After nine months of meetings, hearings, and headlines, an Employee Hours Tax to help fund affordable housing and homelessness services has finally passed – and raised even more questions for the future.
On Monday, the Seattle City Council unanimously passed a last-minute compromise on Employee Hours Tax (EHT) legislation, also commonly called a head tax. The exhaustion and relief was explicit Monday in many of the councilmembers’ comments. But for both elected officials and for the business leaders and community activists who squared off over the issue, there is no resolution. Not really. There is only the next phase of a series of vexing problems with no easy answers.
The compromise legislation is designed to raise about $47 million a year for the next five years, with the revenue dedicated to building permanent affordable housing and expanding homelessness services. That’s less than the $75 million a year that would have been raised when the bill passed through committee last week – and much less than the $150 million a year in new revenue urged by last winter’s Progressive Revenue Task Force – but more than the Amazon-approved $40 million in Mayor Durkan’s last-minute alternative plan. And it’s far more than the $25 million in annual revenue that last fall’s failed EHT package was intended to raise.
Similarly, the 66 percent of that $47 million in annual revenue intended for affordable housing construction (about $32 million) is less than the 75 percent of $75 million (about $57 million) in the original package, but far more than the $10 million a year that Durkan wanted.
However, the city’s estimate that the final bill will fund 591 new housing units over five years assumes a per-unit cost of about $270,000 – significantly lower than past construction estimates of over $300,000 a unit. Given that Seattle real estate prices continue to explode, over five years that target of 591 units may not be realistic. And while every new unit helps, a business-funded study released earlier this month estimated that King County overall would need to spend $410 million on new housing each year just to house those who were homeless here in January 2017 – and even then it would take seven years to catch up with the backlog.
When the January 2018 one-night estimate of our county’s homeless is released later this month, it likely will be at least ten percent higher than last year. Unless the growth in homelessness slows over the next five years, that means hundreds of millions of dollars in additional revenue, beyond the $410 million per year estimate, will need to be found for still more affordable housing. And that’s just to house the homeless. Such units will also be heavily in demand from poorer and working class residents who are currently housed but who are also being squeezed out of Seattle’s private housing market.
Everything Counts In Large Amounts
Such good news/bad news dichotomies abound in considering where Seattle can or will go next on these issues. Seattle’s new EHT is the largest such tax ever passed in the U.S. In part, that’s because many jurisdictions use payroll taxes instead to accomplish the same revenue goals, but it still means that in the end, the council and even Mayor Durkan stood up to a business lobby that did not want this tax at all – in a city that is now far more reliant on a single employer than any other large city in the country.
That business opposition has not gone away. After the vote, the Seattle Metropolitan Chamber of Commerce issued a statement decrying the compromise. So did Amazon. The obedient Seattle Times editorial board urged a citizen initiative to overturn the tax – a plan that would work better if Medina residents could vote in Seattle elections. But if such an initiative can get on to this fall’s ballot – and while they would need to get 17,632 signatures by June 15, there are plenty of people in Seattle who would sign such an initiative just because they despise the homeless – there is no limit to the amount of money that anyone can contribute to an initiative campaign. That’s how, for example, an attempt to ban plastic bags a few years back was killed single-handedly by the chemical industry and other interest groups.
Beyond that, the elections next year for Seattle’s seven districted council seats offer business interests another, perhaps easier opportunity to control 2020’s city council in a way that would make repeal a likelihood and an initiative unnecessary. More on that below.
For companies like Amazon, which took the unusual step of threatening to pull jobs out of Seattle if the original bill had passed, the $20 million a year the original proposal would have cost them was never the point. The point was to avoid setting a precedent that other jurisdictions might emulate, especially as Amazon conducts a noisy public search for a city that will give it the most tax incentives to locate its second headquarters there. Amazon failed to prevent this precedent. In the end, even Mayor Durkan, with her anemic last-minute proposal, stood up to Amazon and got them to give their reluctant approval. Likely those were difficult conversations, in which Durkan had to explain to some Amazon government affairs executive that political realities required that Seattle act on its crises, and that businesses like Amazon would have to pay something.
The Fight to Repeal the Head Tax, Again
But whether they’ll need to pay for it much beyond 2019 is an open question. In January 2020, Seattle’s seven district city council representatives will be sworn in for a new four-year term. Only four council members opposed the original EHT proposal this spring – and three of them (Bruce Harrell, Debora Juarez, and Rob Johnson) arguably represent what are now the three most liberal of the seven districts. Moreover, it’s being widely speculated that both Harrell and the fourth opponent, Sally Bagshaw, will not seek re-election.
The converse, however, is also true: three of the five EHT supporters on council are also up for re-election, and all are vulnerable. Kshama Sawant’s 2015 re-election campaign against Pamela Banks turned into the most expensive council race in Seattle history, and even more business and third-party money will nbe spent to unseat her next year. Budget Committee chair Lisa Herbold – who also spearheaded last fall’s failed EHT proposal – won her seat against a business-oriented opponent in 2015 by literally dozens of votes. And anti-homeless activists have been baying for Mike O’Brien’s head for years, and may have new business allies in 2019.
Amazon gave a record $350,000 in independent money for Jenny Durkan’s 2017 victory. Her one veto threat last week, and the compromise that resulted, will save Amazon $7 million in 2019 alone – a two thousand percent return on investment in just the first year of the tax. That successful investment didn’t go unnoticed. Even if Harrell is replaced by a more progressive council member in the south end – which seems likely at this early point – if Juarez and Johnson are safe, and either Bagshaw or another business-oriented candidate holds the downtown seat, defeating two out of the three pro-tax incumbents up for another term (Herbold, Sawant, and/or O’Brien) would give the business lobby enough votes to repeal the tax. They have enough money to dominate all of these races, if they choose to do so.
And we’ve been here before. The city turned to a head tax rather than a more equitable payroll tax because implementation would be easier and cheaper. The systems to collect it are still in place from Seattle’s last experience with a head tax, in 2007-10. That history got remarkably little attention during the past year’s debate in part because of how the tax ended: Backed by new developer money, a largely unknown pro-density environmentalist named Mike McGinn campaigned for mayor in 2009 promising to repeal the head tax as an impediment to fighting climate change. That claim hasn’t aged well, but after McGinn was elected, he made head tax repeal one of his first items of business. Approaching 2019’s elections, that ancient history suddenly becomes quite relevant.
Awash in new wealth, Seattle’s local elections next year are going to shatter all previous records for fundraising – and the just concluded head tax debate will be back with a vengeance.
The Bills Come Due
That’s doubly unfortunate because it’s likely to eclipse an even bigger problem over the coming year: the failure of at least the last four elected mayors and two decades’ worth of developer-friendly city councils to adequately plan for Seattle’s explosive population growth. While nobody in 1998 could have known that Amazon would become a global juggernaut, a coalition of developers and climate change-obsessed environmentalists have successfully pushed a develop-at-any-cost approach to increased population and density that ignored existing neighborhood plans. It concentrated development near arterials but left many single-family home neighborhoods nearly untouched.
The unintended impacts included building new market-rate housing on land made available through the destruction of affordable housing Seattle now desperately needs. But while city leaders underwrote development and funded expensive real estate development schemes and civic amenities (the Mercer Mess, streetcars, the downtown tunnel and waterfront development, convention center expansion, etc.), they failed to fund numerous infrastructure improvements that were needed to absorb so many new residents. That includes not just affordable housing, but transportation (including badly backlogged maintenance projects), public transit, sewage and utilities, public school capacity, and much, much more. Homelessness and housing were simply the focus new because that’s the crisis that already has a death toll. But it isn’t be the only crisis.
After 20 years of misplaced priorities, the bills are coming due. The businesses that city leaders have encouraged while heavily taxing everyone else are the only serious remaining source of money that our city can turn to in order to address a whole series of urgent issues. That funding was already going to be a tough sell, with taxpayers reasonably asking why city leaders should be trusted to collect still more taxes when they’ve gotten it so wrong in the past. That argument already surfaced with objections to the head tax based on that crisis having worsened despite past funding increases. Now, those objections are also fuel for business interests who, between Amazon’s successful extortion and the unprecedented money that put Durkan into office, also have a political road map for how to stop any effort to tax them further.
How to Spend the New Tax
Most immediately, as part of its annual budget process the city council and mayor will need to decide this fall how, exactly, to spend the new revenue. That will also be contentious.
As a companion to the new legislation, city council also passed a resolution outlining its priorities for spending the new revenue. But that resolution isn’t just non-binding; its numbers were hashed out behind closed doors over one weekend, with no study or public input, and are likely to be challenged this fall on several fronts.
The most obvious is the reduction in the compromise proposal, both as a percentage and in absolute terms, in the amount of money dedicated to new affordable public housing construction. A lot of people will push to see that component reprioritized. They’ll face resistance. Mayor Durkan has continually pushed to move dollars away from housing and into homeless services for reasons that are unclear, given that the sole focus of the city’s current “Pathways Home” approach to homelessness is to steer people into affordable housing that does not, as yet, exist. And as noted above, the goals for this section of the spending resolution seem unrealistically optimistic – as well as still falling far short of the need.
There will also be several activist-led fights over the services portion. Durkan has already indicated that she wants that money to go primarily into expansion of existing programs, many of which service providers and advocates have been decrying for years. For starters, there’s the dramatic escalation in homeless encampment sweeps in recent years – a homelessness “service” which cost the city over $10 million last year alone and which has continued apace under Mayor Durkan.
Beyond that, Durkan wants to spend much of the money on expansion of Navigation Teams – which connect individuals to case managers and services, but not, usually, to housing – and a private market voucher program that most advocates seem to regard as not only ineffective, but somewhere between a brief respite and a cruel fraud for those seeking to escape homelessness. Increased spending for all of those programs will face opposition. Beyond that, there’s also the noisy band of residents who seem to loathe spending money of any kind on the homeless. They’ll be around, too.
Meanwhile, Back in Reality…
While wrangling over this tax has droned on, and more fighting over both the tax and how its revenues will be spent seems inevitable, the problems the EHT proposal was meant to address keep worsening. The King County Medical Examiner is now recording, on average, almost four homeless deaths a week so far in 2018, a pace that would shatter last year’s record. The release later this month of last January’s “one night count” is also likely to not only set another new record, but chronicle the spread of increased homelessness into every corner of King County.
Rent increases have slowed a bit in recent months, but an average Seattle apartment still rents for close to $2000 a month. With the standard measure of affordability being 30 percent of income, that means affording even a basic apartment in our city requires a household income of around $80,000 a year. If you’re, say, retired, disabled, or otherwise on a fixed income, or working one or more low-wage jobs – as many homeless individuals are – a case manager can’t bridge that chasm. Activists are sure to push a variety of non-EHT reforms this year to help reign those costs in, from more relocation assistance to protection of remaining affordable housing and increased “in lieu of” fees for new housing to (gasp) rent control.
We’ve learned several important things from the EHT debate so far. One is that even the political power of Amazon can be overcome – for now – if the need is urgent enough and the demands for it are loud and disruptive enough. Another is that while this victory was important, it does not nearly meet the scale of the need, and it may not be possible to pass anything that can meet the scale of the need.
But the two most important takeaways are that, one, the battle to overturn this tax – or divert its revenues to other needs – is ongoing. It’s not over. And secondly, as competing interests continue to block more comprehensive solutions, people keep dying on Seattle’s streets. Every week.