Tag: city budget 2025

City Council, Economy

A Closer Look at Mayor Harrell’s Rickety 2026 City Budget Proposal
Mayor Bruce Harrell announces an executive order at City Hall earlier this month.

By Erica C. Barnett

As the council takes up Mayor Bruce Harrell’s election-year budget, they could choose to heed their own staff’s warnings and make cautious, fiscally prudent choices about the future—something the cohort of centrists elected in 2023 promised would be a priority as they ran on promises to “audit the budget.”

Instead, an early list of proposed council amendments suggests they plan to pile tens of millions in new spending on top of the $53 million in new, mostly ongoing obligations the mayor has already proposed, exacerbating what was already a steep fiscal cliff that the next mayor will have to fix.

As we reported earlier this month, the council’s own staff called Harrell’s budget plan “inherently unsustainable” because it relies heavily on budget tricks to remain balanced for 2026, tumbling immediately into nine-figure deficits in 2027 and beyond.

These tricks include relying on a one-time $141 million fund balance from 2025; funding long-term needs, like food assistance for people losing federal benefits, with one-time resources; and assuming a $10 million “underspend” every year in the future, allowing the mayor’s budget team to chop $10 million off each year’s expenditures automatically without actually making cuts.

In addition, the $80 million reparations plan Harrell hyped earlier this year—describing his proposal as new spending to help the descendants of enslaved Black Americans buy or rent homes in Seattle—is unfunded. The budget for Harrell’s proposal “does not provide new funding for this purpose,” a staff memo says, noting that the current plan calls for “the same dollar [to] be used to satisfy multiple commitments.”

This allows Harrell to claim he has funded reparations without actually spending any new dollars on this purpose—a neat budget trick if the only goal is to avoid adding new spending to a precariously balanced budget, but one that may not produce any actual new programs to help Black Seattle residents whose families were robbed of potential wealth as the result of redlining, gentrification, and displacement.

Harrell’s budget also treats levies and taxes that were passed for specific purposes—including the voter-approved Families, Education, Preschool, and Promise (FEPP) levy, the JumpStart payroll tax on big businesses, and the sweetened beverage tax—as all-purpose revenue sources that can be used to backfill shortfalls created, in part, by excess spending and a lack of fiscal restraint.

Last year, the budget added around $100 million in new spending, largely for programs that require ongoing funds, like the expansion of the city’s encampment removal and graffiti removal teams. Harrell’s new 2026 budget, which is supposed to include only minor tweaks to the 2026-2026 biennial budget the city adopted last year, piles on $53 million more in new spending compared to the 2026 budget adopted last year, much of it ongoing.

These 2026 additions include another expansion of the sweeps team, another expansion of the graffiti team, and an expansion of CCTV police surveillance into Capitol Hill and the Stadium District—plus $26 million to fund 86 net new officers at a rate of more $300,000 per officer.

The budget also includes revenues from a new “public safety” sales tax increase and an increase in the business and occupation tax that will have to be approved by voters in November.

The long-term impacts of Harrell’s budget could be significant, whether he’s reelected or not. Questions the council could choose to tackle head-on this year—but, based on their own proposals to swell the budget further, probably won’t—include: Should the city keep expanding politicians’ pet programs every year, and if so, should this new spending be offset with commensurate cuts? Should the police department be allowed to keep the details of how it spends tax dollars under wraps, or should the council’s demands to “audit the budget” apply to the half-billion-dollar department? Is it politically sustainable for elected officials to treat taxes and levies passed for specific purposes as all-purpose slush funds?

The council hasn’t really taken up those questions. Instead, for the last couple of weeks, they’ve focused on small-picture stuff—adding noise-activated cameras to a street in West Seattle where racing is common, for instance—and proposing amendments to add more new long-term spending to the budget.

As the council launches into its annual amendment process, here are some elements of this year’s budget I’ll be paying attention to.

More Money for Seattle Police 

Harrell’s proposed 2026 budget is balanced, as required by law, but falls into an immediate $140 million deficit in 2027 that rises, under the current projection, to a staggering $374 million by 2029—and that number doesn’t account for “one-time” new spending that will inevitably become permanent.

Part of the future budget gap comes from new spending on the Seattle Police Department: Harrell’s budget increases SPD’s budget by $35 million next year, which represents a $15 million increase over to the 2026 budget the city just adopted last year. That new funding includes $24 million to hire and train 169 new officers (for a projected net increase of 86 new officers, counted against officers who leave next year). That price tag will grow to $34 million in 2027 and continue to increase as new recruits—whose new starting salary is $118,000, with an automatic bump to $126,000 after six months—get raises.

Additionally, SPD’s budget calls for almost a million dollars in ongoing costs, some of that funded with the JumpStart payroll tax that was originally earmarked for affordable housing, to expand police surveillance cameras into Capitol Hill and the Stadium District.

Council members, who raised numerous, detailed questions about new spending in other departments (the Office of Planning and Community Development’s Equitable Development Initiative came in for line-item-level scrutiny by Councilmember Maritza Rivera), had few questions about SPD’s expansion when the department presented its budget earlier this month.

In fact, several councilmembers took the time to preemptively promise that they wouldn’t even consider reducing SPD’s budget to help address the growing budget deficit. “I recognize there may be temptations to go after public safety dollars, and specifically SPD dollars, but that’s penny wise, pound foolish,” public safety committee chair Bob Kettle said.

Councilmember Rob Saka agreed with Kettle that the city should exempt SPD from budget scrutiny in the interest of hiring more cops. “I know there are some conversations around what this quote, unquote ‘slate’ of council members committed to doing about budget and reforms and audits, but one thing that I think this slate was elected to was to improve public safety and specifically hire more officers,” Saka said. “Data doesn’t lie, so it’s great, encouraging news, but we’re also at a fairly fragile state as well. We need to continue this momentum in this sustained effort over time.”

Not everyone agreed that fiscal responsibility and hiring more officers are mutually exclusive goals. Councilmember Alexis MercedesRinck, for instance, wondered aloud why the department insists they have no money to hire a coordinator for the department’s “30 by 30” program work—part of SPD’s commitment to have a 30 percent female recruit class by 2030. (Currently, that number is under 9 percent—less than half the national average). SPD was supposed to hire the coordinator this year using unspent funds for vacant position, but the department said had to repurpose the money as “civilian salary savings to balance the budget”; next year, they plan to use the funds intended for the position “to meet budget reduction targets.”

“This is serious,” Rinck said. “We talk about ‘culture issues’ within the department, but what we’re doing is alluding to the very real allegations and lawsuits by women officers about mistreatment and misogyny within the department. The money is there, and the department needs to take this work seriously, and the funding is there to do this work. I mean, the budget that we’re talking about is now nearly half a billion dollars.”

Asked at a recent press conference about progress on SPD’s commitment to having a 30 percent female recruit class by 2030 (part of the national “30 by 30” initiative), Barnes called 30 by 30 “a goal, not a plan” and said SPD was looking at things like child care and flexible assignments for women raising children. He also noted that the city where he was previously police chief, Madison, WI, started its own efforts to hire more women in 1974 and recently reached 28 percent, “so it’s going to take some time.”

For the second year in a row, SPD estimates that it will use less overtime than it has in previous years, saving almost a million dollars. Historically, SPD has asked for more money for overtime through the city’s supplemental budget process later in the year. “Should SPD continue to spend at a rate of 500,000 [overtime]hours per year, then the difference of 50,000 hours would translate into a budget-spending gap of $5.5 million,” the central staff memo notes. Police Chief Shon Barnes, the memo continues, has “indicated that he does not expect that new officer hires will [reduce] overtime spending in the near term” because SPD is spending more money on “special projects.”

The proposed budget also permanently cuts $2.8 million in spending on parking enforcement officers, who SPD has had trouble hiring. Actually hiring people to fill those positions would increase city revenues by about $85,000 per hire, the staff memo notes, so the apparent savings really represent a financial loss to the city.

Starving future density, feeding the AI bubble

When the council finally adopted “Phase 1” of Mayor Harrell’s very belated Comprehensive Plan proposal, they decided to delay significant changes, including proposals from Councilmember Alexis Mercedes Rinck to restore some of the higher-density “neighborhood centers” Harrell removed from his plan, until later. As part of this compromise, they passed a “docketing resolution” that includes the expanded neighborhood centers and a number of other amendments the council decided to put off until later.

Harrell’s budget proposes eliminating one of two existing long-range planning positions at the city’s Office of Planning and Development, which happens to be currently unfilled. That means that just one person would be available to do all of OPCD’s long-range planning work, which the council greatly expanded by adding the new comprehensive plan work to the department’s workload.

As a staff memo notes, the work outlined by the docketing resolution is “on top of an existing work program that includes rezoning all neighborhood centers, urban and regional center expansion areas, and frequent transit corridors, and developing proposals to major transit areas and other areas inside existing regional and urban centers.” The cut saves the city less than $200,000, and could force the city’s planning department to deprioritize work on new neighborhood centers, among all the other comprehensive plan changes in the resolution.

At the same time, Harrell’s budget proposes spending $800,000 as an initial investment in AI software that will purportedly help the city’s Department of Construction and Inspections streamline the permitting process for development by using chatbots for troubleshooting and customer service and handing some work currently done by humans over to AI. Rinck has proposed a budget amendment that would ask the city’s IT department to report periodically on the city’s use of AI.

The initial cost for the software Harrell wants to buy is $500,000, with a current annual subscription cost of $250,000. SDCI, which is funded through permitting fees, has already seen layoffs due to funding cuts as the construction market has slowed, so the additional spending on AI would exacerbate the department’s ongoing funding shortfall.

Seattle Department of Transportation expansion focuses on eliminating graffiti, taco trucks, and tents

Harrell’s budget reflects his top priorities, which include moving homeless people and drug users out of downtown Seattle and eliminating graffiti. In keeping with those priorities, the budget creates an eyebrow-raising 16 new positions in SDOT for “right-of-way cleaning” and “restoration” as part of Harrell’s Downtown Activation Plan, along with five new positions for graffiti removal. Overall, Harrell’s budget brings the city’s annual expenditures for graffiti abatement to $6.1 million, representing 22 full-time staff devoted to this purpose.

In addition, the proposed budget adds six new positions to beef up permit enforcement, including three street use inspectors, two people to inspect street vendors and shut them down if they don’t have proper licenses, and one person to augment the city’s Joint Enforcement Team, a task force that drops in on nightlife businesses and issues citations. (The add would allow the JET to inspect nightclubs 50 times a year instead of the current 18). There’s also an additional $1.8 in next year’s SDOT budget “to support FIFA World Cup operations.”

Like other departments that have nothing to do with affordable housing, green jobs, and equitable development—the three purposes for which the JumpStart progressive payroll tax was initially earmarked—SDOT will dip into JumpStart to help pay for the 32.5 new positions in Harrell’s budget for the department.

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Homelessness System Fractured Further

For the first time since the creation of the King County Regional Homelessness Authority, which was created to consolidate all of the region’s homeless services in one agency, the city is proposing to create a new program—the Community Solutions Initiative, led by the Downtown Seattle Association in partnership with the nonprofit Purpose Dignity Action—that would operated be entirely outside the KCRHA.

That’s in keeping with Harrell’s earlier moves to take over outreach and homelessness prevention programs that had been KCRHA’s purview (and his generally bellicose approach to the struggling homelessness authority). But by moving programs into the city’s Human Services Department on a one-off basis, Harrell’s budget goes against the concept of a regional approach—and, as a staff memo notes, gives a shelter contract to a business group, DSA, “with no previous experience” responding to unsheltered homelessness.

The budget also includes funding for about 300 new shelter beds over the next two years. Council staff identified a couple of major issues with that funding. First, while Harrell’s budget calls for 150 new beds next year, the budget only includes enough funding to operate those shelters for three months, meaning that no new shelter beds would open until the final quarter of 2026. Second, there’s no plan to keep those beds open, or fund an additional 155 beds Harrell has said his administration would open in 2027, beyond those three months. It’s basically an unfunded plan.

The Community Solutions Initiative, meanwhile, would be paid for with one-time funding that would disappear in 2027, which is not how shelter and housing navigation programs for homeless Seattle residents are ordinarily funded.  “It seems unrealistic to stand up a pilot, enroll people in shelter or housing and get every person enrolled in the pilot stably housed all within one year,” the staff memo observes.

This kind of unrealistic expectation, in fact, is one thing that helped doom a similar public-private partnership run by the KCRHA called Partnership for Zero, which also used one-time funding in an attempt to rapidly eliminate visible homelessness downtown within one year. The program, which Harrell supported, shut down the year after it launched without accomplishing its goals.

Budget tricks and

I mentioned earlier that Harrell’s still-vague housing reparations proposal could be achieved by double- and triple-counting programs that already exist. Here’s how the staff memo describes the proposal: “The Executive [Harrell] anticipates the same dollar could be used to satisfy multiple commitments. For example, funding for a homeownership project could help meet overall production goals and be counted as an Anti-Displacement and Reparations Housing Fund project.”

This double- or triple-counting could help city leaders avoid touch choices and preserve existing programs that receive JumpStart funds through the Office of Housing.

But OH faces a deeper problem: Right now, the voter-approved Housing Levy is not on track to pay for existing commitments. Put another way, in order to meet the housing production targets in the levy, OH will need an additional $327 million from JumpStart between 2026 and 2030, which “substantially impacts the amount of [payroll expense tax] that is available for other uses,” according to a staff memo.

Those other uses include operating costs for existing buildings, salary increases for service providers in city-funded housing, and homeownership programs. They also all the new programs unrelated to housing for which Harrell’s budget taps the JumpStart tax, including police surveillance cameras, Seattle Fire Department support during the FIFA games, “preventative security” for businesses, and the aforementioned expansion of street cleaning and “restoration” downtown.

JumpStart isn’t the only tax city officials plan to raid to backfill the general fund. Harrell’s budget also uses revenues from the Families, Education, Preschool and Promise levy and the tax on sugary soda to supplant general-fund spending, freeing up money for other purposes. And the new sales tax increase for public safety, passed by the council before the budget so it can go into effect first thing next year, will be half general fund backfill right out of the gate—a letdown for anyone who hoped a regressive new tax would serve as more than another slush fund.

All three of these taxes—JumpStart, the levy, and the soda tax—were originally passed with specific spending plans related to the tax itself. JumpStart was earmarked for programs benefiting people affected by growing inequality brought on by the tech boom. The FEPP levy paid for new preschool, education, and eventually college programs. And the soda tax was supposed to go to programs that improved access to healthy food in neighborhoods where soda is more accessible than fresh fruit and vegetables.

The council passed laws restricting the use of both JumpStart and the soda tax after Mayor Jenny Durkan repurposed each tax to backfill the general fund. A new council overturned the spending restrictions on JumpStart last year, and will have to do the same thing for the sweetened beverage tax to make Harrell’s budget pencil. The budget also assumes voters will pass a new business and occupation tax in November, allowing Harrell to use most of the $81 million in anticipated revenues—$51 million— to backfill existing general fund spending.

These budget tricks will allow the mayor and council to balance the budget while continuing their annual spending spree, but it sets the city up for major cuts in the future if the economy takes a turn for the worse. They also establish a precedent of asking voters to essentially approve new slush funds that can be used for any purpose—something that may eventually become a hard sell, even in pro-tax Seattle.

City Council, Equity

Councilmember Rivera Questions 2026 Funding for CARE Team, LEAD Diversion, and Equitable Development Initiative

 

By Erica C. Barnett

At the city council’s first meetings on Mayor Bruce Harrell’s proposed budget this week, Councilmember Maritza Rivera repeatedly suggested that she has not gotten sufficient information, since joining the council last year, about several programs the city funds that are designed to help people living unsheltered or in crisis. Rivera has opposed some of the

On Thursday morning, Rivera suggested it might be premature to expand the city’s CARE Department, which responds to 911 calls, and the related CARE Team, which responds to a limited subset of emergency calls alongside police and can take over those calls once police sign off. As we’ve reported, the CARE Team is set to sign a new agreement with SPD that will allow it to respond to calls without police in tow, and expand the types of calls team members, who are social workers, are allowed to respond to.

The city expanded CARE to 24 people last year, the maximum allowed under the agreement with SPD that expires at the end of this year. A proposed 0.1 cent sales tax would increase that number to 48, on the assumption that the new agreement will allow the expansion.

“I don’t know how well that expansion is going,” Rivera said. “I know there are issues underlying all of that. Nevertheless, we are not done with this full year and  the proposal in this budget is to go from 24 to 48… and I have not seen any information about the work that CARE is doing that warrants the expansion,” given that the 2025 budget year isn’t over yet.

Largely in response to council questions, CARE launched a detailed data dashboard, currently accessible only the city’s internal network (to which Rivera has access) earlier this year. CARE has also repeatedly presented data and results to the council and publicly answered their questions.

Rivera did not raise similar concerns about a lack of data when the council approved an expansion of live police cameras into several new neighborhoods earlier this month. The council started discussing that expansion in late July, just weeks after SPD turned on new surveillance cameras in three initial “pilot” neighborhoods. The pilot program added almost $6 million to the 2025-2026 budget along with 21 new positions at SPD; the new budget anticipates SPD will need to hire another nine people to staff the surveillance center, and cost around $500,000 on cameras alone. A majority of the council, including Rivera, green-lit the surveillance expansion without any data showing that the cameras helped SPD solve or stop crimes that would have gone unaddressed without the cameras.

Later in the day, Rivera said she also didn’t have enough information to know whether LEAD and CoLEAD, two programs run by the nonprofit Purpose Dignity Action, were worth the funding provided in the mayor’s budget, which includes about $15 million for LEAD pre-booking diversion and $5 million for the CoLEAD encampment resolution program. That money, Rivera observed, is enough to “fund an actual department,” like the Office of Arts and Culture.

“I just want to make sure I understand how well we’re doing with diversion services,” Rivera said. “I just don’t feel, since I got here last year, that I have that information that I can really speak to. How really are we helping people? I understand there’s a lot more people in the system. Ideally we’d be people should be going into recovery, and then we’re taking up new people. I don’t necessarily think that’s happening, but I don’t want to be unfair, so I just need more information.”

Andrew Myerberg, Harrell’s chief of staff, said the people LEAD and CoLEAD work with, who are often homeless and involved in the criminal legal system, don’t just “go into recovery” and cycle out; their complex needs can take years to address, and relapse is common. LEAD, founded in 2021, is an internationally renowned diversion model that has been implemented around the world, while CoLEAD has been widely praised as the most successful approach to addressing unsanctioned encampments by permanently housing people living in state-owned rights-of way.

Speaking more broadly, Rivera said she was not “supportive of Housing First”—programs based on the premise that housing is a necessary, if not sufficient, condition for long-term stability, health, and recovery—because “I don’t think it’s fair. … They’re not going to be able to stay housed if they don’t have the treatment services.” This reflects a misunderstanding that has become a talking point among the right across the country—that “housing first” means “housing only,” and that programs like LEAD simply dump people in empty houses and leave them there to rot.

On Friday, Rivera appeared eager to reignite her efforts last year to gut the city’s Equitable Development initiative, which helps fund community-based efforts by small, often first-time, developers to help their projects get off the ground. Last year, Rivera proposed legislation that would have frozen all new funding for the program and required the community groups it funded to spend down every penny they received from EDI by the end of the year or lose all their funding—a virtual impossibility for long-term capital projects that typically take five to seven years to complete.

Rivera’s proposal resulted in an outcry from communities that were slated to benefit from EDI projects (which are concentrated in Southeast Seattle) as well as panicked EDI recipients, who begged the council not to withdraw city funding for their projects. (Eventually, Rivera withdrew her amendment and replaced it with new reporting requirements for EDI projects.) Rivera suggested Friday that she still thinks EDI is completing projects too slowly, noting that 20 of 75 EDI projects that have received funding at some point in the last 10 years, through 2025, are finished.

“You know, ideology is great, but what is really great is when we [take] action and these projects actually open to help community,” Rivera said. “Just talking about it, that’s great, but we have to do it. And so this was my concern, as you know last year, is a lot of these projects are not not moving along fast enough where they’re actually going to benefit community, and that’s a concern.”

Rob Saka backed Rivera up, saying that while he didn’t “remember all the ins and outs and twists and turns of that… [I] remember there being a fair amount of confusion around the original purpose and goals of that underlying effort. And I also remember my colleague being unfairly attacked, in some cases based off of race, which, you know, check your privilege! White saviorism in the city of Seattle is particularly real.”

Saka did not give any examples of anyone making a racist argument against Rivera’s proposal to gut the Equitable Development Initiative, which is explicitly designed to benefit underserved communities of color. The original EDI initiative was sponsored by former councilmember Tammy Morales, who, like Rivera, is Latina.

PubliCola’s own coverage at the time showed that the overwhelming majority of those who asked the council to allow EDI projects to keep moving forward were people of color who worked on or whose communities directly benefited from these grassroots community projects.

City Council, Elections, housing, podcasts, Taxes

This Week on PubliCola: August 10, 2025
The crowd begins to gather at Mayor Bruce Harrell’s party early on Election Night

A huge election upset led this packed week, which included two podcasts (plus two-thirds of Seattle Nice on KUOW!)

By Erica C. Barnett

Monday, August 4

New Forecast Reduces City’s Projected Revenue Shortfall to $150 Million

Seattle’s latest revenue forecast, which will form the basis of the 2026-2027 biennial budget, reduced the. city’s projected two-year budget shortfall from around $240 million to about $150 million. The city’s revenue forecasters used a more optimistic model than the April forecast.

Seattle Nice: Seattle Sues Trump, Camping Ban Proposed, Business Tax Hike Heads to Ballot

On the first of two Seattle Nice episodes this week, we discussed the broader implications of a proposed ballot initiative that would make it illegal to fall asleep outdoors in unincorporated King County, a Seattle ballot measure to raise business and occupation taxes to pay for housing stability and human services, and a lawsuit filed by City Attorney Ann Davison, a Republican who’s struggling to retain support, over a seven-month-old Trump executive.

Tuesday, August 5

Business Tax Will Be on November Ballot, Despite Council Objections Over Spending “Buckets”

The city council approved the business and occupation tax proposal for the November ballot, overcoming objections from some councilmembers that it shouldn’t be dedicated to any specific purpose, but instead should go toward any current or future general-fund purpose elected officials decide they want to fund. In general, voters approve taxes for specific purposes, and there is no recent precedent for sending a blank-check tax measure to the ballot.

In Anti-Incumbent Rout, Progressive Candidates Lead In All Local Races

This week’s local elections represented a massive rebuke of the people elected in the wake of COVID and the 2020 protests against police brutality. Across the board in Seattle, progressive candidates were leading big, from Katie Wilson (running against Mayor Bruce Harrell) to Erika Evans (headed for victory against Davison).

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Thursday, August 7

Council Amendments to Comprehensive Plan Reveal Competing Priorities

City councilmembers have proposed more than 100 amendments to Mayor Bruce Harrell’s much-delayed Comprehensive Plan update, which only deals with neighborhood residential (former single-family) zoning. Some amendments would further shrink the size of neighborhood centers—small nodes of potential future density—while others would expand them and create new incentives for housing.

Seattle Nice: Election Results Emergency Edition!

On this week’s second edition of the podcast, we debated what’s behind the shift toward progressive candidates this year. I argued that it’s a combination of people’s desire to have people in office who’ll fight Trump policies that impact Seattle and a rejection of politicians who’ve prioritized cracking down on minor crimes over solving the affordability crisis; Sandeep says voters are reflexively “lurching to the left” because of Trump, not any specific local issues.

Friday, August 8

Another Tree Petition, Another Council Staff Departure, and Another Round of Election Results

A petition to “save the trees” is more blatantly misleading than usual, as the trees in question aren’t threatened by the development people are protesting. Maritza Rivera can’t seem to keep staff for more than six months. And the latest election results put Katie Wilson at 50.2 percent to Harrell’s 41.7, while Ann Davison and City Council President Sara Nelson lost ground too: The two incumbents have 33.8 percent and 35.8 percent of the vote, respectively.

City Council

New Forecast Reduces City’s Projected Revenue Shortfall to $150 Million

 

Sales tax revenues have declined in Seattle, thanks largely to a slowdown in construction.

The change comes largely from the shift from a “pessimistic” to “baseline” revenue forecast scenario.

By Erica C. Barnett

Seattle’s August revenue forecast, which will form the basis of the 2026-2027 biennial budget, reduced the. city’s projected two-year budget shortfall from around $240 million to about $150 million, thanks largely to the Economic Revenue Forecast Council’s decision to adopt a more optimistic “baseline” budget forecast this month, rather than the “pessimistic” forecast the group adopted in April.

The forecast council includes City Councilmember Dan Strauss (who chairs the four-member body), City Council President Sara Nelson, a representative from Mayor Bruce Harrell’s office (at this meeting, Andrew Myerberg), and the city’s finance director, Jamie Carnell. (Editor’s note: Carnell’s name was misspelled and has been corrected.)

At the council’s meeting Monday, forecast council interim director Jan Duras and other staffers explained their decision to shift to a more optimistic forecast.

“The overall situation has stabilized somewhat,” Duras said, noting that major economic forecasters, such as Moody’s and S&P Global, were no longer predicting a recession, which was one of the assumptions in the April forecast for Seattle. (Technically, the prediction was for a “growth recession,” in which economic growth slowed but GDP did not.) At the same time, “in the last few days, there have been some developments that shifted the balance of risk more towards the downside,” including a new tariff announcement from Trump and weaker than expected employment numbers, Duras said.

If the city’s current projections hold (another forecast will come out in October, as the city works to finalize the next biennial budget), the upshot is  that budget writers will have a total of about $90 million more to work with this year than they expected to have in April.

That still means many forms of city revenues are falling far short of previous projections. The JumpStart payroll tax, for instance, is now expected to bring in about $32 million more than anticipated over two years, but that’s compared to an April forecast that reduced revenue projections for the tax by $167 million over two years.

Similarly, sales tax revenues are now projected to come in $20 million higher over two years than the forecast office projected in April, most of that in 2026, but sales tax revenues depend heavily on construction, which has plummeted since 2022. Office construction has been hit particularly hard, as existing downtown buildings remain largely vacant. And residential permits have plummeted over a similar period—a trend that could persist if the city decides to impose new restrictions, such as zoning restrictions and new tree-related mandates, on new housing development.

Tourism has also declined, especially from other countries (for some reason, Dan Strauss put an optimistic spin on this news, saying he would change the “headline” to “higher number of visitors expected in Seattle in 2025; international visitors lag”), depleting another source of sales tax revenues.

Meanwhile, revenues from smaller funding sources, like automatic speeding cameras, parking fines, and the sugary soda tax also continue to come in lower than expected.

In each case, city officials suggested the trends would reverse soon. The rollout of automated speed cameras has taken much longer than projected, so ticket revenues should start pouring in any day now. Parking fines, once so small (at $45) that Strauss said people would rather pay them than feed the meter, were just raised to around $70, which should pay off once the new fines have been in effect for a while. People may be drinking less soda now, but just wait until all those international visitors show up for the FIFA World Cup next year!

There are obvious counterarguments to all these optimistic scenarios (here’s one: What if $70 parking tickets just send more people into collections?), but the forecast doesn’t directly incorporate most of those assumptions. It does include a $33 million reduction in Jumpstart payroll tax revenues that will go into the general fund, a reflection of lower-than-anticipated revenues and the fact that there was enough budget “underspend” in 2024 that the transfer wasn’t necessary.

Losing less money than anticipated is good news, but only in the context of how bad it could have been. Under the pessimistic scenario, the city would stand to lose an additional $87 million on top of  the $240 million shortfall projected in April.

The city, in other words, will still be faced with huge potential budget cuts this year, just not quite as huge as anticipated in April. Unless the economy tanks because of future decisions by Trump, an unpredictable president whose moves to crack down on immigrants and impose huge tariffs on other countries, including US allies, have caused market volatility.

Strauss, who chairs the revenue forecast council, said he wished he could share the relative optimism of Duras and his staff, but that “today, maybe for the first time in a long time, I feel greater risk than you do,” thanks to the possibility of higher-than-anticipated tariffs and other national news that could impact Seattle’s economy.

Duras said choosing between more optimistic and pessimistic forecasts “essentially means taking a stance over whether the economy is going to go into a recession or not,” and the likelihood of a recession is now lower than it was in April—between 40 and 50 percent—so “the more likely scenario is the one without a recession.”

 

City Council, Elections, Taxes

Council Broaches Using Housing Levy, Proposed “Seattle Shield” Tax Funds to Backfill General Fund Shortfall

 

By Erica C. Barnett

During a recent discussion of a potential ballot measure that would increase the business and occupation tax for larger businesses and exempt gross revenues up to $2 million a year, Councilmember Maritza Rivera suggested that the city should not dedicate the new tax, if it passes, to housing and human services, but put the money in the general fund instead, where it could pay for anything from police to road repairs to prosecution.

The council sponsor of the proposal, Alexis Mercedes Rinck, has dubbed it the “Seattle Shield” proposal because, she says, it will help shield the city from some of the more devastating cuts from the Trump administration, by contributing about $90 million a year to critical safety-net services. Voters will “choose whether we protect each other or abandon each other,” Rinck said when announcing the plan.

But, Rivera noted, the city is also facing a budget deficit of $250 million or more (the next revenue forecast will come in August.) “At the end of the day, you know, it begs the question: Why not just put all of this in the general fund?” Rivera said. “And as you’re doing the budget process, then you’re delineating where it goes, because we keep doing these funding sources, and then we are narrowing what we can use to spend with it.”

The JumpStart payroll tax, for example, was originally passed to pay for services targeted toward people most impacted by the high cost of living for which big companies like Amazon are partly responsible; since its passage, however, the council has turned it into an all-purpose slush fund.

Rinck noted that the Trump cuts will likely include emergency housing vouchers, homelessness funding through the federal Continuum of Care, and funding for basic needs like food assistance. “The outlined areas in this legislation are intended to speak to where we are anticipating the cuts will be the deepest,” Rinck said. Additionally, she said, “I think we need to be clear with voters about what we intend to use these funds for.”

It’s hard to say whether voters would find the idea of a tax that can be used for any purpose the council chooses appealing, but Seattle’s other voter-approved levies and taxes are all for specific spending areas, so a business tax for the general fund would be a major departure from precedent.

Rivera also brought up another idea that has come up frequently in recent months, including on the 2025 campaign trail: Given that the Office of Housing is “sitting on” hundreds of millions of dollars it isn’t currently spending, why can’t the city just borrow some of “that housing levy money we’re starting to collect now”?

Doing so would require the city to forego some future housing, Rivera acknowledged—the city can’t encumber tax dollars from the housing levy to build housing in the future if that money has already been used to address the budget deficit the city is facing today—but that seemed to her like a sensible tradeoff.

“Nothing is getting built,” Rivera said, “and this money is going to continue to come in. So if it’s not being used today, we know money is continuing to come in, we can make good down the line, on the award or, you know, the investment. But we have needs today, and we have money sitting somewhere today—I’m not an accountant, but it seems to me that we should be able to” use that money now, she said.

Deputy Mayor Greg Wong noted that the housing levy funds, is “not a pot of money the executive has one to touch, because we want to maintain our promises and investments in affordable housing.” By spending revenues from the housing revenue on general-fund purposes, the city would be breaking an implicit promise to voters when they agreed to tax themselves for housing.

And city budget director Dan Eder noted that it isn’t true that affordable housing isn’t getting built; last year, 1,300 new units of affordable housing were partly funded by housing levy dollars.

On its face, it seems somewhat absurd to think of the city asking voters for a new tax to backfill its budget deficit (a deficit exacerbated, last year, by $100 million in new spending the mayor and council hung on the budget like it was a Christmas tree), or for the city to use the housing levy, a voter-approved property tax for housing, to backfill the general fund.

But the city is entering unprecedented times, with federal funding cuts on the way that will force the mayor and council to decide between massive cuts to basic services (except police and prosecution, of course) and reneging on promises to voters about how the taxes they approved will be spent. It’s always an easier decision for elected officials to cut long-term spending that won’t pay off until years in the future than to make tough choices in the present. Just look at what happened to JumpStart.

City Council, Elections, Mayor Harrell, Taxes

Proposed Business Tax Increase Would Raise $90 Million a Year While Exempting Most Small Businesses

By Erica C. Barnett

On Wednesday, City Councilmember Alexis Mercedes Rinck and Mayor Bruce Harrell proposed a ballot measure that would increase the city’s business and occupation (B&O) tax rates by about 50 percent and use the proceeds to fund programs that support housing stability, homeless services, food security, and small business sustainability.

The proposal, which could appear on the November ballot, would exempt businesses’ gross receipts up to $2 million, which would increase the number of businesses who don’t have to pay B&O taxes to about 16,500, or around 76 percent of businesses in Seattle. The remaining businesses would have to pay the tax on all revenues above $2 million. The exemption has been a longtime goal of the Seattle Metro Chamber of Commerce, which has argued that the current exemption is set too low, at $100,000, to provide tax relief to most of the city’s small businesses.

After accounting for the expanded exemption, which would cost the city about $30 million, the tax increase on larger businesses would bring in an estimated $90 million a year.

Speaking to PubliCola on Tuesday, Rinck acknowledged that the business and occupation tax is “not without shortcomings”— for instance, high-revenue, low-margin businesses like grocery stores and restaurants tend to increase prices in response to higher taxes, passing costs on to consumers. But, she said, the city is “looking at an urgent situation, where we’re being confronted with federal funding cuts” that stand to harm Seattle’s most vulnerable residents, including potentially steep reductions in federal spending on homelessness, housing, and human services.

“[The plan] creates some tax relief for small businesses, and it’s a really great opportunity for us to provide that support for small businesses while asking some of our large businesses to pay more of their fair share to keep the city running and help our most vulnerable neighbors,” Rinck said.

On Wednesday, Rinck said the tax increase, which she has dubbed the Seattle Shield law, will protect essential programs from Trump-era cuts. “And here’s what makes this moment special: We’re not imposing this on Seattle, we’re trusting Seattle,” Rinck said. “You choose whether we protect each other or abandon each other, and you choose what kind of city we want to be.”

State law prohibits the city from increasing the business and occupation tax without a public vote. One advantage of a voter-approved tax is that, unlike the council-approved JumpStart tax, it can’t be easily reallocated to new purposes based on the transitory whims of a mayor or city council.

The proposal includes specific spending categories—broadly, housing stability for low-income tenants; small business assistance; services for people facing homelessness, food insecurity, or gender-based violence, and protections for vulnerable workers through the city’s Office of Labor Standards. If the measure passes, these categories would have the force of law.

According to the most recent revenue forecast, the city is facing an unanticipated budget shortfall of more than $240 million over the next two years, with or without additional cuts to federal programs that fund services in Seattle.

The city has two business and occupation tax rates for different kinds of businesses; one, which applies to all retail businesses (and five other business categories) would increase from 0.222 percent to 0.34 percent if voters approved the new tax. The other, which applies to freight transportation and professional services, would increase from 0.443 to 0.65 percent.

By pairing a tax increase with a tax exemption, the proposal puts the reflexively anti-tax business community in a somewhat awkward position. In an email blast about the forthcoming proposal last Friday, Seattle Metropolitan Chamber CEO Rachel Smith praised the proposed exemption, while arguing that a new tax will harm Seattle’s economy and drive businesses away.

“While proposal details have not been released, one component would expand the B&O exemption for very small businesses with an annual gross under $2 million—a good policy that we support,” Smith wrote. “But taxing all of our other businesses to pay for it—when the city has $800 million in unspent revenue—is the wrong move.”

In a statement on Wednesday, Smith said the new proposal “has been rushed, [and] the beneficiaries and payers have not been sufficiently identified or engaged. Everyone deserves to understand the impact of any proposed tax restructuring with more than just 45 days of consideration before heading to the ballot.”

The Chamber’s $800 million estimate refers to the money allocated, but not yet spent, from the JumpStart payroll tax (which funds, among other things, the Equitable Development Initiative, programs to mitigate the impacts of climate change, and affordable housing); funds allocated by the Office of Housing through the voter-approved housing levy; and an estimated $200 million in budget funds that were allocated, but not spent, last year.

“Let’s be clear: Seattle isn’t facing a deficit, in fact, they can’t spend the money they have budgeted today,” Smith wrote.

Budget experts and proponents of the legislation confirmed that most of the money Smith identified can’t easily be moved from place to place—it isn’t possible, for example, to pull money allocated to a signed contract away from that project just because it didn’t get underway by the end of the year.

Additionally, the city’s annual “underspend” stretches across multiple city departments that have different reasons for failing to spend their full budget by the end of the year. It’s legitimate to ask city departments to explain why they aren’t spending all the money they get, and to establish polices to address this perennial issue, but the answers are bound to be complicated. Requiring city departments to unilaterally forego unspent money at the end of each year without knowing the reason each department ended up under budget could be a recipe for budget chaos.

Harrell, whose 2021 run for mayor got a big boost from Chamber members like Vulcan and Goodman Real Estate, stands to benefit politically from allying with Rinck on the taxing measure even as he risks pissing off his deep-pocketed business backers: His leading opponent, Katie Wilson, is outflanking him on the left with a campaign focused on progressive revenue, housing abundance, and access to safe, reliable transit. Recent polling described to PubliCola suggests that Harrell is vulnerable to a challenge from the left.

Wilson, a longtime proponent for progressive revenue, said in a statement that she’s “glad that Mayor Harrell is backing this proposal coming from Councilmember Rinck’s office,” because it will help the measure move through the mostly Harrell-aligned council.

“It’s clear that Harrell is terrified he won’t win re-election and he suddenly feels the need to show progressive leadership,” Wilson added. “It’s disappointing that it takes the threat of being unseated for our mayor to do the right thing.”

While progressives who support raising revenue to preserve city services and respond to federal budget cuts argue that a higher B&O tax that exempts smaller businesses is progressive, the tax is generally considered regressive because it has a greater impact on smaller businesses and those that operate on slim margins, and because businesses generally pass B&O tax increases on to consumers in the form of higher prices. Exempting most businesses from the tax arguably eliminates the first problem, but it doesn’t directly address the second.

Complicating matters, the city is planning to take up separate tax increase soon: A 0.1-cent sales tax hike to pay for public safety, which the state legislature authorized earlier this year. King County is currently considering its own 0.1-cent tax increase; together, the two tax increases, which do not require voter approval, would increase the sales tax in Seattle to 10.55 percent, the highest combined sales tax rate in the country.

Asked about the potential sales tax increase on Wednesday, Harrell said it’s “on the table for discussion, but because we understand the regressive nature of it, we are treading very carefully.”