talked with West Seattle Chamber of Commerce members this morning.
West Seattle-residing Councilmembers Lorena González and Lisa Herbold co-chaired the task force that came up with the idea,
About 50 people were at the Disabled American Veterans hall in Delridge to hear them out and ask questions. And there were multiple mentions of the letter that Mayor Jenny Durkan has sent to the council, urging some caution:
The chamber offered the councilmembers a chance to speak beforetaking questions. Herbold opened by thanking attendees:
“This is really important … and really appreciated … that you took out this extra time in the week for this conversation.” She offered background on how the proposal had evolved, starting with the one that the council rejected last year during the budget process before expressing “an intent to enact such a proposal at a later date” after a “more deliberative process.”
The task force formed in late 2017, started meeting in January, and made recommendations in March, for $150 million in new revenue, half to be collected through the head tax – “employee hours tax” as it’s formally known. Herbold mentioned that the One Table regional task force meantime was looking at how to “make a dent in (the homelessness) crisis.”
She noted that 80 percent of the head tax revenue is to be “devoted to building affordable housing.” Why isn’t current spending “making a difference”? Herbold said they’re often asked. It’s because that money is “providing emergency services for people,” not going toward permanent housing, so that, she said, is why the new money would go thee.
She said the task force recommended potential ways to structure the tax, which she said would only affect about five percent of businesses. “We know sometimes large businesses with many employees don’t sometimes have that much profit,” she acknowledged, so they’ve tried to be cognizant of that.
Herbold recapped the three options proposed for the tax (above, from page 15 of the report), and also talked about the particularly controversial “skin in the game” fee that was proposed for all businesses bringing in more than $500,000 to pay – “a moral statement,” but Herbold said many found that term offensive “because as business owners, you all have skin in the game.”
The task force’s first briefing for councilmembers was just a month ago, on March 14th. An April 23rd public hearing in Council chambers is one of the next major steps; draft legislation is expected to be available before then, Herbold says. (ADDED: It was made public the day after this event.)
González said the recommendations from the task force “are not the starting place, they are the landing place. … What we’re hoping to be able to do through this process and processes at City Hall are to dig into details of what the recommendations are, how they will impact businesses, what kind of difference (the money could) make in terms of visible homelessness through the city.” She insisted “we truly are here open and receptive to your feedback.”
After the councilmembers’ statements, the floor was opened for that feedback. First to speak was a manager for VCA West Seattle Veterinary Hospital, which, while it’s part of a large company, “operates as a small business,” she said. “We don’t get bailed out with our big company behind us, and if you do another 24 cents (an hour) to us, our hospital may have to close.” They have 12 employees.
Dave Montoure of West 5 asked flat out, “Why are we taxing jobs?”
“This isn’t intended to be a tax on jobs,” insisted Herbold. “We are looking to move toward a payroll tax instead of a per-hour tax … ” but she said that would take some time to “transition.”
González added, “I think really, Dave’s question makes me think about issues around accountability and impact and untintended consequences … I want to make it clear we are thinking about these things.” She mentioned other cities with similar taxes and that she’s been asking for data to see if “this type of tax results in the loss of jobs.” But she said she’s been told that kind of data doesn’t exist.
Herbold recalled the “head tax” that used to be in effect in Seattle. “That existed, it was on all businesses in the city … the reason it was removed was not because it was a tax on jobs but because of the complexity around it and its connection to transportation.. it was a difficult tax to administer.”
Gary Potter from Potter Construction (WSB sponsor) then asked, “Once you build these low-income houses, is this tax going to go away?”
Herbold said the concept of “a sunset” has been discussed – it’s in the mayor’s aforementioned letter, too – and that “there is interest in reducing the tax over time” but the money is expected to go toward 20- to 30-year housing bonds that will require revenue for all those years. “We may not need the full 75 million dollars a year in the future… 10 years is the framework we’ve been looking at … we may be able to dial (it) down but we will still need a revenue source to pay off about $10 million a year.”
González said “figuring out how we reform our tax system at the state” would be a priority in the meantime and noted the oft-cited status of Washington as having one of the most regressive tax systems in the nation.
Some in the audience said they would be happy to see the B&O tax go away. González said their discussion with the mayor includes how small/medium businesses could get some relief from that and that they hope to develop “creative/innovative ways” to provide that relief. Herbold added that the mayor’s letter included some “good ideas.”
Another local businessperson said that he is a landlord and they are bearing the brunt of a lot of “public good” measures – the council says “this is good for everyone” but “they just tax the landlords,” he said. “With this tax in that bucket as well … if it’s good for everyone, why are just businesses being taxed? If it’s a greater good cause, then everyone should be taxed.” A smattering of applause greeted that. He accused them of making an “easy” move by taxing just businesses.
Herbold replied, “The idea behind this tax is … we already have a regressive taxation system, so the people who earn the least are paying the most under our ‘everybody pays the same’ system … We are trying to construct a task that, just a little bit, rights that.”
Next question was from a local lawyer. “We keep hearing this phrase … I hear this a lot from my clients … that this is a ‘homelessness crisis’ … I think (it’s) more (that) we’ve had a local government crisis … not the current City Council, this goes back 15 years. I want to thank you for stepping up … to actually (try to) solve those problems. But … those before you have made serious policy mistakes in how to handle the homelessness crisis and the budget for that.” He said he believes people have been encouraged to come here and “rather than throw more money at the problem, I want to know how you’re changing the existing policies … and specifically what you’re doing to enforce existing laws,” such as allowing camping in parks.
“There’s a lot to unpack there,” González observed. She referred to complaints such as “(homeless people) were offered shelter but they wouldn’t go.” She said, “We have a lot to reform in (the shelter system) …” saying people choose not to go because they feel unsafe in shelters. “So over the past couple years … we have undergone an effort to improve conditions” in local shelters, “to incentivize people to move from the outside to the inside. We have a lot of work to do in that area,” but she said last year’s RFP process was the first of its kind. “We now have attached to that, performance metrics, accountability metrics … I think we are moving in that direction … trying to unwind, frankly, decades of not getting it right. … It’s going to take a while before we see the impacts on the street. … We get that we need to see outcomes.”
Second, she said, the city Human Services Department “has never had a wholesale audit of its homelessness-services department,” and while she said she has “confidence” in the department, auditing it would make sense, and figuring out how to improve the city’s contracts. The audit is being “scoped out” right now.
After Herbold said that they were working on outcome-based rules for service providers, one audience member pointed out that some organizations that had funding pulled had it restored.
Next, a rep from Quail Park Memory Care Center of West Seattle (WSB sponsor) wondered “how does de-incentivizing employment help the current job stability and homeless problem?” He also mentioned that Chicago had tried and repealed a similar tax.
Herbold said that one of the things that make a city livable, that make an employer want to bring people there, is funding for important things … such as people not sleeping in doorways, not having garbage and human waste in the streets. “I don’t agree that this (tax) is going to dis-incentive this being a place people want to bring employees.”
“All those things are the result of current city policy not to interfere with the homeless people,” the questioner said.
“There is no current policy not to interfere with the homeless people,” Herbold countered, saying there are 400 unauthorized encampments in the city but city employees are out dealing with them all the time.
He followed up, “How does de-incentivizing payroll hours not contribute to unemployment … ?”
Herbold replied, “When we implement new laws, we will evaluate the outcome of those laws,” noting that the mayor has recommended an oversight committee and having an economist look at whether the tax would have unintended consequences.
Next, an alternative was proposed by Anne Higuera of Ventana Construction (WSB sponsor). She said that as a landlord she had been hearing from renters saying they had to move because their homes were being sold. She wondered if a real-estate tax had been considered, because it could “yield huge dollars and not make a different in the profit of people selling them.” Those sales are leading to homelessness, she said, so that’s what should be taxed, “not all businesses.”
Herbold said real-estate excise taxes currently can’t be used for housing.
“If you can tax drinks within the city, why can’t you tax real estate?” Higuera followed up.
Herbold blamed the state constitution, saying “we have a little more authority to tax things we want to discourage the use of.”
“Like jobs,” someone called out.
Next, Keith Hughes of West Seattle Electric and Solar said he hadn’t heard anyone discussing the infrastructure of the city and its “ability to manage any of this … if I wrote you a $75 million check right now, how long would it be until any of these houses were standing up? … The first two years would be wasted going through the DPD” (now the Department of Construction and Inspections). He said that the problem isn’t going to be helped by doing something now that won’t manifest results for five years. “Get DPD under control so you can actually build housing.”
González said that while she hasn’t ever had to seek a permit to build something, she has gone through the permitting process, related to her condo in The Junction, and understands the complaint, adding that there is work under way “to get rid of a lot of red tape for nonprofit housing developers.” She also mentioned 2,300 housing proposals are “waiting in the pipeline” already – waiting for funding.
Final question: Dan Austin of Peel & Press wondered “what study backs that $75 million is going to be the magic number” that solves the crisis. He also voiced concern that the membership of the task force developing the tax included people who stand to make money from it. And as a restaurateur, he said, he can’t just keep endlessly raising prices, though the city seems to be able to endlessly raise taxes. “This is a regressive tax – this is going to come down to the people who buy goods and services.”
“$75 million is the target for this revenue source,” Herbold said, but reiterated that $150 million was the overall funding need cited by the task force. “We’re looking at One Table to make up the other $75 million. … Even that $150 million is not going to solve the problem … the number of units needed …” is larger than what that will fund, but she contended “it will make an appreciable difference.” Meantime, task-force participation “routinely” involves experts in the field, and she countered that the people who participated “are not going to personally profit.” What about their organizations, since low-income-housing developers were represented? “There is nothing untoward about” the composition of a task force, Herbold said. The questioning about that grew a little more acrimonious and González interjected that “maligning each other” wasn’t going to help anything. Regarding task-force members, she added, “I don’t think these folks came to the table because they are looking to make a buck … (they) have spent their lives dealing with human services, human suffering,” González countered. Overall, “the programs that are being recommended for funding … are very popular in our community.”
Chamber board chair Pete Spalding closed by reading part of the mayor’s letter aloud – the parts in which she urged the council to not harm small businesses.
To continue tracking the tax proposal, follow agendas for the council’s Finance and Neighborhoods Committee. (González is a member of that committee and Herbold is not, though all councilmembers are allowed to participate in all committees if and when they choose.) The public hearing on April 23rd will be at 5:30 pm in City Council chambers downtown.
P.S. As for the crisis that the new revenue is supposed to ease – the West Seattle Chamber is sponsoring a discussion about that too, this Saturday (April 21st), 1 pm at Youngstown Cultural Arts Center (4408 Delridge Way SW), as previewed here.