To Help the Homeless, Seattle Will Tax Big Companies Like Amazon and Starbucks

by | May 15, 2018

By Matt Day and Daniel Beekman

After a weekend of high-stakes negotiations between Seattle City Council members and Mayor Jenny Durkan, the council voted unanimously Monday to tax the city's largest employers to help address homelessness.

Starting next year, the tax will be $275 per employee, per year on for-profit companies that gross at least $20 million per year in the city -- down from a $500-per-head proposal that Durkan threatened to veto.

The city declared a homelessness state of emergency in late 2015. A point-in-time count last year tallied more than 11,600 homeless people in King County and one in 16 Seattle Public Schools students is homeless.

"We have community members who are dying," Councilmember Teresa Mosqueda said before the 9-0 vote. "They are dying on our streets today because there is not enough shelter" and affordable housing.

In a statement after the vote and weeks of fierce debate, demonstrations and denunciations, she said the tax "will have a meaningful impact on addressing our homelessness crisis by building housing and providing health services."

Having paused construction planning on an office tower over the larger proposal, Amazon now will move ahead with it, a spokesman said after the vote. But the company's plans to occupy a skyscraper under construction are still up the air, he said.

"We are disappointed by today's City Council decision to introduce a tax on jobs," spokesman Drew Herdener said in a statement.

"While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council's hostile approach and rhetoric toward larger businesses, which forces us to question our growth here."

Council members were working on the deal past midnight Sunday, and council staff postponed Mother's Day plans to assist, they said. On the line: money to house struggling people, Seattle's reputation as a tech-boom town and the city's political soul.

About 3 percent of Seattle businesses will be taxed, raising about $47 million per year, according to the council.

The larger proposal would have raised $86 million annually, according to a council estimate Monday, based on updated data from the city's budget office.

The council ordinance calls for the tax to end after five years, with renewal requiring a council vote in 2023.

With more than 45,000 employees in the city, Amazon could pay more than $10 million per year. Some proponents of the measure used the slogan "tax Amazon," arguing the e-commerce behemoth owed Seattle help with its affordability problem.

Other companies set to be taxed include Starbucks, The Seattle Times and longtime, family-owned supermarket Uwajimaya.

The tax that won approval is much smaller than the proposal that had been under consideration for many weeks and that was vehemently opposed by the Seattle Metropolitan Chamber of Commerce.

 

The compromise

For months, Durkan left council members to drive the public discussion. But a 5-4 council split over the $500-per-head proposal raised the prospect she could exercise her veto power and forced her to engage.

A new law needs six votes to override a mayoral veto.

On one side were homeless advocates, service-worker unions and voters looking for Seattle to do more to help vulnerable people. On the other were business leaders, construction-worker unions and voters critical of how City Hall has been spending money.

Amazon contributed $350,000 this past year to a business group that supported Durkan's mayoral campaign.

At Monday's council meeting, some in the crowd waved signs that read "housing first," while others countered with signs that read "results first."

In the end, Durkan pushed for the smaller tax. She plans to sign the legislation, she said Monday.

Under the original proposal, the city would have switched from a head tax to a 0.7 percent payroll tax in 2021 -- a change to help low-margin businesses with many modestly paid workers, such as supermarkets. Under the approved ordinance, there will be no payroll tax.

"We saw what happens when we come together, sit down together, and work together -- we can find common ground and get things done," Durkan said in a statement.

Activists who spent months lobbying for a head tax on large employers hailed the council's action.

"Is this bill everything we hoped for? No. Is it a major step forward? Absolutely," the Transit Riders Union said in an email to supporters.

Working Washington, a union-backed advocacy group that accused Amazon of felony intimidation last week over the company's planning pause, also applauded the vote.

"Seattle refused to knuckle under," the group said in an email.

Amazon will resume planning for its Block 18 tower and continue weighing whether to sublease the space in the Rainier Square skyscraper, Herdener said. Before the tax debate, the retail giant had been expecting the two buildings to accommodate about 7,000 employees.

In a biting statement, a Starbucks spokesman accused city leaders of failing to spend effectively on homelessness and ignoring children sleeping outside.

"If they cannot provide a warm meal and safe bed to a five-year-old child, no one believes they will be able to make housing affordable or address opiate addiction," said John Kelly, the company's top public-affairs executive.

Councilmember Kshama Sawant cast the only "no" vote Monday on an amendment that reduced the size of the tax but joined her colleagues approving the overall measure. She mentioned the immense wealth Amazon has created for CEO Jeff Bezos, who recently became the world's richest person and is worth an estimated $130 billion.

"There is no way this tax will be a burden on big businesses in Seattle," Sawant said, slamming the mayor for siding with "Amazon billionaires."

 

How money will be spent

Along with the tax Monday, the council approved a nonbinding resolution that calls for spending 66 percent of the new money on affordable housing, 32 percent on emergency shelter, trash pickup, raises for service workers and other needs, and 2 percent on administration.

The plan says the revenue could help build 591 units of low-income housing over five years -- down from 1,700 units slated under the $500-per-head tax.

An effort by Sawant to prohibit any of the revenue from being spent on sweeps of unauthorized homeless encampments was voted down 8-1.

In a news conference after the council acted, Durkan expressed dissatisfaction with the council's spending plan. The mayor wants a greater percentage of the money spent on emergency options and on addressing street encampments.

Durkan stressed the city must be transparent with Seattle residents about how the revenue is spent. She said she would create an oversight committee to monitor that.

"As a city we have to know that our strategies are going to work," the mayor said, also calling on King County and state lawmakers to "step up and shoulder their fair share" in dealing with homelessness.

Homeless-services workers and unions representing supermarket and hotel workers, among others, supported the larger tax proposal, which was sponsored by Councilmembers Mosqueda, M. Lorena González, Lisa Herbold and Mike O'Brien.

They said companies such as Amazon have contributed to homelessness because their highly paid employees have sent rents and home prices soaring.

"We could not find the votes we needed," a disappointed O'Brien said before voting for the smaller proposal.

González said she was in regular contact with Durkan over the weekend and had "a couple of work sessions with her and her staff."

The council member said she had hoped to be voting "on a different package" with more money, but "I'm glad to be able to finally move this forward."

Construction-worker unions worried about losing work building for Amazon opposed the larger tax, as did Council President Bruce Harrell, Councilmembers Sally Bagshaw, Debora Juarez and Rob Johnson. Some business leaders said the city should instead ease zoning restrictions to allow more new housing.

Though Seattle's population grew 11 percent from 2012 to 2016, its government spending rose much faster, even accounting for inflation.

The city budgeted $63million for homeless programs and will invest more than $100 million in affordable housing this year.

"The city does not have a revenue problem -- it has a spending efficiency problem," Herdener said in his statement for Amazon.

Johnson called the $275-per-head tax a "reasonable compromise that will allow us to make real progress."

(c)2018 The Seattle Times