There was as much as $34 million in new money for homelessness before the Seattle City Council Tuesday, but all of it was rejected.
First to fall, 5-4, was the proposed per employee tax on big business — a thinly veiled tax on Amazon — that would have brought in as much as $25 million a year. After weeks of tense negotiations, the revenue source will not make it to the final budget package, which the council will vote on Nov. 20.
And quickly after its rejection, a second proposal to borrow about $9 million from the city’s rainy day fund for homelessness, was also defeated, this time by the proponents of the employee hours tax, still smarting from its failure, plus Councilmember Lorena González.
The city has already earmarked $63 million a year for homelessness, but the dual rejection leaves the council with no additional revenues for the crisis, at least not currently. Considering the overtures to act, it’s a surprising position for the council to find itself and one that may be revisited in the next week.
The tense fight over funding comes at a time when the city has an uncannily specific view of what it can spend versus what it should spend: Current resources allow for funding only half of the 977 affordable housing units the Office of Housing says it has lined up. And a massive request for proposal for homeless service providers received over $100 million in proposals, with only about $30 million worth of funding to give.
Meanwhile, more than 5,000 people continue to live on the streets of Seattle, according to this year’s count.
In a progressive city in Washington state, where income and capital gains taxes are off the table and property taxes are capped at just one percent growth per year, the significance of the proposed employee hours tax on business, known as the HOMES tax, ballooned in recent weeks, both in its perceived necessity to address the homelessness crisis and as a litmus test in a city where all politics are “progressive.” Where the stereotypes of “moderate” and “progressive” council members do not always stand up, the tax’s failure perfectly splintered the competing factions.
“The city we make over the next four years is gonna define our city for the next two decades," Councilmember Kirsten Harris-Talley said. "I just feel it in my bones.”
The proposal’s failure marks a climactic end to what has been the most tense piece of the council’s budget deliberations. The city’s homelessness crisis has not improved since officials declared a state of emergency around the issues. In fact, it has gotten worse. Recognition of this has pushed the council to the edge, spurring tension, some of it personal, between the famously consensus driven legislative body.
The employee hours tax, or HOMES, was Councilmember Mike O’Brien’s answer to the Seattle's stagnant issue. “I cannot disagree the state of emergency on the streets is actually worse than it is today when we declared the state of emergency two years ago,” O’Brien said Tuesday. And when Mayor Tim Burgess proposed his budget, O’Brien says he didn’t see the investments he thought necessary to get ahead of the problem.
The proposed tax would have levied an approximately $125 per employee, per year tax on all businesses with gross revenues — not net profits — over $10 million. Council staff estimated it would have raised between $20-$25 million a year.
Its proponents have painted it as a sustainable and lasting revenue source to combat homelessness, a contrast to the series of one-time injections of new dollars in recent years. Whether it is, in fact, sustainable depends on Seattle's economy lingering in its current boom cycle.
Tuesday’s failure, according to the council members who voted against it, was not out of ideological opposition, but squeamishness with the process and the framework for how the money will be spent. “There’s nothing in this legislation that lays out how we’re going to spend that money,” said Councilmember Debora Juarez.
Councilmember Sally Bagshaw was most concerned about outreach. “My concern about a head tax is that we haven't brought in those 1,100 businesses that people dismiss and say 'they can pay for it,'” she said, advocating the council wait until Mayor-elect Jenny Durkan takes office to work on a proposal.
Councilmember Kshama Sawant, however, wasn’t buying it, turning again to a familiar trope of hers that the opposition is thanks to corporate lobbying. “If you agree there’s a crisis, why aren’t you doing everything in your power to address that issue?” she asked, saying later, “The real reason there is opposition to the HOMES tax, where the rubber hits the road, is corporate politics.”
The employee tax is something of a zombie — it was adopted by council in the early 2000s, then killed in 2009 at the height of the recession. Since then, it has come up as a proposed new revenue source again and again, including as a way to make a transportation levy smaller and as a funding mechanism for the Office of Labor Standards. But it's never gained traction, thanks in part to intense lobbying against it from the Chamber of Commerce.
The 5-4 vote Tuesday does not appear to be the end of the discussion, after several council members said they supported the tax in principle. When Juarez said she’d be up for revisiting it within 30 days, Sawant and O’Brien both pounced to hold the council to it. Sawant said she would introduce a resolution Monday stating the council’s intention to pass an employee tax. And O’Brien proposed setting aside funding to begin creating the infrastructure necessary for collecting the tax in the event it is passed.
Those specifics and the rest of the budget deliberations — around criminal justice, tenant rights, even a municipal bank — will unfold in the coming days.