Category: Taxes

No Local Capital-Gains Tax This Year; Water Tax Repeal Also On Hold

By Erica C. Barnett

The Seattle City Council won’t take action on a proposed local capital gains tax or a related proposal to repeal the city’s water utility tax until after an effort to repeal the state capital gains tax, which pays for public schools, has run its course. The news of the delay, which will put both tax proposals in the hands of a mostly new council next year, came during a meeting of the council’s budget committee on Thursday.

Opponents of the state tax, which has brought in far more than expected in its first year, have filed an initiative to repeal it, part of a suite of anti-tax proposals backed by Redmond hedge fund CEO and Republican donor Brian Heywood. The campaign will have to gather more than 300,000 valid signatures to get the measure on the ballot.

Councilmember Alex Pedersen proposed repealing the water tax, currently 15.4 percent, and offsetting the lost revenues—around $40 million a year—with a 2 percent tax on capital gains, effectively replacing a regressive tax with a progressive one. The two proposals came as a package, with the capital gains tax proposal explicitly calling the tax “a more progressive method of taxation to replace revenues from regressive taxes no longer collected by The City of Seattle including, but not limited to, the tax on water.”

“People aren’t filling up my inbox complaining to me about the water tax. They’re complaining primarily about crime and homelessness and other issues that Seattle is facing and wondering why aren’t we doing more about these issues.” — City Councilmember Sara Nelson

An analysis by city council staff estimated that the capital gains tax could raise around $38 million a year, based on Seattle’s share of state capital gains tax revenues from the state capital gains tax. However, the staff report cautions, that estimate doesn’t take into account “tax avoidance” by wealthy people who can move their assets around, and is based on “an extremely concentrated tax base,” which could make it an unreliable revenue source from year to year. Just 163 people are responsible for 85 percent of state capital gains tax revenues originating in Seattle.

Councilmember Lisa Herbold proposed amending Pedersen’s proposal to increase the capital gains tax to 3 percent, which would offset the water tax and provide a modest cushion against next year’s estimated $218 million budget deficit.

After the meeting, council budget chair Teresa Mosqueda said the council decided to put off the decision on capital gains “to protect the viability of that [revenue] source,” noting that a new, local capital gains tax might increase support for the campaign to repeal the statewide tax.

Councilmember Sara Nelson said during the meeting that she showed up “prepared to vote against this today. And I just wanted to make sure that I got this on the record if it does come back” in the future, she added.

“People aren’t filling up my inbox complaining to me about the water tax,” Nelson said.They’re complaining primarily about crime and homelessness and other issues that Seattle is facing and wondering why aren’t we doing more about these issues.” 

If the council’s goal was “really to help low -income people,” Nelson continued, the city should be “working harder to enroll them into our utility discount program,” which provides a 50 percent discount to eligible residents. Unlike the proposed utility tax repeal, however, the utility discount program requires a lengthy application process, and is only open to very low-income residents: For single people, the cutoff is a little over $41,000 a year, and a two-person household has to make less than $54,000 to qualify.

Pedersen said his intent in proposing both tax proposals was to make the city’s overall tax system less regressive. “As a centrist who cares about business in the city and worked really hard on public safety issues here in the city, I support a capital gains tax,” he said. “I think it’s fair, and we should do it…. And I think we could also repeal the water tax. We could do both.”

Whether the council will do either is now up to the incoming council, which will no longer include Pedersen, Herbold, or Mosqueda. Nelson, who actively campaigned for several of the council’s new centrist majority, reportedly wants to be council president, a role that would give her authority over how (and whether) legislation moves through the committee process.

The budget committee did pass two proposals imposing new transparency requirements on the budget process on Tuesday, along with an ordinance requiring human services providers that receive funding for worker wage increases to spend that money only on worker pay, not for other purposes.

Council’s Budget Would Preserve JumpStart Spending Plan, Restrict Shotspotter, and Restore Safe Streets Spending


By Erica C. Barnett

Last week, Seattle City Council budget committee chair Teresa Mosqueda released a first-draft 2024 budget “balancing package” that includes dozens of amendments to Mayor Bruce Harrell’s 2024 budget proposal—reversing a plan to fund child care and human service worker wages with the JumpStart affordable-housing payroll tax; adding or restoring funding for transportation, eviction prevention, free help with tax pand other services; and placing restrictions on the Seattle Police Department’s future spending on an acoustic gunshot detection system and salary savings from unfilled positions, among many other relatively small tweaks to a budget that Harrell’s office has changed significantly since the council and mayor passed an “endorsed” 2024 budget last year.

As in previous years, the mayor’s office proposed using about $9 million in JumpStart funds—which are earmarked for affordable housing, small businesses, equitable development, and Green New Deal projects—on items that aren’t authorized uses of the tax, including pay increases for human service workers and child care providers, the relocation of a tiny house village in the University District, and startup costs for the new social housing public development authority.

Mosqueda’s budget proposal would change the way those items are funded so that they come out of the city’s general fund, which is authorized to receive up to $84 million in JumpStart revenues in a lump sum this year; by shifting these expenditures to the city’s mainline operating budget, the proposal avoids the need to change the legally binding JumpStart spending plan and avoids making these items dependent on JumpStart funding in the future. Additionally, in response to new projections showing almost $10 million more coming in from JumpStart than expected, Mosqueda’s budget increases spending on a number of JumpStart priorities—including $4.6 million for multifamily housing that the mayor’s budget cut—and contributes $2 million to the fund’s reserve.

Responding to Councilmember Sara Nelson’s comment that the appropriate use of JumpStart funds “seems to be a matter of interpretation,” Mosqueda said that there’s actually “not a lot of disagreement about what the current statute says,” and that if the council wanted to fund items that aren’t allowed under the current spending plan, “we would have had to statutorily amend JumpStart, which the [mayor’s office] also understood and realized in the transmission of their budget proposals.”

Councilmember Lisa Herbold noted that although Burgess told the council there are studies showing that acoustic gunshot locater systems better in concert with camera surveillance, the mayor’s office has not provided any evidence for this; meanwhile, she noted, a study in Philadelphia found that adding cameras to Shotspotter increased police workload without improving outcomes or even confirming more shootings.

The budget still includes funding for Shotspotter—an audio surveillance system that deputy mayor Tim Burgess told the council will be more effective when “married” to CCTV cameras in the same locations—but would now include a budget proviso barring the police department from putting it to use until the city conducts a racial equity toolkit and a Surveillance Impact Report. Ulike the mayor’s proposal, which would do one racial equity analysis and impact report up front and apply it to all future uses anywhere in the city, Mosqueda’s proviso would require SPD to look at each neighborhood individually.

Councilmember Lisa Herbold noted that although Burgess told the council there are studies showing that acoustic gunshot locater systems better in concert with camera surveillance, the mayor’s office has not provided any evidence for this; meanwhile, she noted, a study in Philadelphia found that adding cameras to Shotspotter increased police workload without improving outcomes or even confirming more shootings.

Referring to the same study as well as a review of Shotspotter in Chicago, Mosqueda said the systems have led to “more officers going to neighborhoods on high alert, potentially with guns drawn … expecting to potentially confront a dangerous situation. Given the already tragic number of shootings for our BIPOC community, especially our Black community, by police, this is a recipe for trouble.”

Other potential changes in the council’s budget proposal include:

• A proposal to retain the title “director” for the head of the Community Assisted Response and Engagement department (formerly the Community Safety and Communications Center). Harrell’s budget would change CARE department director Amy Smith’s title to “Chief” to make it equivalent to the police and fire chiefs, but opponents of this change argue that the title change is out of step with efforts to distinguish the CARE department as a civilian response team, not another arm of the police.

Discussion about this change got surprisingly heated during a budget meeting earlier this month, when Smith insisted Harrell’s title change was “brilliant” because it provides “a level-setting, across public safety to say these are of equal importance and significance” to first responders from police and fire departments. Mosqueda said she had heard “directly from first responders” that their jobs are different because they take an oath to show up in emergencies, which is distinct from the role of the civilian team that will soon begin responding, accompanied by police, to some low-priority, non-emergency calls.

• Funding ($200,000) to expand pretrial diversion programs, which allow people accused of some misdemeanors to avoid charges by attending classes or other programs on a short-term basis. Sponsor Andrew Lewis said enhancing these programs would help the city “continue to have a more just and equitable system of justice”; these light-touch programs not generally appropriate for people with serious addiction or mental health issues, so the money won’t address the influx of new potential clients pouring into  programs like LEAD because of the city’s new drug criminalization law.

• Funding to raise wages for human services workers at agencies whose contracts with the King County Regional Homelessness Authority are funded through the federal Department of Housing and Urban Development (HUD), not the city. The council passed a Mosqueda-sponsored law in 2019 that requires annual inflationary adjustments to most human services contracts to boost workers’ pay and improve employee retention, but that mandate only applies to city-funded contracts. Increasing other homeless service contracts would bring workers at those agencies to parity, but would create an ongoing annual budget issue.

The proposed amendments include one from Council President Debora Juarez stipulating that of $2.4 million reserved in 2024 for paving non-arterial streets, $600,000 can only be spent paving the streets around the Seattle Storm’s planned practice center in Interbay, which former mayor Jenny Durkan pushed through on her way out the door. Under the agreement, the developers is only “responsible for repaving half the streets”—from the property line to the center of the road—leaving the city on the hook for the rest.

• A one-time, $300,000 transfer to King County’s Department of Community and Human Services to pay for what sponsor Sara Nelson described as “intensive outpatient or inpatient treatment,” including detox, for low-income people who can’t access private treatment through Medicaid. The intent, Nelson said, is to fund treatment at facilit[ies] where they are taken out of their daily lives and detoxed and given some counseling and behavioral therapy nutrition, etc.” Nelson has advocated for the city to fund traditional abstinence-based treatment in addition to opioid use disorder medications and harm reduction, and the council may be more open to the idea if the money flows through the county’s human services department—which will have discretion over how to spend the money—than the city’s.

• A proviso stipulating that of $2.4 million reserved in 2024 for paving non-arterial streets, $600,000 can only be spent paving the streets around the Seattle Storm’s planned practice center in Interbay. Former mayor Jenny Durkan pushed through a special zoning exemption to allow the 50,000-square-foot facility, which is under construction, in an industrial area; under a subsequent agreement, the developers is only “responsible for repaving half the streets”—from the property line to the center of the road—leaving the city on the hook for the rest. The proviso, sponsored by retiring Council President Debora Juarez, would lock up a quarter of next year’s non-arterial street paving fund to pay for the other half.

• About $10 million in restored funding for transportation that Harrell’s budget proposed cutting to account for shortfalls in revenue from traffic cameras, parking taxes, real estate transactions, and vehicle license fees. The balancing package would use the balances sitting in several transportation funds to restore funding for ADA curb ramps, bridge maintenance, greenways for bicyclists, and school safety projects. “We wanted to make sure to fully preserved the investments in transportation in 2024 to avoid broad cuts to Safe Streets infrastructure projects, and prevent pitting communities against each other.

The initial balancing package would also convert $300,000 of a $1 million loan city made to Community Roots Housing, the affordable housing nonprofit, into a grant. Community Roots, formerly Capitol Hill Housing, is supposed to pay back the full interest-free loan by 2025. Earlier this week, Capitol Hill Seattle reported that Community Roots is selling off a 30-unit apartment building that the nonprofit said cost too much to maintain; it’s the second time the organization has put one of its buildings on the market this year.

Council Fast-Tracks Plan to Legalize “Impact Fees” on New Apartments

Seattle’s list of projects that impact fees could fund includes projects that have already been funded and are nearing completion.

By Erica C. Barnett

In an unusual move, City Councilmembers Lisa Herbold and Alex Pedersen persuaded a majority of their council colleagues last week to fast-track an amendment to the city’s Comprehensive Plan that would set the stage for “transportation impact fees” on new housing—fees that are based on the premise that dense, urban living causes negative impacts on the city’s transportation system.

The Comprehensive Plan is the overarching framework for planning and development decisions in Seattle. The changes the council is considering would allow transportation impact fees, “identify deficiencies in the transportation system associated with new development,” and adopt a list of projects that could be funded through such fees.

Pedersen has said fees on new housing could allow the city to reduce the size of the Seattle Transportation Levy, which is paid for by property taxes—lowering taxes for homeowners while raising the cost of new apartments for renters.

The council voted to bypass the normal process for approving changes to the comp plan, skipping Councilmember Dan Strauss’ land use committee to send the proposal directly to the full council, with a single public hearing scheduled for the council’s 2pm meeting on November 7 (coincidentally, Election Day). The council would vote on the amendment itself two weeks later, on November 21—the deadline to push the changes through this year.

Unlike MHA, in which developers fund new affordable housing in exchange for greater housing density, impact fees treat new housing as a bad thing that must be offset by fees to offset its negative impact. This anti-urbanist assumption elides the fact that the hundreds of thousands of people moving to Seattle over the coming decades are going to have to live somewhere—and that if there isn’t enough housing in the city, people, including many who can no longer afford to live in Seattle, will be pushed out into car-dependent suburbs.

Strauss, who has already scheduled a public hearing in the land use committee for November 29, protested this departure from the council’s normal procedures, noting that the city spent years deliberating over changes to industrial zoning and a tree protection ordinance, and both still need work after passing earlier this year. In addition, Strauss noted that the city’s hearing examiner has yet to issue a ruling on an appeal related to the fee proposal, which developers say would have a significant negative environmental impact—namely, it would reduce the amount of new housing in the city.

“I believe it is important that we receive the hearing examiner’s decision and have the time needed … to understand the policy” and hold a public hearing before voting the changes through, Strauss said.

Proponents of the legislation, including Herbold and Council President Debora Juarez, have minimized its impact, calling it a minor “procedural vote” with no actual policy impacts. In reality, changing the city’s Comprehensive Plan to allow impact fees is a consequential decision that could ultimately reduce the amount of housing that gets built inside city limits.

Juarez, Herbold, and Pedersen are not running for reelection and will leave the council at the end of this year.

According to a staff analysis, impact fees could bring in between $200 million and $760 million over 10 years—similar to the Mandatory Housing Affordability program the city adopted in 2019, which allowed denser development in some areas while helping to fund new affordable housing. MHA, like impact fees, was controversial, and the council held “at least 20 committee meetings” before passing it, Councilmember Teresa Mosqueda noted.

Unlike MHA, in which developers fund new affordable housing in exchange for greater housing density, impact fees treat new housing as a bad thing that must be offset by fees to offset its negative impact. This anti-urbanist assumption elides the fact that the hundreds of thousands of people moving to Seattle over the coming decades are going to have to live somewhere—and that if there isn’t enough housing in the city, people, including many who can no longer afford to live in Seattle, will be pushed out into car-dependent suburbs whose negative impacts are well-documented.

Advocates on both sides of the issue will now have just two opportunities to weigh in—once at the full councl meeting on November 7, and two weeks later, when the council is scheduled to take its final vote. Although Pedersen claimed last week that the commenters who showed up to oppose impact fees were just “paid lobbyists” who were “afraid of a public hearing,” Mosqueda argued that the accelerated schedule makes it less likely that ordinary members of the public will be able to weigh in on changes that could further depress housing development in the middle of a housing downturn.

Once the council adopts the changes to the Comprehensive Plan, they can begin the process of adopting the fees themselves. That process will almost certainly have to include additional comp plan changes, since the proposal the council is considering includes a list of projects that includes some that have already received funding—like the RapidRide G line on Madison Street, set to open next year.

Council Debates Harm Reduction, RV Storage and Jumpstart Tax as Annual Budget Deliberations Begin

Mayor Bruce Harrell’s proposed budget turns an estimated $212 million funding shortfall in 2026 into a $247 million shortfall, according to a city council staff analysis.

By Erica C. Barnett

Seattle City Councilmember Sara Nelson raised objections to funding several small harm-reduction programs using funds from the state’s settlements with opioid makers and distributors on Thursday, saying that the funds might better be spent on “treatment” rather than drug user health programs at the Hepatitis Education Project (HEP), Evergreen Treatment Services, and the People’s Harm Reduction Alliance.

These programs, which total less than $500,000, were originally funded using money the council set aside for a safe consumption site; in the face of strong political opposition to that idea, including from former mayor Jenny Durkan, the city worked with advocates to come up with alternatives that would still fulfill the original mission of harm reduction and health care without requiring a physical site.

Nelson, who has advocated for the city to fund traditional, abstinence-based inpatient treatment, said she wanted to know “what is the harm that is being reduced by the use of this money, and how do we measure the the performance of that investment? Because I know people know that I prefer that our scarce dollars should be used for treatment.” Although the three groups received funding from King County through a competitive Request for Proposals process, Nelson said they should go through another one, since the funding source is new.

According to City Attorney Ann Davison’s office, any lot for storing RVs that were previously used as residences has to be directly adjacent to a noncongregate shelter site—a requirement that has had the effect of virtually prohibiting such a lot. Davison said RVs could be allowed in this situation for up to 90 days, with extensions on a “case-by-case basis if the resident is working in good faith towards permanent housing”—a significantly more paternalistic approach than the previously approved proposal.

Both council president Debora Juarez and Councilmember Lisa Herbold seemed exasperated by Nelson’s objections. Juarez said it was already the city’s policy to fund both conventional treatment and harm reduction, while Herbold noted that the King County Board of Health, which includes Herbold and Councilmember Teresa Mosqueda, just unanimously approved a resolution supporting harm reduction as one use for the opioid settlement funds.

The council, Herbold pointed out, just approved spending $5 million in block grant funds for a new low-barrier opioid treatment facility, along with $2 million for a post-overdose recovery site, on Tuesday.

Another odd detail that emerged on Tuesday: Although the city allocated $1 million a year last year for people who had been living in RVs to store their vehicles for up to a year while they transitioned to living in shelter or permanent housing, the money has not been spent. The reason? According to City Attorney Ann Davison’s office, any lot for storing RVs that were previously used as residences has to be directly adjacent to a noncongregate shelter site—a requirement that has had the effect of virtually prohibiting such a lot.

The reason for allowing people to hang on to their old vehicles, at least for a while, while they transition into shelter is obvious. Many people are reluctant to move from the relative safety and privacy of their own RV into a shelter bed or tiny house, and don’t go into shelter as a result. If people can keep their RVs as a backup option, they’re much more likely to say yes to offers of shelter.

In a memo, an advisor to the city’s Human Services Department told the KCRHA that Davison’s office had determined that RV storage is “not identified as a permitted princip[al] use in the Seattle Land Use Code and is prohibited” everywhere in the city. RVs, the city attorney’s office said, could be allowed as an “accessory use” to a tiny house village for up to 90 days, but only if each resident who owned an RV started meeting with a case manager within 90 days to move toward permanent housing; extensions allowing people to store their vehicles longer “could be granted on a case-by-case basis if the resident is working in good faith towards permanent housing.”

This significantly more paternalistic version of the original proposal will require a provider willing and able to meet the city’s new conditions and restrictions. KCRHA put out an initial “letter of intent” seeking providers that are interested in opening an RV storage lot and a tiny house village next to each other on Wednesday.

On Thursday, Councilmember Lisa Herbold called the city attorney’s interpretation a “pretty significant misunderstanding” of the reason people want to store their RVs while they stay in a shelter. “The idea is is that this is a lot—much like a tow lot—where people voluntarily allow their vehicles to be towed into a fenced-in area,” Herbold said. “There are tow lots all over the city and they don’t all have to be next to housing for formerly homeless people.”

The council is just starting its annual budget deliberation process. At a high level, the council will be debating how best to prepare for a “structural” general-fund budget deficit that’s now estimated at $212 million in 2025, an improvement from earlier predictions. Harrell’s budget plan would increase that structural deficit by adding $51 million in new expenditures, of which almost $28 million are ongoing annual costs.

Although the general fund is actually projected to do better in 2024 than anticipated, a lot of one-time funds that created new programs during COVID are set to expire, and the new council, which will likely have at least five new members, will have to come up with new revenues and, most likely, cuts.

Given that reality, it’s likely the council will scrutinize Harrell’s decision to add 110 new city employees next year, most of them permanent positions that create ongoing new funding obligations for the city. Overall, Harrell’s 2024 budget adds $51 million to the 2024 budget the council and Mayor Bruce Harrell “endorsed” last year) and increases the estimated deficit in 2025 to $247 million. Of the 110 positions, 40 are funded through the general fund—the part of the budget that pays for most of the city’s operations—and another 16.5 come from Jumpstart.

Jumpstart revenues are now expected to come in about $21 million below previous predictions; the tax is based on payroll expenses for the highest-paid employees at the city’s very largest companies, which makes it susceptible to swings when big tech companies cut jobs or move offices elsewhere.

The mayor’s proposal would extend an exemption from the tax for highly paid employees of nonprofit hospitals who make between $150,000 and $400,000. If this exemption was allowed to expire as scheduled, the city would take in an additional $5 million. Most of the private hospitals in Washington state are nonprofits and are exempt from many other taxes.

Harrell’s budget transfers $27 million from the Jumpstart tax fund to the general fund, an ongoing practice that the council has approved every year for the past several years to keep COVID-era programs going. Much of that includes new spending beyond what the council approved last year in the “endorsed” 2024 budget.

For example, the mayor’s budget would use revenues from the Jumpstart tax—which are supposed to be dedicated to affordable housing, small businesses, equitable development, and Green New Deal investments—to pay for higher human service worker pay, relocation costs for a tiny house village that needs to move off Sound Transit property; and subsidies for child care workers.

Nelson noted that she was the only councilmember to vote against raising human service workers’ pay, because she thinks the goal of eventually raising human service workers’ wages by 37 percent—the increase a University of Washington study concluded they would need to get to parity with similarly skilled workers—is unrealistic.

“The taxpayers are paying for a lot,” she said, citing several voter-approved human services levies.

“Regardless of what jurisdiction, it is—city, county, state, federal—it’s all taxpayer money,” Councilmember Lisa Herbold responded, and noted that other local jurisdictions, like King County, are also contributing to higher wages for human services workers, who often make so little that they qualify for social service programs themselves.

Harrell’s budget does not continue funding for a one-time 4 percent pay increase, plus an ongoing 3.6 percent increase, for homeless service workers, which the city had hoped the KCRHA would figure out a way to fund long term. Paying for these pay increases would cost the city an additional $1.9 million a year.

Councilmember Alex Pedersen, who represents the University District, suggested that it would potentially harm the people living at the tiny house village to “quibbl[e] about the pots of money”—a position that runs counter to his frequent calls for audits and “accountability” for programs he believes may be wasting money.

The mayor’s proposal also includes $1 million a year in new funding to evaluate the effectiveness of the Jumpstart tax, which would include two new permanent employees and unspecified additional expenses. It would also extend an exemption from the tax for highly paid employees of nonprofit hospitals who make between $150,000 and $400,000. If this exemption was allowed to expire as scheduled, the city would take in an additional $5 million. Most of the private hospitals in Washington state, including Virginia Mason, Providence/Swedish, and Pacific Medical Centers, are organized as nonprofits and are exempt from many other taxes.

Given how often the council has had to agree to exemptions from the spending plan since Jumpstart went into effect in 2021, a council staff memo asks semi-rhetorically, “is it time to consider expanding the areas of spending the JS Fund can be used for on a permanent basis?” Jumpstart architect Teresa Mosqueda may object to changing the spending plan, as she has in the past, but she’s likely to be replaced by a new, appointed council member next year, assuming she wins election to the King County Council.

Proposals to Close City Deficit Prompt Immediate Backlash from Businesses, Business-Backed Council Members

A look at the ongoing structural shortfall in the city budget through 2026; “PET” refers to the JumpStart payroll tax.

By Erica C. Barnett

A list of potential progressive revenue options put forward by a city task force this week is already stirring controversy among businesses (and business-backed city council members) because it involves new taxes, rather than spending cuts, to maintain existing services and meet the city’s labor obligations. The policies, which are not recommendations, would help offset an average projected revenue shortfall, beginning in 2025, of $244 million a year.

Immediately after the task force published its list of options, one of the group’s own members, Seattle Metro Chamber CEO Rachel Smith, issued a statement denouncing the city for its “lack of budget transparency, accountability, and practical problem-solving” and arguing that the city’s real problem is overspending, not a lack of revenue.

Instead of proposing any new taxes, Smith said, Seattle should “look at reducing or eliminating services that do not meet measurable outcomes, are duplicative of other entities, are no longer aligned with current priorities, or have grown faster than real-world demands.” Smith did not identify any specific programs the Chamber believes the city should eliminate.

During a presentation of the recommendations to the council’s finance committee Thursday morning, Councilmember Alex Pedersen echoed Smith’s comments. “I believe City Hall doesn’t have a revenue problem. It has a spending problem,” he said. Chiming in, Councilmember Sara Nelson added that she believes the city should “live within our means” and cut the budget instead of raising taxes.

“I am simply suggesting that spending within our means is not austerity. It’s our responsibility,” Nelson said.


“The definition of austerity is a situation in which people’s living standards are reduced because of economic conditions,” Herbold responded.  

The projected shortfall, which is the result of declining revenues, expiring short-term funding, and spending increases, represents more than 15 percent of the city’s annual discretionary budget.

The progressive revenue work group, which included representatives from business and labor as well as the council and mayor’s office, came out of a statement of legislative intent the council passed in 2021, expressing the council’s commitment to work with the mayor to come up with permanent funding sources for a number of new general-fund programs that the city paid for using federal COVID relief dollars and revenues redirected from the JumpStart payroll tax.

With federal funding running out and JumpStart reverting to its intended purpose (funding housing, equitable development, and Green New Deal programs), the city is seeking new revenue sources to fund needs that are still ongoing, including homeless services, alternative 911 responders, and business assistance.

In addition to new programs, the city has had to spend more each year to keep up with population growth (more people require more services) and inflation, which raises labor costs. The city has also committed to raise wages for workers at human service nonprofits that contract with the city, which are so low that many employees qualify for public benefits. Overall, internal labor agreements account for 85 percent of the city’s increased costs through 2026, according to the work group’s report, while raises for human service workers account for about 4 percent of the increase.

According to a memo from the council’s central staff,  if the city fails to deal with this structural shortfall, the budget gap between 2025 and 2030 will average $244 million a year.

The task force, which looked only at the revenue side of the equation, whittled a list of more than 60 potential new fees and taxes down to nine, including three the city could implement right away, without the need for a ballot initiative or a change to state law. Those options include increases to the size or scope of the existing JumpStart payroll tax; a local tax on capital gains above a specific level, modeled after the state capital gains tax that recently withstood a state supreme court review; and a local tax on businesses whose CEOs make significantly more than the average worker.

Councilmembers have already proposed—and council staff have already analyzed—a JumpStart tax increase and a local capital gains tax, which could form the basis for future legislation and reduce the time it takes to pass either option.

In the council meeting Thursday, Nelson and Pedersen returned repeatedly to two ideas: First, they argued, the city should simply reduce the amount it spends on programs that, as Nelson put it, “do not meet measurable outcomes, are duplicative… [or] are no longer aligned with the city’s residents’ current priorities.”

“I am simply suggesting that spending within our means is not austerity. It’s our responsibility,” Nelson said.

Second, the pair argued, the city should get rid of all spending restrictions on the JumpStart tax, which provides a dedicated source of funding for housing and programs that benefit people and businesses disproportionately impacted by the presence in Seattle of large tech companies, like Amazon, and their wealthy employees. “I think the next city council could consider, once again, liberating those payroll tax revenues to handle that deficit, rather than locking up those dollars permanently for new programs [while] piling on another round of new taxes,” Pedersen said.

Councilmember Lisa Herbold—who, like Pedersen, is leaving the council next year—took issue with Nelson and Pedersen’s argument that budget cuts would not negatively impact the city. “The definition of austerity is a situation in which people’s living standards are reduced because of economic conditions,” Herbold said. “‘Just simply living within your means’ sounds nice, and it’s a great soundbite. I’m sure it’ll get picked up today. It sounds great. It’s just not accurate.”

The other taxes on the list include a tax on vacant residential or commercial units, which would have to navigate state law requiring uniform property taxes; a higher real-estate excise tax on the sale of properties above a certain value; a local graduated estate tax, with an exemption for the first $250,000; a local inheritance tax, paid by the beneficiaries of large bequests, which would be the first of its kind in the country; a congestion fee, or toll, on people who drive into highly congested parts of the city; and a flat income tax with rebates for low-income people.

All six of these options would require additional study, authorization from the state legislature, or a public vote, making them less viable solutions to the city’s near-term revenue shortfaull.

Bill Would Exempt Newspapers and Online Publications from Business Tax

Washington State Attorney General Bob Ferguson

By Erica C. Barnett

State legislation requested by Attorney General Bob Ferguson would fully exempt newspapers and some online publications from the state business and occupation tax, saving eligible publications (and costing the state) a total of about $10 million over the next four years. The bill is sponsored by Sen. Mark Mullet (D-5, Issaquah) in the senate and Rep. Gerry Pollet (D-46, Seattle) in the house.

Newspapers already pay a reduced B&O tax rate, but online publications don’t count as newspapers (or publications, for that matter) under current state tax law. As a result, online outlets pay a higher tax rate than print newspapers like the Seattle Times; PubliCola, for example, pays the same B&O tax as any other “retailer,” even though our only product is free online content.

If the tax break for newspapers is allowed to elapse in 2024, as scheduled, their business and occupation taxes would increase around 40 percent—a significant hit for an industry that’s already struggling.

To prevent that, the legislation would exempt newspapers and “eligible digital publications”—those with at least two full-time employees, but no more than 50—from state B&O taxes through 2035.

In a committee hearing on the proposal Tuesday, Sen. Mullet said he’s found it alarming to watch the newspaper industry shrink over the years, but struck a note of caution about the impact of expanding the exemption too far.

“I think the attorney general, in their agency request, had a good idea to say, maybe we should think about how to get some of the electronic people in the preference as well,” Mullet said. “But I think it seems like based on the fiscal note, we have to work with [the state Department of Revenue] to kind of define that. We’re not trying to quadruple or quintuple the size of the preference here. We’re just trying to expand it to make sure it wasn’t just the traditional print papers but some of the other legitimate online newspaper publications as well.”

Most of the people who testified at Tuesday’s meeting were the publishers of small newspapers around the state, including the Mason County Journal, the Methow Valley News, and The Star newspaper from Grand Coulee Star.

Scott Hunter, the publisher of the Star, said that in the last 30 years, his paper has transformed from “a very robust newspaper” with multiple full-time reporters to a one-person operation in which Hunter does everything from photographing local basketball games to covering city council meetings, unpaid. “This bill… is not going to be a game changer for me,” Hunter said. “But it doesn’t make fundamental sense to tax something that you want to keep going, that is struggling, and is essential. It’s just fundamentally doesn’t make sense.”

PubliCola submitted testimony supporting the inclusion of small online publications in the bill, and asked legislators to eliminate the minimum publication size (two or more full-time employees) to reflect the fact that many small publications rely on freelancers rather than full-time staff reporters to fill their physical or virtual pages.

Seattle’s Housing Levy, On the Ballot Next Year, Could Rise to $840 Million or More

By Erica C. Barnett

Next year, Seattle voters will be asked to approve a renewal of the city’s seven-year housing levy—a property tax that, since 1981, has constituted the city’s main source of funds for affordable housing. Although the Office of Housing is still hammering out the details, the proposal is certain to dwarf the current levy, more than doubling the size of the tax and almost tripling amount it will raise, from $290 million to $840 million a year. Under the latest draft, the owner of a median Seattle house would pay about $342 a year if the most recent version of the levy passed, compared to $114 today, an increase in real terms from 14 cents per $1,000 of assessed home value to 34 cents per $1,000.

What will Seattle voters get for all that money? The biggest-ticket item, at $640 million: About 2,600 new apartments, or about 200 more than the 2016 levy. Most of those units will be studios and one-bedrooms, although the final number, and mix of apartment sizes, could still change; an earlier version of the plan would have built fewer than 2,200 new homes.

Seattle’s Office of Housing is aware that number seems underwhelming, but says they have little choice but to ask voters to do less with more.

“Seattle’s affordable housing developers are contending with the same increased development costs as market-rate developers,” said OH spokeswoman Stephanie Velasco. “Simply put… it’s expensive to do any new development right now, due to inflation, high cost of land, and high cost of materials.”

Merely “meeting today’s need,” Councilmember Teresa Mosqueda said, would “mean we wouldn’t be planning for and building the housing needed for our growing population and the projected influx of residents in the near future.”

The revised levy proposal—an expansion of OH’s original, $758 million plan—would also maintain or expand funding for housing acquisition (buying up existing buildings, which both the city and King County did a lot more of during the pandemic), homeownership assistance, eviction prevention, and operations and maintenance (maintaining new buildings and providing supportive services and rent assistance to residents who need them).

“The Operating, Maintenance, and Services (OMS) program keeps the water running, the lights on, addresses regular repairs, provides maintenance and janitorial work, and supports operating and services personnel in Housing Levy-funded buildings,” Velasco said. “We have heard many times from affordable housing providers over the past year, particularly those providing permanent supportive housing, that these funds are critical to keeping their buildings running.”

One thing that has changed since the last levy renewal is that Seattle now has the JumpStart payroll tax, a tax on the wages of the highest earners at Seattle’s largest companies that passed in 2020. According to projections from OH, JumpStart is likely to produce between 1,600 and 2,200 new apartments over the life of the levy—a fact that could end up being a liability or an asset.

For those who reflexively oppose higher taxes—like, say, the Seattle Times editorial board—the existence of JumpStart could provide an argument against expanding the levy. “Say no to huge tax increase for housing,” the headline might read. “Time to go back to drawing board on bloated housing levy.”

City Councilmember Teresa Mosqueda, who proposed the JumpStart tax in 2020 and has defended it during two lean budget cycles, said the city “cannot look to JumpStart to supplant what the levy should pay for. [The tax] is intended to be additive to the housing levy base, which must still grow. [Merely] meeting today’s need,” Mosqueda added, would “mean we wouldn’t be planning for and building the housing needed for our growing population and the projected influx of residents in the near future.” Seattle continued to grow during the pandemic, and city planners anticipate our population will swell to 1 million in the next 20 years.

Mosqueda’s colleague, Councilmember Andrew Lewis, argues that the JumpStart tax could  actually help the levy pass, by showing voters that the city has a plan to build enough housing to alleviate Seattle’s affordability crisis.

“For the first time ever, when you look at all these [housing] resources”—including the city’s Multifamily Housing Affordability (MHA) program and the state Housing Trust Fund, among others—“I think we’re pretty well positioned to be the jurisdiction on the West Coast that makes a real systematic impact on homelessness,” Lewis said. “What I would want to really look at is what role does the housing levy fill in the context of all of our funding streams that are going into housing, and how can we use the levy as tool to close gaps?”

“I take the rapid public shift to a stronger levy proposal as a hopeful sign the [Harrell] administration understands this is a legacy issue, and a great issue to embrace and champion.”—Alison Eisinger, Seattle/King County Coalition on Homelessness

Velasco, from OH, notes that while proceeds from the housing levy are basically steady—unless home values decline sharply, it will keep bringing in reliable revenues year after year—the JumpStart tax is more variable: Payroll tax revenues fluctuate based on the number of high-paying jobs in Seattle, and that number will ebb and flow over time as big employers like Amazon shed and gain staff.  “Because of this, we consider the Housing Levy to be foundational to Seattle’s entire affordable housing ecosystem,” Velasco said. OH’s model shows the impact of JumpStart revenues ranging from $1.1 billion (the current 2023 projection) to $557 million (a 50 percent dropoff).

Some advocates have argued that the levy should be even larger, to build in long-term wage stability for housing provider staff, fund ongoing maintenance at buildings that already exist, and create more housing, especially larger, family-sized size units, which make up just 15 percent of the latest levy proposal.

Seattle/King County Coalition on Homelessness director Alison Eisinger said the success of the levy will depend on whether it will “stand the 2030 test. Will we look back in seven years and say: ‘Damned right! This city made the biggest housing difference possible’? … I take the rapid public shift to a stronger levy proposal as a hopeful sign the [Harrell] administration understands this is a legacy issue, and a great issue to embrace and champion.”

Source: Technical Advisory Committee presentation on Seattle Housing Levy

Housing Development Consortium director Patience Malaba—who, like Eisinger, testified in favor of a larger levy at a recent TAC meeting—said the levy still has “room to grow” before OH recommends a final proposal to Mayor Bruce Harrell. “Number one, we should invest in the buildings once we have created them. And number two, we do need to support the people who are working in those buildings” with fair wages, Malaba said. She sees $840 million as “a starting place”—one that should provide the basis for a larger levy that will build more housing and “really push the bounds of what’s possible.”

Historically, Seattle voters have approved the housing levy by increasingly wide margins—56 percent in 2022, 63 percent in 2009, and 70 percent in 2016. But the success of any tax increase depends on whether taxpayers believe the city is investing its tax dollars wisely, and the future campaign against the levy could capitalize on the widespread perception that the region continues to spend more money on homelessness and housing but the crisis isn’t getting better.

Polls, Lewis points out, have consistently showed that voters rank housing insecurity and homelessness among their top concerns—a sign, he said, that “it’s important that we have a plan to actually solve the problem. We have a tendency to get 80 percent there and then hold back a little because we’re worried about overreach. What I would like to do is create a plan and go to the people and say this is the comprehensive plan that the levy [is] a puzzle piece [in] attempting to solve.”

Velasco, from the city’s housing, declined to provide details about the latest iteration of the levy proposal, which the TAC will meet to discuss on December 16. Once OH has finalized its levy plan, it will go to Harrell’s office, and on to the city council, for approval or amendment before it heads to the ballot next year.

Council Budget Eliminates 80 Vacant Police Positions, Preserves Human Service Pay, Moves Parking Officers Back to SPD

City Council budget chair Teresa Mosqueda

By Erica C. Barnett

The Seattle City Council’s budget committee, which includes all nine council members, moved forward on a 2023-2024 budget yesterday that will move the city’s parking enforcement division back to the police department, preserve inflationary wage increases for human service workers, and increase the city’s funding for the King County Regional Homelessness Authority—all while closing a late-breaking budget hole of almost $80 million over the next two years.

Every fall, the mayor proposes a budget and the council “rebalances” it, adding spending for their own priorities and removing items to keep the budget balanced. In November, after many council members had already proposed substantial changes to Mayor Bruces Harrell’s initial budget proposal, the city received news that tax revenues would be even lower than previously anticipated. The biggest unanticipated shortfall came from a decline in real-estate taxes, which pay for long-term capital projects, but other revenues, including parking taxes and money from the sweetened beverage tax, also declined.

Last week, council budget chair Teresa Mosqueda proposed a balancing package that saved money by declining to fund most of the new programs and program expansions Harrell proposed in his budget, while making several substantive policy changes. Among the most controversial: A proposal to eliminate 80 vacant positions in the police department, and a related plan to to keep the city’s parking enforcement officers at the Seattle Department of Transportation (SDOT), rather than moving them back to SPD, while the city decides on a permanent home for the unit.

“Our mayor’s budget did not delete these 80 [vacant police] positions, and if we trust in what the mayor asks for regarding public safety and the budgeting knowledge and skills and best practices of the city budget office, I don’t think we should do anything different here.”—Councilmember Alex Pedersen

The budget the committee adopted Monday night, nearly 12 hours into a meeting that began at 9:30 that morning, will eliminate the 80 vacant positions, while preserving another 160 vacant positions in future years. Vacant positions continue to be funded year after year unless the mayor or council takes action to defund them temporarily and use the money for other purposes, as Harrell’s budget does this year. Both the proposed budget and the one adopted by the committee on Monday use money  that would have gone to the 80 vacant positions to augment the city’s general fund, while using the savings from another 120 positions to pay for new spending within the police department. This week, the council got word that SPD had identified another 40 vacant positions, for a total of 240.

Council member Alex Pedersen opposed eliminating the 80 unfilled police positions, arguing that it would be wrong for the council to go against the “wisdom” of the City Budget Office, the mayor, and police chief Adrian Diaz, who want to keep as many positions vacant but funded as possible.

“Our mayor’s budget … did not delete these 80 positions, and if we trust in what the mayor asks for regarding public safety and the budgeting knowledge and skills and best practices of the city budget office, I don’t think we should do anything different here by abrogating or deleting these 80 positions,” Pedersen said.

Council member Sara Nelson added that eliminating vacant positions as a recurring budget line item could discourage people from applying for jobs at SPD and send a message to existing officers that the city did not support police hiring.

In response, council public safety chair Lisa Herbold pointed out that the budget fully funds the mayor and SPD’s hiring plan, which would increase the department by a net total of 30 officers in the next two years. (This hiring plan assumes a complete reversal, and then some, of current SPD hiring trends). It also keeps the remaining 160 vacant positions on the books, where they will be funded again automatically in 2025. For the city to need the 80 positions the council eliminated Monday, it would have to hire at least 190 net new officers, not counting new recruits who replace officers who leave the department. If that very unlikely scenario came to pass, the council could add funding for more officers—as it has many times in the past.

“It’s really disappointing that … some people seem unwilling to say that the hiring budget is fully funded for the next biennium for the council to act on,” Herbold said. “That would send a positive factual message, rather than … distort what an abrogation of positions would do for the budget.”

Nelson and Pedersen also cast the only votes against a Herbold-sponsored proviso, or spending restriction, requiring the police department to get council approval if they want to use their staffing budget for anything other than salaries and benefits, arguing it was important to give SPD special flexibility to spend their budget how they want to.

“I believe we should stop micromanaging the use of salary savings and exercise some humility going forward because we simply don’t know what needs will need to be met,” Nelson said. “[Extra] overtime, for example, if there’s an earthquake or a mass shooting or something.”

In a last-minute compromise with Harrell’s office, the council agreed to move parking enforcement from SDOT to SPD, as PubliCola reported Monday. The compromise amendment uses administrative savings from the move (almost $9 million a year) to pay for several council spending priorities, including $1 million in one-time funds to support the Public Defender Association’s LEAD and Co-LEAD programs, which Harrell’s budget partially defunded; $1 million to “activate” City Hall Park in Pioneer Square, which has been fenced off since the summer of 2021; and $1 million for RV parking and storage “associated with non-congregate shelter,” among other new spending.

In a separate amendment, the council provided an additional $2 million a year for LEAD and Co-LEAD, which the PDA says still leaves them $5.3 million a year short of what it needs to fully fund both programs. The two programs provide case management and (in the case of Co-LEAD) hotel-based shelter for people involved in the criminal legal system, including many with behavioral health conditions that make it harder to find housing.

Morales had more success with another amendment that would place a budget proviso, or restriction, on $1 million in 2023 spending from the city’s transportation levy, requiring SDOT to spend it replacing plastic bollards that do not actually “protect” bike lanes with concrete barriers that do.

Here are some more highlights from Monday’s meeting, which was the last chance for council members to make substantive changes to the budget; for budget changes the council agreed on prior to Monday’s meeting, check out our coverage of those changes from last week.

• The council turned down proposals to place extra scrutiny on two programs that the council’s more conservative faction, led by Pedersen and Nelson, generally oppose. For example, they voted to remove $1.2 million in funding (all numbers are two-year figures) that Nelson wanted to spend on two full-time city staffers who would evaluate the JumpStart tax, which was just implemented last year.

The council also rejected two proposals by Nelson to apply extra scrutiny to LEAD and Co-LEAD, which take a harm reduction approach to addiction and low-level criminal activity rather than the abstinence-only approach Nelson favors (more on that in a moment). Specifically, Nelson wanted detailed information about the PDA’s subcontracts with REACH, the homeless outreach provider, and the basic details of both programs.

“What services are provided to the clients of LEAD?” Nelson asked Monday. “Which contractors do what for which program?”  because they do receive so much funding?” Additionally, Nelson proposed an amendment that would require quarterly reports on LEAD and Co-LEAD clients’ shelter and housing “acceptance” rates. Continue reading “Council Budget Eliminates 80 Vacant Police Positions, Preserves Human Service Pay, Moves Parking Officers Back to SPD”

Dire Revenue Forecast Spells Trouble for Capital Projects, Delays Council Budget Action

Graphs showing stark decline in the US housing market in 2023
The problem: A spike in interest rates has made mortgages unaffordable to many, reducing revenue from real estate sales that the city relies on to balance its budget.

By Erica C. Barnett

PubliCola management has been out of the office for the past couple of weeks (vacationing in a graffiti-covered post-apocalyptic European wasteland), which is why we haven’t been posting our usual detailed city budget updates. Luckily for us, city council budget chair Teresa Mosqueda decided to take an extra week before releasing her final budget balancing package, after the city’s Office of Economic and Revenue Forecast released a new revenue forecast last week that sent budget writers scrambling.

That new forecast predicts a sharp decline in revenues from a number of sources, including the sweetened beverage tax (SBT), the real estate excise tax (REET), and the retail, business, and sales taxes that make up the city’s general fund, which pays for everything from police salaries to homeless outreach workers.

For 2023, the new forecast predicts an additional general-fund shortfall of about $4.5 million. In addition, the new projections predict an additional sweetened-beverage tax shortfall of $1.6 million and an additional REET shortfall of $26.7 million. Over three years, those projections are $9.4 million, $4.5 million, and $64 million, respectively. Revenues from REET and the sugary beverage tax, unlike general-fund revenues, can only be spent on certain purposes, which limits the city’s ability to pull funding from either source to fill general-fund shortfalls (although elected officials have frequently tried); in addition, REET is largely tied up in mandatory debt payments on major bond-financed capital projects, making much of this funding source off-limits to annual budget writers.

Usually, when people refer to the city budget, they’re talking about the general fund, which represents the part of the city’s overall budget that the city council and mayor have the greatest ability to tweak. So let’s start there. On its own, the $4.5 million general-fund shortfall is not a hugely significant number in the context of a $1.6 billion budget. However, in late October, council members proposed budget amendments that would add $80 million in general-fund spending, which would have to be offset by still-unidentified cuts to Harrell’s budget proposal.

To vastly oversimplify, last week’s revenue forecast downgrade means that if the council wanted to fund all of their own priorities, they would need to reduce Harrell’s budget by $90 million. Obviously, many of these budget amendments won’t make it through—looking at you, new Seattle Fire Department program to promote “floatplane awareness”—but any additional spending requires an equivalent cut to Harrell’s budget plan.

And some of these amendments will be sacrosanct. For example, the council has shown virtually no enthusiasm for Harrell’s plan to cap annual increases on human service provider wages at a sub-inflationary 4 percent, effectively cutting these underpaid workers’ wages. (The exception is Councilmember Sara Nelson, a longtime business owner who wondered aloud why a subinflationary wage increase didn’t constitute a “raise.”) Increasing provider wages to the level currently required by law would cost about $7.1 million in 2023.

Other amendments would increase the city’s contribution to the King County Regional Homelessness Authority by $9.4 million annually to offset the loss of temporary federal funding that enabled shelters to reduce crowding during the (still-raging) pandemic; establish new tiny house villages; preserve the LEAD and Co-LEAD programs; and pay for new and existing crisis response programs. Proposals to expand human services will be harder to eliminate than, say, an amendment from Nelson that would spend $1 million on an unspecified new addiction treatment center—something King County, which has jurisdiction over public health and addiction programs, would ordinarily fund.

Achieving a new budget balance will, as always, require some combination of spending restraint (passing only some proposed amendments) and cuts (bringing Harrell’s proposal, which includes tens of millions in new spending on priorities like removing encampments and graffiti abatement, down to size). Council members had already set their sights on Harrell’s proposal to dramatically expand the encampment-sweeping Unified Care Team and his plan to spend $1 million on a gunshot surveillance system like Shotspotter, which civil liberties advocates, including the ACLU, oppose.

Another option will be for council members to overturn a law they passed last year restricting the use of JumpStart payroll tax revenues, which are supposed to pay for affordable housing, equitable development, and Green New Deal programs, to backfill the city’s general fund. The new law says the city can only use JumpStart revenue for non-JumpStart purposes if the general fund falls below $1.5 billion. Harrell has proposed changing the law to pin the general fund baseline to inflation, allowing the city to use more of the earmarked money for non-JumpStart purposes.

The general fund is not the only budget area where the council will have to make some hard choices, nor is it the largest. Projected revenues from real estate taxes, which the city thought would continue to increase this year, have taken a nosedive thanks to rising mortgage rates and the resulting slowdown in housing purchases.

Because a large chunk of REET revenues pay for debt service, a fixed cost, or multi-year capital improvement projects such as road paving and maintenance, the city can only make limited changes to REET spending. Generally, that means cutting new or shorter-term capital projects. Some of these are improvements that mostly benefit city employees rehabbing the elevators at the Seattle Municipal Tower, for example—but others are the kind of visible, council district-level projects that voters tend to notice.

For example, Harrell’s proposed budget includes $2.5 million in new REET spending to promote “safety and accessibility” at City Hall Park; $10 million for a new Tribal Interpretive Center on the downtown waterfront; and $1 million to rehab at least one park restroom. Eliminating or delaying these programs, or any REET-funded capital project, will produce instant blowback from constituents, who will be voting next year in all seven district-based council races.

A spokesman for Harrell’s office said Monday that the mayor “recognizes that this is a challenging revenue forecast. … The mayor’s proposed budget makes critical investments in key priority areas including public safety, housing and homelessness, and the essential city services residents expect. Based on our collaboration throughout this process, we believe the Council will ensure these priorities remain adequately funded in the final budget.”

PubliCola has calls out to several council members, including Mosqueda, and will be posting additional budget updates later this week.

Maybe Metropolis: The Solution Is More Density, Not Just More Taxes

Image of three developments allowed in some former single-family areas, from least to most dense: residential small lot, low-rise 1, and low-rise 2.
MHA’s modest upzones on a sliver of Seattle’s single-family land include (l-r) residential small lot, low-rise 1, and low-rise 2. Images via City of Seattle.

By Josh Feit

The JumpStart tax, city council member Teresa Mosqueda’s payroll tax on big employers like Amazon, is posting standout numbers. This year, JumpStart will fund $97 million in affordable housing investments, including nearly $80 million for 1,769 units of affordable rental housing. Last year, the $71.4 million it provided toward affordable housing amounted to almost half the $153 million total raised by all the city’s affordable housing funding streams.

The Jump Start tax teases out the nexus between surging tech job growth and housing prices by capturing nouveau corporate Seattle’s impact on the market. That is: As the hyper growth of tech companies like Amazon inflate local housing prices, the city is taxing them to help fund affordable housing. It’s a good look, and it seems like a logical offset for the influx of high-earning tech employees. And, let’s be honest: It also feels good.

However, as much as I agree with the logic of an Amazon tax, and as much as it’s bringing in, I think there’s a more germane and effective way to raise affordable housing dollars. Luckily, it’s already part of our affordable housing strategy—sort of.

I’m talking about 2019’s Mandatory Housing Affordability program, a fee on new development in designated parts of the city, which brought in an impressive $50 million in 2021 itself.

Given that Jump Start outpaced MHA by $20 million, why am I focusing on  MHA as the smarter policy? For starters, MHA, which came with a series of targeted upzones that allow more housing in more places, actually attempts to undo the root cause of our housing crisis: prohibitive zoning laws that discriminate against multi-family housing in the vast majority of the city. These historical zoning laws cordon off nearly 75 percent of the city from multifamily housing, pinching supply and thus fueling steep housing prices.

While conventional wisdom holds that upzones and new development inflate housing costs, a 2021 UCLA report found that the latest studies show the opposite: Five out of six studies looking at the impact of market-rate housing determined that new market-rate density “makes nearby housing more affordable across the income distribution of rental units.”

Conversely, those who warn that upzones lead to gentrification, have a hard time explaining why gentrification is alreday happening in Seattle today, under our status-quo zoning that prohibits the very density urbanists are calling for. More logically, the prohibition on new development in so much of the city is spiking prices for the limited housing that is available.

Seattle gained 130,000 people between 2010 and 2020 (13,000 a year) and another 8,400 during the first year of the pandemic, many of them tech transplants. These newcomers didn’t cause the housing shortage, though—they merely brought it into sharper relief. The MHA strategy, which encourages housing development, is actually in the position to do something about it.

MHA, which came with a series of targeted up-zones, actually attempts to undo the root cause of our housing crisis: prohibitive zoning laws that discriminate against multi-family housing in the vast majority of the city.

And MHA might be worth more money than JumpStart. The MHA data point that interests me most is $13.4 million, a subset of MHA dollars raised. This figure represents the amount of money MHA raised specifically from developments built on land where it was previously prohibited: multifamily housing built on land that was upzoned in Seattle’s previously exclusive single-family zones.

Passed in 2019, MHA didn’t merely tack a fee onto new development; it also upzoned tracts along the edges of 27 single-family zones, allowing small-scale density in some previously single-family-only neighborhoods by expanding low-rise and neighborhood commercial zones and creating a new “residential small lot” zoning designation. These modest upzones, which the city adopted on just 6 percent of single-family land, allow new housing that fits in seamlessly with single-family houses.

Interestingly, this modest bit of geography— 6% of the single-family zones, or  4% of the city’s total developable land—accounted for nearly 20 percent of all MHA dollars. This outsized production could represent an upward trend. Last year, the same modestly upzoned fraction of single-family areas brought in 12 percent of the money raised from MHA overall, $8.3 million out of MHA’s $68.3 million.

This disproportionate performance indicates that pent-up demand for development on formerly cordoned-off land could be a spigot of affordable housing cash. Consider: There’s a lot more developable land where that 6 percent came from, and the city could increase the potential density of those areas more dramatically than it has to allow multifamily and commercial development, for example. If the city council and Mayor Bruce Harrell had the courage to stand up to Seattle’s NIMBY class by extending the upzones further into exclusive single-family areas and by opting for denser upzones, Seattle would generate far more cash for affordable housing.

Sure, $80 million from the JumpStart tax  is helping a lot. But the truth is, we need far more money for housing. According to the Office of Housing, MHA helped fund 990 units in 2021. But, according to the Regional Affordable Housing Task Force , we need 12,000 a year. Unfortunately, JumpStart’s impressive figures could dampen any move to expand the more on-point MHA approach, which raises money for affordable housing (and could raise a lot more) while actually addressing the crux of the housing problem by freeing up land for development.

In this way, JumpStart could unwittingly play to the interests of single-family homeowners (and their ever-appreciating property values) by shifting the focus away from the central role these homeowners play in the housing crisis, holding them harmless and avoiding bold policy solutions by taking their communities off the table.

According to the MHA numbers, the 4 percent of Seattle that we timidly opened up to more housing construction is trying to tell us something: The table is bigger than we think.