>> GOOD AFTERNOON EVERYBODY.
THANK YOU FOR COMING BACK TO
THE SEATTLE CITY COUNCIL SELECT
BUDGET COMMITTEE MEETING. I'M
TERESA MOSQUEDA, CHAIR OF THE
COMMITTEE. THE TIME IS TO:0 4
PM AND THE COMMITTEE WILL COME
BACK TO ORDER FROM RECESS. CAN
YOU PLEASE CALL THE ROLE?
>> HERBOLD?
>> HERE.
>> JUAREZ?
>> I JUST SAW HER.
>> HERE.
>> LEWIS?
>> PRESENT.
>> MORALES?
>> HERE.
>> NELSON? PEDERSEN?
>> HERE.
>> SAWANT? SORRY, SAWANT IS
EXCUSED. STRAUSS? CHAIR
MOSQUEDA?
>> PRESENT.
>> SIX PRESENT.
>> THANK YOU SO MUCH,
COLLEAGUES. WE ARE ON A TRIED
-- AGENDA ITEM NUMBER 28. WE
BEGAN A DISCUSSION ON THIS IN
THE FIRST SESSION OF THE
MEETING. WE ALREADY PROVIDED AN
OVERVIEW OF THE REVENUE
STABILIZATION WORK GROUP
UPDATES IN THE REPORT OUT FROM
CENTRAL STAFF ON THE WORK THEY
HAVE DONE EARLIER THIS FALL.
THANK YOU VERY MUCH FOR ALL OF
THE WORK IN THAT REGARD. WE
STILL HAVE WITH US A NUMBER OF
OTHER AGENDA ITEMS THAT WE ARE
GOING TO COVER AS PART OF THIS
AFTERNOON'S BRIEFING AND WE ARE
GOING TO START WITH THE FISCAL
TRANSPARENCY LEGISLATION .
THANKS AGAIN TO ESTHER HANDY,
OUR DIRECTOR OF CENTRAL STAFF
FOR HER WORK ON THIS. THERE ARE
TWO PIECE OF LEGISLATION THAT
THIS TOPIC CORRESPONDS WITH AND
I WILL TURN IT OVER TO DIRECTOR
HANDY WHO WILL PROVIDE US AN
OVERVIEW AS A REMINDER OF THE
WORK THAT THEY ACCOMPLISHED
WITH THE CITY BUDGET'S OFFICE,
THROUGH THE FISCAL TRANSPARENCY
WORK GROUP THAT THEY
PARTICIPATED IN AND THE
SUBSEQUENT LEGISLATION THAT IS
IN FRONT OF US THAT WILL BE UP
FOR VOTE ON NOVEMBER 30. AGAIN,
MY HOPE IS THAT THESE TWO
PIECES OF LEGISLATION OFFER
RADAR OPPORTUNITIES FOR BOTH
COLLEAGUES AND MEMBERS OF THE
PUBLIC, AS WELL AS THE
INTERACTION AND TRANSPARENCY
BETWEEN THE EXECUTIVE AND THE
LEGISLATIVE BRANCH TO BE MORE
CODIFIED IN A STREAMLINED WAY
FOR FUTURE FLOW OF INFORMATION
BETWEEN BRANCHES OF GOVERNMENT
IN A PROACTIVE WAY. WE WILL
TALK MORE ABOUT THAT
AFTERWARDS. COUNCILMEMBER
PEDERSEN, I AM LOOKING AT YOU,
SPEAKING OF OUR EARLIER
CONVERSATION ABOUT THE
IMPORTANCE OF THE INDEPENDENCE
OF EACH BRANCH OF GOVERNMENT. I
HOPE THAT THIS IS A USEFUL TOOL
FOR FUTURE DISCUSSIONS AS WELL.
WITH THAT, WE WILL TURN IT OVER
TO DIRECTOR HANDY TO WALK TO
THE LEGISLATION.
>> THANK YOU. GOOD AFTERNOON,
COMMITTEE MEMBERS. AS THE
CHAIR SAID, I WILL BRIEF THE
COMMITTEE ON TWO PIECES OF
LEGISLATION, A FISCAL ORDINANCE
AND A BUDGET PROCESS
RESOLUTION. THESE BILLS ARE THE
RESULT OF SEVERAL YEARS OF WORK
AND RECOGNIZING THAT MANAGING
$7.8 MILLION BUDGET FOR LOCAL
GOVERNMENT WITH 13,000
EMPLOYEES IS A LARGE AND
COMPLEX TASK. IT TAKES
COORDINATION UP AND DOWN THE
ORGANIZATION FROM FRONT-LINE
SUPERVISORS THAT ARE MANAGING
THE BUDGET, FINANCE DIRECTORS
THAT ARE MANAGING THE
DEPARTMENT BUDGET, ANALYSTS AT
THE CITY BUDGET AND ANALYSTS
WORKING CITYWIDE AND YOU ALL AS
ELECTED DECISION-MAKERS IN BOTH
BRANCHES OF GOVERNMENT WHO ARE
RESPONSIBLE FOR MEETING THE
DEMAND FOR PUBLIC SERVICES
WITHIN A BALANCED BUDGET. THESE
BILLS ARE DEVELOPED TO PUT
ADDITIONAL TOOLS IN THE CITY'S
TOOLBOX TO SUPPORT THE
MANAGEMENT BOTH IN CITY
GOVERNMENT AND TO PROVIDE
TRANSPARENCY ABOUT THAT FISCAL
INFORMATION TO THE PUBLIC.
PATTY, NEXT SLIDE PLEASE. TO
DEVELOP THESE SPECIFIC -- A
2023 STATEMENT OF LEGISLATIVE
INTENT , EXPRESSES THE COUNCILS
INTEND TO UPDATE RESOLUTION
2885 RELATED TO THE BUDGET
PROCESS THROUGH LEGISLATION AND
ASK CENTRAL STAFF TO WORK
TOGETHER WITH THE CITY BUDGET
OFFICE TO PREPARE
RECOMMENDATIONS. IN JUNE, OUR
GROUP ISSUED EIGHT
RECOMMENDATIONS TO INCREASE
TRANSPARENCY OF CITY BUDGETING,
CREATE SUSTAINABLE BUDGETS AND
SHIFT THOSE SECOND YEAR BUDGET
PROCESS GOALS IN OUR BIANNUAL
PROCESS FOR FINANCIAL
MONITORING AND PLANNING. THE
GOAL WITH THAT IS MORE TIME ON
PLANNING AND MONITORING TO
PROVIDE BETTER INFORMATION TO
DECISION-MAKERS. IN ADDITION,
CHAIR MOSQUEDA HAD ASKED
CENTRAL STAFF TO SUPPORT BEST
PRACTICES FROM AROUND THE
COUNTRY WHICH WERE PRESENTED TO
THE HOUSING COMMITTEE. I WANT
TO THINK WAS OUR FISCAL POLICY
TEAM AND OUR DEPUTY DIRECTOR
ALY PENNUCCI FOR BOTH HER WORK
ON THE ROOF -- WORKGROUP AND
DEVELOPMENT OF THESE. FIRST, I
AM GOING TO WALK THROUGH WHAT
THE FISCAL TRANSPARENCY
ORDINANCE DOES.
>> THIS ORDINANCE ESTABLISHES A
CODE, A FISCAL TRANSPARENCY
PROGRAM AS A FORMAL POLICY OF
THE CITY. IN DOING SO, IT
CONSOLIDATES THE EXISTING
FINANCIAL REPORTING INFORMATION
ON PAST ACTIVITIES, CURRENT
ACTIVITIES AND FUTURE FINANCIAL
PROJECTIONS INTO A SINGLE
SECTION OF THE CODE, SECTION
3.14. IT IS EASIER TO FIND AND
TRACK WHAT THOSE REPORTING
REQUIREMENTS ARE INSIDE THIS
FISCAL TRANSPARENCY PROGRAM.
>> NEXT SLIDE. I WILL GO
THROUGH THESE THREE AND THEN WE
CAN TAKE QUESTIONS. SECOND, IT
ESTABLISHES REQUIREMENTS FOR
SUMMARY IN FISCAL NOTES. IT
REQUIRES THAT FISCAL NOTES BE
PREPARED AND TRANSMITTED WITH
LEGISLATION , AS IS OUR CURRENT
PRACTICE AND THAT FISCAL NOTES
WOULD BE UPDATED AFTER
COMMITTEE ACTION BEFORE A CITY
COUNCIL VOTE AND AFTER FINAL
ACTION BY THE CITY COUNCIL.
THERE IS A FISCAL NOTE IN THE
RECORD THAT REFLECTS THE FINAL
BILL. THIS WILL BE NEW WORK FOR
CENTRAL STAFF BEGINNING IN 2024
TO UPDATE THESE FISCAL NOTES
THROUGHOUT THE COUNCIL'S
LEGISLATIVE PROCESS. IN TERMS
OF THE CONTENT, THE BILL
REQUIRES INCOME BE MAINTAINED
AND DEVELOPED BY THE CITY
BUDGET OFFICE AND CENTRAL
STAFF. IT WOULD INCLUDE A BILL
SUMMARY AS IS CURRENTLY
REQUIRED, A FISCAL IMPACT FOR
THE CURRENT YEAR AND FOUR
FUTURE YEARS. THAT PART IS NEW
AND REQUIRED INFORMATION
CURRENTLY REQUIRED ABOUT
CAPITAL IMPACTS THROUGH OTHER
LEGISLATION BE INCLUDED IN THE
FISCAL NOTES. THEN, NEXT SLIDE.
THE ORDINANCE UPDATES THE CITY
BUDGET OFFICE IN CODE TO ADD
FINANCIAL REPORTING
RESPONSIBILITY REFLECTING THE
VARIETY OF REPORTING
RESPONSIBILITIES THAT THEY
HAVE. THEN, IT UPDATES THE CITY
BUDGET OFFICE'S AUTHORITY TO
MAKE MIDYEAR TRANSFERS. THIS
UPDATE WOULD ALLOW A TRANSFER
UP TO A TOTAL VALUE OF 10% OF
THE RECEIVING BILL OR $250,000.
THIS WILL ALLOW TRANSFERS IN
AND OUT OF SMALL WHILE
RETAINING THE TRANSFERS THAT
MAY NEVER RESULT IN THE
CUMULATIVE ANNUAL NET TRANSFER
OF MORE THAN HALF $1 MILLION
INTO A SINGLE BUDGET
CONTROLLABLE WITHOUT COUNCIL
APPROVAL. THE EXISTING CODE
OFFERS SOME FLEXIBILITY FOR THE
BUDGET DIRECTOR TO
ADMINISTRATIVELY MOVE SMALL
AMOUNTS OF MONEY MIDYEAR. THIS
IS A SMALL UPDATE TO THAT. I
THINK I WILL PAUSE THERE AND
SEE IF THERE ARE ANY QUESTIONS
ABOUT THE SUBSTANCE OF THE
ORDINANCE AND IF NOT, WE WILL
MOVE ON TO THE RESOLUTION.
>> ICY COUNCILMEMBER MORALES '
HAND.
>> I WILL ASK A QUESTION THEN.
THANK YOU . I WONDER, ON THIS
LAST POINT, IF YOU CAN TALK A
LITTLE BIT MORE ABOUT THE
RATIONALE FOR EITHER THE
PERCENTAGE OR THE AMOUNT
INCLUDED HERE AND HOW IT
DIFFERS FROM WHAT IS ALREADY
ALLOWED.
>> OUR FISCAL ANALYSTS BOTH AT
CBO AND THE FISCAL WORKGROUP
LOOKED BACK ON SEVERAL YEARS OF
TRANSFERS AND WHAT THEY NOTICED
WAS PARTICULARLY WHEN A SMALL
BCL HAD NO RESOURCES IN IT, YOU
COULD NOT TRANSFER IN IT
MIDYEAR BECAUSE 10% OF ZERO IS
ALWAYS ZERO . I DON'T HAVE A
GREAT POLICY OF WHAT THIS LOOKS
LIKE IN PRACTICE BUT THEY FOUND
A FEW CASES WHERE IT MADE SENSE
TO MOVE SMALL AMOUNTS OF
FUNDING AROUND UNDERNEATH THE
HALF-MILLION DOLLAR CAP BUT THE
PERCENT WAS THE BARRIER TO
MAKING IT HAPPEN. THIS KEEPS
THE OVERALL CAP AND MAKES IT
EASIER FOR SOME OF THE SMALLER
DOLLARS TO MOVE AMONGST SMALL
BUDGETS.
>> OKAY. THANK YOU.
>> NOT SEEN QUESTIONS. I'M
HAPPY TO MOVE -- I SEE ANOTHER
HAND.
>> I DON'T KNOW IF THIS
QUESTION IS BETTER NOW OR AFTER
THE RESOLUTION BUT, IS THIS THE
PRODUCT OF CONVERSATIONS WITH
BOTH THE CITY BUDGET OFFICE AND
THE OFFICE OF EXECUTIVE
FORECASTING AND REVENUE? I
THINK I HEARD IN ONE OF THOSE
MEETINGS IN THE PAST THAT THERE
WAS A LOT OF ALIGNMENT BETWEEN
CHAIR MOSQUEDA AND BEN NOBLE
ON SOME OF THESE THINGS. I JUST
WANT TO MAKE SURE I AM NOT
COMPLETING CONVERSATIONS.
>> THIS WORKGROUP WAS LARGELY
BETWEEN THE CITY BUDGET OFFICE
AND CENTRAL STAFF. THERE ARE
NOT NEW REQUIREMENTS FOR THE
OFFICE OF ECONOMIC REVENUE
FORECAST. IT DOES UPDATE -- IT
MOVES SOME OF THE REQUIREMENTS
ABOUT THEIR FORECASTING INTO
THIS SECTION OF THE CODE ABOUT
FISCAL TRANSPARENCY. YOU CAN
SEE IT DOES NOT TOUCH THEIR
WORK.
>> THANK YOU.
>> YEAH.
>> PATTY, LET'S GO TO THE NEXT
SLIDE. I AM HAPPY TO TAKE MORE
QUESTIONS ABOUT ALL OF IT ONCE
WE GET THROUGH THE RESOLUTION.
THE BUDGET PROCESS RESOLUTION
REPLACES AND SUPERSEDES OUR
CURRENT RESOLUTION ABOUT
BIANNUAL BUDGETING. THAT IS
2885 THAT WAS ESTABLISHED AND
ADOPTED IN 1994. THIS DEFINES
THE CITY'S MODIFIED BIANNUAL
PROCESS AND CONTINUES THE
PRACTICE OF HAVING THE COUNCIL
CONSIDER TWO BUDGET YEARS
TOGETHER, ADOPTING A FIRST-YEAR
BUDGET AND ORDINANCE AND
ENDORSING A YEAR 2 BUDGET BY
RESOLUTION AND ENCOURAGES US
TO CONTINUE PRACTICES THAT WERE
ADOPTED THIS YEAR WHERE THE
EXECUTIVE DEPARTMENT REALLY
FOCUSED ON CHANGES BALANCED
WITHIN DEPARTMENTS AND HELPS US
FOCUS OUR REVIEW ON CHANGES
AGAINST THE ENDORSED BUDGET
RATHER THAN A TOP TO BOTTOM
START FROM THE BEGINNING OF THE
YEAR WITH THE BIANNUAL PROCESS.
THE RESOLUTION ALSO DEFINES THE
TYPES OF ALLOWABLE BUDGET
CHANGES AND DEFINES THEIR
EXPECTED CADENCE. THAT INCLUDES
AN ANNUAL CARRYFORWARD
ORDINANCE TO BE DELIVERED TO
THE COUNCIL BY APRIL 1. YEAR
END SUPPLEMENTAL BILL,
CONTINUING TO PRACTICE THE YEAR
END SUPPLEMENTAL BILL COMES
WITH A PROPOSED BUDGET FOR THE
NEXT YEAR AND THEN SUPPLEMENTAL
GRANT APPROPRIATION BILL UP TO
THREE TIMES A YEAR THAT ACCEPT
INAPPROPRIATE GRANTS IN A
SINGLE ORDINANCE. THIS IS A
CADENCE THAT WE HAVE BEEN
PILOTING OVER THE LAST YEAR OR
TWO IN THIS ESTABLISHES A
CADENCE AND POLICY TO MAKE IT
MORE PREDICTABLE, RETAINING
FLEXIBILITY, SHOULD THERE BE
ANY EMERGENCY OR SIGNIFICANT
CHANGE IN ECONOMIC CONDITIONS
THAT REQUIRE LOOKING AT MIDYEAR
CHANGES.
>> NEXT SLIDE. THE RESOLUTION
ALSO CHARTS A PATH TO EXPLORE
-- CHAIR MOSQUEDA, DO YOU WANT
ME TO PAUSE HERE?
>> ITEMS ONE, TWO AND THREE
HERE, ALL ARE THOSE ALL
CONSISTENT WITH THE EXISTING
RESOLUTION? WE HAD BEEN TRYING
THIS APPROACH, WHICH LED ME TO
BELIEVE THAT MAYBE IT IS NOT
THE APPROACH THAT THE
RESOLUTION CURRENTLY
RECOMMENDS.
>> 12 AND THREE HERE GET MORE
SPECIFIC THAN THE CURRENT
RESOLUTION DOES. THE CURRENT
RESOLUTION IS PRETTY SPECIFIC
ABOUT THE BIANNUAL PROCESS BUT
THE TIMING WITH THE
SUPPLEMENTAL, HAVING THEM
COMING WITH THE BUDGET IS NEW
IN POLICY. THIS WAS THE FIRST
YEAR WE DID GRANT APPROPRIATION
BILLS THAT ACCEPTED
APPROPRIATED GRANTS TOGETHER.
THIS IS MORE PRESCRIPTIVE.
>> VERY HELPFUL. THANK YOU.
>> GREAT. THE RESOLUTION
CHARGES A PATH TO EXPLORE NEW
CITY PLANNING RESERVES. THOSE
PRACTICES BEING EXPLORED WOULD
BE TO BRIEF THE COMMITTEE ON
LABOR RESERVES PRIOR TO THE
BUDGET AND TO CREATE AN
APPROPRIATE RISK RESERVE FOR
ANY RESOURCES WITH
CONFIDENTIALITY CONSIDERATIONS
LIKE RESERVES FOR THE JUDGMENT
AND CLAIMS FUND . THIS
RESOLUTION ASKS FOR A REPORT TO
THE SELECT BUDGET COMMITTEE BY
JUNE 30, ABOUT THOSE OPTIONS SO
THAT THERE IS A POLICY
CONVERSATION ABOUT HOW THOSE
WILL BE ADDRESSED.
>> FINALLY, THE RESOLUTION IN
CARING FOR CONTENT MAINTAINS
THE POSITION LIST REQUIREMENTS
IN THAT RESOLUTION.
>> COUNCILMEMBER PEDERSEN?
>> THANK YOU, CHAIR MOSQUEDA.
DIRECTOR HANDY, ON THIS SLIDE,
WHEN IT TALKS ABOUT THE
PLANNING RESERVES AND SELECT
LABOR COMMITTEE, ONE OF THE
ISSUES THAT CAME UP YESTERDAY
WAS WHEN WE WERE TRYING TO GET
MORE INFORMATION FROM THE
EXECUTIVE ON THE CENTRAL
SERVICE COSTS. I THINK MOST OF
US ARE FAMILIAR WITH THIS
PLANNING RESERVE ISSUE BUT,
THEN THERE WAS THIS NEW WRINKLE
YESTERDAY WHERE THEY WERE
SAYING THAT THERE MAY BE SOME
LABOR STUFF IN THIS CENTRAL
SERVICE COST. IT WAS VERY
OPAQUE . I THINK I WOULD BE
INTERESTED IN WHAT WE HAVE
LEARNED THE LAST COUPLE OF
WEEKS, WHETHER THERE NEEDS TO
BE AN AMENDMENT TO THIS. MAYBE
THERE IS ANOTHER ITEM THAT CAN
BE ADDED TO THE RESOLUTION TO
GET THE CENTRAL SERVICE COST
INFORMATION SINCE THAT IS
SOMETHING WE HAVE BECOME MORE
AWARE OF IN THE FIRST COUPLE OF
WEEKS SINCE THIS RESOLUTION
DRAFT. I JUST WANT TO SIGNAL
THAT.
>> I APPRECIATE THAT AND AM
HAPPY TO TALK OFF-LINE WITH YOU
ABOUT WHAT THAT MIGHT LOOK
LIKE. I THINK IT IS LIKELY
SLIGHTLY DISTINCT FROM WHAT IS
BEING ADDRESSED HERE IN THE
PLANNING RESERVES BUT SOMETHING
ABOUT INTENTION IS WHAT WE WANT
TO GET TO WITH FURTHER
TRANSPARENCY AND INFORMATION
ABOUT THOSE INTERNAL SERVICE
COSTS.
>> PERHAPS IT COULD BE PART OF
THE ORDINANCE INSTEAD WITH MORE
DIRECTIVES. WE WILL TALK ABOUT
THAT IN A MINUTE. I HEAR YOUR
CONCERN ON THAT AND THE THING
THAT WAS A CONCERN WITH ME AND
YESTERDAY'S DISCUSSION WAS THE
POTENTIAL IMPACT ON PAPER. WHAT
I HEARD FROM CENTRAL STAFF WAS
THAT IT IS UNKNOWN HOW THE
CHANGES THAT WERE BEING
PROPOSED WITH THAT SPECIFIC
AMENDMENT WOULD BE APPOINTED
BUT THAT THE EXECUTIVE HAVE THE
ABILITY TO MAKE THINGS HOW WE
WANTED. I THINK YOUR COMMENT
RIGHT NOW IS A WAY TO GET MORE
INFORMATION AND IT IS LESS
SUBJECTIVE TO WHAT ONE
INDIVIDUAL'S PRIORITY WOULD BE
OR HOW THEY WOULD APPLY THE
POTENTIAL REDUCTION FOR GREATER
TRANSPARENCY ON THAT WHICH
WOULD HAVE BEEN HELPFUL TO
EVERYONE. I APPRECIATE WHERE
YOU ARE COMING FROM AND I WOULD
BE INTERESTED IN WORKING WITH
YOU AND CENTRAL STAFF ON
SOMETHING THAT IS LITTLE MORE
DIRECT.
>> THANK YOU.
>> THE NEXT SLIDE INCLUDES THE
LESS SIGNIFICANT SECTION OF THE
RESOLUTION, WHICH IS TO DEFINE
A CURRENT YEAR OF FINANCIAL
REPORTING PROGRAM. THE CITY
BUDGET OFFICE AND THE OFFICE OF
CITY FINANCE HAVE BEEN WORKING,
I THINK, SINCE THE DATE
DIRECTOR JULIE STEPPED INTO HER
ROLL. SHE HAS A FINANCIAL
MONITORING PROGRAM THAT
LAUNCHED THIS. THIS RESOLUTION
WAS FORMALIZED INTO POLICY AND
REQUIRES CITYWIDE REPORTING TO
THE COUNCIL TWICE A YEAR
GETTING IN THE THIRD QUARTER OF
2025 WHEN THE PROGRAM IS FULLY
BUILT OUT ON BUDGET TO ACTUAL
SPENDING MIDYEAR AND YEAR END.
THE PILOT PROGRAM THAT LAUNCHED
THIS SPRING REDUCED SPENDING
VARIANCES AT THE DEPARTMENT BY
$100,000. THIS RESOLUTION ASKED
TO DEFINE THE APPROPRIATE
THRESHOLDS FOR THIS MONITORING
AS THE PROGRAM DEVELOPS BY THE
FIRST HALF OF 2025 AND THE
INTENT HERE IS THAT THIS
REPORTING WILL PROVIDE BUDGET
DECISION-MAKERS BOTH AT THE
DEPARTMENT LEVEL, THE MAYOR'S
OFFICE, AND THE COUNCIL AN
ADDITIONAL INFORMATION ABOUT
THE YEAR TO DATE SPENDING TO
HELP YOU ALL UNDERSTAND WHAT
ARE THE COST OF DELIVERY AND
CITY SERVICES, WHEN IS THE
MIDYEAR SPENDING THAT IS
FREEING UP RESOURCES ? WHEN DO
WE INFORM BUDGET DECISIONS TO
MAKE THE BEST CHOICES AND MOST
SUSTAINABLE DECISIONS? THAT
ENDS THE SUMMARY ON THE
RESOLUTION. I WOULD BE HAPPY TO
TAKE QUESTIONS ON THE BILL.
>> THANK YOU. COUNCILMEMBER
HERBOLD?
>> THANK YOU. I AM WONDERING
WHETHER OR NOT THERE HAS BEEN
ANY PROGRESS MADE SUFFICIENT
ENOUGH TO CREATE AN EXPECTATION
MOVING FORWARD ON THE ISSUE OF
HAVING THE EXECUTIVE DEPARTMENT
REPORT OUT ON FUNDED VACANT
POSITIONS?
>> YEAH. I WILL ASK THE
DIRECTOR TO ASSIST HERE. I
THINK THAT THE BUDGET TO ACTUAL
REPORTING IS GOING TO PROVIDE
US SIGNIFICANT MORE INFORMATION
ABOUT THE IMPACT OF THOSE
VACANCIES ON A BUDGET MIDYEAR
AND YEAR END. THIS IS NOT AS
FAR AS THE POSITION-BASED
BUDGETING EXERCISE WERE DOLLARS
WOULD BE TIED DIRECTLY TO
POSITIONS. I THINK THIS MOVES
THE BALL FORWARD IN THE
CONVERSATION. DO YOU HAVE
ANYTHING YOU WANT TO ADD TO
THAT?
>> THIS BILL WILL NOT CONNECT
THE BUDGET TO POSITION. WE ARE
CONTINUING TO HAVE A
CONVERSATION IN COMMITTEE TO
TALK ABOUT THE NEW PROGRAM, THE
PERSONNEL MANAGEMENT PROGRAM
THAT MAY OFFER SOME. WE FOUND
THAT THERE WILL CONTINUE TO BE
A DISCONNECT BETWEEN THE BUDGET
AND FUNDED OR NOT FUNDED
POSITIONS BUT WE ARE IN
CONVERSATION WITH HOW WE CAN
MAKE THOSE PROJECTIONS. RIGHT
NOW, I AM NOT CLEAR THAT THIS
SYSTEM IS GOING TO SOLVE THAT
ISSUE.
>> FOLLOW-UP, PLEASE?
>> YEAH.
>> I AM NOT QUITE UNDERSTANDING
THE DIFFERENCE BETWEEN
CONNECTING POSITIONS TO BUDGET
AND THE CONCEPT OF JUST SIMPLY
KNOWING HOW MANY -- THE CONCEPT
THAT DR. HANDY IS TALKING ABOUT
WITH THE BALL MOVING FORWARD.
>> WHAT THIS BUDGET MONITORING
PROGRAM SHOULD SHOW US IS BY
BUDGET CONTROL LEVEL, WHERE
THEY ARE OVER, UNDER, OR IN
LINE WITH THEIR PROPOSED BUDGET
IN DIFFERENT BUDGET CONTROL
LEVELS. THAT INCLUDES A
PERSONNEL BUDGET. WE MIGHT KNOW
WHERE THERE WILL BE SOME
VACANCY SAVINGS BUT WE WON'T
ACTUALLY KNOW WHICH POSITIONS
UNTIL -- I AM NOT SURE WE ARE
GOING TO HAVE THAT LEVEL OF
INFORMATION. THROUGHOUT THE
YEAR, WE SHOULD BE ABLE TO GET
BETTER INFORMATION ABOUT WHERE
THERE ARE SAVINGS AND THE
DEPARTMENT. IT JUST WON'T BE
TIED TO SPECIFIC POSITIONS.
>> THANK YOU. THAT IS A STEP
FORWARD.
>> SPEAKING TO AN AREA I WAS
VERY INTERESTED IN RECEIVING, I
THINK IT IS ALSO A MATTER OF A
LACK OF TECHNOLOGY AT THIS
POINT. I THINK THERE WAS
INTEREST FROM THE CITY BUDGET'S
OFFICE THAT ALLOWS -- THAT
ALIGNS OUR INTERESTS IN REAL
TIME DATA BUT PLEASE CORRECT ME
IF I AM WRONG. IT SEEMS LIKE
THE CAPACITY TOOLS MEASURE FOR
MONITOR THAT IN ACTUAL REAL
TIME. IT IS TOTALLY UP TO PAR
AT THIS POINT.
>> I THINK IT IS A COMBINATION
OF OUR SYSTEM BUT ALSO HOW THE
CITY APPROACHES -- WE DON'T DO
THE POSITION-BASED BUDGETING
APPROACH. WE BUDGET AT THE
BUDGET CONTROL LEVEL. THERE IS
A DISCONNECT BETWEEN THE LEVEL
OF DETAIL AND INFORMATION THE
COUNCIL HAS BEEN REQUESTING FOR
AS MANY YEARS AS COUNCILMEMBER
HERBOLD AND I HAVE BEEN WORKING
TOGETHER, WHICH IS MORE THAN
EIGHT . IT IS SOMEWHAT OF A --
WE DON'T DO POSITION-BASED
BUDGETING. WE ARE LOOKING FOR
STRATEGIES ON HOW WE CAN GET
THAT INFORMATION WITHOUT
ENTIRELY CHANGING HOW THE CITY
APPROACHES BUILDING AND
AMENDING THEIR BUDGETS.
>> YEAH.
>> I WILL JUST ADD TO THE
OVERALL COMMENT . WHILE THE
ISSUE OF CAPACITY HAS COME UP,
MUCH OF WHICH IS OUTLINED IN
THIS ORDINANCE IS AN
IMPLEMENTATION OF EXISTING WORK
THAT IS BEING DONE WITH
CURRENT CAPACITY AT THE BUDGET
OFFICE OF CITY FINANCE IN
DEPARTMENTS WITH CENTRAL STAFF.
WHILE THE PILOT HAS LAUNCHED,
IT IS A NEW BODY OF WORK THAT
WE EXPECT TO BE ABLE TO DO OVER
THE LONG RUN WITH EXISTING
RESOURCES. THAT SAID, WE ALL
RECOGNIZE THAT 2024 IS GOING TO
BE A BIG BUDGET YEAR IN
DEVELOPING THE BUDGET,
ADDRESSING THE DEFICIT, HAVING
THE COUNCIL AND MAYOR WORK
TOGETHER ON THAT. WE EXPECT THE
CITY BUDGET OFFICE MAY REACH
SOME LIMIT IN THEIR OWN
CAPACITY WITH STANDING UP SOME
OF THESE PROGRAMS NEXT YEAR.
>> GREAT.
>> LET'S KEEP GOING.
>> THAT IS THE END OF MY
PRESENTATION. I AM HAPPY TO
PASS IT TO MY TEAM FOR THE NEXT
UNLESS THERE ARE COMMENTS ON
THE FISCAL TRANSPARENCY BILLS.
>> THANK YOU SO MUCH. I THINK
IF WE COULD GO BACK TO THE LAST
LINE, PLEASE. WELL, ACTUALLY
-- YOU CAN TAKE IT DOWN, PATTY.
THIS IS SOMETHING I FEEL REALLY
EXCITED ABOUT AND PASSIONATE
ABOUT. YOU CAN TELL THERE IS
MUCH MORE WE WANTED TO HAVE
ACCOMPLISHED HERE .
COUNCILMEMBER PEDERSEN,
FOLLOWING UP ON THE IDEA THAT
YOU HAVE AND IDEAS THAT OTHER
PEOPLE HAVE AND THAT THEY
WOULD LIKE TO SEE INCORPORATED.
PLEASE LET ME KNOW BY TOMORROW
AT 5:00. THAT IS THE DEADLINE
FOR CENTRAL STAFF SO THEY CAN
WORK AND GET SOME ITEMS
ACCOMPLISHED, GIVEN HOLIDAY
THAT WE HAVE COMING UP NEXT
WEEK. THINGS ARE MOVING FAST.
WE WOULD LIKE TO HAVE THOSE
CIRCULATED BEFORE ANY VOTE ON
THE 30th. THINK OUR GOAL IS TO
BE PUBLISHED EARLY IN THE WEEK.
WE WANT TO HAVE TIME TO REVIEW
THOSE AS PART OF THE PUBLIC
AGENDA. AGAIN, THERE IS A LOT I
WANTED TO DO IN THIS
LEGISLATION THAT WE ARE NOT
DOING BUT WE ARE TRYING TO FIND
SOME AREAS WHERE THERE IS
COMMON GROUND. SOME OF THESE
THINGS, PER OUR CONVERSATION WE
HAVE BEEN HAVING ALL DAY, ARE
THINGS THAT WILL SUPPORT THE
DEAL. IT IS IMPORTANT FOR US TO
BE ABLE TO HAVE ACCESS TO THIS.
THAT IS NOT FOR ME. IT IS NOT
FOR ANYBODY CURRENTLY IN OUR
SEAT. IT WILL BE IMPORTANT
POLICY DIRECTIVE FOR FUTURE
ELECTED TO BE ABLE TO ADHERE TO
ANY OF THE BRANCHES OF
GOVERNMENT AND CREATE A
MUCH-ANTICIPATED TRANSPARENCY
FOR THOSE WHO ARE WORKING TO
CRAFT THE BUDGET FOR ACTION. AS
A SUMMARY HERE, TWO PIECES OF
LEGISLATION THAT RELATES TO
FISCAL TRANSPARENCY AND A
RESOLUTION. IT REFLECTS CURRENT
PRACTICES WITH THE ANNUAL
BUDGET PROCESS AND CREATES A
NEW FISCAL TRANSPARENCY PROGRAM
THAT I AM HOPING TO PUT THROUGH
STAFF THROUGH THE SEATTLE
MUNICIPAL CODE TO CODIFY
CERTAIN TRANSPARENCY
REQUIREMENTS. THE INTENT OF THE
LEGISLATIVE PACKAGE IS TO
MEMORIALIZE IN POLICY THESE
PRACTICES AND PROCESSES. I
ALSO WANT TO THANK THE MEMBERS
OF THE CITY BUDGET'S OFFICE,
CENTRAL STAFF BUDGET AND THE
TEAM WHO WORKED ON THE FISCAL
TRANSPARENCY WORK GROUP
RECOMMENDATION THROUGHOUT THE
EARLIER PART OF THIS YEAR. IT
WAS REPORTED OUT TO THE FINANCE
COMMITTEE. BECAUSE OF THAT
WORK, THAT IS WHY WE HAVE THESE
COMPONENTS IN FRONT OF US, THE
RESOLUTION AND THE ORDINANCE. I
AM EXCITED THAT WE HAVE A
HANDFUL OF THE RECOMMENDATIONS
INCLUDED . IF YOU LOOK BACK,
YOU WILL SEE RECOMMENDATION
NUMBER ONE, WHICH IS A BIANNUAL
BUDGET DIRECTIVE, INCLUDING THE
BIANNUAL REVIEW PROCESS IN THE
MIDST OF . YOU WILL SEE
RECOMMENDATIONS NUMBER TWO AND
THREE WHICH IS FOR MIDYEAR
BUDGET CHANGES INCLUDING THE
GRANT ACCEPTANCE ORDINANCE AND
IN THE END OF THE YEAR
SUPPLEMENTAL GRANT FROM
SEPTEMBER AND FINALLY, THE NEXT
STEPS OF THE PLANNING RESERVE
INCLUDING THE DESIRE TO CREATE
THE APPROPRIATED RISK RESERVE
THAT IS OPERATIONALIZED IN THE
FUTURE BIANNUAL RECOMMENDATION.
>> THANK YOU AGAIN FOR ALL OF
THE WORK AND PLEASE LET US
KNOW. HAPPY TO WORK IN
PARTNERSHIP WITH YOU IF YOU
HAVE SOME TRANSPARENCY IDEAS.
WE ARE VERY OPEN TO THOSE. IF
YOU FEEL LIKE YOU NEED TO GO
DIRECTLY TO CENTRAL STAFF
WITHOUT US, YOU ARE WELCOME TO
DO THAT AS WELL. CENTRAL STAFF
WILL BE WORKING ON UPDATING THE
LEGISLATION TO TRY TO
ACCOMMODATE ANY OF THE SMALL
AMENDMENTS THAT YOU MAY HAVE.
WE HAVE A DEADLINE OF 5:00
TOMORROW. THANK YOU, COLLEAGUES
FOR YOUR ONGOING WORK TO TRY TO
ADVANCE SOME OF THESE CONCEPTS
AND I HOPE THAT THIS WILL BE A
GOOD FRAMEWORK FOR THE FUTURE.
>> LET'S KEEP GOING.
>> IF YOU WANT TO PULL UP THE
SLIDES FOR THE NEXT, WE ARE
TALKING PROVIDER PAY
LEGISLATION. I WILL HAND IT TO
MY COLLEAGUE FOR OUR NEXT
PRESENTATION.
>> GOOD AFTERNOON. I AM HAVING
A BIT OF A CAMERA ISSUE SO
PLEASE GIVE ME ONE SECOND.
THERE WE GO. A LOW-TECH ISSUE.
GOOD AFTERNOON. I AM JENNIFER
FROM CITY COUNCIL CENTRAL STAFF
AND I AM HERE THIS AFTERNOON TO
PRESENT ON A PROPOSED PROVIDER
PAY LEGISLATION . NEXT SLIDE.
AS A REMINDER, THE EXECUTIVE
2024 PROPOSED BUDGET
ADJUSTMENTS CONTAIN 4.3 MILLION
FOR A 2% INCREASE TO HUMAN
SERVICES CONTRACTS FOR THE
PURPOSES OF HUMAN SERVICE
PROVIDER PAY. THE MAJORITY OF
THOSE FUNDS ARE ABOUT 4.2
MILLION AND WILL GO TO ABOUT
200 CONTRACTS ADMINISTERED BY
THE HUMAN SERVICES DEPARTMENT.
THE REMAINING 100,000 WILL GO
TO EIGHT CONTRACTS ADMINISTERED
BY THE DEPARTMENT -- I'M SORRY,
THE DEPARTMENT OF EDUCATION AND
EARLY LEARNING AND ONE CONTRACT
ADMINISTERED BY THE DEPARTMENT
OF NEIGHBORHOODS. YESTERDAY,
THE BUDGET COMMITTEE ALSO
APPROVED THREE AMENDMENTS TO
INCREASE THE AMOUNT OF PROVIDER
PAY FUNDING IN THE 2024 BUDGET
. WITH THOSE THREE APPROVED
AMENDMENTS, THERE IS NOW A
TOTAL PROPOSED AMOUNT OF 5.1
MILLION FOR PROVIDER PAY IN THE
2024 BUDGET.
>> NEXT SLIDE.
>> THE PROVIDER PROPOSED
LEGISLATION REQUIRES THAT ANY
HUMAN SERVICES CONTRACT THAT
INCLUDES APPROPRIATED MONEY IS
EXPRESSLY RESERVED FOR THE
PURPOSE OF HUMAN SERVICES
PROVIDER PAY MUST BE USED ONLY
FOR WAGE INCREASES FOR HUMAN
SERVICES WORKERS. IT ALSO
REQUIRES THAT SUCH WAGE
INCREASES BE IN ADDITION TO
INFLATIONARY ADJUSTMENTS . THE
LEGISLATION ALSO ESTABLISHES
CONTRACTING AND REPORTING
REQUIREMENTS, WHICH WE WILL GO
INTO MORE DETAIL ABOUT IN THE
NEXT SLIDE. FINALLY, IT ADDS A
NEW CHAPTER TO TITLE 20 OF THE
SEATTLE MUNICIPAL CODE. BECAUSE
THIS LEGISLATION IMPACTS
CONTRACTS ACROSS MULTIPLE
DEPARTMENTS, NOT JUST THE HUMAN
SERVICES DEPARTMENT, WE ADD
THIS NEW CHAPTER TO TITLE 20
WHICH CONTAINS GENERAL CITYWIDE
CONTRACTING PROVISIONS RATHER
THAN A DEPARTMENT SPECIFIC
SECTION OF THE CODE.
>> I WILL TALK FOR A MOMENT
ABOUT THE REPORTING
REQUIREMENTS. THE LEGISLATION
REQUESTS AN ANNUAL REPORT BY
JUNE 30 REGARDING THE PRIOR
YEAR CONTRACT THAT WAS SUBJECT
TO THE LEGISLATION. FOR
EXAMPLE, THE REPORT WOULD BE IF
THE LEGISLATION PASSES, IT
WOULD BE THROUGH JUNE 30, 2025.
HS D IS RESPONSIBLE FOR
AGGREGATING THIS INFORMATION
FOR THEIR CONTRACTS PLUS
INFORMATION FROM A SMALL NUMBER
OF OTHER CONTRACTS BEING
ADMINISTERED BY THE DEPARTMENT
OF NEIGHBORHOODS AND THE
DEPARTMENT OF EDUCATION AND
EARLY LEARNING. THE REPORT MUST
INCLUDE THE FOLLOWING ITEMS. IT
MUST LIST ALL THE ORGANIZATIONS
WITH FUNDING FOR HUMAN SERVICES
PAY AND THE AMOUNTS OF FUNDING
IN THE CONTRACT FOR THAT
PURPOSE . IT MUST LIST ANY
ORGANIZATION WHO DECLINED THE
FUNDING AND THEIR RATIONALE AND
WHY WAS DECLINED AND MUST
PROVIDE A NARRATIVE ON HOW
PROVIDERS USE THE FUNDING
INCLUDING WHICH POSITIONS HAD
WAGE INCREASES DUE IN PART OR
IN FULL TO THE FUNDING AND MUST
DESCRIBE OTHER FUNDS
CONTRIBUTING TO PROVIDER PAY
INCREASES DURING THE SAME TIME
PERIOD AND PROVIDE A
DESCRIPTION OF ANY INFLATIONARY
ADJUSTMENTS THAT WERE ALSO
GIVEN TO STAFF INCLUDING THE
EXTENT TO WHICH THE
INFLATIONARY A JUDGMENT WERE
USED TO PAY FOR THOSE
INFLATIONARY ADJUSTMENTS.
AGAIN, THAT CODE REFERENCED
THERE IS PART OF THE CODE THAT
REQUIRES INFLATIONARY
ADJUSTMENTS FOR CONTRACTS
ADMINISTERED BY THE HUMAN
SERVICES DEPARTMENT.
>> NEXT SLIDE.
>> ONE IMPORTANT THING TO NOTE
HERE IS THAT THIS LEGISLATION
IS -- YOU CAN THINK OF IT AS
BEING LATENT OR DORMANT BUT IT
WILL ALSO NEED TO BE ACTIVATED
BY PROVISO. THE PROVISO IS A
STAFF THAT IS NEEDED TO
EXPRESSLY RESERVE THE BUDGET
FUNDS FOR PURPOSES OF PROVIDER
PAY WHICH THEN TRIGGERS OR
ACTIVATES THE REQUIREMENT FOUND
IN THIS LEGISLATION.
CONSEQUENTLY, HSD A NINE AND
HSD ONE AND TWO WHICH WERE
APPROVED BY THE BUDGET
COMMITTEE YESTERDAY CONTAINS
PROVISOS THAT RESTRICT $5.1
MILLION OF THE BUDGET IS SOLELY
FOR THE PURPOSES OF PROVIDER
PAY INCREASES. IF THERE IS
FUNDING FOR HUMAN SERVICES
PROVIDER PAY, IT FEATURES THE
BUDGET, WHETHER THAT IS ADDED
BY THE CITY COUNCIL. ADDITIONAL
PROVISOS WOULD BE NECESSARY TO
ACTIVATE THE REQUIREMENTS OF
THIS LEGISLATION.
>> FINALLY, HSD 12 S A, WHICH
WAS APPROVED BY THE BUDGET
COMMITTEE YESTERDAY, IS A
COMPANION PIECE TO THIS
PROPOSED LEGISLATION. IT
REQUESTS THAT BY JUNE 2024, HSD
SUBMIT A REPORT ON HOW THEY
INTEND TO IMPLEMENT THIS
LEGISLATION INCLUDING HOW THEY
INTEND TO IMPLEMENT THESE
REQUIREMENTS THROUGHOUT THE
CONTRACT NEGOTIATION, RECORDING
AND CONTRACT MONITORING
PROCESS. IT ALSO REQUESTS THAT
HSD HAVE STRATEGIES FOR TURNING
EQUITY INTO COMPETITIVE
FUNDING, RECOMMENDATIONS FOR
OTHER STRATEGIES TO EVALUATE
THE IMPACT OF PROVIDER PAY
FUNDING THAT CREATES OR
MINIMIZES ADMINISTRATIVE
BURDENS AND PROVIDES
RECOMMENDATIONS FOR OTHER
DEPARTMENTS THAT ADMINISTER
CONTRACTS WITH PROVIDER PAY
FUNDING ON HOW BEST TO
IMPLEMENT THE LEGISLATION. I
WILL STOP THERE FOR ANY
QUESTIONS.
>> I BELIEVE YOU ARE THE
CURRENT SPONSOR ON THIS
LEGISLATION. WOULD YOU LIKE TO
SPEAK TO IT?
>> I WANT TO FIRST THANK
JENNIFER FOR ALL OF HER WORK.
SHE HAS REALLY DUG INTO THIS
ISSUE AND REALLY GAVE US A
THOROUGH PIECE OF POLICY THAT
GETS TO OUR DESIRE, INTENT TO
CONFIRM THAT FUNDS PROVIDED FOR
PROVIDER PAY WITH THE GOAL OF
ADDRESSING THE PROVIDER PAY
PENALTY AS WE DESCRIBED IT,
WHICH IS A MULTIYEAR EFFORT
THAT WILL INEVITABLY BE TAKEN
UP NEXT YEAR. IT WILL BE
IMPORTANT TO SEE HOW THIS
YEAR'S PROVIDER PAY WAS
IMPLEMENTED IN A WAY THAT WAS
CONSISTENT WITH THE POLICY
OBJECTIVES. I APPRECIATE THE
WORK THAT HUMAN SERVICES
COALITION HAS DONE REVIEWING
THIS POLICY AND APPRECIATE THE
INPUT THAT WE HAVE RECEIVED
FROM HSD WITH THE UNDERSTANDING
THAT THERE WILL BE MUCH MORE
INPUT WITH LEGISLATIVE INTENT.
THIS IS SORT OF A FRAMEWORK FOR
HSD TO COME BACK TO US AND TELL
US HOW THEY INTEND TO IMPLEMENT
THE INTENT OF THE ORDINANCE. I
THINK THE OTHER THING I WOULD
WANT TO FLAG IS THIS NOTION OF
A PROVISO ACTING AS A TRIGGER.
I THINK THAT IS CERTAINLY A
CASE AS IT RELATES TO THIS
YEAR'S FUNDING AND IT MAY EVEN
BE THE CASE IN THE FUTURE YEARS
BUT IT IS ALSO POSSIBLE THAT
THE HUMAN SERVICES DEPARTMENT
WILL JUST BEGIN TO IMPLEMENT
THIS AT PRACTICE AND REPORT OUT
ON THIS WITHOUT HAVING THAT
DISCIPLINE OF THE PROVISO BEING
INCLUDED. IS THAT CORRECT, JEN?
>> I WOULD SAY THAT IN ORDER TO
TRIGGER THE LEGISLATION, THOSE
FUNDS NEED TO BE EXPRESSLY
RESERVED. A PROVISO IS USED TO
EXPRESSLY RESERVE OUR
CONVERSATIONS AND ARE NOT THE
BEST MECHANISM CURRENTLY
AVAILABLE TO BE ABLE TO DO
THAT.
>> SO IT IS LESS ABOUT THE
PROVISO TELLING HSD WE ARE
SERIOUS ABOUT THIS AND WE WANT
YOU TO GIVE US THIS REPORT, IT
IS MORE ABOUT THE SUM OF
DOLLARS WE ARE ASKING FOR THERE
TO BE A REPORT ON. THAT HAS TO
BE KNOWN.
>> IT HAS TO BE APPROPRIATED
FOR THAT SPECIFIC PURPOSE.
>> SUPER HELPFUL. THANK YOU.
>> ARE THERE ANY ADDITIONAL
QUESTIONS ON THIS?
>> COUNCILMEMBER NELSON, PLEASE
GO AHEAD.
>> SO, JUST TO MAKE SURE THAT I
AM SPEAKING TO THE RIGHT ITEM,
THIS IS A STATEMENT OF
LEGISLATIVE INTENT BUT WE ARE
ADDRESSING THE ORDINANCE AS
WELL?
>> YES. THE COUNCIL VOTED
YESTERDAY OR APPROVED THE
STATEMENT OF LEGISLATIVE
INTENT. THIS IS JUST YEAR FOR
CONTEXT AND THEN THERE IS THIS
COMPANION SLIDE THAT HAS A
REPORT FOR HOW THEY PLAN TO
IMPLEMENT THE LEGISLATION THAT
COUNCIL ALREADY MADE A DECISION
ON YESTERDAY.
>> OKAY. I JUST WANTED TO MAKE
SURE -- WHEN WOULD BE A GOOD
TIME TO SPEAK TO THE CONTENT OF
THE ORDINANCE?
>> GO AHEAD, COUNCILMEMBER
HERBOLD.
>> NOW IS THE RIGHT TIME TO
TALK ABOUT THE ORDINANCE.
>> OKAY. I AM WONDERING IF
THERE WAS ANY CONSIDERATION OF
INCLUDING ANY SECTION OR ANY
LANGUAGE ON CONTRACT
ADJUSTMENTS BEING BASED, IN
PART, OR INFLUENCED BY
PERFORMANCE METRICS OR
REPORTING MORE ANY OUTCOMES
MEASUREMENT. I ASK THAT BECAUSE
I BELIEVE THAT WE HAVE TO
ADDRESS THE FACT THAT WE NEED
TO BE ACCOUNTABLE TO WHAT THESE
CONTRACTS ARE PRODUCING AND WE
HAVE HAD SEVERAL DIFFERENT
GOALS OVER THE COURSE OF THIS
SUMMER AND OVER THE COURSE OF
LAST YEAR. THE MOST RECENT ONE
SAID THE COUNCIL'S APPROVAL
RATING IS AROUND 20%. PEOPLE
DON'T TRUST -- THE CITY IS
SPENDING THEIR TAX DOLLARS. A
COMMISSIONER POLL SAID THAT
ONLY 50% OF PEOPLE REALLY
APPROVE OF CITY COUNCIL. IT IS
A TRUST PROBLEM. WE HEARD THIS
MENTIONED A LOT OVER THE COURSE
OF LAST YEAR. PEOPLE WANT TO
MAKE SURE THAT WE ARE BEING
ACCOUNTABLE FOR PUBLIC
RESOURCES. THAT IS SOMETHING I
CAME INTO THE OFFICE THINKING
AS WELL. WHY AREN'T ADJUSTMENTS
BASED ON AN ANALYSIS OF WHETHER
OR NOT THEY MET THE
REQUIREMENTS THE PREVIOUS YEAR?
WAS THAT AT ALL CONTEMPLATED
WHEN TALKING ABOUT PROVIDER PAY
WITH THESE AUTOMATIC
ADJUSTMENTS THAT ARE ON TOP OF
OR IN ADDITION TO THE NEW WAGE
EQUITY CONTRACT ADJUSTMENTS?
>> IF I COULD, AS A SPONSOR,
JUST TAKE A SWING AT THAT.
THERE MAY BE MORE TO SAY AND I
WOULD REFER, AGAIN, ABOUT
WHETHER OR NOT THERE IS ROOM TO
REFINE THE CONCEPT. MY
RECOLLECTION IS THAT WE DECIDED
TO INCLUDE THIS ORDINANCE IN
THE CODE SECTION THAT RESULTS
IN ACCOUNTABILITY. HSD IS A
DEPARTMENT THAT RESULTS IN
ACCOUNTABILITY BY LAW. I JUST
HAVE TO REMEMBER THAT BECAUSE I
WAS THE SPONSOR OF THE
LEGISLATION. IT WAS AN EARLY
VERSION THAT WAS PROPOSED BY
THE THEN MAYOR AND WORKED WITH
THE ADMINISTRATION AT THE TIME
AND BROUGHT FORWARD A BILL
THAT IS NOW PART OF THE
MUNICIPAL CODE RELATING TO
RESULTS-BASED ACCOUNTABILITY IN
CONTRACTING. AGAIN, I SHOULD
DEFER TO JEN BECAUSE SHE HAS
BEEN WORKING WITH THIS PART OF
THE CODE MORE IN-DEPTH THAN I
HAVE. THAT WAS SEVERAL YEARS
AGO.
>> A COUPLE OF THINGS TO ADD TO
THAT. I WILL SAY THAT THIS
PARTICULAR ORDINANCE WOULD NOT
GO IN THE HSD SECTION OF THE
CODE THAT IS RELATED -- I'M
SORRY. I AM LOSING THE TERM.
THERE WAS A DECISION TO PUT
THIS ORDINANCE IN TITLE 20 OF
THE CODE, WHICH IS A GENERAL
CITYWIDE CONTRACTING POSITION.
IT IMPACTS THE DEPARTMENT OF
NEIGHBORHOODS. THAT SAID, THERE
IS A SECTION THAT DEALS
SPECIFICALLY WITH HSD CONTRACTS
THAT DOES USE THE
ACCOUNTABILITY FRAMEWORK AND
THE AGENCY DOES -- UNDER THAT
CODE, IS REQUIRED TO DO THE
CONTRACT EVERY FOUR YEARS, IN
PART, TO BE ABLE TO ASSESS
PERFORMANCE AND TO BE ABLE TO
MAKE ADJUSTMENTS AS NEEDED.
THEN, TO SPECIFICALLY SAY, TO
YOUR QUESTION, WE KNOW THERE
WAS NO SPECIFIC CONTEMPLATION
FOR THIS SPECIFIC ORDINANCE
ABOUT ADDING IN ACCOUNTABILITY.
>> THANK YOU FOR THAT. WE HAVE
RESULTS-BASED ACCOUNTABILITY.
THE LEGISLATION THAT YOU
REFERRED TO SAID, IN ADDING A
NEW SECTION TO THE SEATTLE
MUNICIPAL CODE TO EXEMPT
CONTRACTS FOR HUMAN SERVICES
EXECUTED BY THE DIRECTOR FOR
PROVISIONS OF CHAPTER 20.50.
ARE YOU SAYING TO THIS
LEGISLATION -- WHOSE CONTRACTS
ARE EXEMPTED?
>> WE CAN GET MORE INTO THE
OFF-LINE. I THINK WE ARE MAYBE
MIXING PARTS OF THE CODE. I AM
ALSO HAPPY TO SEND YOU A COPY
OF THE ORDINANCE OR THE LINK
THAT I WAS REFERRING TO
EARLIER.
>> OKAY. THANK YOU.
>> ANYTHING ELSE ON THIS ITEM?
>> OKAY. I WOULD LIKE TO ADD IN
MY APPRECIATION FOR THE
LEGISLATION . I WILL SAY THERE
IS A HUGE DISCONNECT BETWEEN
THIS CONVERSATION AND WHAT WE
HAD YESTERDAY. IF WE WANT
RESULTS, WE NEED TO FUND
PEOPLE. IF WE WANT THERE TO BE
CONSISTENT DELIVERY OF SERVICES
-- IF WE WANT THERE TO BE
IMPROVED OUTCOMES FOR THE
RESIDENTS AND THE COMMUNITY
THAT WE SERVE, WE NEED TO HAVE
MORE THINGS CONSTANTLY
AVAILABLE. THAT IS WHY IT IS
IMPORTANT TO INVEST IN WAGES.
THAT IS WHY IT IS IMPORTANT TO
INVEST IN INFLATIONARY -- THAT
IS WHY IT IS IMPORTANT TO DO
BOTH OF THOSE THINGS IN AN
EFFORT TO REDUCE SUSTAINABILITY
OF THE WORKFORCE AND IMPROVE
DELIVERY. THUS, IT COULD BE
MEASURED IF THERE IS ADDITIONAL
WORK. NUMBER TWO, WHILE THIS
STATISTICS -- THE STATISTICS
WERE RATTLED OFF, IF WE WANT TO
MEASURE THINGS, WE NEED TO
INVEST IN WHAT WORKS. I AM GLAD
THAT THE COUNCIL SUPPORTED THIS
TO CARRY OUT THE WORK THAT WE
ARE TALKING ABOUT IN THE LONG
TERM. I AM ALSO REMINDED THAT
CONGRESS CONSTANTLY HAS MARKS
THAT ARE REMARKABLY LOW IN IT
EVERY YEAR, CONGRESSIONAL
MEMBERS CONTINUE. ONE EXAMPLE
IS THAT EVEN THOUGH
CONGRESSIONAL APPROVAL IS AT
THE LOWEST RATE IN DECADES
ACCORDING TO A GALLUP POLL, 90%
OF HOUSE MEMBERS A 91% OF -- I
THINK IT IS A GOOD REMINDER. I
KNOW THOSE BROADLY LOOK AT
BODIES BUT IT IS IMPORTANT TO
NOTE THAT THOSE BROAD POLES ARE
WHERE PEOPLE PERCEIVE THE
ENTIRE INSTITUTION AND DON'T
ACTUALLY HAVE A BEARING AS TO
HOW PEOPLE LISTEN AND SEE WHAT
THEY ARE ELECTED TO DO. HERE WE
ARE TRYING TO INVEST IN OUR
MOST VULNERABLE COMMUNITY
MEMBERS BUT IN ORDER TO DO SO,
WE'VE GOT TO INVEST IN WAGES.
WE HAVE TO MAKE SURE PEOPLE CAN
HAVE THE COST OF LIVING WHEN
THE ACTUAL COST OF WHAT IS
NECESSARY TO PUT A ROOF OVER
THEIR HEAD ON FOOD ON THEIR
TABLE. IF WE DON'T DO SO, MORE
OF THE PEOPLE THAT CONTINUE TO
SERVE OUR MOST VULNERABLE, THEN
THEY THEMSELVES WILL BE
UNHOUSED, LIVING IN CARS AND
THAT IS NOT HEALTHY. WE HAVE TO
HAVE PART OF THE COHORT OF
COLLEAGUES WITH THIS ADVANCE OF
ISSUE. I THINK THIS LEGISLATION
IS CRITICAL TO HELPING TO
FULFILL A VISION OF GREATER
SUSTAINABILITY. IF WE DO THAT,
THEN WE CAN SHOW PEOPLE WHAT IS
BEING DONE. WE HAVE ALREADY
BEEN ABLE TO ACCOMPLISH MUCH OF
THAT FROM THAT OCTOBER 13
HEARING THAT WE HAD. AGAIN, I
ENCOURAGE PEOPLE TO LOOK FOR
ADDITIONAL DATA COMING FROM
THAT OCTOBER 13 MEETING,
PRELIMINARY RESULTS AND THE
ONGOING NEED TO INVEST IN THE
BASE WAGES OF WORKERS WITH THE
POLICY OUTLINED.
>> THANK YOU.
>> THAT WAS NOT FOR YOU. THAT
WAS THE CLOSING STATEMENT.
>> I WAS JUST GOING TO SAY, IT
IS NOT THAT I DON'T VALUE THE
WORK THAT PEOPLE ARE DOING. I
AM JUST SAYING THAT AT SOME
POINT, WE HAVE TO ESTABLISH
THAT WE ARE MAKING SURE THAT
THE CONTACTS ARE DOING WHAT WE
THOUGHT THEY WERE DOING. UNLIKE
CONGRESS, SEATTLE HAS TO PASS A
BALANCED BUDGET EVERY YEAR. WE
CAN'T JUST RAISE OUR DEBT
CEILING. THE POINT IS THAT,
YES, APPROVAL RATINGS FOR
CONGRESS ARE ALSO LOW. WE HAVE
TO MIND OUR EXPENSES, PERHAPS
MORE DILIGENTLY THAN THE
FEDERAL GOVERNMENT.
>> THANK YOU SO MUCH.
COUNCILMEMBER HERBOLD?
>> I JUST WANT TO -- I
MENTIONED THAT THIS LEGISLATION
IS INTENDED TO PRODUCE
INFORMATION THAT IS USEFUL TO
THE LONG-TERM EFFORT TO RAISE
WAGES, A MULTIYEAR CAMPAIGN
THAT THE COMMISSION IS WORKING
ON BOTH WITH SEATTLE AND OTHER
JURISDICTIONS BUT I ALSO WANTED
TO SAY THAT I HAVE HEARD MY
COLLEAGUES ASK FOR CONFIRMATION
THAT THE WAGE EQUITY INCREASES
ARE BEING USED WITH A PURPOSE ,
THAT WE ARE PASSING BUDGET
LEGISLATION TO ENACT. AGAIN, I
HAVE HEARD COUNCILMEMBERS SAY
THAT THERE IS CONCERN OR DOUBT
THAT THE FUNDS FOR RAISES MAY
NOT BE BEING USED FOR THAT.
THIS IS ALSO PART OF THAT
ACCOUNTABILITY THAT I HAVE BEEN
HEARING PEOPLE CALL FOR.
>> I REALLY APPRECIATE THAT.
THANK YOU. I AM GRATEFUL FOR
YOU FOR DOING THAT. THANK YOU.
>> ON THAT HIGH NOTE, I THINK
WE CAN GO AHEAD AND MOVE ON.
>> THANK YOU.
>> GOOD AFTERNOON, BRIAN.
>> GOOD AFTERNOON, CHAIR
MOSQUEDA AND COUNCIL MEMBERS.
FOR THE RECORD, BRIAN GOODMAN,
COUNCIL CENTRAL STAFF. THE NEXT
BILL THAT WE WILL BE TALKING
ABOUT TODAY IS COUNCIL BILL
120602 , A BILL THAT WOULD
REPEAL THE WATER UTILITY TAX.
THANK YOU IN ADVANCE TO PATTY
FOR DRIVING THE PRESENTATION.
DURING THE PRESENTATION, I WILL
FIRST COVER THE UTILITY TAX AND
THEN WE WILL SHIFT TO SOME
INFORMATION ON THE WATER RATE
STRUCTURE AND THAT IS JUST TO
HELP DESCRIBE THE CUSTOMERS
IMPACTED BY THIS UTILITY TAX.
NEXT, I WILL DESCRIBE THE
PROPOSED BILL AND POTENTIAL
IMPACTS AND THEN I WILL FINISH
BY DESCRIBING A PROPOSED
LEGISLATION.
>> THE CITY'S ABILITY TO OPPOSE
UTILITY TAXES DERIVED FROM THE
AUTHORITY TO PUT EXCISE TAXES
ON BUSINESSES OPERATING WITHIN
THE CITY'S BOUNDARIES. THE CITY
IMPOSES A VARIETY OF UTILITY
TAXES. THEY ARE LISTED ON THE
SLIDE THERE BUT SOME OF THEM
ARE ELECTRICITY, WATER,
DRAINAGE WATER. THE TAXES ARE
APPLIED TO BOTH PUBLIC AND
PRIVATE SERVICE PROVIDERS AND
IMPORTANTLY, THE TAXES ARE
APPLIED UPON THE UTILITY
BUSINESS ITSELF, NOT UPON
INDIVIDUAL UTILITY CUSTOMERS.
NEXT SLIDE, PLEASE.
>> ONE IMPORTANT DETAIL OF THE
UTILITY TAXES IS THAT THEY ARE
ONLY LEVIED ON REVENUE FROM
RETAIL SALES. WHOLESALE
REVENUES ARE NOT SUBJECT TO
UTILITY TAXES. AND A FEW
SLIDES, WE WILL GET TO MORE
DETAIL OF WHAT THE RETAIL
PORTION LOOKS LIKE FOR THE
WATER UTILITY. ANOTHER
IMPORTANT DETAIL FOR
ELECTRICITY AND WATER IS THAT
THE TAXES APPLY TO BUSINESS
PERFORMED BOTH INSIDE AND
OUTSIDE OF THE CITY. FOR
EXAMPLE, SEATTLE PUBLIC
UTILITIES PROVIDES RETAIL WATER
SERVICE TO CERTAIN CUSTOMERS
IN BURIEN. THE REVENUE THAT
GENERATES FROM THIS SERVICE IS
PASSED AT THE SAME RATE AS THE
REVENUE GENERATED FROM
CUSTOMERS WITHIN SEATTLE. NEXT
SLIDE, PLEASE.
>> REVENUES FROM THE UTILITY
TAXES GO INTO THE CITY'S
GENERAL FUND. THE CHART SHOWS
THE REVENUE FOR THE GENERAL
FUND IN THE 2023 ADOPTED
BUDGET. AS YOU CAN SEE IN THE
UPPER LEFT-HAND CORNER, UTILITY
TAXES FOR BOTH PUBLIC AND
PRIVATE SERVICE PROVIDERS ARE
EXPECTED TO GENERATE $232
MILLION TO THE GENERAL FUND
THIS YEAR AND THAT IS ABOUT 14%
OF ALL REVENUE FROM THE GENERAL
FUND. NEXT SLIDE, PLEASE.
>> THIS SLIDE SHOWS THE RATES
FOR THE VARIOUS TAXES AS THEY
ARE APPLIED ON CITY BUSINESSES.
THE UTILITY TAX ON ELECTRICITY
IS THE LOWEST AT 6% AND THE
HIGHEST RATE IS ON WATER AT
15.54%. STATE LAW LIMITS THE
TAX RATE THAT CAN BE ON CERTAIN
TYPES OF UTILITIES UNLESS THE
VOTERS IN THE JURISDICTION
APPROVE A HIGHER RATE AND
ELECTRICITY IN THIS INSTANCE IS
ONE OF THE TYPES THAT HAS THE
CAP AND THAT CAP IS 6%. THE
UTILITIES THAT SPU OPERATE
DON'T HAVE SPECIFIC CAPS IN THE
STATE LAW. SPENT TURNING TO THE
RATE STRUCTURE, THIS IS JUST
CONTEXT FOR YOU ALL ON HOW
WATER REVENUES ARE GENERATED.
THE FIRST STEP IS TO DETERMINE
THE REVENUE REQUIREMENTS FOR
THE WATER SYSTEM. THE REVENUE
REQUIREMENT IS THE AMOUNT OF
OPERATING NECESSARY TO FUND THE
BUDGET AND BE A FINANCIAL
TARGET. IN THE MOST BASIC
SENSE, WHEN EXPENSES INCREASE,
THE REVENUE REQUIREMENT WILL
ALSO IN THE OPPOSITE
RELATIONSHIP IS TRUE. TAXES,
INCLUDING THE CITY'S UTILITY
TAX ARE CONSIDERED AN OPERATING
ATTACKS FOR THE WATER SYSTEM
AND THEREFORE, THEY IMPACT THE
REVENUE REQUIREMENTS. NEXT
SLIDE, PLEASE.
>> SPU OPERATES FROM THREE MAIN
CATEGORIES, RETAIL WATER RATES,
WHOLESALE CONTRACT AND THEN
SOME OTHER NON-RATE REVENUES.
RETAIL WATER MAKES UP THE
MAJORITY OF THE PIE CHART ON
THE RIGHT WHICH INCLUDES
RESIDENTIAL CUSTOMERS, GENERAL
SERVICE CUSTOMERS, PRIVATE FIRE
AND PUBLIC FIRE AND THOSE MAKE
UP APPROXIMATELY 76% OF THE
WATER REVENUE. REVENUES FROM
WHOLESALE CONTRACTS AND THOSE
WITH NEARBY CITY AND WATER
DISTRICTS ACCOUNT FOR 20% OF
REVENUE. THAT IS THE GRAY SLICE
OF PIE. THE OTHER CATEGORY,
WHICH IS ABOUT 4%, THAT HAS
SOME ELEMENTS OF LATE FEES THAT
ARE SUBJECT TO THE TAX BUT ALSO
INCLUDES ELEMENTS THAT ARE NOT
IN THOSE WOULD BE THINGS LIKE
INTEREST RATES. NEXT SLIDE,
PLEASE.
>> SINCE UTILITY TAXES ARE ONLY
APPLIED TO THE RETAIL PORTION,
I THOUGHT I WOULD SPEND A FEW
MORE SLIDES TALKING ABOUT THOSE
FOUR SLICES OF THE 76%. THE
FOUR GROUPS ARE CUSTOMER
CLASSES. SPU CREATES THESE
CUSTOMERS WITH SIMILAR DEMAND
PATTERNS AND COSTS FOR SPU TO
PROVIDE THEM WITH SERVICES. SPU
THEN USES ALLOCATION PROCESS TO
DISTRIBUTE THE COST OF THE
WATER SYSTEM ACROSS THOSE
GROUPS. THE FIRST RETAIL
CUSTOMER CLASS IS RESIDENTIAL.
RESIDENTIAL CUSTOMERS ARE THOSE
LIVING IN SINGLE FAMILY HOMES
AND DUPLEXES. THEY ACCOUNT FOR
80% OF ALL OF SPU RETAIL
ACCOUNTS . THAT IS 173,000
CUSTOMERS. THEY ONLY MAKE UP
ABOUT 58% OF RETAIL WATER
USAGE. THE NEXT CUSTOMER
CLASS, GENERAL SERVICE, HAS
KIND OF THE OPPOSITE PROFILE.
THESE ARE GOVERNMENTAL,
INDUSTRIAL AND COMMERCIAL
CUSTOMERS. COMMERCIAL CUSTOMER
DOES INCLUDE MULTIFAMILY
RESIDENTIAL STRUCTURES. THOSE
CUSTOMERS REPRESENT 11% OF
RETAIL WATER ACCOUNTS AND USE
61% OF WATER. NEXT SLIDE,
PLEASE.
>> THE OTHER TWO CUSTOMER
CLASSES ARE PRIVATE FIRE AND
PUBLIC FIRE. THOSE ARE BILLED
FOR THOSE SERVICES IN ADDITION
TO WHATEVER RESIDENTIAL OR
GENERAL SERVICE CHARGES THAT
THEY MAY INCUR. THE PUBLIC FIRE
CLASS IS MADE UP OF GOVERNMENT
AGENCIES RESPONSIBLE FOR FIRE
HYDRANTS. THEN, COMBINED, THE
TWO CLASSES MAKE UP LESS THAN
1%. NEXT SLIDE, PLEASE.
>> THE LAST TWO SLIDES --
COUNCIL BILL 120602 WOULD
AMEND SECTION 5.48 TO THE
SEATTLE MUNICIPAL CODE TO
ELIMINATE THE WATER UTILITY
TAX. AS THE BILL IS CURRENTLY
DRAFTED, IT WOULD MAKE THIS
EFFECTIVE ON JANUARY 1 OF 2025.
IN AN EARLIER SLIDE, YOU SAW
HOW MUCH OF THE VARIOUS TAXES
GENERATED AND THAT WAS $232
MILLION. THIS SLIDE SHOWS THE
AMOUNT OF REVENUE FOR THE
GENERAL FUND SPECIFICALLY FROM
THE WATER UTILITY TAX. IT IS A
PRETTY STABLE SOURCE OF REVENUE
OVER TIME. TYPICALLY GROWS BY A
SMALL AMOUNT EACH YEAR WITH THE
EXCEPTION OF A SMALL DROP THAT
YOU WILL SEE IN THE FIRST YEAR
OF THE PANDEMIC. THE 2023
ADOPTED BUDGET, THE WATER
UTILITY TAX IS GOING TO
GENERATE $37.2 MILLION AND THE
2024 PROPOSED BUDGET WITH A
REVENUE OF $37.6 MILLION. IF WE
ARE JUST LOOKING AT THE IMPACT
OF THIS BILL BY ITSELF SEPARATE
FROM ALL OTHER POTENTIAL
LEGISLATION, APPROVER OF THE
BILL WOULD REDUCE BY $37
MILLION IN THE ABSENCE OF NEW
REVENUE, THE CITY WOULD NEED TO
REDUCE EXPENDITURES BY EQUAL
AMOUNTS. NEXT SLIDE, PLEASE.
>> THE TABLE ON THIS SLIDE IS
ATTEMPTING TO SHOW THE
POTENTIAL IMPACT OF THE WATER
UTILITY TAX REPEAL ON VARIOUS
CUSTOMERS. THE AMOUNTS IN THIS
CHART ARE PROVIDED BY A FEW AND
THEY DO ASSUME THAT THE FULL
BENEFIT OF THE TAX REPEAL IS
PASSED ALONG TO RATE PAYERS. AS
YOU CAN SEE IN THE VERY FIRST
TOP ROW OF THE TABLE, IMMEDIATE
ESSENTIAL CUSTOMERS WHO HAVE
APPROXIMATELY $49 PER MONTH
WOULD BENEFIT PER YEAR AND THEN
THE CENTRAL SAVINGS INCREASE TO
CUSTOMERS WHO HAVE HIGHER
BILLS. LASTLY, THERE IS A
PROPOSED AMENDMENT FOR THE
BILL. A COUPLE OF MONTHS AGO IN
SEPTEMBER, COUNCIL PASS THE
ORDINANCE THAT ESTABLISHED
RETAIL WATER RATES FOR A
THREE-YEAR PERIOD FROM 2024 TO
2022. IF WE WERE TO PASS THIS
BILL TO REVEAL THE WATER TAX,
THE WATER CUSTOMERS THE BENEFIT
IF THE WATER RATES WERE
ADJUSTED INTO ACCOUNT.
COUNCILMEMBER PEDERSEN HAS AN
AMENDMENT IT IS IN RECOGNITION
OF THE ELIMINATION OF THE TAX.
I WILL TURN IT BACK TO THE
CHAIR TO ANSWER ANY QUESTIONS.
>> COUNCIL MEMBER PEDERSEN HAS
SPONSORED THIS LEGISLATION.
WOULD YOU LIKE TO SPEAK TO
THAT?
>> I AM VERY EXCITED TO SPEAK
TO THE COLLEAGUES. WE ARE
CRAFTED AND ANNOUNCED TOGETHER
ON JUNE 7 AND I WANT TO THANK
OUR COUNCIL CENTRAL STAFF ,
HANNAH THORSON, ON MY TEAM AND
THE CITY ATTORNEY'S OFFICE FOR
THEIR WORK ON THIS LEGISLATION.
SEATTLE WATER UTILITY TAX
PLACES A DISPROPORTIONATE
BURDEN ON LOW INCOME
COMMUNITIES, REPEALING THIS TAX
WILL ALLOW MORE OF OUR MEMBERS
TO BE FOCUSED ON THEIR HEALING
AND RECOVERY AS THEY MOVE
FORWARD ON A JOURNEY TO BEING
HEALTHY UNHOUSED IN A
SUPPORTIVE ENVIRONMENT. THIS
BREAKS DOWN ALL BARRIERS TO
CREATE HOMELESSNESS WITH
HOUSING INSTABILITY WITHOUT
LIMITING OUR RESOURCES TO
ADDRESS THESE CRISES IN OUR
URBAN COMMUNITIES. JOHN BURBANK
SAID OF THIS PROPOSAL, QUOTE,
INTRODUCING A PROGRESSIVE TAX
TO SUNSET A PROGRESSIVE TAX IS
A WELCOME AND ELEGANT STEP
TOWARD ADDRESSING ECONOMIC
INEQUALITY IN SEATTLE, LOWER
INCOME HOUSEHOLDS THAT PAY A
GREATER PORTION OF THEIR INCOME
FOR THE UTILITY BILL INCLUDING
MANY SENIORS ON FIXED INCOME
WILL BENEFIT FROM ELIMINATING
THE WATER TAX . COLLEAGUES,
THIS PROPOSAL IS WHOLEHEARTEDLY
ENDORSED BY THE CUSTOMER REDUCE
PANEL AND SEATTLE PUBLIC
UTILITY. THE INSTITUTE FOR
TAXATION ECONOMIC POLICY RANKS
WASHINGTON STATE AS THE MOST
UNFAIR REGRESSIVE TAXATION
SYSTEM IN THE COUNTRY WHERE
LOWER INCOME RESIDENTS PAY MUCH
HIGHER PERCENTAGE OF EARNINGS
THAN WEALTHIER RESIDENTS,
INCLUDING CITY TAX ON
EVERYONE'S DRINKING WATER. WE
HAVE NOT TALKED A LOT ABOUT
THIS TAX BECAUSE THERE IS AN
ACCEPTANCE AT OUR CURRENT
POLICY IS NOT AS FAIR AS IT
COULD BE. EVERY HOUSEHOLD AND
BUSINESS IS NOT ONLY CHARGED
THE COST OF THE WATER FROM
SEATTLE PUBLIC UTILITY BUT ALSO
TAXED ON THAT SAME WATER BY
CITY HALL AT AN ARBITRARY RATE
OF 15.5%. IN A RECENT SURVEY,
NEARLY 60% OF SEATTLE VOTERS
SAID THEIR TAXES ARE TOO HIGH.
TAX REFORM IS OVERDUE AND WE
CAN DO IT HERE, NOW AS WE ADOPT
COUNCIL BILL 120602 . THIS TAX
REFORM WILL REPEAL THE
AGGRESSIVE TAX ON DRINKING
WATER WOULD, FOR THE FIRST
TIME, PROACTIVELY ELIMINATE
ATTACKS AND THAT ACTION WOULD
NOT ONLY HELP LOWER INCOME
HOUSEHOLDS BUT IT WOULD ALSO
FOSTER TRUST OF LOCAL
GOVERNMENT FOR ALL OF OUR
CONSTITUENTS. AT THE SAME TIME,
I REALIZE MANY OF THESE
POLICYMAKERS DON'T WANT TO
LEAVE A $38 MILLION REVENUE GAP
IN OUR CITY'S GENERAL FUND SO
THIS PROPOSAL TO ELIMINATE THE
TAX DRINKING WATER FOR EVERYONE
CAN BE PAIRED WITH THE PROPOSED
LOCAL 2% CAPITAL GAINS EXCISE
TAX THAT MIRRORS STATE POLICY
ALREADY UPHELD BY THE
WASHINGTON STATE SUPREME COURT,
A POLICY THAT EXEMPTS REAL
ESTATE TRANSACTIONS FROM
RETIREMENT ACCOUNTS. I KNOW WE
WILL TALK ABOUT THAT SOON. THIS
IS A FISCALLY RESPONSIBLE AND
REASONABLE REBALANCING OF THE
SYSTEM TO MAKE IT MORE FAIR AND
MORE PROGRESSIVE. I DON'T THINK
WE CAN TRULY MAKE A SYSTEM MORE
PROGRESSIVE UNLESS WE FULLY
ELIMINATE THIS UNFAIR TAX ON
EVERYONE'S DRINKING WATER. I AM
HOPING ON NOVEMBER 30 WE CAN
VOTE YES ON COUNCIL BILL 120602
AND IF THERE IS SUPPORT FOR
THAT, I CAN SUPPORT 120601
WHICH I WILL THEN TALK ABOUT.
THANK YOU.
>> I HEARD YOU SAY IF THERE IS
SUPPORT FOR THE WATER TAX
REPEAL, THEN YOU WOULD BE
SUPPORTIVE OF YOUR BILL. THANK
YOU. BEFORE I SEND IT TO
COUNCILMEMBERS WHO HAVE
QUESTIONS HERE, IS THE REPEAL
OF THIS TAX CONTINGENT ON THE
PASSAGE OF -- IS IT TIED
LEGALLY TOGETHER IN THAT WAY?
>> CHAIR, ONLY IN THE RECITALS
IS IT TIED. THERE WAS VARIOUS
ADVICE WE GOT THAT IT WAS SAFER
TO KEEP THEM SEPARATE. THAT IS
WHY WE ARE TALKING ABOUT THEM
AT THE SAME TIME BUT YOU ARE
RIGHT, IT IS NOT TECHNICALLY
TIED.
>> I THINK THE ORDER ON THE
AGENDA IS YOUR PREFERENCE THEN.
>> OKAY. COUNCILMEMBER HERBOLD?
>> THANK YOU. I JUST WANT TO
SAY, AS A COUNCILMEMBER WHO, IN
THE PAST, THEIR COMMITTEE WAS
OVERSIGHT FOR UTILITIES, I AM
VERY EXCITED ABOUT THIS
PROPOSAL . IN WORKING TO CREATE
THE STRATEGIC PLAN AND TO
SMOOTH THE VERY HIGH RATE
INCREASES, I KEEP TURNING TO
THE UTILITY TAX IN AN AREA
WHERE I THOUGHT WE SHOULD BE
ABLE TO REDUCE IT BUT THE FACT
THAT THE FUNDS -- IT CREATED
THIS HOLE THAT MADE IT
IMPOSSIBLE TO REDUCE THE
UTILITY TAXES. I AM REALLY
PLEASED THAT WE ARE BRINGING
THIS FORWARD. ONE THING I WAS
ABLE TO ACCOMPLISH AS HEAD
CHAIR OF THE COMMITTEE WITH
OVERSIGHT OF SPU IS SOME
TRANSPARENCY AROUND THE UTILITY
TAX. IT WAS VERY FRUSTRATING TO
ME THAT THIS LARGE TAX THAT WAS
MAKING UP A SIGNIFICANT PORTION
OF PEOPLE'S BILL WAS JUST
BURIED IN THE ENTIRE BILL AND
SEATTLE PUBLIC UTILITIES AGREED
TO BEGIN CREATING A SEPARATE
LINE ON THE BILL IT SELF SO
THAT PEOPLE CAN AT LEAST SEE
WHAT THEY WERE PAYING ON THE
UTILITY TAX. I JUST HOPE, IN
THE SOME SMALL WAY, BUT THE
AWARENESS OF THAT PORTION OF
THE BILL IS SUPPORTING THIS
NEXT STAGE IN THE EFFORT TO
REIN IN THE TAXES. I
APPRECIATE THE COMMUNITY
VALIDATOR'S THAT WE HAVE
MENTIONED. A COUPLE OF OTHERS ,
MOLLY MOON MITCHELL OF MOLLY
MOON'S ICE CREAM SAID, AS A
SMALL BUSINESS OWNER, SHE SEES
HER EMPLOYEES STRUGGLING WITH
PROGRESSIVE EXPENSES . I
SUPPORT THE EXCISE TAX FOR
SEATTLE TO ELIMINATE THE CITY'S
TAX ON EVERYONE'S WATER BILL.
SHARON LEE SIMILARLY REFERRED
TO THE FACT THAT TINY HOMES AND
APARTMENTS IN THEIR BUILDING
ARE CURRENTLY BURDENED BY THESE
WATER TAXES AS WELL AS MERCY
HOUSE NORTHWEST. ANCHORAGE
BOOKS TO LOOK AT THIS PROPOSAL
AND I AM VERY EXCITED TO BEGIN
TO SEE SOME TAX REFORM HERE.
THANK YOU.
>> THANK YOU SO MUCH.
COUNCILMEMBER NELSON?
>> I HAVE TWO QUESTIONS. I'M
TRYING TO WRAP MY HEAD AROUND
THE CHARACTERIZATION OF UTILITY
TAX AS REGRESSIVE. IS THAT
BECAUSE EVERYBODY HAS TO PAY
IT? IN MY MIND, IT IS BASED ON
THE USAGE. IF YOU LIVE IN A
BIGGER HOUSE, YOU USE MORE
WATER AND YOU PAY MORE. IT IS
NOT LIKE A SALES TAX WHICH IS A
FIXED AMOUNT OF MATTER WHAT. IT
IS A UTILITY TAX BASED ON
USAGE. HELP ME UNDERSTAND THE
LANGUAGE. I UNDERSTAND THE
REGRESSIVE " IS AN ATTRACTING
FOR SUPPORT FOR THIS BILL. THE
OTHER QUESTION HAS TO DO THE
BULLET POINT ON PAGE 6 OF THE
SLIDE DECK, IF SOMEBODY COULD
HELP ME UNDERSTAND THE FIRST
ONE, THAT WOULD BE GREAT.
>> THANK YOU. OTHER RESPONSES
FROM THE SPONSOR?
>> I WILL TRY. WE HAVE TWO
DIFFERENT HOUSEHOLDS USING THE
SAME AMOUNT OF WATER BUT ONE OF
THE HOUSEHOLDS IS LOWER INCOME,
IT IS A GREATER PROPORTION OF
THEIR HOUSEHOLD INCOME THAT
THEY ARE CONTRIBUTING TOWARD
THAT BILL WHICH WOULD THEN MAKE
IT REGRESSIVE. THAT IS WHY.
>> OKAY.
>> THEY BOTH HAVE TO PAY THE
BILL.
>> BASICALLY, EVERYBODY HAS TO
PAY IT SO IT IS REGRESSIVE
BECAUSE IT BURDENS PEOPLE WHO
ARE LESS ABLE TO PAY.
>> I WILL THINK ABOUT THAT ONE.
I JUST LIKE THE FACT THAT
PEOPLE WHO USE MORE PAY MORE.
ON THIS SLIDE, YOU WENT
THROUGH THIS PAGE PRETTY FAST.
WHY ARE TAXES AN OPERATING
EXPENSE TO THE WATER SYSTEM. IT
SEEMS LIKE THEY WOULD BE A
REVENUE.
>> TAXES ON THIS INSTANCE, IT
IS THE OPERATION OF THE
BUSINESS. WITH REGARD TO THE
WATER EXPENSE OF THE SYSTEM AND
THEN THE GENERAL FUND -- DOES
THAT HELP ANSWER?
>> BUSINESSES ARE PAYING A
UTILITY TAX THAT COUNTS AS ONE
OF THE OPERATING EXPENSES?
>> THE OPERATING EXPENSE, I
MEAN SPU 'S OPERATING EXPENSES.
THEY TAKE A LOOK AND THEY SAY,
HOW MUCH WILL IT COST. ALL OF
THE WORK WE WANT TO DO TO
OPERATE THE SYSTEM, ALL OF THE
STATE TAXES. THEY PUT UP WITH
HOW MUCH MONEY DO THEY NEED TO
COLLECT FOR RATEPAYERS? ONE OF
THE THINGS THAT HAS BEEN AN
EXPENSE IS PAYING STATE TAXES.
THAT IS WHY IT IS LISTED AS AN
OPERATING EXPENSE.
>> THANK YOU. COUNCIL MORALES?
>> THANK YOU. I AM TRYING TO
WRAP MY HEAD AROUND THE
EXCLUSIVITY AS WELL ALTHOUGH I
MIGHT BE COMING AT IT FROM A
DIFFERENT ANGLE. I AM LOOKING
AT SLIDE 13. REALLY TRYING TO
UNDERSTAND WHO BENEFITS HERE.
CAN WE GO TO SLIDE 13?
>> ARE YOU SPEAKING OF THE
REVENUE?
>> FIRST OF ALL, THANK YOU FOR
BRINGING THIS. I DO THINK THAT
WHERE THERE IS OPPORTUNITY FOR
US TO AGGRESS THE TAX
STRUCTURE, WE SHOULD DIVE IN
AND TRY TO MAKE SURE WE ARE
SUPPORTING WORKING FAMILIES AND
WORKING PEOPLE IN THE CITY THAT
IS GETTING MORE AND MORE
EXPENSIVE AND LOOK FOR
OPPORTUNITIES TO PROVIDE RELIEF
AS LONG AS IT DOES NOT
DISCOURAGE OUR ABILITY TO
DELIVER SERVICES. WHAT I AM
TRYING TO UNDERSTAND HERE IS,
IN TERMS OF THE SAVINGS, I AM
LOOKING AT RESIDENTIAL,
APARTMENTS. IT SEEMS TO ME THAT
RENTERS DON'T BENEFIT AS MUCH
FROM THE REPEAL OF THIS TAX AS,
FOR EXAMPLE, LARGE INDUSTRIAL
OR LARGER SIZE BUSINESSES MIGHT
BENEFIT. IT STILL FEELS TO ME
LIKE IT IS REGRESSIVE IN THAT
SENSE BECAUSE WE DON'T KNOW,
FOR EXAMPLE, THAT THE OWNER OF
THESE APARTMENTS WOULD PASS ON
ANY SAVINGS TO THE TENANTS. WE
DON'T KNOW THAT THE OWNERS OF
LARGE INDUSTRIAL OFFICE
BUILDINGS WOULD PASS ON THE
SAVINGS TO THEIR COMMERCIAL
CENTER. I AM STILL STRUGGLING
WITH -- IN PRINCIPAL, I WOULD
LIKE THE IDEA. IT DOES NOT PASS
THE BIG TEST FOR ME IN TERMS OF
ADDRESSING THE QUESTION OF
EXCLUSIVITY.
>> I THINK IT IS A TRUE
STATEMENT THAT WE DON'T KNOW.
WE DON'T KNOW IF THE OWNER OF
THE BUILDING RECEIVING A LOWER
WATER BILL WOULD PASS THAT OFF
TO THE RESIDENT. I THINK THAT
IS TRUE AND I DON'T THINK THAT
IS SOMETHING WE COULD NO. I
WILL SAY A COUPLE OF THINGS. I
THINK IT IS SOMETHING THAT YOU
WILL HAVE TO EVALUATE FOR
YOURSELF OTHER THAN TO SAY THAT
TYPICALLY SPEAKING, CONSUMPTION
TAXES ARE SEEN AT MORE -- THE
WATER UTILITY TAXES A LITTLE
ODD. IT IS A FLAT TAX THAT IS
TYPICALLY SEEN AS REGRESSIVE.
WITH THE UTILITY TAXES, IT IS
ONE RATE . THE WATER RATE
STRUCTURE THAT THE CITY HAS,
HAS THINGS IN IT THAT MAKE IT
MORE PROGRESSIVE. FOR
INSTANCE, WE HAVE THE UTILITY
DISCOUNT PROGRAM. IF YOU MEET
INCOME QUALIFICATIONS, WE
PROVIDE A DISCOUNT OF 50%. THAT
IS ONE WAY THAT WE TRY TO MAKE
THE SYSTEM CHEAPER FOR LOWER
INCOME INDIVIDUALS. ANOTHER ONE
IS THAT IN THE PEAK SEASON,
RESIDENTIAL CUSTOMERS, WE HAVE
THE FIRST BLOCK OF WATER THAT
IS LESS EXPENSIVE THAN THE
SECOND BLOCK OF WATER. THE IDEA
BEING, AS YOU INCREASE THE
TERMS OF YOUR USAGE, YOU WILL
BE CHARGED A RELATIVELY HIGHER
RATE FOR EACH UNIT OF WATER.
OUR RATE STRUCTURE HAS SOME OF
THOSE THINGS IN IT BUT, YEAH.
THAT IS AS FAR AS I CAN GO IN
TERMS OF THAT.
>> I APPRECIATE IT.
>> IT IS IMPORTANT TO NOTE THAT
THE UTILITY DISCOUNT PROGRAM,
AT LEAST WHEN I WAS THERE, THAT
WAS -- THERE WAS A LOT OF
CONVERSATIONS ABOUT HOW TO OPT
OUT. I DON'T KNOW IF WE HAVE
MOVED FULLY TO THAT . WE ARE
TRYING TO GET MORE PEOPLE IN.
IT HAS BEEN A WHILE SINCE I
TRACKED DOWN THE NUMBER BUT IT
WAS SOMETHING ALONG THE LINES
OF TWO THIRDS OR HALF OF THE
PEOPLE WHO WERE ELIGIBLE WERE
NOT ENROLLED. IT IS A POLICY
GOAL. I DON'T HAVE NUMBERS IN
FRONT OF ME RIGHT NOW BUT I
THINK YOU ARE ABOUT RIGHT. WHEN
WE LOOK AT IT, IT IS ABOUT ONE
THIRD OF THE PEOPLE THAT WE
THINK THEY ARE ELIGIBLE. THE
UTILITIES, BOTH CITY LIGHT AND
SPU HAVE DONE WORK TO AUTO
ENROLL FOLKS FOR THE HOUSING
AUTHORITY AND SOME OTHER
PROGRAMS BUT IT IS DIFFICULT
BECAUSE WE NEED TO HAVE PEOPLE
SUBMIT INCOME VERIFICATION. I
THINK YOU ARE RIGHT THAT THERE
IS A LOT TO BE DESIRED.
>> COUNCIL PRESIDENT?
>> THANK YOU. I KNOW EVERYBODY
LIKES TO TALK ABOUT THE
REGRESSIVE IN WASHINGTON. I
HAVE BEEN HEARING THIS FOR A
COUPLE OF DECADES. I WANT TO
GET PAST THAT. THEN, IT IS KIND
OF ALONG THE LINES OF WHAT
COUNCILMEMBER STRAUSS WAS
SAYING. ON PAGE 8, YOU LIST
RESIDENTIAL. YOU BASICALLY HAVE
MORE ACCOUNTS BUT THEY USE LESS
BUT THEY PAY MORE. THAT IS
BECAUSE THEY HAVE MORE
ACCOUNTS. ON THE GENERAL
SERVICE, YOU HAVE LESS ACCOUNTS
BUT THEY USE MORE AND PAY LESS.
SO , THERE IS NOT REALLY A GOOD
COMPARISON BECAUSE THERE IS
ONLY 22,000 ACCOUNTS. THAT IS A
BIG DISCREPANCY IN THE
ACCOUNTS, I AM GUESSING IN THE
ANNUAL RETAIL WATER USAGE.
RIGHT?
>> I'M SORRY. I AM STRUGGLING
TO UNDERSTAND WHAT YOUR
QUESTION IS. YOU HAVE
CHARACTERIZED IT CORRECTLY. A
LOT OF CUSTOMERS THAT USE A
SMALL AMOUNT OF WATER AND/OR
COMMERCIAL OR INDUSTRIAL, IT IS
A SMALL AMOUNT OF CUSTOMERS
THAT USE A LARGE AMOUNT OF
WATER. YOU CHARACTERIZED THAT
CORRECT.
>> LET ME ASK YOU THIS. I WILL
HAVE SOME MORE REFINED
QUESTIONS. I WILL APOLOGIZE. I
AM TRYING TO WRAP MY HEAD
AROUND THIS. WHEN I GO TO PAGE
12 AND THEN YOU LIST THE
GENERAL SERVICE, YOU DON'T HAVE
GOVERNMENTAL ON HERE. YOU HAVE
CONVENIENCE, SMALL OFFICE,
MEDIUM, LARGE INDUSTRIAL BUT
YOU LIST ON PAGE 8 GOVERNMENTAL
SERVICE. THAT WOULD INCLUDE ALL
CITY, PUBLIC SCHOOLS, CITY
STRUCTURES -- YOU KNOW, CITY
HALL. THAT IS NOT ON HERE?
>> WE COULD ASK FOR MORE
INFORMATION. THIS IS THE TABLE
THAT SPU STAFF GENERATED THIS
SUMMER FOR CONVERSATION FOR THE
CUSTOMER REVIEW PANEL. THEY
WERE TRYING TO GET EXAMPLES OF
DIFFERENT CATEGORIES FOR
CUSTOMERS. TRULY, WHAT IT ENDS
UP BEING IS A PRETTY ROUGH
ESTIMATE. IT IS JUST THE 15.4
RATE. JUST AS PEOPLE'S BILL GO
UP, THEY WOULD SAVE MORE IF
THE WHOLE SAVINGS OF THE REPEAL
WAS PASSED ALONG TO THEM. IT IS
A PRETTY ROUGH ESTIMATE.
>> THIS -- THE REASON WHY THIS
IS AROUND THE SAME LINES --
WOULDN'T COST -- IF YOU HAD 90
APARTMENT UNITS OF LOW INCOME ,
ALSO, IF YOU ARE NOT LISTING
GOVERNMENTAL, WOULDN'T THOSE
COSTS JUST BE PASSED ON TO THE
TENANTS OR THE TAXPAYERS?
>> I'M SORRY.
>> THAT'S OKAY.
>> WHAT COSTS ARE YOU REFERRING
TO?
>> OKAY. LET'S JUST PEEL OFF
GOVERNMENT EVEN THOUGH IT IS
NOT ON THE CHART. WE DON'T KNOW
WHAT THE SAVINGS WOULD BE
BECAUSE IT IS NOT ON HERE.
LET'S JUST SAY THIS GETS PAST
AND IT FALLS INTO THE CATEGORY
THAT YOU PUT IT IN. SOMEONE
WILL PAY THE DIFFERENCE LIKE
LARGE INDUSTRIAL. THEIR BILL
WOULD GO FROM 20,000 TO 38,000.
>> NO. SORRY. IF YOU LOOK AT
THE LARGE INDUSTRIAL ROW, IF
THE AVERAGE BILL WAS $20,500 A
MONTH , IF YOU TOOK OFF THAT
15.5%, THEY WOULD SAVE ABOUT
$3200 PER MONTH AND THEN IF YOU
JUST MULTIPLY 3200 BY 12, YOU
GET TO THE ANNUAL SAVINGS FOR
THAT.
>> OKAY. I AM SEEING THAT NOW.
>> I GUESS -- I APOLOGIZE. I
NEED SOME MORE TIME WITH THIS
BECAUSE I AM NOT REALLY SEEING
-- I GET THE PREMISE. I THINK
COUNCILMEMBER PEDERSEN WILL
GIVE ME A HARD TIME FOR THIS. I
THINK HIS INSTINCTS ARE CORRECT
BUT I DON'T KNOW IF THE MATH
IS CORRECT FOR ME ON WHO
BENEFITS AND WHETHER OR NOT
COSTS GET PASSED ON TO LOW
INCOME PEOPLE, GOVERNMENTAL
BUILDINGS, NONPROFITS. THAT IS
KIND OF WHERE I'M AT. I
APOLOGIZE FOR NOT BEING MORE
ARTICULATE. THIS IS THE FIRST
TIME I HAVE SEEN IT. I HAVE
MORE THINKING TO DO ABOUT THIS.
>> THAT MAKES SENSE. THAT IS NO
PROBLEM. I THINK IT IS GOOD TO
HAVE THESE QUESTIONS AND IT
GIVES US PLENTY OF TIME BEFORE
NOVEMBER 30 WHEN WE HAVE TO
VOTE ON IT . I APPRECIATE
COUNCILMEMBER PETERSON,
IDENTIFYING YOUR INTEREST IN IF
ONE, THEN THE OTHER. I THINK
THAT WE ARE READY TO
POTENTIALLY MOVE ON TO THE
OTHER WHICH IS THE CAPITAL
GAINS ORDINANCE BUT I WANT TO
DOUBLE CHECK. BRIAN, DO YOU
HAVE MORE YOU WANT TO TALK
ABOUT?
>> I DO NOT.
>> THANK YOU FOR WALKING US
THROUGH THIS AND I APPRECIATE
THE QUESTIONS THAT HAVE BEEN
ASKED. THANK YOU, COUNCILMEMBER
PEDERSEN FOR YOUR INTEREST AND
COUNCILMEMBER HERBOLD FOR THIS
BILL.
>> OKAY. WE SHALL MOVE ON. WE
WILL SUMMARIZE THE CAPITAL
GAINS COMPONENT OF THIS
DISCUSSION AND WE WILL THEN
TURN IT BACK OVER TO
COUNCILMEMBER PEDERSEN TO
SUMMARIZE IT HERE AND THEN WE
WILL OPEN IT UP . THANK YOU.
>> THANK YOU, MADAM CHAIR. GOOD
AFTERNOON, MEMBERS OF THE
BUDGET COMMITTEE. TOM HERE FROM
CENTRAL STAFF. I AM GOING TO
GIVE YOU A BRIEFING ON COUNCIL
120601 WHICH WOULD IMPOSE A
CITY CAPITAL GAINS EXCISE TAX.
NEXT SLIDE.
>> BY WAY OF BACKGROUND, YOU
ARE LIKELY FAMILIAR, IN THE
WASHINGTON STATE LEGISLATIVE
SESSION FOR 2021, THEY HAD A
STATE WIDE CAPITAL GAINS EXCISE
TASK -- TAX. THAT WAS
EFFECTIVE IN JULY 2021. IMPOSED
A 7% TAX ON THE LONG-TERM
ASSETS OF THE $260,000 STANDARD
DEDUCTION. THERE ARE ALSO A
NUMBER OF OTHER REDUCTIONS
INCLUDED IN THAT. THAT TAX
WOULD BE DEPOSITED INTO THE
EDUCATIONAL ACCOUNT. SO, NOT
THE STATE GENERAL FUND. THAT
LEGALITY OF THAT TAX WAS
CHALLENGED AND ULTIMATELY, THE
STATE SUPREME COURT UPHELD THE
LEGALITY OF THE TAX. THEN, TO
ROUND OUT THE BACKGROUND, IN
THE FIRST YEAR OF THE TAX
COLLECTION, THEY COLLECTED $840
MILLION , WHICH WAS OVER THREE
TIMES THE AMOUNT THAT THEY
ESTIMATED.
>> IF WE CAN LOOK AT THE NEXT
SLIDE, WE CAN GUIDE THEM TO THE
STRUCTURE OF THE PROPOSED CITY
TAX. RIGHT OFF THE TOP, THE
CITY'S TAX IS MODELED OFF THE
STRUCTURE OF THE STATE TAX ON
THE EXCEPTION BEING THAT IT IS
A DIFFERENT RATE. THE RATE, AS
PROPOSED IN 120601 IS A 2% TAX
ON THE GAINS FROM CAPITAL
ASSETS. RIGHT OFF THE TOP,
THERE IS A $250,000 STANDARD
DEDUCTION FOR EACH TAX PAYER.
THAT IS THE SAME REDUCTION
WHETHER OR NOT IT IS A SINGLE
OR A JOINT FILER. ANYTHING THAT
IS PROHIBITIVE OF BEING TAXED
IS ALSO NOT TAXED IN THE CITY'S
TAX, GAINS FROM THE SALE OF
DEFINED SMALL BUSINESSES OWNED
BY FAMILY. THEN, UP TO
$100,000 OF CHARITABLE
DONATIONS ABOVE 250,000 MINIMUM
QUALIFYING DEDUCTION. ALL OF
THESE DIFFERENT PARAMETERS ARE
DEFLATED EACH YEAR. LET'S GO TO
THE NEXT SLIDE.
>> THERE ARE ALSO A VARIETY OF
EXEMPTIONS. TWO OF THE KEY
EXEMPTIONS ARE REAL ESTATE,
REAL ESTATE TRANSACTIONS. AS
OUR RETIREMENT ACCOUNTS, 401(K)
. ALL OF THE ACTIVITIES IN
THOSE ACCOUNTS WOULD BE EXEMPT
FROM THIS TAX. WE HAVE GAINS
FROM LIVESTOCK EXEMPT AND THEN
GOODWILL FROM THE SALE NO --
THIS TAX WOULD BE EXCISED BY
THE OFFICE OF FINANCE AND
ULTIMATELY WHAT THAT COST WOULD
ENTAIL WOULD BE SUBJECT TO A
FUTURE BUDGET REQUEST. THIS IS
A TYPO IN THIS MEMO. SOME TAXES
THAT HAVE BEEN POSED, THE
BEVERAGE TAX, THOSE
ADMINISTRATIVE COSTS HAVE
REACHED 800,000 $206 MILLION.
THEN, THE FINAL MEASURE OF HOW
MUCH IS ADDED TO THE BUDGET
WITH THE BUDGET REQUEST .
FINALLY, THE TAX WOULD BE
EFFECTIVE ON JANUARY 1 OF 2024,
THE FIRST DOLLARS FROM THE TAX
WOULD BE IN APRIL OF THE
FOLLOWING YEAR.
>> THIS IS JUST AN EXAMPLE TO
SHOW HOW THE TAXES ARE
CALCULATED. LET'S SAY THAT IN
2024, A TAXPAYER SOLD $1
MILLION STOCK AND THEY HELD
THAT STOCK FOR LONGER THAN ONE
YEAR, WHICH IS THE MINIMUM
THRESHOLD FOR HOW LONG THE
STOCK HAS TO BE HELD TO BE
CONSIDERED LONG-TERM. THEN,
THEY ORIGINALLY BOUGHT THE
STOCK FOR $700,000 SO THE NET
WOULD BE $300,000. YOU CAN SEE
THE VARIOUS CALCULATIONS HERE
OF HOW THE MILLION DOLLARS
STOCK, AFTER DEDUCTING THE
ORIGINAL PURCHASE PRICE GETS
YOU A NET CAPITAL OF $300,000.
YOU TAKE OUT THE STANDARD
DEDUCTION, $50,000 WHICH IS
BILLED TO A $1000 TAX
EXEMPTION.
>> OKAY. THEN, THE OFFICE OF
ECONOMIC AND REVENUE FORECAST
PROVIDED SOME REVENUE ESTIMATES
FOR THIS TAX. THEY BASE THEIR
CALCULATIONS OFF INFORMATION
FROM THE STATE COLLECTION,
ESSENTIALLY DOING SOME
STRAIGHTFORWARD COMPARISONS OF
HOW MUCH THE STATE COLLECTED
AND WHERE THEY COLLECTED FROM.
AS I INDICATED EARLIER, THE
STATE GETS ABOUT $840 MILLION
FROM THE FIRST YEAR OF TAX. IN
THAT AMOUNT, 15.8% WAS FILED
FOR SEATTLE RESIDENTS. USING
THE SAME 16.84% AND APPLYING IT
TOWARD THE CITY FORECAST FOR
THE NEXT YEAR, WHICH WOULD BE
OUR FIRST YEAR OF TAX WOULD BE
$19 MILLION OF REVENUE FOR EACH
20% OF TAX. GIVEN THAT THIS IS
A 2% TAX -- HOWEVER, IF WE LOOK
AT THE NEXT SLIDE, I DO NEED TO
POINT OUT SOME OF THE DETAILS.
FIRST, THERE WERE ONLY 816
SEATTLE TAXPAYERS THAT PAID
THE STATE TAX AND THAT IS A
VERY, VERY SMALL POOL OF
TAXPAYERS. FURTHERMORE, OF THAT
816, 85% OF THE TOTAL PAID BY
SEATTLE TAXPAYERS -- IT IS A
VERY HIGHLY CONCENTRATED TAX.
ALSO, GIVEN ALL THE EXEMPTIONS
THAT I WENT THROUGH EARLIER,
THE TAX LARGELY CONSISTS OF
SUBJECT TO STOCK MARKET. ALSO,
THE TAXES BASED ON WHERE THE
TAXPAYER IS. RESIDENTS WHO PAY
THE SEATTLE TAX MAY HAVE
VARIOUS ADDRESSES THROUGHOUT
THE STATE WHICH THEY WOULD
CONSIDER THEIR DOMICILE FOR
PROTECTED SERVICES. THEY WILL
NOT SAY IF ANY OF THOSE 816
TAXPAYERS WOULD MEET THE
CRITERIA SO THAT IS CERTAINLY
SOMETHING THAT SHOULD BE
CONSIDERED IN EVALUATING FOR
THE TAX. I WOULD POINT OUT THAT
IN THE INFORMATION FROM THE
FORECAST OFFICE, THEY HIGHLIGHT
A VERY HIGH DEGREE OF
UNCERTAINTY. THERE IS NO BETTER
WAY TO PUT IT THEN GIVEN THE
HIGHLY CONCENTRATED TAX BASE
AND THE VOLATILE RISK, IT IS
ESSENTIALLY THE TAX AND THE
ISSUE OF COST POTENTIAL,
AFFORDABILITY OF THE TAX TO
MULTIPLE ADDRESSES IN
WASHINGTON STATE, THE ANNUAL
REVENUE FROM THE TAX VARIES
WIDELY ABOVE. IF WE COULD LOOK
AT THE NEXT SLIDE, BRING THAT
INTO CONTEXT FOR BUDGETING
REVENUE FOR THE TAX. ASSUMING A
JANUARY 1 2024 EFFECTIVE DATE,
THE MONEY WOULD COME IN APRIL
2025 . NEXT YEAR, CITY COUNCIL
WILL BE ADOPTING AND ENDORSING
A 75.6 BUDGET IN THE FALL.
HOWEVER, THERE WILL BE NO
ADDITIONAL CLARITY AS TO THE
RELIABILITY THAT WE HAVE NOW. I
AM JUST POINTING OUT THAT THE
BUDGETS THAT ARE MADE NEXT FALL
WILL BE MADE IN THE CONTEXT OF
THE REVENUE.
>> THAT IS ESSENTIALLY THE
BILL. I WOULD NOTE THAT THERE
IS ONE AMENDMENT ON THE NEXT
SLIDE WHICH IS THE AMENDMENT
SPONSORED BY VICE CHAIR HERBOLD
WHICH WOULD INCREASE THE TAX
RATE FROM 2% TO 3% WITH
ADDITIONAL 1% INTENDED TO
GENERATE REVENUE OFF THAT
PORTION. THAT IS MY
PRESENTATION AND I AM HAPPY TO
ANSWER ANY QUESTIONS.
>> THANK YOU, AS ALWAYS, TOM.
YOU HAVE BEEN WORKING ON THIS
FOR A WHILE. THANK YOU FOR THE
PRESENTATION AND ALL OF THE
ANALYSIS THAT YOU PUT IN TO
CRAFTING THIS ORDINANCE. I
THINK THERE WILL BE SOME
QUESTIONS BUT BEFORE THAT, I
WOULD LIKE TO NAME A SPONSOR.
>> THANK YOU. I HAVE NOTHING TO
ADD AT THIS TIME.
>> GREAT. THANK YOU.
COUNCILMEMBER MORALES?
>> THANK YOU. I JUST WANT TO
MAKE SURE I UNDERSTAND HOW THIS
WORKS. I THINK -- LET ME MAKE
SURE I UNDERSTAND. WHAT I SEE
ON SLIDE FOUR OF THE PREVIOUS
PRESENTATION IS THAT THE
UTILITY TAX -- MAYBE I AM
MISUNDERSTANDING. I SEE THE
WATER TAX GENERATING 232
MILLION A YEAR AND THIS
POTENTIAL REVENUE AT 38
MILLION. AM I DOING THAT
RIGHT?
>> IT IS ABOUT 38 MILLION FOR
EACH, 38 MILLION FOR EACH. IT
DOES NOT LOOK LIKE WE ARE ABLE
TO PULL UP THAT SLIDE BUT IT IS
$38 MILLION A YEAR THAT CITY
HALL RECEIVES FROM THE SPU
WATER TAX . 2% CAPITAL GAIN
STRUCTURED EXACTLY THE WAY THE
STATE DOES IT.
>> LET ME TURN IT TO TOM REAL
QUICK.
>> I WOULD JUST OFFER THAT THE
TOTALITY OF ALL PUBLIC AND
PRIVATE UTILITY TAXES IS IN THE
PIE CHART WE ARE LOOKING AT.
THERE PROBABLY IS A SLIDE IN
THE PRESENTATION THAT SHOWS THE
WATER UTILITY TAX.
>> HERE WE GO.
>> THANK YOU FOR THAT
CLARIFICATION.
>> ANY ADDITIONAL QUESTIONS?
>> I SEE COUNCILMEMBER JUAREZ.
I THINK YOU HAD YOUR HAND UP
EARLIER AND THEN YOU TOOK IT
DOWN .
>> I THINK I GET TO PULL THE
ELDER CARD ON HERBOLD.
>> I AM GOING TO CALL ON YOU.
>> THEN WE WILL GO TO
COUNCILMEMBER NELSON AND
COUNCILMEMBER HERBOLD.
>> MINAS ALONG THE SAME LINES
AS COUNCILMEMBER MORALES.
THANK YOU -- I THINK YOU
ANSWERED. I WANT TO REFRAME IT.
I HAVE THE SAME QUESTION. YOU
ARE TELLING ME THAT IF WE PASS
THE WATER UTILITY TAX REPEAL AT
2%, AND THEN WE GO TO THE
CAPITAL GAINS, WHETHER AN
ELIMINATION OF THE WATER TAX AT
A $38 MILLION LOSS, THE CAPITAL
GAINS TAX CAN PLUG THAT HOLE?
AT 2%?
>> THAT IS THE PROPOSAL. I
WOULD NOTE THAT THE WATER TAX
IS A FAIRLY STABLE TAX,
GENERATING THAT APPROXIMATE
AMOUNT. THE CAPITAL GAINS TAX
IS A MORE VOLATILE TAX. I WOULD
LIKE TO HIGHLIGHT THAT THERE IS
A LEVEL OF UNCERTAINTY ABOUT
THAT. THAT IS THE ESTIMATE THAT
WE HAVE AVAILABLE.
>> WHEN YOU SAY HIGHLY VOLATILE
WITH CAPITAL GAINS AT 2% AND
COUNCILMEMBER HERBOLD MAY BE
ANTICIPATING A 3% THERE THAT
WE RAISE MORE TO PLUG THE $38
MILLION HOLE, THE UTILITY IS
PRETTY STABLE FROM YOUR CHART
ON WE CAN SEE. IT IS SOLID ON
THAT. THERE COULD BE AN
OPPORTUNITY TO ASK FOR A BIGGER
CAPITAL GAINS TAX BEYOND TWO OR
THREE OR FOUR. IS THERE A WAY
TO HEDGE THAT?
>> THERE IS ALWAYS
OPPORTUNITIES TO ADD ADDITIONAL
TAX BREAKS. THERE IS THE
POTENTIAL FOR AVOIDABLE TAXES.
I DON'T KNOW WHAT THE TRADE-OFF
IS BUT THERE WILL CERTAINLY BE
SOME RESPONSE AS THE TAX RATE
GETS HIGHER.
>> AS LONG AS WE DON'T GO OVER
7%.
>> THE STATE TAX IN THE CITY
TAX RATE ARE SEPARATE FACTORS.
THE CITY IS NOT LIMITED TO THE
LEVEL OF TAX RATE TO COMPLY.
THE TAX RATE IS PURELY A CITY
DECISION. I AM JUST POINTING
OUT THAT THE STATE IS ADDITIVE.
THE TOTAL TAX FOR A RESIDENT IN
SEATTLE WOULD PAY 9%. THE
ORIGINAL BILL WOULD BE 10%
EVERY ADDITIONAL PERCENT THAT
SEATTLE ADDS IS GOING TO
INCREASE THE TOTAL TAX RATE.
>> OKAY. NOW I AM
UNDERSTANDING.
>> IF I MAY, THERE IS
TECHNICALLY A LIMIT ON THE
PERCENTAGE, ALTHOUGH, AT SOME
POINT, PEOPLE WILL BE AVOIDING
IT. A DIFFERENT WAY OF THINKING
ABOUT IT IS, RIGHT NOW WAS
INTRODUCED, THE WATER TAX
REPEAL WOULD HAPPEN IN 2025
WHICH IS BEFORE WE RECEIVE THE
DOLLARS COMING IN THE DOOR FOR
THE CAPITAL GAINS TAX. ANOTHER
OPTION WOULD BE TO FURTHER
DELAY THE REPEAL OF THE WATER
TAX AND WE HAVE A FULL JAKE --
A FULL YEAR OR TWO OF THE
TAXES. IT WOULD BE CHANGING THE
UP ACTIVE DAY, IT WOULD BE A
DIFFERENT WAY OF HEDGING OR
MAKING SURE THAT THIS REVENUE
WAS ADEQUATE.
>> CAN I ASK ANOTHER QUESTION
THEN, CHAIR?
>> OF COURSE.
>> THIS MAY BE MORE OF A
POLICY. DOES IT MAKE SENSE TO
DO THEM BOTH TOGETHER? I AM
TRYING TO DO CONVENTIONAL
WISDOM HERE FOR MORE CERTAINTY,
IF YOU DID THE CAPITAL GAINS
FIRST? THEN DO THE WATER? IS
THERE A REASON TO DO THEM BOTH?
IS IT BECAUSE IT IS AN ANSWER?
BY THE WAY, WE CAN DO CAPITAL
GAINS. IF THAT IS IT, THAT IS
OKAY TOO, I JUST WANT TO
UNDERSTAND IF THERE IS A RHYME
OR REASON.
>> THANK YOU, CHAIR. THANK YOU
FOR THE PRESIDENT. THE IDEA IS
TO DO THEM TOGETHER FOR SEVERAL
REASONS. ONE IS THAT THE
FOUNDER OF THE THINK TANK
POINTED OUT THAT IT IS AN
ELEGANT SOLUTION TO THE
REGRESSIVE SYSTEM THAT WE HAVE,
TO TAKE AWAY A REGRESSIVE TAX.
THAT IS AN IMPROVEMENT. THEN,
TO IMPOSE THIS PROGRESSIVE
CAPITAL GAINS TAX IS ANOTHER
IMPROVEMENT TO BALANCING THE
SYSTEM AND WE WERE TALKING
EARLIER ABOUT PEOPLE FEELING
BURDENED BY TAXES, PEOPLE
WANTING TO SEE CITY HALL MAKE A
GOOD-FAITH EFFORT HERE. BY
ELIMINATING THE TAX, WE ARE
HELPING FOSTER THAT TRUST THAT
WE ARE ACTUALLY CAPABLE OF
GETTING RID OF A REGRESSIVE TAX
IN ADDITION TO IMPOSING NEW
ONES. THIS CASE, WE HAVE THIS
OPTION NOW THAT IT HAS BEEN
THROUGH THE STATE PROCESS, DO
THEM TOGETHER. IT IS AN
EQUIVALENT AMOUNT AND IT SOLVES
THE PROBLEM.
>> I DON'T KNOW IF I WOULD SAY
ELEGANT BUT OKAY.
>> ANY ADDITIONAL COMMENTS?
>> NO.
>> THANK YOU.
>> YOU ARE WELCOME.
COUNCILMEMBER -- WHAT DID I SAY
I WAS GOING TO DO? GO AHEAD.
HELP ME OUT.
>> NELSON FIRST. THEN HERBOLD,
THEN MORALES. FOR SOME REASON,
THE TITLES COTTLE JUMBLED.
PLEASE GO AHEAD.
>> THANK YOU. I AM WONDERING
ABOUT THE DEFINITION OF A
QUALIFYING FAMILY OWNED SMALL
BUSINESS REDUCTION. THAT SEEMS
LIKE A TERM -- I DON'T KNOW
HOW THAT CONDITION RELATES TO
OTHER DEFINITIONS AND HOW
BUSINESSES CAN BE DEFINED BY
THOSE THINGS. I AM READING THE
TEXT OF THE LEGISLATION AND IT
IS DEFINING FAMILIES, WHAT IS
-- HOW IS A FAMILY OWNED SMALL
BUSINESS TO FIND? I MEAN, IS IT
THE SAME AS AN LLC? WHAT IF A
FAMILY BUSINESS HAS INVESTORS?
HELP ME UNDERSTAND WHAT
QUALIFIES AS THAT AND HOW THERE
ARE SPECIFIC TAX DESIGNATIONS
AND HOW THOSE RELATE TO THIS
DEFINITION, THIS LEGISLATION.
>> THANK YOU FOR THE QUESTION.
THE TAX DONATIONS FROM THE
INTERNAL REVENUE CODE --
>> THAT IS WHAT I NEED. THE
DEFINITION OF THIS BILL BEFORE
US ARE ESSENTIALLY DEFINED IN
THE LEGISLATION WHICH CALL A
FAMILY OWNED SMALL BUSINESS AS
ONE THAT IS LESS THAN $10
MILLION OF GROSS WORLDWIDE
REVENUE. IT HAS A MEMBER, AN
OWNER OPERATOR OF THE BUSINESS
WHO HAS OWNED AND OPERATED THAT
BUSINESS FOR FIVE YEARS
CONSECUTIVELY. THOSE WOULD BE
THE PRIMARY CHARACTERISTICS OF
WHAT DEFINES A SMALL
FAMILY-OWNED BUSINESS. AGAIN,
IN TERMS OF HOW THAT RELATES
--
>> SO, IF A BUSINESS MEETS ALL
OF THE CRITERIA YOU JUST
MENTIONED, THE DEDUCTION DOES
NOT MATTER. THAT IS WHAT I AM
KIND OF HEARING BUT I WOULD
LIKE MORE INFORMATION ABOUT
THAT. THEN, A FOLLOW-UP ON THE
QUESTION ABOUT ADDITIVES ON THE
CAPITAL GAINS TAX. THIS IS THE
APPLICATION OF THE POTENTIAL
CITY CAPITAL GAINS TAX. WOULD
IT APPLY -- IS IT BASICALLY THE
OVERLAY COMPLETELY THAT WOULD
APPLY TO THE EXACT SAME THING?
ARE THERE DIFFERENCES IN THE
TWO?
>> IS IT POSSIBLE THAT PEOPLE
WOULD BE SUBJECT TO ONE AND NOT
THE OTHER?
>> NO. THE BILL IS WRITTEN
IDENTICAL TO THE STATE STATUTE.
IT WOULD BE STRUCTURED EXACTLY
THE SAME.
>> SO THEY ARE IDENTICAL. THANK
YOU.
>> COUNCIL MEMBER HERBOLD?
>> I JUST WANTED TO MAKE AN
INQUIRY ABOUT THE VOLATILITY AS
YOU HAVE DESCRIBED IT, TOM. I
KNOW THAT THE STATE TAX IS
DIFFERENT THAN THE STATE IN
THIS PROPOSED CAPITAL GAINS TAX
BUT I BELIEVE THEY BOTH RELY ON
OWNERSHIP OF STOCKS AND BONDS,
WHEREAS THIS IS BASED ON THE
SALE. GIVEN THAT THE STATE
WEALTH TAX IS GENERATED MUCH
MORE THAN ANTICIPATED, WOULD
THAT BE A LESSON ABOUT THE
CONCERNS OF VOLATILITY AS WE --
THE RESOURCING FOLDS? I
UNDERSTAND THERE IS TAX
AVOIDANCE AND THAT IS A WHOLE
OTHER THING BUT I AM TRYING TO
NARROW DOWN, IS IT WHAT IT IS
BASED ON THAT IS MAKING IT
VOLATILE? IS IT REALLY
PRIMARILY THE CONCERN ABOUT TAX
AVOIDANCE? WHAT WE HAVE LEARNED
ABOUT THE STATE WEALTH TAX IS
INFORMATIVE TO THIS CAPITAL
GAINS TAX BUT I MIGHT BE
UNDERSTANDING.
>> WHEN YOU REFER TO THE STATE
TAX, YOU REFER TO THE STATE
CAPITAL GAINS TAX?
>> NO. I UNDERSTAND IT TO BE A
DIFFERENT TAX.
>> OKAY.
>> IT IS A PROPERTY TAX ON
HOMES AND REAL ESTATE THAT WAS
ESTABLISHED BY THE SENATE
BEFORE 86 SENT HOUSE BILL 1473.
IT GENERATED -- IT WAS THE
OWNERSHIP OF STOCKS AND BONDS
WITH OTHER FINANCIAL ASSETS
WITH A LOT OF EXEMPTIONS. VERY
SIMILAR EXEMPTIONS FOR THE
CAPITAL GAINS TAX AND IT HAS
RAISED IN THE STATE MANY MORE
TIMES THAN WAS ANTICIPATED. I
THINK THERE WERE SOME ARTICLES
-- WE HAD WAY MORE BILLIONS
THAN WE THOUGHT WE HAD IN THIS
STATE, KIND OF THING. I WAS
JUST WONDERING IF LESSONS
ABOUT THAT MIGHT BE
CONSTRUCTIVE IN RETURNS OF
VOLATILITY ON THE CAPITAL GAINS
SIDE.
>> I WOULD HAVE TO DO MORE
RESEARCH. IT DOES SOUND VERY
SIMILAR TO THE CAPITAL GAINS
TAX OF THE STATE WHICH IS KIND
OF A MIRROR OF THIS TAX. THEY
OUTPERFORMED THE ORIGINAL
AMOUNT. IN GENERAL, A WEALTH
TAX WILL BE MORE STABLE BECAUSE
IT WILL NOT BE SUBJECT TO A
TRANSACTION COMPONENT. IT IS
JUST A TAX ON PROPERTIES SOLD
FROM ONE YEAR TO THE NEXT
VERSES SOMETHING THAT REQUIRES
THE SALE. THE VOLATILITY FOR
THE STATE CAPITAL GAINS TAX IS
STARTING FROM THAT HIGH-LEVEL
POINT. IT IS VERY CONCENTRATED
WITH A SMALL NUMBER OF
INDIVIDUALS. ANYONE OF THOSE
INDIVIDUALS COULD CONSTITUTE A
LARGE PORTION OF THE TAX. IT
WOULD BE DECISIONS THAT THOSE
INDIVIDUALS MAKE WITH REGARDS
TO TAXING AND WHERE THEY LIVE.
SO, YOU TAKE IT DOWN TO THE
CITY OF SEATTLE LEVEL WHERE YOU
HAVE A PERSON WHO HAS MULTIPLE
PROPERTIES IN THE STATE OF
WASHINGTON. THEY CAN SAY THAT
THEY LIVE IN SOME OTHER CITY
AND IF THEY CAN DEMONSTRATE
THAT WITHIN THE DEFINITIONS OF
THE CITY TAX, THEY WOULD NOT
HAVE THE SEATTLE TAX. IT IS
IMPOSSIBLE TO KNOW WHAT THOSE
INDIVIDUAL SYSTEMS WILL BE AND
THEN, AGAINST THE BACKDROP OF
THE STOCK MARKET, WHICH IS
SUBJECT TO SUDDEN DROPS. THAT
IS JUST IN THE BACKGROUND OF
THE WHOLE STRUCTURE OF THE TAX.
IT IS BASED ON THE ASSETS AND
YOU WILL HAVE SOME LEVEL OF
VOLATILITY THERE. WE HAVE THE
CONCENTRATION, THE POTENTIAL
FOR AVOID ABILITY.
>> COUNCIL MEMBER HERBOLD,
THANK YOU FOR ASKING THE
QUESTION ABOUT THE WEALTH TAX .
UNFORTUNATELY, SOMETIMES THE
CAPITAL GAINS TAX IS SOMETIMES
REFERRED TO AS THE CAPITAL
GAINS WEALTH TAX. THAT IS A
SEPARATE PIECE OF POLICY.
UNFORTUNATELY, THAT HAS NOT YET
PASSED. SENATE BILL 5846 AND
HOUSE BILL 1473 --
>> OKAY.
>> THERE WAS A LOT OF HOPE THAT
THEY WILL STILL BE WORKED ON
BUT THEY HAVE NOT BEEN PASSED.
>> THANK YOU FOR THE
CORRECTION. THE ARTICLE THAT I
WAS REFERRING TO WAS
ESSENTIALLY ABOUT CAPITAL GAINS
TAX.
>> THAT IS CORRECT.
>> IT IS NOW COMING IN AT OVER
800 MILLION.
>> I APPRECIATE THE CORRECTION.
I THINK, AGAIN, IT SEEMS TO ME
THAT THE VOLATILITY IS LESS
ABOUT WHAT IS BEING TAXED AND
MORE ABOUT TAX AVOIDANCE. I
GUESS VOLATILITY CAN ALSO
INCLUDE RAISING MORE MONEY THAN
YOU ANTICIPATED BUT , I THINK
IT IS LESS ABOUT IT BEING BASED
ON STOCKS AND BONDS. IT IS MORE
ABOUT THE FACT THAT PEOPLE CAN
SAY THEY LIVE SOMEWHERE ELSE IN
THE STATE FOR THE CITY TAX AND
THEY CAN'T DO THAT FOR THE
STATE TAX.
>> IF I COULD , THE FORECAST
OFFICE DID LOOK AT 15 YEARS OF
HISTORIC CAPITAL GAINS AT THE
FEDERAL LEVEL AND THEY ARE
PRETTY VOLATILE. I THINK IT IS
BOTH. WITHOUT MULTIPLE YEARS OF
THE STATE'S COLLECTION, WE
DON'T YET KNOW IF THAT IS
HIGHER THAN ANTICIPATED. THAT
IS WHAT WE ARE SIGNALING.
LOCALLY, WE DON'T HAVE ENOUGH
DATA POINTS TO KNOW HOW
VOLATILE IT IS AND TO KNOW
WHETHER THE OR NOT THERE WILL
BE TAX AVOIDANCE BUT I ALSO
THINK THAT THIS PARTICULAR TAX
IS MORE SUBJECT TO ECONOMIC
CONDITIONS AND FLUCTUATIONS IN
THE STOCK MARKET AND THAT SORT
OF THING. I THINK WE ARE JUST
SIGNALING -- HARD TO KNOW
EXACTLY WHEN IT WILL FLUCTUATE
BUT IT MIGHT. WHEN WE ARE
REPLACING A REVENUE SOURCE, IT
MAKES IT A LITTLE MORE RISKY IN
THE SHORT TERM.
>> TOM, SOMETHING BEFORE WE
MOVE ON?
>> I WOULD JUST ADD THAT THE
ESTIMATE SHOULD ALSO BE
CONSIDERED. IT IS NOT JUST THE
VOLATILITY, IT IS THAT WE HAVE
THE FORECAST WITH A CERTAIN
NUMBER OF RELIABLE INFORMATION
WITH VERY LIMITED DATA,
PARTICULARLY WITH REGARDS TO
SEATTLE REVENUE AND WHETHER OR
NOT THEY WILL BE RESIDENTS NEXT
YEAR. IT IS KIND OF A BROADER
UNCERTAINTY.
>> THANK YOU. COUNCIL MEMBER
HERBOLD, ANYTHING ELSE?
>> NO.
>> COUNCIL MEMBER 12?
>> I HAVE TWO IDEAS THAT MAY BE
COMPETING AND I WOULD LIKE TO
UNDERSTAND A LITTLE BIT BETTER.
GIVEN THE GAP, OR POTENTIAL GAP
DUE TO VOLATILITY OR WHATEVER
THAT FACTOR IS BETWEEN WHAT IS
GENERATED AND WHAT WE ARE
TRYING TO EXEMPT, I AM
WONDERING ABOUT MAYBE ONLY
EXEMPTING THOSE WHO QUALIFY FOR
THE SMALL BUSINESSES AS DEFINED
BY THE CRITERIA WE DECIDE ON SO
WE SHRINK THE REVENUE THAT WE
ARE EXEMPTING AND MAYBE MAKE UP
THE DIFFERENCE WITH THE 2% . I
AM TRYING TO FIGURE OUT HOW WE
CAN STILL PRESENT THIS AS A
PACKAGE THAT COUNCILMEMBER
PEDERSEN IS PRESENTING BUT , I
THINK THAT IS ALMOST A SEPARATE
DISCUSSION FROM THE BROADER
BUDGET DISCUSSION WE ARE HAVING
RIGHT NOW ABOUT THE FACT THAT
WE STILL HAVE A HOLE TO FILL IN
OUR BUDGET AND THIS IS AN
AFTERNOON SPENT ON CONVERSATION
ABOUT THE NEED TO GENERATE MORE
REVENUE FOR OUR EXISTING
BUDGET, NOT EXEMPT SOMETHING
AND THEN FILL THAT HOLE. I AM
STILL INTERESTED IN THE GENERAL
CONVERSATION ABOUT A CAPITAL
GAINS TAX AND WHAT WE MIGHT BE
ABLE TO SUPPORT WITH THAT
OUTSIDE OF THE QUESTION OF
WHETHER WE WANT TO EXEMPT
EXISTING STABLE SOURCES OF
REVENUE METAL AND JUST HAVE THE
CONVERSATION ABOUT HOW WE CAN
HAVE ANOTHER TOOL FOR FILLING
THE HOLE THAT WE ARE
ANTICIPATING FOR THE NEW YEAR.
I WILL LEAVE IT AT THAT. THANK
YOU.
>> WELL SAID. THANK YOU VERY
MUCH.
>> COUNCIL MEMBER NELSON?
>> I WILL JUST PUT A PLUG IN
FOR LETTING THE COUNCIL NEXT
YEAR FIGURE OUT HOW THEY WILL
FILL THE GAP IN 2025 GOING
FORWARD. THIS IS A REALLY
COMPETENT A DISCUSSION AND I
THINK WE NEED MORE TIME TO
UNDERSTAND THE INTRICACIES OF
BOTH PIECES OF LEGISLATION. BE
THAT AS IT MAY, TOM, YOU SAID
SOMETHING THAT RAISED A
QUESTION . WE ARE CALLING IT A
CAPITAL GAINS TAX BUT IT IS
ACTUALLY A CAPITAL GAINS EXCISE
TAX. WE ARE TAXING A
TRANSACTION, GAINS FROM A
TRANSACTION THAT ACCRUE TO AN
INDIVIDUAL LIVING IN SEATTLE,
RIGHT?
>> THE FOLLOW-UP IS, IT DOES
NOT MATTER WHERE THE
TRANSACTION TAKES PLACE. AN
INDIVIDUAL LIVING IN SEATTLE
COULD SELL A PIECE OF PROPERTY
OR NOTES OF STOCK OR WHATEVER
TO ANYPLACE. IT DOES NOT MATTER
WHERE THE SALE OF THAT PROPERTY
THAT GENERATE THE GAINS TAKE
PLACE, RIGHT?
>> IT IS WHERE THE RESIDENT
CALLS THEIR HOME. IF THE
PROPERTY IS NOT PHYSICALLY IN
THE STATE OF WASHINGTON, I DO
BELIEVE IT WOULD NOT BE SUBJECT
TO THE TAX. IF IT IS INTANGIBLE
PROPERTY LIKE STOCKS OR BONDS,
THEN IT DEFAULTS TO THE
DOMICILE STATUS OF THE
RESIDENT.
>> OKAY. SO, A RESIDENT OF
SEATTLE WHO OWNS A BUSINESS IN
OREGON THAT MAKES $11 MILLION
WOULD BE PAYING THE TAX THEN?
>> I BELIEVE THAT THE SALE
WOULD BE IN OREGON BUT I WOULD
HAVE TO FOLLOW-UP. I BELIEVE
THAT WOULD BE AN ORGAN
TRANSACTION.
>> THAT IS WHAT I'M GETTING AT.
I WANT TO KNOW IF IT MATTERS
WHERE THE TRANSACTION IS PER
PERSON WHO'S DOMICILE IS IN
SEATTLE.
>> I WOULD HAVE TO FOLLOW-UP TO
BE SURE. MY HUNCH IS THAT IT IS
NOT PART OF THE SEATTLE TAX
BASE BUT I WANT TO BE SURE. I
WILL FOLLOW-UP.
>> THANK YOU.
>> IF I MAY ADD TO THAT?
>> GO AHEAD.
>> MIRRORING THE STATE POLICY
REAL ESTATE TRANSACTIONS ARE
EXEMPT FROM THIS. SO, THERE YOU
GO.
>> IS THAT PRIMARY ? WHEN YOU
SAY REAL ESTATE, YOU MEAN A
HOME?
>> NO, ALL REAL ESTATE
TRANSACTIONS.
>> AGAIN, THIS IS A STATE
POLICY. WE ARE NOT MAKING UP
SOME NEW LAW. WE ARE SIMPLY
TAKING IN A STATE POLICY THAT
HAS BEEN IN PLACE FOR COUPLE OF
YEARS, UPHELD BY THE WASHINGTON
SUPREME COURT.
>> YEAH. I JUST DON'T KNOW THAT
MUCH ABOUT IT. WE ARE ABOUT TO
MAYBE DO IT HERE. I AM JUST
TRYING TO UNDERSTAND.
>> REAL ESTATE WOULD BE EXEMPT.
COUNCILMEMBER NELSON'S
QUESTION WAS MORE TO A BUSINESS
SALE, ACTUALLY THE SELLING OF A
BUSINESS THAT IS FULLY LOCATED
IN THE STATE OF OREGON AND NOT
IN THE STATE OF WASHINGTON
ALTOGETHER AND WHETHER OR NOT
THAT SALE WOULD BE SUBJECT, IF
THE ACTUAL PERSON SELLING THE
BUSINESS LIVED IN SEATTLE AND
AT THIS POINT, I DON'T HAVE AN
ANSWER TO THAT. I WOULD HAVE TO
FOLLOW-UP. WITH REGARDS TO REAL
ESTATE, IT IS EXEMPT FROM
IMMEASURABLE STATUS.
>> OTHER COMMENTS?
>> OKAY. COUNCILMEMBER
PEDERSEN, ANY FINAL COMMENTS ON
THIS THAT YOU WOULD LIKE TO
OFFER?
>> THANK YOU CHAIR MOSQUEDA, I
DON'T HAVE ANY OTHER COMMENTS.
>> THANK YOU. THIS IS A HELPFUL
OVERVIEW. I AM ASSUMING THAT
THERE WILL BE A HANDFUL OF MORE
QUESTIONS THAT FOLKS MIGHT WANT
TO ASK. I THINK THAT I WILL
JUST FLAG THE CONCERNS THAT IT
IS IMPORTANT FOR ME TO HAVE A
BETTER UNDERSTANDING. IS THERE
ANYTHING ELSE THAT YOU WOULD
WANT TO UNDERSCORE ON THOSE
POINTS BEFORE WE CLOSED TODAY?
>> NO. NOTHING TO ADD.
>> OKAY.
>> THE ONLY THING I WOULD ADD
IS LOOKING AT THE EFFECTIVE
DATE FOR NEXT YEAR, THE NEXT
COUNCIL BUDGET LIBERATION. I
WILL ADVISE CAUTION ON
PROGRAMMING THIS NEW REVENUE.
IF THE 3% DOES PASS, FOR
EXAMPLE, THE HIGHER REVENUE,
WHAT COMES IN THE DOOR.
>> TOM, DID YOU HAVE SOMETHING?
I AM GOING TO TURN IT BACK TO
COUNCILMEMBER PEDERSEN IN JUST
A MINUTE. COUNCILMEMBER
PEDERSEN AND I WILL GO BACK TO
COUNCIL PRESIDENT.
>> JUST TO ENCOURAGE US TO
LOOK AT BOTH SIDES OF THE
EQUATION. THE WATER TAX HAS
BEEN IN PLACE. IT IS
REGRESSIVE. IT DOES HARM NOW.
WE ARE DOING IT CONSISTENTLY BY
HAVING THE WATER TAX. I WOULD
JUST ENCOURAGE US TO REPEAL THE
WATER TAX AND I AM HAPPY TO
TWEAK THE CAPITAL GAINS DATES
AND PERCENTAGES AND THINGS SO
THAT WE CAN REPEAL THE WATER
TAX. THANK YOU.
>> THANK YOU.
>> TWO QUICK THINGS. I CAN TALK
TO COUNCILMEMBER PEDERSEN
OFF-LINE. I KNOW THERE IS
CONVENTIONAL WISDOM FOR
GOVERNMENT, INDUSTRIAL AND BIG
BUSINESS TO HAVE A LITTLE RATE
MY TIME ON THE COUNCIL
COMMITTEE. WHETHER OR NOT I
AGREE WITH IT, THERE IS A
REASON WHY. I AM GLAD YOU PUT
THE DATES AND THERE BECAUSE THE
LAST TIME WE VISITED IT WAS IN
2011. THERE IS ROOM FOR
DISCUSSION THERE. I DID NOT
MEAN TO BE SARCASTIC . IT IS
GETTING LATE AND I AM GETTING
CRANKY. THAT IS A. THAT IS WHAT
I HAVE TO SAY ON THAT. I HAVE A
QUESTION FOR YOU, MADAM CHAIR.
THIS MAY BE A DUMB QUESTION BUT
IT IS DRIVING ME CRAZY. ON THE
POWERPOINT PRESENTATIONS YOU
GAVE US , ON ONE OF THE
POWERPOINT CHARTS, IS PROVIDER
PAY LEGISLATION, WAGE EQUITY
POLICY, ARE THOSE THE SAME
THING? OKAY GOOD. ON ONE SIDE,
YOU HAVE WAGE EQUITY POLICY AND
THEN ANOTHER ONE YOU HAVE
PROVIDER PAY LEGISLATION.
>> I THINK THE TERMINOLOGY HAS
EVOLVED AND I WAS A LITTLE
BEHIND AND I MADE ONE SLIDE AND
I THINK JEN MADE ANOTHER.
>> OKAY.
>> WHEN WE ARE PRODUCING THIS
MANY SLIDES, SOMETIMES IT
HAPPENS. WE ARE HUMAN.
>> I JUST WANTED TO MAKE SURE
IT WAS NOT ME.
>> THANK YOU. FAIR ENOUGH.
>> I ALMOST JUST TURNED MY
SCREEN OFF.
>> COUNCILMEMBER HERBOLD?
>> SORRY. I JUST WANTED TO
SAY, THE INTENT OF THE 1%
AMENDMENT IS INTENDED THAT I
HAVE FORWARD IS INTENDED TO
ADDRESS THE REVENUE GAP THAT WE
ARE LOOKING AT FOR 2025. OUT
OF SUPPORT AND INTEREST FOR
COUNCILMEMBER PEDERSEN 'S
PACKAGE, I JUST WANT TO SAY
THAT I AM WILLING TO BE
FLEXIBLE. ANOTHER WAY OF
THINKING ABOUT THE PROJECTED
GROWTH IN THE GENERAL FUND
EXPENSES COULD ALSO BE NOT
FULLY MAKING UP THE HOLE FROM
THE WATER TAX. JUST THROWING
THAT OUT THERE . AS YOU HAVE
HEARD ME SAY MANY, MANY TIMES,
WE KNOW THAT THE GENERAL FUND
EXPENSES ARE PROJECTED TO
INCREASE BY $544 MILLION FROM
2022 TO 2026 AND 85% OF THAT
GROWTH IS DUE TO THE
ANTICIPATED LABOR AGREEMENT. WE
WILL NOT BE ABLE TO MAKE IT UP.
AGAIN, MY INTENT WAS TO START
MAKING A DOWN PAYMENT ON NEW
REVENUE TO ADDRESS THAT GROWTH
BUT I AM OPEN TO THINKING ABOUT
THAT AMENDMENT DIFFERENTLY TO
ALLOW IT TO SERVE BOTH
PURPOSES. I JUST WANTED TO PUT
THAT OUT THERE. I APPRECIATE
THAT. I WILL TURN IT BACK TO
CENTRAL STAFF FOR POSSIBLE
AMENDMENTS. IN THAT VEIN, THERE
IS A LOT MORE WORK TO COME. I
AM VERY DISAPPOINTED ABOUT THE
POTENTIAL RETURNS -- A SMALL
RETURN ON THAT WAS SO LOW THAT
IT SEEMS LIKE THERE IS A MUCH
BIGGER CONVERSATION TO HAVE
ABOUT HOW THAT MODEL POLICY
FROM SAN FRANCISCO OR PORTLAND
COULD BE APPROACHED BUT NOT
JUST ADDING IT. I THINK THERE
IS AN OPPORTUNITY THERE FOR THE
FUTURE COUNCIL TO DO THAT
RESEARCH AND TO ADVANCE THAT
CONCEPT. THIS HAS REMINDED US A
NUMBER OF TIMES THAT THE
FASTEST WAY TO CLOSE THAT GAP
WOULD POTENTIALLY BE AN
INCREASE TO THE SALES TAX. WE
DID THAT YESTERDAY WITH 20
MILLION BUT IT IS SPECIFICALLY
GOING TO MENTAL HEALTH
SERVICES. THAT IS NOT PART OF
THE OVERALL SOLUTION. THERE IS
STILL SUBSTANTIAL UNKNOWNS. ANY
SORT OF ATTEMPT TO TRY TO CLOSE
THAT GAP USING ONE REVENUE
STREAM THAT HAS VOLATILITY AND
THAT WOULD HAVE SOME VOLATILITY
AS WELL, THAT IS THE ULTIMATE
SOLUTION. I WANT TO UNDERSCORE
THAT I THINK THERE WILL HAVE TO
BE A COMPILATION OF VARIOUS
REVENUE STREAMS THAT HELP CLOSE
THIS GAP. IT CANNOT BE ONE
REVENUE SOURCE GIVEN SOME OF
THE VOLATILITY AND AGAIN, I AM
HEARTBROKEN THAT I AM NOT ABLE
TO OFFER SOMETHING THAT IS
LARGER IN SCALE HERE TODAY OR
THIS MONTH TO HELP TO CLOSE
THAT IN BUT I DO APPRECIATE THE
COLLEAGUES CONTINUING TO BRING
FORWARD THE ONE ITEM THAT
COUNCILMEMBER PETERSON HAS
UNDERSCORED TODAY. WE KNOW THE
COUNCIL MEMBER SAWANT HAD
BROUGHT THE INCREASE TO THE TAX
IN 2020 EVERY YEAR. YESTERDAY,
WE USED THAT TO IDENTIFY AN
OPPORTUNITY TO EXPAND MENTAL
HEALTH. HAD THAT NOT PASSED, IT
WOULD HAVE BEEN IN TODAY'S
CONVERSATION. I WANT TO
IDENTIFY ADDITIONAL WAYS TO
SCALE THAT PROPOSAL TO CLOSE
THE GAP AND I AM VERY THANKFUL
THAT WE ARE RALLIED AROUND
ADDITIONAL SUPPORT FOR HEALTH
SERVICES FOR YOUTH AND I WOULD
CONTINUE TO UNDERSCORE THE
MASSIVE NEED FOR US TO CLOSE
THIS GAP. I AM GOING TO TURN IT
TO ALY PENNUCCI TO CLOSE US OUT
WITH SOME NEXT STEPS AS WE
THINK ABOUT OUR NOVEMBER 30
MEETING.
>> THANK YOU. JUST AS A
REMINDER, THERE ARE FIVE PIECES
OF LEGISLATION THAT YOU
RECEIVED A BRIEFING ON TODAY.
IF YOU HAVE ANY AMENDMENT
IDEAS, THE DEADLINE IS 5:00
P.M. TOMORROW I KNOW THAT IS
NOT A LOT OF TIME. IT DOES NOT
HAVE TO BE A FULLY FORMED
THOUGHT. PLEASE LET US KNOW.
SOME OF US TURN INTO PUMPKINS
AFTER THE BUDGET VOTE ON THE
21st. I JUST WANT TO MAKE SURE
WE HAVE REALLOCATED ASSIGNMENTS
AND WE ARE READY TO STAFF SO WE
CAN HAVE THOSE AMENDMENTS
PREPARED AND DISTRIBUTED IN
ADVANCE OF THE NOVEMBER 30
COMMITTEE DISCUSSION. PLEASE,
EVEN IF YOU ARE JUST THINKING
ABOUT A POTENTIAL AMENDMENT,
PLEASE LET US KNOW BY 5:00 P.M.
TOMORROW AND WE WILL WORK WITH
YOU. WE CAN HELP REFINE YOUR
PROPOSAL OVER THE BEGINNING OF
THE WEEK BEFORE COMMITTEE ON
THE 30th.
>> ANY FINAL COMMENTS?
COUNCILMEMBER PEDERSEN, I DON'T
THINK I OFFER YOU FINAL
COMMENTS ON THIS LEGISLATION.
ANYTHING ELSE YOU WANT TO SAY?
>> NO. THANK YOU.
>> YOU'RE WELCOME. THANK YOU
AGAIN FOR INITIATING THE
CONVERSATION. THANK YOU FOR TOM
FOR THE WORK THEY DID WITH THE
REVENUE STABILIZATION WORK
GROUP AND THANK YOU COLLEAGUES.
IT IS WELL BEFORE 5:00 TONIGHT,
4:15. WE HAVE AN OPPORTUNITY TO
CELEBRATE HERE TODAY AND WE
WILL SEE YOU ON MONDAY. I THINK
THAT MEETING STARTS AT 9:30,
NOT 10:00.
>> 9:00.
>> 9:00 A.M. ON MONDAY.
>> OKAY. I WILL SEE YOU AT 9:00
A.M. ON MONDAY AND WE WILL GET
THROUGH ALL OF THE TECHNICAL
ASPECTS NECESSARY TO FINALIZE
THE BUDGET AND THAT WILL BE OUR
LAST OPPORTUNITY TO MAKE A
FINAL VOTE ON THE BUDGET. THERE
IS NO EDIT. IT IS REALLY THE
TECHNICAL FINAL VOTE. THEN,
COUNCIL PRESIDENT, YOU WILL GET
IT OUT OF OUR BUDGET COMMITTEE
AND WE WILL HANDED OVER TO YOU
FOR THE FULL COUNCIL VOTE ON
THE 21st. THANK YOU VERY MUCH
FOR THE WORK YOU HAVE DONE OVER
THE LAST THREE DAYS AND
ESPECIALLY FOR THE WORK ON THE
121 AMENDMENTS. WE WILL SEE
THOSE ONE MORE TIME ON MONDAY
FOR A FINAL, FINAL VOTE. WE
WILL MAKE SURE EVERYTHING ADDS
UP AND WE WILL HAVE A FULLY
BALANCED BUDGET AND THEN WE
WILL CONTINUE THIS
CONVERSATION. WITH THAT, WE
WILL SEE YOU AT 9:00 A.M. ON
MONDAY THE 20th. WE WILL SEE
YOU THEN, COLLEAGUES.