Governance, Accountability and Economic Development Committee 9/11/2025

Good afternoon, everyone.

It's Thursday, September 11th, and the Governance, Accountability and Economic Development Committee will come to order.

It is 2.02 PM.

I'm Sarah Nelson, chair of the committee.

Will the clerk please call the roll.

Council member Rivera.

Council member Solomon.

Here.

Council member Hollingsworth.

Here.

Council member Kettle.

Here.

Chair Nelson.

Present.

For present.

Thank you very much.

I'm sure that Councilmember Rivera will be joining us soon.

All right, folks.

This is the last Governance, Accountability, and Economic Development Committee before budget.

And on today's agenda, all three are on deck.

And I'll note that, coincidentally, today's Seattle Times editorial says, lawmakers willing to ask hard questions and take on conventional wisdom.

Auditors who roll up their sleeves and follow the money.

Those are key elements to efficient, clean governance.

And that is what we'll be talking about today.

So item one looks at annual citywide underspends.

In other words, why is the executive not spending the money that council allocates year after year Up to 16.5%.

And we'll also learn why the Office of Housing currently has $374 million in cash reserves when people across the city are living in tents.

Why not just get that money out the door faster or maybe even pay people's rent so they don't become homeless in the first place?

These are some of the questions that I hear out there when I'm talking to constituents.

Item two is legislation to strengthen the Office of the City Auditor, which is critical to Council's oversight function.

And then items three, four, and five make requested changes to three neighborhood business improvement areas that will help our small businesses thrive.

And remember, that's revenue that we depend on for running the city government, and those are jobs and also places in our communities that hold our city together.

So with that, if there's no objection, the agenda will be adopted.

Okay.

Hearing no objection, the agenda is adopted.

So let's just go into the hybrid public comment period.

But I will note that today's discussions are really important as I opened with because it's our last meeting before budget and we're getting into lots of really meaty minutiae.

If you, as we're going through, if I don't say this when we get to this item, if you do have questions, please signal me and we can slow down the discussion because I really want people to benefit as most as possible.

And Council Member Rivera has joined us.

All right, moving into the public comment period.

How many folks are signed up to speak today?

We have one in person and five online.

All right.

Of course, let's give two minutes to each person and we'll start with our one in-person speaker.

Our in-person speaker is Ryan Mannesker.

Good afternoon, Chair Nelson and committee members.

Ryan McKinster, Advocacy and Policy Manager for Habitat for Humanity Seattle.

Just wanted to take a moment to give you an idea of how we work to create affordable housing in our city and kind of how the financing happens for the projects that we build.

It may surprise some of you, and I'm sure some of the public as well, but it's easier for us as a Habitat to build affordable housing here in Seattle than most other jurisdictions we participate in in the Seattle area, largely due to the fund availability and the city's commitment to be first in on that funding.

Let me illustrate with a real example that's pertinent.

In 2023, we received commitments for five projects tolling in 90 homes.

Including our MLK Junior Way project, which is actually about four projects in about, I would say about a mile area of MLK.

We're partnering with the African Community Housing and Development with that.

We also have the Yarrow Bay Cottages project, which actually is already starting and coming to fruition right now.

We have a number of families living in those.

These funded projects won't complete until 2026 through 2030, so they're still in process.

A three to seven year development cycle.

The Office of Housing's grant that we received for these projects and became obligated in 2023 are drawn down gradually as we move forward with the projects through design permitting construction.

This creates the appearance of unexpended funds in annual snapshots, but every dollar is committed and they're important to us.

By obligating funds but holding them until expended, the Office of Housing and the City of Seattle serves as good stewards of the people's money, maximizing housing production opportunities while also holding us and others accountable.

The City's reputation for being first in and honoring commitments makes it much easier for us to find additional housing for these projects at a reasonable price point.

We understand Seattle's budget realities but have serious concerns with conversations about using these committed funds for other purposes.

Thank you very much.

That was our only in-person speaker.

We will now move on to the remote public comment.

The rules are the same.

I'll call on speakers in the order in which they're signed up to speak.

When you hear the chime, you'll have 10 seconds left.

If you exceed that time, your microphone will be cut off so that we can move on to the next speaker.

Speakers will have two minutes.

And remember, please make sure to press star six to unmute yourself.

Our first remote commenter is Alberto Alvarez.

Go ahead, Alberto.

I fully support the Office of Housing.

Their mission of helping low-income people keep stable housing is foundational work to help during our homeless and housing crisis.

From helping workers find proper living spaces and preventing displacement of legacy Black and Brown residents, the Office of Housing has helped many people I know.

Families, elders, Elders on fixed income and young workers have already been making crucial sacrifices just to stay afloat.

And we are headed into a severe economic downturn.

If the question is how much money is underspent, you as responsible leaders have to take bold action to get projects built from expanding neighborhood centers in the comp plan And passing more legislation like the Roots to Roof program, as well as curtailing design reviews and countless actions that are used to delay the process or sometimes stop them.

Council members must fast track building, not steal money away from programs that are a safety net for struggling families, elders, and working people.

Vote for Dion Foster and have a great day.

Our next virtual speaker is Lauren Faye.

Good afternoon, committee chair Nelson and members of the committee.

My name is Lauren Faye and I'm here today representing DESC to comment on agenda item one discussing understand fiscal monitoring and grants.

We build, operate, and provide critical, supportive services to people in affordable, permanent, supportive housing.

I grew concerned by a message I saw from Council President Nelson implying millions of dollars in unspent funding for housing may be sitting, wasting away.

This isn't the case, and I want to take a moment to explain why.

I do appreciate that it is the responsibility of the city and this council to look for all unused and abandoned funds to make sure that those are circulated back into the community before cutting essential programs and taxing further.

But attempting to balance the city's budget by reducing commitments already made that have not yet been fulfilled will create a much worse disaster.

All but a few million of the hundreds of millions of dollars referenced as unspent housing funds are obligated for planned housing construction or preservation.

This is largely related to capital projects.

The city plays a vital role often as the first partner we housing developers secure.

From there we go seek other partners for the rest of the capital funds required.

We need the money you provide to wait for us briefly while this and other pre-development activities happen.

If it didn't, we wouldn't have the proof of leverage required to secure any other partners in these deals, and no affordable housing would be built.

DESC has a few projects lumped into this assessment right now.

One opens imminently in November, two others in 2026. This is all in varying stages of development, so we have not sought full reimbursement on these contracts yet.

For operating funding, we have Congress chocolate span over the year or longer contract terms, and these aren't always on the same contract cycles as your fiscal year.

These are also a reimbursement model.

We expect and truly need the money to be there when we show proof of work.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Sarah, go ahead.

Please remember to press star six.

Can you hear me?

Yes.

Hi.

Hi, Chair Nelson and members of the committee.

My name is Sarah Clark, and I'm the Director of Policy at the Seattle Metro Chamber.

I'm here today to speak to item number one, the response to the underspend fiscal monitoring and grants SLI.

I want to thank Council President Nelson for your engagement and leadership on this issue.

As the city's budget growth has outpaced both population and inflation growth over the last decade, this report is critical to enhancing transparency for the public and council members in terms of showing how dollars are being spent and what kind of results these city's investments are getting.

In light of the concerning report that came out last week regarding the grant audit at King County that highlighted a number of issues with compliance just across the street, this SLI report is a key tool for the city to help ensure that public dollars are spent well and get the outcomes our city's residents expect and deserve.

We're looking forward to the briefing and today's discussion, and thank you for your time.

Thank you.

Our next commenter is Allison Esinger.

Allison, go ahead.

Good afternoon, council members.

Thank you very much for the opportunity to comment.

My name is Allison Esinger, and I'm the director of the Seattle-Pain County Coalition on Homelessness.

We do not provide housing or direct services, but our 60-member organizations include nonprofit housing developers, And I think it's fair to say that you probably won't find any group that is more impatient for housing and for housing dollars to be out appropriately in the community than the Coalition on Homelessness and our members.

I am also here today to echo my concern about the description of these funds that are in the Office of Housing as underspend, when indeed they are, as you have just heard from previous commenters, Crucial and committed dollars.

When I came to the work at the Coalition, I had an awful lot to learn.

And one of the things that I learned is that Seattle's housing levy makes us the envy of many other jurisdictions that are grappling with the national crises of the lack of affordable homes.

Now we have not only our housing levy, but the payroll expense tax and social housing.

And indeed, the volume of dollars that our Office of Housing is charged with appropriately managing and distributing rapidly for the public interest has increased.

I want to draw your attention to something else that I learned, which is that essentially what the Office of Housing manages are capital dollars.

But you know and we know that what are also needed are services and operating dollars.

And under our current federal regime, Those services and operating dollars are at grave risk.

I want to be sure that you're aware that this morning the National Alliance End Homelessness announced a lawsuit against HUD because of the imminent threat to, among other things, $67 million of services.

Thank you, Allison.

Our last virtual speaker is David Haynes.

Go ahead, David.

Thank you, David Ains.

I commend the council president for the city auditors like improving themselves and want to highlight that we still need an investigation of the Office of Housing and the Human Services Department and all of the racist defund police and shift the paradigm away from improving the war on drugs and prioritize repeat offending criminals who are treading on innocent, houseless people that they've stolen from.

That are being racially discriminated against.

And I want to ask, like, why is it that the, uh, claims for, um, new apartments versus preserved apartments, there's a distinct difference in building new apartments and just going back and cosmetically prettifying some dilapidated inflated piece of real estate and claiming that you're preserving more homes for people.

That somebody's parasitically skimming off of.

It's like we need to stop wasting money on Sharon Lee's rundown real estate empire and all of her overpriced services that are unqualified and failing miserably because we don't have honesty within the King County Regional Homeless Authority and all these experts who have been around for so long that all they learn is more advocating for more funds, more money, power tripping.

We're never keeping it honest about the efforts.

So like, You know, mental health and behavioral crisis and drug addiction.

We see the concerns about the drug clinic that might open up for $41 million over in Capitol Hill.

When those people go through that, as soon as they leave out of there, they're not supposed to roam around freely.

They're supposed to be in a low security, low barrier, authorized encampment that could be stood up within 72 hours with the service providers coming there to break their addiction and then have them community supervised to go do their, like, Bring trash pickup to get ready to get a job instead of gouging Medicaid, making things worse.

Thank you, David.

That is our last in-person or remote commenter.

Thank you very much.

Before we get into item number one, I do want to exercise Chair's privilege here and respond to some of the comments and say emphatically that although there might be concern out there, I did talk to Patience Malaba of HDC last week and individual housing providers and Personally, for my part, there is no intention of spending housing money on anything but housing.

I just want to say that full stop.

And we have got a housing affordability crisis on our hands.

And this is crucial that we look at today and all the time.

And so what my concern is, not necessarily concern, it is our duty to make sure that our dollars are getting out the door in the As quickly as possible to help the people that they're intended to help.

And so we can perhaps as council do simply through our oversight or maybe taking actions later, which I don't have any in my mind right now, but if there's anything that we can do to support the office of housing in getting those Dollars out faster, completely willing to do so, and this has been a conversation between me and the Office of Housing for a year or two now, and it's still on the table because I think that we're all on the same page with what has to happen to that money.

Get it working for people and families in our city right now.

So please read item one into the record.

Agenda item one, response to statement of legislative intent, slide CBO003SA2, underspend fiscal monitoring and grants for briefing and discussion.

Thank you very much.

I'll just say that this is accountability full stop.

This is all about our role in making sure that the things that we allocate money to are actually benefiting from those decisions and how we can perhaps work better with the executive to make sure that there is A smooth transition between our decisions to allocate resources and the executives getting them out the door.

So with that, we do have two departments here to present the information.

You all received, I believe it was around July 21st, if you want to search in your records, July 21st?

Anyway, from all these files that will be Referring to here but this is a request that was made during last year's budget deliberations and the response was due on July 31st and we got it early and so now we will be able to ask more detailed questions and hear from the horse's mouth so to speak of what all those really Info-rich files that we received actually say to us.

So please go ahead and introduce yourselves, and then you can begin with your presentation.

Dan Eder, CBO Director.

Good afternoon, committee.

I'm Zachary Kuntz.

I am the Fiscal Management Team Lead for CBO.

Hi, everyone.

Michael Winkler-Chin, Director of the Seattle Office of Housing.

Good afternoon.

Kelly Larson, Director of Policy, Seattle Office of Housing.

Good afternoon.

Tom Mikesell, Central Staff.

Hi.

Jennifer LeBrec, Central Staff.

Thank you.

Hello and welcome.

Go ahead, please.

Okay.

Thank you, Council President.

Appreciate you and the City Council raising important questions about underspend, carry forward, and other topics in the Statement of Legislative Intent.

We appreciated the opportunity to address those questions in writing.

And are happy to be here to discuss them with you today.

Zach Kuntz, CBO's Fiscal Management Lead, is going to present today on behalf of the City Budget Office.

His presentation will focus on a citywide perspective, and I'll be here to provide and assist as we talk through issues and questions.

Then the Office of Housing Director, Winkler Chin, will provide additional analysis and detail about how the particulars of these issues underspend and carry forward in particular, Present in the Office of Housing.

So that's just an overview of where we're going to go in our two decks today.

Thank you.

I'll kick it over to Zach.

You want to get us started?

All right.

Good afternoon, committee.

As Director Eder introduced, I am Zach Koontz of the CBO's fiscal management team.

So on our agenda today, I first wanted to provide a refresher on the scope of the statement of legislative intent and its three parts.

And then we'll summarize some of the key findings of the analysis.

And then before we get to Q&A, I will then pause to hand it over to my colleagues from the Office of Housing to cover some additional information.

That's pertinent to the slide response.

So I would like to begin with a little background on the statement of legislative intent itself, which had three parts to it, as shown here on the screen.

Part 1 dealt with a report on historical underspend covering the periods of 2018 through 2023, organized by fund and department.

Part 2 requested a report on year-to-date budget versus actual performance through the second quarter, or Q2, as memorialized in Resolution 32116. Then the final part, part three, requested a searchable and sortable database of outstanding city contracts and grant awards exclusive of the EDI program that were outstanding as of December 31st, 2024, encompassing the three departments with the largest portfolios of grants to nonprofit providers, which, in working with Council Central staff and the departments, we determined those to be The Office of Housing, the Human Services Department, and the Department of Education and Early Learning work deal.

So I'm somewhat going to take our walkthrough a little out of order, as I imagine that part one is where we will be spending the bulk of our time today.

But I did want to make sure that I covered all three parts of the slide response.

So I'm beginning here on the screen with part two of the Statement of Legislative Intent response, which memorialized Resolution 32116, which was approved as part of the 2024 budget.

And among its provisions, it requires that reporting on the budget versus actual performance both at midyear and as well as at year end.

The city formalized its fiscal monitoring program back in 2023, and it utilizes quarterly meetings between the departments, CBO, and the Office of City Finance to review financial results in four key areas of financial performance.

Number one is transactions, namely the actual postings to our financial system, cash balances to ensure that we are consistent and meeting our financial policies around cash balances, grants management, To ensure that we are staying on top of our grants during their periods of performance and providing timely billings to our grantors to ensure that we are receiving funds in a timely manner and booking those accordingly to the respective grant funding source.

And then part four is the budget versus actual analysis that we do on a quarterly basis.

This program really began as a very primitive version using our existing Excel-based financial pivot report, with each of the four areas having its own tab in the workbook.

Last year, we migrated those reports over to a Power BI application.

It's web-based.

It provides a much more dynamic view.

It's much more user-friendly, offering dashboard-style reporting with toggles that enable users to slice the data between different funds, Budget summary levels or BSLs, account groupings, and then as well as to take a citywide look and department-specific views.

It was the citywide view that was provided as part of attachment B in our slide response.

The overarching goal of the program is really to identify those fiscal challenges during the course of our year with the goal of avoiding budget exceptions that would be considered by the council as part of year-end legislation, as well as any year-end issues for our colleagues in finance as they prepare the annual comprehensive financial report.

Thus far, the program has used a straight-line approach, which assumes a uniform 1 12th approach where the budget is evenly split into 12 periods.

The challenge with that is obviously we have a very big operation here in the City of Seattle, and the budget doesn't necessarily fit into 12 equal portions.

And we're varied enough that this is going to create variances in our quarterly reviews based upon seasonality and just timing of when expenses are incurred.

Beginning this year, we did pilot a department-driven expenditure plans to try and be more precise and address the issues with seasonality and timing that come up with a straight-line approach.

We used four departments, Seattle Center, the Department of Neighborhoods, Seattle Municipal Court, and Seattle Public Utilities, and asked them to really plan out their expenses by quarter and then by subcategories, including their labor budget, their operating budget and non-labor accounts, and their capital spending by fund.

We compared these results against our regular straight line approach and noted that the expenditure driven plans do result in smaller variances and better reflect the pace of expenditures by the departments.

We also provided these pilot reports as part of attachment B to our slide response.

Part three of the Statement of Legislative Intent regarded the searchable contracts database.

This information requested the information regarding our open contracts and sub-grant awards, including the name of the agency, the date of the contract originated, the amount of the contract, any related contract grant deliverables, and any performance measures that were listed in the contract.

The challenge in providing the information for this part of the SLI response is that this information, it's not centrally located.

We began our analysis as part of our 2024 year end by examining the open encumbrances as reported out of our financial system by the Office of City Finance.

And from this list, we were able to Derive a lot of basic information from this list, but in order to provide the full accounting and fill in the gaps required by the SLI, we worked with the departments and their department-based systems to make sure that we had a full accounting of this information.

As I noted in my intro, the three departments that we reviewed were Deal, OH, and HSD, and they all have nuances to their operations, and this provides some important context when looking at the information that we provided regarding the open contracts and grants, including here the variations in the periods of performance.

Depending upon the funding source that was backing the grant or award, the contract could be longer than 12 months.

Deal in particular has some nuances to their operations in that they follow the school year rather than our fiscal year at the city.

That also depends on the color of money that was funding the awards, whether that be city funds or whether they were passed through funds from the federal government, which tend to carry more reporting requirements and thus can affect the pace at which the outside agency bills the city and that we can turn around and furnish payment.

While meeting our granting requirements as well.

So with that, I will circle back to the primary focus of the statement of legislative intent and that being the underspend review for periods of 2018 through 2023. During those six years, obviously the city organization underwent a considerable change.

We experienced significant population growth in the run up to 2020, but we also saw significant impacts in 2020 with the COVID-19 public health emergency and the effects that it had in the subsequent years.

So through 2023, we saw a number of contributors that affected underspend in some of our larger areas of the budget, and I've listed four of them here on the slide.

Looking at the general fund, we had factors that affected the underspend over this time horizon, including the Coronavirus Local Relief Funds, or CLFR, That were received on a few tranches, and those matriculated themselves through the budget over a period of several years.

The Equitable Development Initiative, which prior to the creation of the Jumpstart Payroll Expense Tax, was funded through the General Fund.

And then the participatory budgeting programs, which were funded and then carried forward over multiple years as the program was Put in place in terms of how those funds would be allocated.

Within the payroll expense tax fund, which was enacted by the City Council back in 2020 and first collected in 2021, in that year, 100% of the payroll expense tax revenue was allocated to the general fund.

So much of our analysis on the payroll expense tax fund was regarding years 2022 and 2023, when it was a standalone special revenue fund And the revenues were allocated according to the spending plan and the legislation, with approximately 71% going to programs in OH and the EDI program administered by the Office of Planning and Community Development.

As of the end of 2023, the city had approximately $1.8 billion in carry-forward funds in our financial system, and just over $1 billion of that amount was in capital funds.

So over this time horizon, we were not immune to the record high inflation levels that we experienced coming out of COVID-19.

And locally, we also had a concrete worker strike, both of which significantly affected construction prices, as well as the project delivery timelines in our projects included in our capital budget.

And then the last area I just wanted to note that we've seen some significant effects in our budgeting and underspend over the years is in the grants area.

This primarily was as a result of when we included grants in the budget, which we ultimately did not receive.

CBO has worked with council central staff to enable grants to be accepted and appropriated outside of the budget process, including a first quarter acceptance and appropriations ordinance, which has enabled us to have better timing with when a grant is actually received instead of some guesswork, including the grant in the budget, ultimately not receiving it, and then having to abandon it Later with a piece of supplemental legislation.

CBO has also instituted revised policies for which grants we do include in the annual budget, requiring them to be either formulaic or entitlement type grants that have a proven track record and support existing programs.

These rules are designed to eliminate the variability associated with including any one-off or competitive grants which may vary year to year in the budget.

So in the context of discussing our budgetary underspend, we did want to discuss how underspend can take a couple of different forms.

The first and most basic is what we would call initial underspend, and this is simply our revised budget minus the actuals.

So this simply reflects in terms of what was not expended within the fiscal year.

However, within our initial underspend are commitments that we need to honor moving forward or they may be other initiatives which the executive or the council would like to continue to see deployed into the community.

And so that's why we have our carry forward process to solidify those commitments and enable them to roll forward into the subsequent fiscal year and deploy those funds into the community.

Taking our initial underspend minus our carry forwards, we arrive at our net or our true underspend, which is the bottom line unreserved fund balance in a particular fund which is then available to be used for future budgets.

If you don't mind me just jumping in before you go to the next slide, I just want to It may not be intuitive what a revised budget is.

You all adopt a budget annually, but then you also pass appropriations bills during the year, typically at least a mid-year supplemental bill and a year-end supplemental bill.

You also may pass one-off bills that change appropriations.

The cumulative changes that you've made are reflected in the revised budget, but they haven't yet been made in the adopted budget, which is made at the front end of the year.

So that's the initial underspend is the revised budget, less what actually got spent actual spending against that benchmark.

The next slide I wanted to discuss just briefly the different types of carry forward that affect the budget.

The blue boxes on the left-hand side of the slide are those items which carry what's called auto carry forward authority.

That means these funds roll over without further action by the City Council at year-end unless they're abandoned.

The largest part of that auto carry forward, types of carry forwards, are encumbrances.

Those are our executed contracts and purchase orders with balances greater than $5,000.

And so as of the close of fiscal year 2023, that totaled about $63 million of open encumbrances, which carried forward to the next year.

The next type of auto carry forwards are our grants.

So if we have a grant that has an unappropriated, unspent balance, and we are still within that grant's period of performance, those open balances roll forward into the next fiscal year as well.

Any funds which are appropriated to a capital project in our six-year capital plan, those funds also auto-carry forward until the project is completed and closed out.

And then the last part of auto carry forwards are what's known as the other administrative carry forwards.

This is generally a very small list.

This is usually those pieces of standalone legislation which carried a provision enabling auto carry forward for those particular programs.

In the past, just to give you some examples, this included at one time the participatory budgeting.

Programs in the Neighborhood Matching Funds, Equitable Communities Initiative, and certain funds in our Judgment and Claims Fund carry auto admin carry forwards.

The last type of carry forward is in the light blue on the right-hand side of the slide, and those are our legislated carry forwards.

Those are the items that are submitted to the council for their consideration, usually in the springtime, and those are non-encumbered funds that pertain to specific initiatives which the council considers for possible carry forward.

Those items are reviewed as part of our year-end process, and they generally need to be for those specific initiatives that were included in the budget that, for whatever reason, were not able to get done.

Either it was a brand-new program that needed to have the process determined about how those funds would be spent, if an RFP needed to be conducted, or any other parts that needed to be negotiated with an outside provider.

And whatever the case may be, we just were not able to deploy those funds within the fiscal year.

Those typically end up in our proposed legislation for council consideration as part of our legislative carry forwards.

But in general, we do not carry forward unencumbered savings.

This is generally for those items which we are part of a program that needs to be continued into the community.

So I'd like to jump in and give just an illustrative example.

I know a lot of the focus is going to be on the Office of Housing.

Projects that have been awarded and contracts have been signed for those projects would appear in the encumbrances bucket.

So we would have legally committed money to move forward a project that would be in the executed contracts with balances, encumbrances bucket.

Projects that have been announced as awardees but haven't yet gotten to the stage where we have locked in a legally binding contract are in the legislative bucket.

They are not encumbered formally and legally, so they are Subject to reappropriation, effectively, through the carry-forward ordinance that is the legislated bucket.

If I have that wrong, please correct me.

If there are no questions, we'll continue.

I do have a question on this page, if you don't mind.

The legislated underspend on that slide says it was $53 million in 2023. We just passed a $169.2 million legislative carry forward.

So that's a big difference.

And of that, I believe 60 million was for housing, 51 was for EDI, and there were projects that went back to 2023. So is that unusual to have that big of a legislative carry forward?

Well, we're going to talk about some of the historical perspective, and that I think may be helpful for answering your question.

But I will say that the EDI program has increased substantially since 2023, as has the investment in affordable housing.

And those projects take multiple years, as you'll hear later in our presentation.

And I think that's a big contributor to why the overall amount of legislated carry forward has increased since 2023. Um, in the, in the 2025 timeframe that you were looking at.

So it just, uh, reflects increased appropriations then.

Okay.

Thank you.

Okay.

On our next slide, I, uh, briefly wanted to provide.

I'm sorry.

Council member Rivera.

Um, thank you, council president.

Uh, thank you all for being here.

Director Eder, um, on the grant side, 52 million is a lot.

Um, this has been appropriated, but Unspent grant balances within the grants period of performance.

So can you just give a little more information here on the grants and the $52 million in 2023?

Like you're holding, it looks like you're holding a lot of unspent grant money.

Yeah, Zach is looking up some information.

My understanding is that this waxes and wanes with the capital projects.

Sometimes capital projects go directly on time, and the next year, one project can get delayed a year.

And it just, you know, because of a variety of things.

The concrete strike, as Zach mentioned earlier, slowed down a number of projects.

I don't know what was happening in 2023 exactly, and I can't by off the top of my head tell you how that's changed in the 2025 carry forward ordinance, but I will say that it varies pretty significantly year to year depending on how projects have proceeded and what size the project was in the first place that may have gotten a change in schedule.

I appreciate your response, direct reader.

I'd like to have more definitive information about this.

And also I'm just going to say in general, I feel like we're lacking in the, how we monitor these funds.

And every time we ask a question, it's really hard to get a response and that doesn't inspire confidence in the, you know, fiscal responsibility part of the city.

Like our fiscal responsibility or fiduciary duty basically to our constituents, if you want to call it that.

So I'd love to have some, you know, fiscal systems put in place where every time we ask a question, we should be able to readily get to the answer.

It makes for a lack of confidence when that's not the case.

So I'd love to hear, and maybe this is part of later in the presentation, but what is going to get put in place?

Because I think part of the, I'm going to say angst, and maybe I'm the only one feeling angsty, but it's just the fact that, you know, there's missing information.

Nobody seems to know.

It's all piecemeal.

It's out there somewhere, and I think it's like maybe it's just how we're keeping track of it is not at the ready.

And I think if it was, it would make it easier for us to be able to feel more confident about what is happening in this space.

And I understand it's grown exponentially in a very short period of time, but all the more reason why we really need to have a system in place

Councilmember, I just want to assure you that we absolutely do have a system in place, and we can report out chapter and verse on every one of the grants from 2023, if that's your interest, or 2025, if that's your More updated focus.

We can tell you how many dollars were anticipated to be spent in 2024, how many dollars were spent, and how many dollars weren't spent but were automatically carried forward by project and by grant.

I'd love to get, sorry, council member.

I'd like to get that, but I also just in general, not just about grants.

I just feel like in this space, we are not getting, it is really hard to get information about vacancies, about just how much is being created and how vacancies are being filled.

I just feel like every time we have this conversation, there isn't a one-stop shop To get all this information, I don't know that that's the best way to put it, but it's just, it's very hard to get information.

And so I appreciate what you're saying, and we can keep talking about it.

The conversation is ongoing, and I know that central staff is engaged in asking a bunch of very smart questions, and we're doing our best to provide you with The information, not just in a raw form, but organized in a way that is useful for decision-makers and policy-makers such as the council members.

Thank you.

Thank you, Council President and Chair.

Our next slide is a snapshot on underspend within the general fund over the six-year window between 2018 and 2023. And between 2018 and 2023, the net underspend, so that underspend after taking into consideration our carry forwards for the general fund, averaged approximately $36 million, or about 2.1 percent annually.

And the table on the screen here shows in terms of the revised budget, our actual expenditures, and then arriving at that initial underspend, so just budget minus actual, To look at what our initial underspend has been over the six years, which averaged around 10%.

We have put in here, just as a context, how much of that initial underspend was due to labor, since we are a service delivery organization.

So in general, that has factored around 22% of our underspend was due to labor savings.

So still around 78% of our underspend is due to areas other than labor.

So looking at our total carry forwards over this window has averaged about $133 million.

And as Director Eater noted in an earlier comment, this is also a function that the budget has also grown over this window as well.

And just in the course of our business, certain items are going to need to be carried forward either for open encumbrances or as Programs continue to expand in our city inventory.

And then on the right-hand side in white are the net underspend and as a percent of the revised budget, so approximately 2.1% average underspend over the six-year time horizon of the slight response.

So just some key summary points on the next slide coming out of our analysis on the general fund underspend.

That underspend and carry forwards peaked in 2021, and that was due to a couple different factors.

The city was the recipient of multiple tranches of coronavirus local fiscal recovery funds, or CLFR funds, which were deposited into the general fund.

We also had the participatory budgeting Funding which was appropriated and then carried forward while the program was determined how it was going to be implemented.

And then as Director Eder noted, the Equitable Development Initiative typically has a long lead time.

And so as those funds were budgeted annually, they were carried forward.

And I believe as of 2023, the balance in the general fund was approximately $20 million in carry forwards for EDI from the general fund.

And so to that end, something that has been done since 2022 includes an underspend assumption for the general fund in our financial plan annually between $10 million and $20 million to capture a portion of the underspend which occurs during the course of normal operations.

And this is a practice that we continue to today in the general fund budget.

And then briefly, some high points from our looking at the payroll expense tax underspend.

Approximately 70 percent of the PET funds over this horizon were allocated to programs with long-term project commitments, namely those for OH and EDI.

As a result of this, the initial underspend for 2022 and 2023 in the payroll tax fund was 45 percent and 57 percent, respectively.

But once you factor in that those funds were carried forward to support those projects, the net resulting underspend for the payroll expense tax fund was 0.8% and 1.7% for 2022 and 2023, respectively.

I just want to jump in to say that is not something that we need to feel like is a problem.

It's a feature, not a bug.

That's exactly the way the anticipated funding of these projects was expected to go.

As you'll hear when the Office of Housing presents on their budget, these are multiyear projects that we fund at the front end of the project.

So that the city portion can attract other dollars and we stay true to our commitment so that when the money is actually needed between three, four, five years later, that money is available and can be locked into a contract and spent to develop the housing or the EDI project that we've committed to multiple years earlier.

So I just wanted to point out it looks like a big percentage For the initial underspend, but those are committed dollars that were always intended to be spent several years later.

And then to follow up on Director Eder's comments, we do hear note on the slide factors affecting the PET fund underspend that the EDI and affordable housing projects, they do cause the payroll expense tax fund to show large underspend and carry forward balances.

I believe as noted one of our public commenters earlier in the meeting, these represent our first dollar in, where the city budgets all the funding in the year committed to specific future projects with our partner organizations.

The city does not have direct control over the project timeline for those projects, and we carry forward those funds in the budget until the partner organization is ready to proceed with the project.

In order to preserve those resources for these projects and reaffirm the city's commitment to its partners, we roll those funds over within the budget each year as part of our carry forward process.

And so I believe before we get to other council committee Q&A, I will hand it over to my colleagues from the Office of Finance.

If you don't mind, let's just stay on this presentation in case people have.

First of all, I do want to apologize for My gesture to speed it up, because I do want to recognize that your questions were extremely important.

It's hard to find information, and also you did raise a question about vacancies, which I share frustration with when we're talking about the vacancies in affordable housing facilities.

It's always seemed to be that we should be able to get that faster, and I understand that there have been attempts there, but I don't think that the numbers that we're getting represent all of the projects, I've always wondered why it's not easier to get that.

But I do have a question on the, could you please go back to the chart where you talk about the historical underspends?

Okay, that's page nine.

So for example, so just for the audience, for going backwards in time 2023 to 2018, the underspins are 11.5, 11.4, 13.1, 9.5, 7.8, 5.9, With a six-year average of 9.9.

So that's one set of numbers.

But then in attachment A, which I think represents all of the funds, and we kind of went about it in a different way.

We added up all the funds and then, you know, did the whole fraction thing to find out what to get a sense of underspends.

And we had We came up with 15.6, 14.4, 16, 16.5, 13.6, and 11.5 in reverse order from 2023 to 2018. So offline, maybe I'd like to understand the discrepancy there.

Happy to talk offline.

I think my initial answer to you is this slide, number nine, is looking only at the general fund, and I think that what you're looking at includes The payroll expense tax fund, for instance, which has, as Zach mentioned, about 70 percent of its investments are in multi-year projects that are expected to carry forward from year to year until construction happens.

So I would expect to see, as you look at a composite of a larger number of funds besides just the general fund, you will include the payroll expense tax fund, which has this Natural element of expected carry forward, and the percent will be different and larger than what you're seeing on this slide.

Thank you.

Could you please go to slide four?

And that concerns the Budget to Actuals report.

The report projects a 2025 underspend projection of 392 million, which is higher than in prior years.

And can you talk about that a little bit?

Is that because of the hiring freezes in the, well, that was 2024, so that would not, perhaps.

Anyway, is that because of some of the measures that were taken looking at the projected deficit?

Can you explain that a little bit more?

Yes, Madam Council President.

The report, the column that you're referencing in Attachment A is a straight-line projection.

Essentially, it takes your year-to-day expenses and runs out that trend through the end of the fiscal year.

It doesn't necessarily represent where we anticipate our year-end balance to be.

It's more of a barometer that we use in our quarterly check-ins with the departments to say, if nothing else changes, here's where we could potentially land.

A $392 million underspend would represent about a 20% underspend for the general fund, and we don't believe that's realistic.

We more use it as a gauge to see where we're spending in the year.

But as I noted in my remarks, this is a straight line.

It's not seasonally adjusted.

And so for departments like Parks and Rec, as an example, it's projected to have about a $21 million underspend, according to this table.

But we also note that Parks does most of its business in the summer.

And so that is not anticipated where we necessarily will land at year end.

But based upon where they were at June 30th and extrapolating out to the year end, that's what that number would be.

So it does not necessarily represent a CBO's forecast for where we think the general fund will end up at December 31st.

Okay.

I was, thank you for that explanation because I was thinking it might have had something to do with HSD because it's only spent 40 million of its 277 million general fund appropriation for the year.

So in other words, 14% of the total has been spent even though As you say in the memo, one would expect to see something closer to 46, that sort of industry standard middle of the year, or 127 million halfway through the year.

So that's what I thought was driving it, but I guess not.

But in general, I think that your memo says at some point that we'll receive narrative explanations for some of these variances with the fall budget questions.

And I would just note that receiving these numbers without at least some additional context for some of the largest variances doesn't put us in a really good position going into the budget.

Again, it's all about what we're looking at and how we make decisions.

Even though the timing of the slide transmittal was on, was January 31st, a month after the fiscal year end, it seems plausible that CPO analysts could provide a little bit more content or explanatory information to council members, not necessarily now, but hopefully we can get that going into the budget in, you know, we can, these are ongoing discussions.

Does that make sense?

Okay.

Before continuing on to the housing, I'm looking to see if there are any other.

Tom, do you have any comments or additions before we go into the next presentation?

Yeah, thank you, Council President.

I would just add that part of the challenge that you're seeing is because of the use of the straight line approach.

It's kind of a very crude metric in a sense, and as Zach points out, there's seasonality in it.

And I think they're trying out an approach with the departments that applies that seasonality to kind of more fine-tune their model to what reality looks like.

The challenge is that you've now received kind of the straight-line look, and it kind of doesn't have any true value for this particular meeting in that context without some additional narrative.

The kind of dedication to provide that additional clarification and narrative of what they're getting was truly going to be a value add because right now, you know, I'm kind of, you know, as staff anticipating the budget, wondering what's to come given what we're seeing and the kind of year-to-date comparisons that they provided.

So it sounds like we're, you know, this is the first start of this report for the Fiscal Transparency Program, and I think their kind of messages are kind of good that there's ways to improve, and I think that they're receptive to those, so thanks.

Thank you.

Council Member Kettle.

Thank you, Council President.

First, I just want to thank everyone for being here, Director Eder, Mr. Kunz from the CBO, and Director Winkler-Chin, your team, and of course the central staff team as well, Mr. Mike Sell and Ms. LeBrecq, whose insight is very helpful to me, usually coming through my staff on different things like the encumbered points and so forth.

I appreciate this process, and I actually appreciate the back and forth, too, even if it can be uncomfortable at times, because I think it's important to kind of, you know, bring up to the level, to the surface, if you will, some of the pieces of it, because a lot of times it'd be right, but if it goes sideways, it could be problematic.

And I just wanted to take the opportunity, too, since Council President brought it up, that You know, in addition to the, you know, the Seattle Times Ed Board, I think we should also be thanking and giving credit to Councilmember Dunn and the King County Council for his work because it shows as an example for us something that we want to avoid, you know, that makes it that much important for us to look at it, you know, look to cross our T's, dot our I's, make sure that things are right.

You know, some of the points that the central staff highlights to us.

And so I commend him for that, and also providing us the opportunity to step back, take a breath, and say, okay, what are we doing here?

And sometimes it can be just a simple misunderstanding or looking at something two different ways, as Director Eder just pointed out, because there's so many, so complex.

But going through this process is also helpful for the public, too.

So I just wanted to make that point generally.

And I'll add to that in terms of my specific area of interest.

As you know, I chair public safety, and I tend to look at things a lot of times through a public safety lens.

And I really, and I've been saying this in meetings with a lot of very senior individuals in the administration and so forth, I have a great interest in the seam that exists between public safety and public health, the seam that exists between public safety and human services, and putting an eyes on that and looking at how can we do things better, how can we, you know, get alignment, maybe, and all those things.

So I just wanted to state that for the public, for the record, As chair of the public safety, that's an area that I'm now looking into, and I think there's opportunities.

And this is something that I've been, you know, speaking to the executive, usually on the public safety side, but I just wanted to put that out there.

For this presentation, I just have one question.

We're going through the different pieces, and you're highlighting different pieces.

And I may have missed it, but was there any lessons learned that you said, oops, yeah, we should be doing things better?

Like, what lessons learned have you taken in in terms of going through this, as I mentioned, can be uncomfortable process?

Is there anything that we can take away to help the process?

Maybe it's just communication between the executive and legislative branches.

I don't know.

But I just wanted to ask that question.

Is there any lessons learned?

Yeah, I think it was a very useful exercise, and I sincerely appreciate the opportunity to sort of dive in and share the work that we've done looking back at the last five or so years.

I think there's no way Legally, that we can spend more than our appropriations.

The council sets the upper limit and revises it up until the year-end supplemental.

We are never going to find ourselves spending more than our revised budget.

So it's necessarily going to be either no underspend whatsoever or some amount of underspend.

And I think between 1 and 3 percent is In the right ballpark.

It suggests to me that we do not have a tremendous problem here.

Other people could reach different conclusions.

But that was my takeaway here, is that we average about a 2% net underspend after the carry forwards.

I do think that there are opportunities and the city has been working diligently under the mayor's leadership to make housing development go faster so that we can get the dollars out the door more quickly so that we're not looking at a four or five year time horizon from when we make our initial awards.

But that's true not only for affordable housing, that's for all kinds of development.

And we are working with SDCI and with some policy changes under your leadership and partnership to make happen.

That's good.

I was going to end with that, so is this good enough question, but thank you very much for bringing up that audit from King County.

Attachment C colleagues is where you will find a list of the contracts for just three of the department, for three departments, those of which Apparently have the most contracts, but it's really a lot of fine print, and this is just three of them.

And I would have thought that OPCD was in here.

Really, I'm looking forward to a database so that we can make this more visible, because making sure that, again, it's all about the outcomes that we're producing.

And so, yes, we make awards, we make decisions, and then service providers are off to do their work.

We also need to, at times, look back and make sure that over a certain period of time, the problem that we were initially trying to address is getting solved.

Go ahead, and you can proceed to the, oh, go ahead.

I'm looking at the screen because, yes, go ahead.

Thank you, Council President.

I'm just on slide eight.

Going back to the encumbrances, and I understand these projects take multiple years, and I do think that the fact that we're first dollar in has an impact as well.

Obviously, the state and feds are last dollar out.

So that means it takes less time from when they give the money to the project completion.

But because we've made a policy decision to do first dollar in, and I understand why, so we don't need to necessarily go unless someone else would like to know.

I'm wondering, what do we have in place?

At what point do we say, well, tell me how long it takes For these projects, and are all these projects averaging the same?

And do any of these projects fail?

And then what happens at that point to those funds?

Do they get put back into the system to award someone?

Like, how does that all work?

Can I add one final point to that question?

That's an excellent question.

I also, we talk about, well, the unencumbered projects, you know, and something becomes officially encumbered when the contract is signed.

Why does it take so long to sign that contract?

I'm wondering if we should wait until our presentation because we kind of walk through the steps.

Okay, we're believing.

That may be helpful for us to walk through the steps, if I may so suggest.

Okay.

Seeing no other questions, go ahead, please.

Okay.

Thank you very much, committee.

We are here today to talk about how the Office of Housing spends its dollars, which requires discussion of the typical housing financing and real estate development process, which I think Councilmember Rivera gets to your point.

We'll also share how the city's housing funds work with other funds to invest and open new homes throughout the city.

I think there's a swapping of chairs.

And by bringing other dollars together with city dollars, we stretch our local investments further to build as many homes as possible.

And we want to acknowledge Councilmember Kettle for your request for the housing investment plan.

Our team is working on this deliverable and we apologize for the delay.

We do appreciate your attention to this important issue of how housing dollars are allocated and delivered into homes in communities throughout the city.

And here we're looking at one of those homes.

This is Julia and her son who live at El Centro's Plaza Roberto Maestas up on Beacon Hill.

And I think a lot of people are probably familiar with that development.

Julia's family exemplifies the work our office and our investees, our partners, do in communities across the city every day.

And I like to highlight this because we oftentimes think of the Office of Housing investing in the housing, which is up above.

But on the ground floor of this site, if you've been there, there is childcare.

There is a really cool coffee shop.

We have a financial institution.

Located right nearby, we have really good tacos.

You got the light rail station across the street.

You got the major bus 36 coming downtown that's located right near there.

You have grocery store.

You've got all the great things.

And the location of this housing, thinking about it with all the things that this housing can provide is really, really important.

And so I wouldn't want to forget about that.

New housing development continues at a time with both great opportunity and great challenges.

And yes, new housing opportunity is happening right now.

We are moving forward with developments.

I actually printed this out so I had some sense of, hmm, I was kind of looking back at my old budget from last year, and I don't know if you can really see this.

So the Office of Housing's budget was $70 million in 2019, went up to $130 million in 2021, And we've been at about right around $340 million for both of the last two years.

Mayor Earl announced another historic housing budget yesterday of almost $350 million proposed for 2026. With more funding available to build new homes, the Office of Housing has more dollars deployed on housing projects than we've ever had before.

This is actually a success story, and we will be sharing more about how these funds are moving into community projects.

And we'll come back to describe the financing timeline for the housing featured here, Plaza Roberto Maestas, later on the presentation.

So the majority of OAH's budget, 84%, is dedicated to building new homes and preserving existing homes.

So you see the 76%, and there's two other smaller 4% slots that are also tied to weatherization and home ownership.

So those all go into the building of new homes and preserving homes.

Agency supports, highlighted in blue, fund operating and services expenses and permanent supportive housing and affordable housing to support resident stability and well-being.

OH is deploying these affordable housing resources to address the growth targets that have been set for Seattle by the state of Washington, and Seattle needs well over 100,000 more affordable homes, and Seattle's housing need is greatest for those with the lowest incomes.

So our current housing investment practices.

As we've said earlier, Seattle is typically the first investor in a project.

This allows the city to help set priorities for the future and secure strong projects.

Once the city has invested in a project, the project sponsors, the developers, are assured that they can continue the work of design and pre-development and begin to spend more of their own money and time to develop the project so it can be built as quickly as possible.

OH staff are meeting regularly with potential applicants to discuss challenges and opportunities and to help inform key project changes so that they are as competitive as possible and so they operate into the long term.

Investors in our community work collaboratively to prioritize and invest in projects, which helps us ensure the most feasible projects move as quickly as possible.

And some of those investors we'll talk about later, but they include other governmental entities, tax credit investors, equity investors, and private banks.

Seattle could choose to invest alone in housing and move faster.

But there's a serious cost to this, which I will discuss later.

I feel like I keep like saying, hold on, I'll get to that in a sec.

But that is basically how this presentation goes.

Seattle currently matches funds at around one Seattle dollar attracting $3 from other sources.

So this is a oldie but goodie slide.

We've shown this a lot.

And this is kind of the life cycle of affordable housing.

And we're gonna talk now about the housing funding process and how this works.

The mayor announced $170 million available for rental housing production, preservation, and stabilization this fall.

This process, which we call the NOFA, is represented in the yellow box on the left.

So OH Capital awards are made in response to a notice of funding availability or site-specific requests for proposals.

We also do that, right?

The OH Investment Committee reviews applications and projects are then selected and receive a commitment letter from the city to secure the funds and the project going forward.

As we move into the yellow to the green on this, developers are working hard to assemble other funding from all sources, including those equity investors that I mentioned, as well as the state and the federal government and private investment.

During this period, a fund balance accrues on OH's books as we wait for all the loans to be finalized and construction costs to be billed or figured out for the project.

This is a structural issue and it's an expected issue and it's part of the real estate development process.

It usually takes about three years between the initial city funding commitment and the first expenditure for construction, which is noted in green.

We've made some improvements over time to become more efficient at assembling financing for the projects.

And some projects also have characteristics that make them move faster than others.

And that could be related to like the size of the project or the special land features if they have to do a lot of construction work on the site.

In real estate development, when working with major banks and numerous subcontractors, a predictable process is valued and rewarded.

Not counting projects that are currently applying for the NOFA, we have about 40 projects in process that are kind of in this yellow to green part up on this chart, with total investments exceeding $2 billion right now underway.

So we have some dollars coming in, and they're helping fund about $2 billion worth of construction right now.

This $2 billion includes many other funding sources outside of city sources, primarily the low-income housing tax credits, private bank debt, and state of Washington housing trust fund dollars.

This means that approximately $500 million of city funds attracts about $1.5 billion of other funds into our city to build more homes.

And these additional dollars brings jobs and support our economy and enable affordable housing projects to continue even when other developments slow down or stall.

If Seattle invested in housing alone and we didn't count on the other dollars, we could probably move more projects faster, but there would be consequences.

We would miss out on billions of funds from other sources.

We would experience more risk as the only funder on a project.

We would fail to meet the Seattle housing levy goals approved by the voters.

And we would build far less housing overall, probably about 65% fewer homes.

We continue to work with our partners and community and our investment partners to stretch city resources as far as possible, serving as responsible stewards of the voter approved housing levy and bringing as many new homes online as we can.

Here we provide a high-level view of the Office of Housing development cycle.

This chart shows how different phases of the process overlap from year to year.

Again, you can see we start with ANOFA, then we move to an award and a contract as financing is secured.

Projects are then built over the next 12 to 24 months.

Projects open as they lease up, welcoming new residents home and achieve final stage as all financing is closed out and converted to a permanent mortgage.

This is our standard process.

It's designed to be predictable and to secure the most bang for our buck, or what we often call this leverage of other funds.

You can see how this process starts each year and requires around six years to achieve full closeout.

Every year, we issue new funds for competition and begin the cycle again.

At any point in time we are collecting new revenue, we are administering prior funds, and all stages of the development process are underway at once.

You can see in this 2025 column, circled in red, that our OH staff team and our community partners are very busy working on every stage of this housing funding and development process at once.

We're operating projects that were funded in prior years.

We're building projects that were funded in 2021 and 2022. We are finalizing contracts for 23 and 24 dollars, and we're in the middle of a NOFA process for 2025 funds.

There's a lot happening at once.

Consider comparing the Office of Housing investments to other city investments that are part of the capital improvement program, the CIP, like SDOT and City Light.

The CIP is a six-year document, which better reflects how most OH housing funds work.

It takes time to fund and build a major capital project.

Most of OH's budget goes toward capital projects that require a similar timeline.

We do not provide a lump sum payment up front.

Construction costs are reimbursed over time as stages of work are completed and documented expenses are submitted to our teams for review.

At this point in time, the OH team and our community partners have a combined 40 projects in process at various stages of development.

They're seeking additional financing.

They're working on pre-development and design.

They're closing on loans.

They're beginning and completing construction, leasing up new apartments, and closing on financing.

Sharing here two project examples of timelines and funding as it flows from city award to housing opening, El Centro's Plaza Roberto Maestas received a $7 million city award in 2013 and moved very quickly, completing construction three years later in 2016. It probably did not feel quick to folks working at El Centro for years and years to build the case to make this project come to life.

They worked really hard, such that when the awards were received in 2013, they could move very fast.

This project cost in total $44 million, so the city's $7 million award brought an additional $37 million of funds to our city to support new jobs and homes, more than five times our city investment.

The lower project is Bellwether's large sound transit site, Cedar Crossing, at the Roosevelt Station.

This received a city award of $15 million in 2017 and completed construction five years later in 2022. With 252 apartments, this project is much larger and more expensive than the El Centro project.

The total cost of this project was $98 million.

Here, the city's $15 million funding award brought an additional $83 million into our city to support these affordable homes, more than six times our original investment.

We could share many other project success stories like these.

Our final slide.

Here we show how the Office of Housing payroll expense tax dollars are moving through our typical investment processes.

This chart lines up with detailed information that OH and CBO have provided to City Council as recently as July of this year to describe the uses of OH's cash balance.

A detailed update will be shared with Council in the coming weeks.

Underspend is not necessarily the term we prefer, as we view these as funds in action, moving toward housing development and housing operations throughout the year.

Our cash balance has increased as our resources have increased over time.

Thanks to the voters of Seattle, we passed the largest ever housing levy.

We received nearly $140 million in payroll expense tax, and we have mandatory housing affordability funds and other federal funds.

With record investments in housing, it is expected that the housing cash balance will grow.

In yellow at the top of this chart, you can see the PET commitment for NOFAs and RFPs with our rental housing NOFA currently seeking proposals.

They're going to be reviewed in the months ahead.

An example of a project in this stage of the process is the Lake City Community Center, which you've all taken action on very recently.

Thank you very much for your support.

The city has awarded over $30 million to secure the Lake City project, and we're working with our One Seattle partners to complete numerous pre-development tasks to set this project up well.

In the green, you can see rental housing awards and contracts in process, totaling $106 million.

These projects are working to secure other financing and also at various stages of construction.

Examples include El Centro's Beacon Hill TOD project, which is under construction now, And the YWCA Lexington and Concord project, which is in the pre-development stage.

Home ownership projects on the separate line here follow a similar process, assembling financing, moving through construction.

Homestead CLT's Finney Nest has recently topped out, but it is still wrapping up its final construction activities inside.

Very excited to see that project open.

On line four, for stabilization, we have made commitments in the last two years, exceeding $150 million to support projects to operate more soundly and complete construction.

And we have $28 million this year to continue supporting stabilization of projects under construction.

Earlier, Councilmember Rivera asked, do projects fail?

Once they start construction with the Office of Housing and our partner funders, they do not fail.

We have not seen a project fail once we have initiated construction.

We have our funds available and the funds of our partners that come to bear to make sure that projects are built and opened.

OH has nearly, in the blue, the final line.

We have nearly $50 million in contracts for operating maintenance and services and workforce stabilization for permanent supportive housing.

These contracts are billed on a reimbursement basis throughout the year, and it's expected to see a balance on those contracts at this level as spending occurs regularly throughout the year.

That concludes our presentation, and we're happy to take your questions now.

I will open this up to other people, not go first this time.

Councilmember Rivera.

Thank you, Chair.

And I've spoken, so if a colleague would like to ask a question, I'm happy to wait.

No?

Okay.

All right.

So I think for some reason this is...

I can't get this close enough so you can hear me.

Okay.

So...

The projects, so I understand you're saying if they start completion, they don't fail.

What about starting completion?

I mean starting construction, not completion.

Are any of these projects you, oh, because you're doing first dollar and you award it, and then they have to secure other funding to even start the construction.

So do any of the projects not make it because they're not able to secure that other funding?

And if so, then what happens to the project, to the funding?

That we've awarded, how many projects, if this is happening.

If it's not, then it's zero, obviously.

But has this happened?

And can you give us a picture of this?

And before you answer, can I add to you?

It's my understanding that OH has perhaps about 40 awards that are kind of outstanding or so.

And so what is that?

Getting back to the we don't fund project, our projects don't fail.

Do they just hang around for a long time before actually being habitable because there are some other things that the city can be doing to improve the finishing them like permitting or anything like that?

So two very different questions.

I think first, Councilmember Rivera, you had asked, what happens to projects before we start construction?

Are there projects that have not made it all the way through?

There are a few that have not made it all the way through.

Some organizations, I can think of two very different projects.

One in which the organization chose not to accept our dollars.

And it just worked better for them if they chose not to accept our dollars.

At that point, we rescinded our offer and then cycled them back into our NOFA.

That's one of the nice things about the timing of our NOFA being at the end of the year, not to be doing the scraping of dollars together, but we kind of look and see where projects are, and then we can just wrap them in to our next funding cycle.

The other project was one where the project was not moving and we did not feel that there were some changes that happened at the organization and that it was not progressing along.

And so we rescinded the offer and said, if you'd like to come back in once you've figured out really what's best in this area with your organization and your organizational focus, please come back.

But there's no outstanding, there's no dollars for them to come.

They have to reapply.

With a whole new plan.

So these two examples occur in the yellow and the orange section on this chart.

Once we really enter into green, that's when you have 20, 30 lawyers on a call.

It's a very serious process, very complicated to achieve final closing for these projects.

We've not seen them fail once we enter this part of the chart.

If I may add to that, when I first started working in the budget office, I had the same question.

I asked it from a slightly different perspective.

I said, are there housing projects that we have awarded money to that, for whatever reason, have hung on and hung on For more than five years, I said, I assume there are some, and I'd like to know which ones they are, how much money we have invested in them, and why they're either not moving forward or we're not cutting bait.

The answer was there are none of those projects.

So we don't, at least at the time that I asked the question, there were no questions that were six years or longer where we had made an award that they had not proceeded apace and turned into projects, or we did cut bait because in those rare examples that you just heard about, the projects didn't ultimately move forward.

But there aren't these zombie projects hanging around That we just haven't decided about or we have hopes and dreams about some future money that hasn't quite come.

Projects get built.

They get built typically within five years or fewer.

It is one of the levy priorities, especially stated now in our most recent NOFA, that your project is expected to be underway, I think it's 16 months, 18 months, I think by March of 2027, anticipating an announcement at latest January, 2026. We align all the public funders, so when somebody applies to us, they apply to the other public funders, and the entity that allocates the bonds and the tax credits also participate, and so we are all aligning together in order to move the public funding side of it as quickly as possible.

But one of the things that is considered is what is the viability of the organization in order to get the equity investments required as well as the bank loans required to move the project forward.

Thank you.

So only two projects in the history of the OH.

That I know of.

I haven't been there that long.

Okay.

So, I mean, and I appreciate you that you asked the same question a number of years ago.

I also know that the money for housing projects has really skyrocketed in the last few years.

So there are more projects than maybe when you first asked the question.

So I think every so often it's good to ask the question in the context of These 40 projects that are moving forward, are these the projects that make up the entirety of the underspend, whether it be General Fund Pet or whatever else?

We can follow up with more information on that.

Just to trace the history, I've only been with CBO for a year or so.

It hasn't been that long.

So in the last year you've asked this question, and I'd love to know those 40 projects, is that what's making up the underspend, the entirety of the underspend, or is there something else that's also contributing to the underspend, not just these 40 projects?

That I understand can take four to six years to completion.

This slide eight is a fairly good proxy for the rest of our budget to show where the different funds are in process at this time.

So this is what was submitted as of May 31st.

An update will be coming to you soon.

But it is capturing the different parts of the process that are accounting for these different levels.

Generally, the bulk of it is what you say.

It is covering the 40 projects that are in process from award to contract to building and billing us for construction activities.

That's the majority of this money that you're talking about.

Could I please request that you add another column to this and then put number of projects at each of these stages?

You bet.

Thank you.

And then Council Member, I mean, sorry, Chair, I had one more question, if that's okay.

Yeah.

So are there other cities that do first dollar in like we do?

First dollar in.

First dollar in.

I think it's fairly common.

Councilmember Rivera, I'm going to have to get back to you.

I feel that it's pretty common in talking with the other major cities in the country, but let me confirm and get back with you.

That'd be great.

Thank you, Director.

I'd love to know if there are any, if so, what their completion of project times are, how many projects they carry.

With their underspend, if you will, and it's important to know...

I could tell you, because of the position of some of the other public funders in the tax credit, the tax credit and the bond process, if we were not the first dollar in, the state typically will not go in.

Not to disparage my friends at King County, but they don't have as many resources as we do.

The bank will not be able to commit because there'd be such a large funding gap because we're not willing to go in, which means that they'd never have a complete application in which to submit to the tax credit investor.

So if we were not the first dollar in, you'd kind of get stuck.

Okay, but you'll get back to me on what other cities are doing and what their timeframe is for those projects and how many projects they're carrying.

Great.

Thank you so much on that.

Chair, I'll cede, not cede, but I'm good for now.

Thank you, Council President, and again, thank you, everyone, for joining us.

Director, I just wanted to, you mentioned it, and by the way, there's been a bunch of slides coming in.

I have a pack of Landlord, tenant, rental-related ones.

And of course, this one here from you, which you actually, Ms. Larson from your team, I guess, wrote it.

It says, we have spoken to my staff and understand there's interest in a broader scope of the projected housing outcomes across all OH fund sources and incentive programs.

This is the SHIP, the Seattle Housing Investment Plan question.

And so there may be like some different, Thoughts about this idea, but my conversations with former council member Moore, my approach to this was having OH, basically put yourselves in SDOT shoes and with the Seattle Transportation Plan, you know, a major look at the enterprise.

First, the funding.

And I say this because, like, we have MFT coming up, MFDE coming up.

And we tend to look at these things individually and not across the, you know, because we, you know, there's PET, there's MHA.

You mentioned housing levy, but now we have the social housing levy.

We have all these different funds.

And so a plan that looks at revenue across the board and says, okay, this is what we have.

And they may have impacts on each other or there may be, they may support each other in a sense of like a downturn.

Like MHA, maybe, and obviously the two big ones are the two housing levies, the regular and the social housing levy.

And I think that would be very beneficial because when these things come up as individuals, what's the context?

Despite the great efforts of central staff to give us context on a regular basis, that would be very important in terms of a Seattle housing investment plan.

Councilmember, I will say about the social housing PDA, they are a different governmental entity.

And although we're friendly, I can't tell you what they're planning.

And I recognize that.

And I recognize that.

So I'll go to part B of this.

Housing.

We need a Seattle housing plan.

I'll take the investment out.

Seattle housing plan.

So as you know, there's permanent supportive housing.

There's affordable housing, and it's different bands and so forth.

There's social housing and the like.

We need to have a comprehensive look.

And as you know, we're the main driver of KCRHA, you know, the permanent supportive housing.

That has to be part of it.

You're right.

But we have to understand the social housing piece and how it impacts affordable housing or permanent supportive housing.

And we need that comprehensive look.

I'm frustrated in terms of like, you know, I support social housing.

But to your point, it's a little bit frustrating because we need to have that comprehensive approach to housing so we understand.

And we understand like a big thing for me is like our ability to digest those funds.

Are we doing it right?

You've answered a lot of those pieces as it relates to affordable housing.

But we really need a plan.

For Seattle housing that includes permanent supportive housing, affordable housing in its various types, and social housing.

And that's what I'm looking for because that's going to allow us, it's going to allow, and like I said, SDOT, they had their pedestrian plan.

They had a street plan.

They had a bridge plan.

You know, freight program plan.

And then they had to bring it together because there's trade-offs.

And there has to be a strategy, an overall strategy.

And I recognize that PDA, they may go off here, but that's good to know.

Because if they're not in sync with what we're doing or what KCRHA is doing on permanent supportive housing, then that's a problem.

And the public should know it.

And so this is the reason why, you know, and going back to SDOT, they have to show those tradeoffs because they could spend $1.3 billion just on sidewalks.

They could spend it on bridges, but they can't.

They have to show the trade-offs and like, hey, this is the reason why we're putting this much into the bridge program or this much into the freight program.

And I believe, and I recognize the point regarding perma-supportive and social, but I believe the city, we would be better off if we can speak to it in terms of strategy.

And that's what I'm driving for in this.

And I recognize This is a lot of work.

I recognize this could be a bit of a challenge.

But then again, we're the ones who are the drivers in terms of KCRHA's budget.

And the social housing is coming from Seattle voters.

And so as the Seattle city government, which is part of the discussion ahead of the referendum, the vote, We also have that need and responsibility to understand.

I'm saying this partly, I've been saying this to different audiences, but I'm saying this out loud for the more general public as our outstanding, award-winning Seattle Channel's gonna be broadcasting, just so that we have that.

And just so I would be clear in terms of what I've been looking for related to the ship, or maybe we just go to Seattle Housing Plant if that makes it better.

All right, with that finished, I would love to hear any response to that.

Thank you.

Just to refer to the earlier message this morning, we do have the foundational Seattle Housing Levy Investment Plan, which does predict and model production goals through the period of time, 2030, that you're interested in.

At the time of the passage of the Seattle Housing Levy, we also looked at all of our other fund sources and projected production goals.

We will be updating those for you with this updated plan and looking at a broader scope after speaking with your staff and working with Council Central staff, hearing from you on the dais, and we will try our best to bring forward a plan that shows how our housing goals will be accomplished over the next several years.

Well, thank you, and I appreciate that.

And I would think that the other two entities should be partnering.

I mean, they shouldn't be stand-alones.

And so, by the way, can I ask one last question, Council President?

Since I asked of the previous one, you know, again, this is a bit of an uncomfortable process and so forth, asking some questions and the like.

You know, What lessons learned do you have going through this, reviewing what we've been reviewing as part of this process, the budget pieces, the housing plan pieces, and so forth?

Is there anything that's come out of this in terms of lessons learned, hey, we can maybe do this better?

And particularly with the council member Reagan done in what's happened at the county level, making sure that T's are crossed and I's are dotted.

So any lessons learned?

I'm curious to hear what Kelly has to say, but I think for me, the need for technological Tools for us is really, really important to be able to both keep track, because Councilmember Kettle, I don't know if you've heard me cry a river about the Microsoft Access database that we have that we are converting over to an actual database with a software system that people in the year 2025 actually know about and is supported.

So that's great.

The dollars going out are really, really important, and I have to say part of it, I think, is just the story that we tell about how our investments are going out, and so it's better understood.

I think having some level of scrutiny is really great.

Working with other city departments in trying to tighten up the time it takes for the housing delivery process for it to be delivered, as well as when it's operationalized is really, really Important as well.

We just recently did a study on the PSH pilot.

During the pandemic, we did, there were a couple of things that the Office of Housing tried out because you take advantage of the crisis.

And there were some interesting findings out of that, and how could we improve?

I think the basic model of housing construction really hasn't changed that much, but what is it that we can do to make it better?

We should be an iterative organization.

So even though some of the slides, same slides, same general process, what is it that we need to do to tweak it to make the outcomes better?

And we have to be clear of the outcomes.

We produce an output, but what is the outcome that we're striving for?

I was going to say the whole housing plan for my colleague here, because what you're hearing here over and over and over again with this new council is a concern that it appears that we're stockpiling housing funds during a housing crisis.

And, you know, stockpiling is not to ascribe any purposeful not spending of money, but clearly if we have these questions and they're not going away, it is a call for Perhaps a database that tracks every single award.

What is happening with that award and when it's finished, how are we monitoring the performance of that award?

What are the vacancy rates?

What are the impacts to neighborhoods, et cetera?

So we're talking about really a big-picture understanding of what's going on with our dollars.

Because I'll note that on, and I am closing, on attachment A of the sly, which details, you know, per fund carry-forwards, the Low Income Housing Fund has about, well, hundreds of millions of dollars each year that's budgeted but not spent.

And so these things are the kinds of things that cause me to have questions.

I see that we have about, in commitments for stabilization, $28 million on page eight of here.

That, I believe, is in three buckets.

Production, preservation, and then accounting for rental arrears that our partners aren't able to collect from existing tenants.

I would like to know more precisely in the line item commitments for stabilization, $28 million, how is that allocated for those three different buckets I heard from?

HSD director, that's kind of what that big bucket is for.

So I believe that what we're trying to say is that we as a council need to have a better understanding and confidence that the money that is allocated is being spent and we can get to the 40 projects that I've been told have been awarded for years but yet aren't up and running and what are the problems with that?

Is there a relationship with permitting, et cetera?

This is an extremely difficult time to get financing.

We're coming off of a very high inflationary period.

And our partners, they're finding it harder and harder to get financing because it's harder and harder for them to collect on the The units that they have right now, and then we read the stories about vacancies in our existing buildings.

I would like to know, for example, when the latest report came out that there were, that several, well, some of our housing partners are selling assets right now.

Has it ever been considered that the Office of Housing would perhaps assume those Those assets instead of letting them go onto the private market.

These are questions that I think are interesting to consider.

But in general, I just have some closing questions that I do want to get on the record so that maybe we can have the conversations offline.

It's simply, are there any, and this is in the context of the King County's recently released audit of DCHS grants, What steps can the city take to ensure compliance with grant conditions, and have we considered a similar audit to ensure that the money we're spending are actually delivering the results that we policymakers expect?

Since 2021, what has been the average time from funding awarded to funding released for city grants to community partners?

That gets at something that I asked before.

What about pre-pandemic funding in comparison?

When the city commits funding to community partners, is there an agreement or indication regarding the timeframe for when the funds will leave the city accounts?

Would requiring that help reduce underspend and get funds out the door more quickly?

Again, what can we do to help our partners Bring up these units, bring these units online faster.

And then, you know, what are some of the funds, what are some examples of funds that have auto carry forward authority over the, well, that's a separate question.

Never mind, that gets into administrative.

And then finally, what would it look like if OH and other departments carrying large fund balances created annual six-year capital spending plan to clarify the use of those funds?

And I think that's something that you have brought up before.

To be continued, I would say.

But thank you very much for spending the time and being patient with us.

And I understand that you have another question.

And Council Member Rivera, I don't know if I captured the point you wanted to make.

So I will leave the last comments, Council Member Kettle, and then Council Member Rivera.

Thank you.

And Council President reminded me, as part of this kind of like Seattle Housing Plan, the point about building new versus maintaining, and I know it was in the slide, the maintenance budget, That has to be part of it.

Again, looking at things from a public safety perspective, not reported at all, but, you know, 15 to 40 percent of the folks that may be at Third Pike and Pine have housing.

At other locations, I've seen this.

There's day tents that's never reported on, but there's that piece, too.

So these counts.

And part of it is that they do have housing, but there's a mismatch for different reasons, which I won't go into now.

But it's real.

But part of that is, and I've been to an area where there's a public safety challenge, and there's a You know, housing location, public housing location, and there's an active rat's nest around it.

And so some on the public safety side, If you have a problematic housing situation because there's a rat's nest or there's other maintenance issues, that's part of the dynamic that we see on the public safety side in terms of what's happening on our streets.

And so that main question between building new and maintaining old has got to be another major piece of whatever Seattle Housing Plan.

I'm dropping the investment now because I want to make sure that we capture everything.

And so I meant to add that before, and the Council President reminded me of that, so thank you.

Thank you, Council President.

Thank you, Council President.

I agree with you, Council Member Kettle.

We need to have an overall picture because even though we may not be oversight of the social housing PDA, those are tax dollars that are going into funding housing and also Just as a city, we should know what the other organizations like the PDA and the King County Housing Authority are doing as part of this overall plan.

We should just be coordinated in our approach to doing this.

And the thing I was going to say earlier, you just mentioned, Councilmember Kettle, Which is the preservation on the maintenance side is really important.

And I would like to know prior to these 40 projects that are on the docket now, the projects that we've already completed, I'd love to know what those are, how many units, what kind of units, and then how you go about keeping track of those projects.

To make sure that they don't have some issues that we could be perhaps helping with and then avoiding those going, you know, having to close, if you will.

And I know when we had this conversation last year, I understood that, you know, OH is focusing on the funding to build the projects.

And you don't necessarily have oversight of the projects.

But I do think that we need to We need to create an expectation with the projects and the funders, excuse me, the non-for-profits we do fund that we are going to stay connected because we need to guard our investment.

Guard maybe is not the right, the best word, but the point is that we need to make sure that we know what's happening so then on the back end a few years from now we don't lose those units.

And so we need to be able to acquire in our contracts with our Non-for-profit partners information about how things are going long term so we don't get to a position where then it's too late.

They needed something and now it's too late.

And that initial funding that we gave is now not going to, you know, we're going to lose those units, which are really critical obviously right now in this housing market.

It's not, or housing crisis, excuse me.

So it's not just building, it's how are we preserving what we have built?

Understanding that we are not that non-for-profit who built it, but we are in relationship with them.

It doesn't stop when we, you know, the financial piece is over because it's part of this broader landscape at the city.

Yes, that is correct, absolutely.

And we have a team of folks who exist to monitor our assets and oversee those contracts long-term and make sure that the loan terms are being followed for 55 years and more.

Whenever possible, at the end of the term, we try to extend or reinvest in projects to keep them going.

Many of the projects that were mentioned in the Seattle Times article were not city-funded projects.

They are part of our partners' portfolios.

But they are not city-funded projects.

This is part of the complication.

Funding is administered by all different types of bodies, and different housing has different funding sources.

We really try everything we can to preserve the housing that we have.

We're working really hard on that, and even more so now, focusing on how we build up the sector that we have and support the units that we have, which is approximately 300 projects, 23,000 apartments that are operating today.

Well, thank you, Kelly.

I'm glad you brought that up because I think this is part of the point of my colleague, the whole housing plan, or at least knowing what is also happening in the housing space.

So when things are being reported, we know what's what.

And I know that that means that it puts an onus on the city to track some things that maybe aren't our investment, but I think it is prudent to do so in terms of what we're putting it into the market and what others are as that whole picture Because the folks that are in those units are all city residents.

And it's just good to stay like right hand, left hand focus as A city, not necessarily.

What I'm trying to say is we shouldn't just focus on the units that we're funding and then not look at the big picture because what we're doing will have an impact on the big picture and vice versa.

That's right.

And then when those types of articles come out and you just said those weren't our projects, no one knows that.

And I didn't know that.

So it's important to really have.

And then to your point, It looks like you, Director, wanted to say.

Yeah, okay, so in closing, I mean, we do have to move on.

What you're hearing here is intense interest, and we are on the front lines of, well, we do the work of the people, and then we hear, Dissatisfaction in questions from our constituents and so that is why we're paying such close attention to this and it probably will continue that way.

So whatever we can do to get information in a form that's easily digestible and that can lend us confidence that our If resources are being spent with the intent that they were allocated, that would be great.

I'm hearing in general that the Office of Housing and CBO think that things are going pretty well.

And so we're just, me personally, I'm just going to have to take your word for that.

You know, when I see that the underspend when it comes to the 2018 on the memo says 2018 to 23, the net underspend for the general fund averaged 2.1 per year, but then lower on the memo it says actually the revised budget versus actuals, which is the initial underspend excluding the impact of carry forwards averaged 9.9 percent.

That gives, that is That gives me personal applause and it also could be when other people are looking over these documents gives people's lens Makes people question what are the metrics and what are the standards that we're trying to achieve in our budgeting practices overall.

So in any case, maybe we'll talk about this more during budget season, but I really feel that this was an important conversation to have going into this so that we can be more streamlined in our questions going forward.

Thank you very much for that.

Thank you.

And if I didn't, I...

Would you like to have a closing?

Okay.

I will say thank you, thank you, thank you very, very much.

I appreciate this.

And for the listening public, all of the documents that we referenced are linked to the agenda.

Would you please read item two into the record?

Agenda item two, an ordinance relating to the updating the structure and process of the Office of the City Auditor amending chapter 3.40 in sections 14.08040 and 14.08050 of the Seattle Municipal Code and repealing sections 15.5 to 100 of the Seattle Municipal Code for briefing discussion and possible vote.

Thank you very much.

Welcome everybody.

Thank you.

We'll get the slides up in one moment.

I will just basically say that this is a very important discussion to have right now because as I've noted in the past, the Office of the City Auditor is our accountability arm and we want to make sure that we are setting you up for success and if there's anything we can do legislatively to help, we stand ready and that's what this legislation is about.

Thank you, Council President.

We appreciate the support.

We'll do introductions and then get into our presentation.

I am Arushi Thakarlal, Deputy City Auditor.

Rita Moore, Office Manager for the Office of City Auditor.

And Karina Bull, Council Central Staff.

Council President, as you mentioned, we are here to discuss Council Bill 121072, which is proposed amendments to the code.

We have a few prepared remarks, and then we would be happy to take questions.

But I'll hand it over to my colleague, Rita, to begin.

And we'll probably have to finish within 15 minutes because we do have a hard stop for one of the items later five.

Go ahead.

Okay.

Thank you, Council President Nelson and members of the committee.

We have a slide show.

I don't know if I have to.

Okay.

Appreciate you.

OK, there you go.

Thank you.

Great.

Just as a matter of background for members of the public and a refresher to the committee that the Office of City Auditor was created in 1991 by a voter-approved amendment to the Seattle City Charter.

It was codified into the Seattle Municipal Code as 3.40 in 1992, and we've been operational since 1993. Since our establishment over 33 years ago, much of OCA's code has remained unchanged or not reviewed in its entirety, despite the growth in expertise, scope, and operations in the office.

Currently, the code lacks clarity or direction on government auditing standards, qualifications for the position of city auditor, external peer review requirements, and subpoena power.

Updating our code will address some of the challenges OCA has faced over the last 30 years and ensure that we are aligned with national best practices in government performance auditing.

Our office, Office of City Auditor, OCA, is more than just a division within the legislative department.

It's part of a broader and recognized profession of government performance auditing, and that means a couple things.

It means that we follow certain standards called the Generally Accepted Government Auditing Standards, or Yellow Book, issued by the Government Accountability Office.

These guidelines ensure that our work is independent, evidence-based, and high quality.

We're also active members of the Association of Local Government Auditors, which connects us to over 300 audit shops in cities, counties, and tribal governments across North America.

ALGA membership supports professional growth, external accountability through peer review, and adherence to evolving standards.

Our Council Bill 121072 has a few goals.

To embed auditing standards in our code, ensuring consistency beyond individual leadership.

To strengthen OCA's independence so our work remains objective and nonpartisan.

And to sustain a culture of high standards and accountability within the Office of City Auditor and the city at large.

And last, it's partially to honor the contributions of City Auditor David Jones.

As you know, City Auditor David Jones is retiring at the end of December after 29 years with the Office of City Auditor, 16 of those serving as the appointed City Auditor.

Under his leadership, our office has passed every external peer review since he made them a routine in 2011. He's championed professional development, independence, and auditing, and a national collaboration amongst other auditors.

In 2024, David Jones received ALGA's Lifetime Achievement Award, a reflection on his impact on both the city and the field of performance auditing.

And so Auditor David Jones isn't here today, which allows me to brag on his behalf.

And if he were here, I know he'd want me to credit OCA staff and the standards they uphold, which have earned our office nine ALGA Awards of Excellence under his leadership.

This legislation both honors David's contributions to growing the Office of City Auditor and builds on the best practices in our field.

In developing our legislation, we took a comprehensive approach to ensure that it reflects the best practices in performance auditing.

So we consulted with the Association of Local Government Auditors, their model legislation guidelines.

We reviewed the King County Auditor's Office Code as their similar and organizational structure.

And we reviewed the City of Seattle other departments' codes to maintain consistency in scope and authority.

And lastly, the Office of City Auditor Staff reviewed the legislation to confirm alignment with Yellow Book Standards and our current practices.

And so with this background context, I will now turn it over to Deputy City Auditor Arushi Thakkalal.

Thank you, Rita.

So before we got too in the weeds with the detailed changes, we wanted to provide that background so you have a really good foundation of understanding why we are even here today and making these proposals.

So to get started, we wanted to present this crosswalk that compares the content of the current code with what we are proposing.

This is very dense.

There's lots of text.

And you don't need to read this in great detail.

I'll be walking through some of these changes over the next few slides.

But just wanted to give a reference that all the information currently in the code has a place in our proposals.

A copy of this crosswalk is on the last page of the memo we shared with you all last week.

We go into lots of detail in the memo because I didn't want anything to be a surprise to you as you consider the legislation.

But for the purposes of the presentation, I'm going to walk through our changes in categories, as Rita described earlier.

Our first category of changes relates to strengthening the independence of our office and codifying the professional standards that we follow to make sure that we are held to these standards no matter who serves in the position of City Auditor.

In Section 010, we establish OCA as independent, nonpartisan, and objective.

This might seem pretty straightforward, but we think it's key to making sure the public can continue to trust what we're saying in our reports That we won't bring any political angle or bring our own personal opinions.

It's going to be just factual information.

In section 030, we propose to codify the qualifications and the appointment process for the city auditor.

Currently, there's no information in the chapter about the qualifications that candidates should have.

We propose just one statement that states a qualified candidate should have at least five years of relevant experience In government auditing, program evaluation, or policy analysis.

And this language was modeled after other director-level positions that have minimum qualifications described in the SMC.

We wanted to be consistent with other departments.

In section 040, We are proposing to codify the auditing standards that we are following.

As Rita mentioned, the generally accepted government auditing standards developed by the federal government, they are well respected, well recognized across the country, and most offices, most government audit professionals are already following them.

This would just make explicit that the city of Seattle continues to follow them, no matter who is serving as city auditor.

And in section 080, we are proposing to codify the office to receive sufficient resources to enable us to perform all of our responsibilities and meet our mission of increased transparency to the public.

Again, we modeled this language after other clauses within the Seattle Municipal Code that exist for other similar accountability offices.

The next category of amendments we are proposing pertain to the office's powers and processes.

There's a lot of work that we have been doing over the last 30 plus years that the City Council and the Mayor's Office have come to expect from us, but some of these powers and processes are not codified.

And here are some examples.

In section 040, we are proposing a clause about the office's authority to be able to access all records and to be able to meet or speak with personnel from all city-funded entities as it relates to our audit work.

Now, in practice, we have generally been granted access to documents and personnel when requested.

I think that is due in large part to Auditor Jones's Liza Rankin's collaboration and his work with other departments to be able to get access and we are grateful for their collaboration in helping us meet our mission.

But there have been instances in our past where that authority of access has been brought into question.

So that's why we are proposing to make that explicit in these changes.

Additionally, the one new authority that we are proposing Liza Rankin.

Tanya Woo.

Liza Rankin.

The city of Portland, the city of Denver, the city and county of Honolulu.

In speaking with these offices, we have learned that they use this power rarely, if ever.

And so that is our plan as well.

But we do think it's crucial that as we continue to develop findings and make recommendations to improve the city, that we're doing so based on as complete information as possible, and this authority would guarantee that.

In section 050, we clarify our role in the selection and oversight of consultant auditors.

This already exists in the code.

We're just adding some clarifying language.

And in section 060, we propose making clear our audit follow-up processes, which you all may be familiar with.

They include sending our draft to the executive to get comment, as well as having an annual process where we follow up on our audit recommendations, as we've presented to the council a few times this year.

We're not proposing anything different than what we already do.

We just want to make sure it's written down since we think it provides value to the city.

And our last big category of changes relate to bringing the code in alignment with the office's current policies and practices.

In section 020, it's pretty straightforward.

We propose adding some definitions.

You may be wondering, you know, I already know what an audit is.

Why do we have to define it?

We wanted to be really clear about how those terms are being used in the context of our work and our office and this chapter.

In section 040, we propose adding another clause to describe the non-audit services that our office has occasionally provided to support city council requests.

Specifically, we're talking about our ability to deviate from those auditing standards that we mentioned earlier to provide, let's say, technical assistance or evaluations or supervisory reviews that may be more appropriate in a given situation.

So for some examples, in 2021, we completed an evaluation of the city's Secure Scheduling Ordinance.

That was not considered a full audit.

We were still able to respond to council needs in that way.

Finally, in Section 070, we are proposing to include a requirement for our office to undergo an external peer review by other auditors from around the country to make sure we are adhering to those standards.

As Rita mentioned, we have already been undergoing those reviews under Auditor Jones's leadership.

It is a recognized practice, not just at local level of government, but across the state and at the federal government audit offices.

And we have been passing these reviews to cover the last 17 years of our work.

We wanted to make sure that this is explicit in our chapter to ensure that the public can continue to trust that we're adhering to our standards no matter who is serving in the position of city auditor.

So these are the primary categories of changes.

Again, the memo included far more detail that we are happy to answer questions about.

But that concludes our prepared remarks.

Thank you.

Thank you very much.

And Central Staff Analyst, Karina, do you have any comments or questions?

Only to reiterate that the changes that are reflected in this proposal do have corollaries for other departments in the Seattle Municipal Code and also in other public auditing agencies.

The one exemption, which is for a minor issue, is the reappointment of the city auditor, where the proposal requires a city auditor to give notice to city council of the interest in being reappointed, and then the council, in an aspirational way, should go ahead and confirm or pick someone else within 45 days.

That is meant to streamline the appointment process, to have a confirmed head Off the office, but that's a more minor issue and it is aspirational as far as how counsel is going to respond.

And counsel would still obviously have the ability to confirm that same person or to initiate a different process, the national search process.

Thank you for that.

Are there any questions or concerns from colleagues?

Okay, this seems kind of anticlimactic because I know that you've been working on this for a really long time and we've been in conversation.

But thank you very much for very adroitly explaining all of the components of this legislation.

So if we're ready, will the clerk please call the roll on the passage of the bill.

Council member Rivera.

Aye.

Council member Solomon.

Aye.

Council member Hollingsworth.

Yes.

Council member Kettle.

Aye.

Chair Nelson.

Aye.

Five in favor, none opposed.

Thank you very much.

The bill passes and the chair will sign it.

Will you please affix my signature to the legislation.

This is committee.

Thank you.

Okay, sorry.

Yeah.

All right.

It has been, we have moved Wait a minute.

I know, but I did not move.

No, I did not move the legislation before we ended up voting.

Yep.

I move Council Bill 121072. Second.

It's been moved and seconded to recommend confirmation of CB 121072. Could you please call the roll again?

Councilmember Rivera.

Aye.

Councilmember Solomon.

Aye.

Councilmember Hollingsworth.

Yes.

Councilmember Kettle.

Aye.

Chair Nelson.

Aye.

Five in favor, none opposed.

Thank you very much.

We will take this up late.

Yes, I know.

Great catch.

Okay.

Would you please, thank you very much.

Thank you.

Would you please read item three into the record?

Agenda item three, an ordinance related to West Seattle Junction Parking and Business Improvement Area modifying the exemptions to the levy special assessment and amending ordinance 113326 as previously amended in ordinances 115997. 1-1-9-5-3-9, 1-2-0-5-7-0, 1-2-1-7-5-8, 1-2-5-1-5-2, and 1-2-7-1-0-3 for briefing, discussion, and possible vote.

Thank you.

Okay, while you are getting seated, hello.

For this item, we'll have a public hearing followed by an opportunity to ask further questions about the legislation, then we'll suspend the rules to vote on the ordinance on the same day as the public hearing.

So as presiding officer, I'm now opening the public hearing on Council Bill 121060 relating to amending the city's subdivision regulations.

How many speakers do we have signed up to speak?

We have two remote, but only one is currently present and no in person.

Okay.

Please give our speaker two minutes to speak, please.

Our first speaker is Rachel Porter.

Rachel, you'll have two minutes to speak.

When you hear the chime, that means 10 seconds are remaining.

After that, it's time to wrap up your comments.

Speakers' mics will be muted at the end of the allotted time.

Public comment is required to be relating to Council Bill 121060 and is only being accepted at this public hearing.

Speakers are asked to begin their comments by stating their name.

Rachel, when you hear the tone, go ahead and unmute yourself.

Rachel Porter, Hello, members of the Council.

Hello, members of the Council.

My name is Rachel Porter, and I am the Executive Director of the West Seattle Chamber of Commerce.

The West Seattle Chamber is committed to advancing economic development through business growth, investment, and community activation.

The Junction BIA is a critical partner in that work by maintaining a clean, safe, and strong business district.

Our shared mission to support West Seattle is shown by the Junction BIA's program of work, which is robust.

Their year-round tree lights, flower baskets, spanners, holiday wreaths, and flags create a sense of place within its boundaries.

Its Clean and Safe program provides weekly cleaning crews and hourly patrols that make the district more open, inviting, and safe.

Seasonal events like Summerfest, which bring in over 50,000 people into West Seattle.

Their quarterly wine walk, which introduce small, local wineries to new audiences while also supporting the agricultural industry of our state.

The hometown holidays, which light up the sky during the darkest time of our winter season.

And the wildly successful blast float hunt all draw visitors into West Seattle businesses and parks, which increases customers for The small businesses that shape the character of our neighborhood.

These creative activations spark regional attention, they drive tourism, and they directly support our local businesses.

At the Chamber, we partner with the Junction at every opportunity.

Our shared efforts show how the Chamber and the Junction are natural partners.

Together, we amplify visibility, improve business conditions, deliver memorable experiences to residents and visitors, And ensure that the junction remains essential to the heart of West Seattle's economy and community.

This amendment update is an investment in the long term vitality of West Seattle's economy.

Thank you, Rachel.

That is our only commenter.

Thank you very much.

That closes our public hearing.

I do want to finish her sentence if I could, but basically note that we did receive, we have received emails in support of what we're doing today.

There's a lot of love out there for the West Seattle Junction BIA.

I just want to put that on the record.

So thank you so much for the work that you've been doing.

And I know that you have also received several letters in support of our action today.

Okay, with that, please go ahead.

And again, I did not do a very good job of managing the time at the beginning of this meeting.

And unfortunately, that means that we will probably have to go through it fairly quickly.

Yeah, no worries.

Okay, so we are now discussing the U District proposed amendment, correct?

Next up.

Yeah, that, yes.

Okay.

Okay, right.

Yes, go ahead.

Okay, great.

Here, let me just bring Dawn up here then.

So I think that's it for you.

We discussed the West Seattle amendment at the August committee meeting, so I think that, is there a vote?

Yes, this is the possible.

For the West Seattle amendment?

Correct.

I don't have a presentation on West Seattle for today.

Okay.

There was one.

We did it last month, yeah.

Okay.

We did have a briefing on this at our last meeting.

Do you have any comments you would like to make, Jasmine?

No, I was just clarifying that I believe we are indeed voting on the West Seattle Junction, and unless there are any questions, I don't have any further comments.

Okay, so this is where we have to suspend the rules.

This item is scheduled for a vote on the same day as a public hearing and the rules must be suspended to allow us to move forward with a vote.

If there is no objection, the rules will be suspended to allow the committee to vote on the same day a public hearing was held.

Looking at my colleagues, there is no objection.

So therefore, hearing no objection, the rules are suspended and the committee will proceed with a vote.

I move that the committee recommend passage of Council Bill 121060. Is there a second?

Second.

It's been moved and seconded to recommend passage of the bill.

Are there any final comments?

All right, seeing none.

Okay, I'm sorry.

Thank you.

Go ahead, Council Member.

Chair, I just want to clarify for the record that we had a briefing on this on August 14th, and we do have a slide deck from then.

So I want to give members of the public that might be watching the confidence that we've already reviewed this, and that's why we're proceeding to the vote.

Thank you.

Great.

Thank you very much for that.

And there are three BIA, we're talking about three different BIAs here, so that is why everybody's wondering, okay, what's up next?

Okay.

All right.

Will the clerk please call the roll on the recommendation to pass the bill?

Council Member Rivera.

Aye.

Council Member Solomon.

Aye.

Council Member Hollingsworth.

Yes.

Council Member Kettle.

Aye.

Chair Nelson.

Aye.

Five in favor, none opposed.

The motion carries and the committee recommendation to pass the bill will be sent to this September 23rd, 2025 city council meeting.

And then we'll, thank you very much for that.

Yep, you're done.

And will the clerk please read item four into the record?

Agenda item number four, an ordinance relating to the university district parking and business improvement area, modifying the process for selecting a program manager, modifying the requirements for governing the composition of the BIA advisory board and amending ordinance 126093 for briefing discussion and possible vote.

All right, here we have Don Blakeney, Director of the University District Partnership, well, no, excuse me, University District Business Improvement Area, and I would like to say that you have appeared before this committee and this council several times in the past.

You have been a valued partner in representing small business in the University District area, and then also advising on policy for how to help Small businesses across the city.

I just wanted to note my appreciation for your work.

Thanks, Council Member Nelson.

Yep.

And go ahead, please.

All right.

Just one second here while we get the presentation up.

Oh, thanks, Lauren.

I have to do it at an angle.

My muscle memory isn't quite the same at that angle.

There it is.

Thank you, council president and council members.

Thanks for accommodating us today.

I know there's a lot of BIA legislation, so really appreciate that.

So my name is Casey Rogers.

I'm the BIA policy advisor at the Office of Economic Development, so I'm the main point of contact to work with our city's 11 BIAs.

Happy to be here today.

I'll give a quick presentation just to kind of tee up what we're talking about today, then I'll pass it over to Don to provide more details on the proposed amendment.

So first, I want to give a quick update or overview of our BIA program.

We have 11 BIAs across the city that generate.

It would be helpful if I had the slide going.

There we are.

That generate more than $45 million for enhanced neighborhood services and programs.

BIAs provide sustainable funding that is allocated directly to the local districts and stay within the neighborhoods themselves.

And lastly, the BIA program is administered by the Office of Economic Development and Office of Treasury Services.

All right, so as I said, I'll do a quick overview of the proposed amendment and then I'll hand it over to Don.

So the amendment that we're discussing today is proposing two changes to the U District BIA's existing ordinance.

The first is removing the RFP requirement.

So the U District's current ordinance requires that OED conduct an RFP process every five years to identify a program manager to run the U District BIA.

We ran this last January.

It was the first time we had done it, and it was a significant amount of work, both internal staff resources and external volunteer hours.

A quick shout out to Erin from SOTA who volunteered her time to help review the RFP proposals.

Additionally, we determined that there was really no public benefit to this RFP process.

The proposals that were submitted were really unqualified applicants who were unfamiliar with the neighborhood and really didn't warrant much, and the selected winner of the RFP was indeed the U-District Partnership.

Eliminating this RFP requirement will align the U-District BIA with the practices of other BIAs and let them focus on service delivery and program impact.

The second part of the proposed amendment is to adjust the board seat requirements to make it easier for them to comply, but still maintain the original intent.

And I'll let Don provide more details on that.

Sorry, I think I...

There we are.

And lastly, I just want to note that we determined that these proposed changes are allowed through the amendment process per the state RCW, and that no petition process is required as part of the amendment process.

So with that, questions I think we can do at the end.

I will pass it right over to Don.

I have that tab right there.

There you go.

Do you want to do it?

Yeah, I can.

I'll just hop over here.

Thank you.

I want to give a big thank you to the Office of Economic Development.

They're doing a lot of work this year to help streamline and make more effective the BIA program in general.

And I'm Don Blakeney.

I'm the Executive Director of the U-District Partnership.

The U-District Partnership is the program manager for the U-District BIA.

And I want to thank the council for hearing this today and for taking up this matter.

I'll tell you a little bit about U-District Partnership just so you kind of know what we're about.

How do I advance slides?

Cool.

Thank you.

So this is us.

We are a place management organization.

There's about 3,300 of these across North America, 10 in Seattle.

We were established in 2015. We used to be the greater Chamber of Commerce for the University District, which was founded in 1914 and ran for 100 years before it became a partnership funded by a BIA.

We are a 501 nonprofit, and we are the program manager for the BIA.

A little bit about us, the U District Partnership is a voice for Seattle's University District neighborhood, improving and promoting its vibrancy through advocacy, public safety, cleaning, economic development, placemaking, events, marketing, and homeless outreach.

We see the U District as a unique and diverse neighborhood, as well as the proud home of the University of Washington.

We welcome people from all over the globe to experience our vibrant small businesses, participate in our time-honored traditions, and to pursue big ideas that can change the world.

We approach our work with leadership, innovation, collaboration, integrity, and responsiveness, and inclusivity.

If you're wondering, I know we don't need a geography lesson here, but this is what we think about the U District.

It's this area right here.

You're right next to the University of Washington.

North of the Ship Canal, east of I-5, west of 25th, and south of Ravenna Boulevard.

This is the BIA's boundary, the darker orange area.

We serve not the entire area, because part of that's the campus, and part of it's single-family homes, which don't really apply in the BIA scheme.

But we were founded in 1996 to clean University Way, and over the years, it's been renewed a couple of times.

In 2015, we expanded to this larger area, and then we renewed in 2020. And just a little bit for the public, the BIA is funded by property owners, and so they elect to assess themselves.

There are three different levels of assessment in our district to account for different types of levels of cleaning.

So we're here today, as Casey said, to talk about the RFP requirement.

I appreciate all the work that went into it.

It was actually a great exercise for us to explain for us what we've been doing.

It was a really good way to gather our thoughts, but it did take a lot of public resources and a lot of community time, and our staff had to spend about a month on it.

If anybody wants to...

Read it.

It's right there.

116 pages of it.

But it was a lot of work.

And so I think that we went through the process to try that new thing, but it's an unusual feature that nobody else has had to do.

It's not an industry standard.

So I appreciate you guys considering not making this a thing that we do every five years.

On the other amendment we're proposing, it's the mandatory board seats that got pretty prescriptive, like, you know, you having, like, different types of residents, different sizes of ratepayers, and I think it's really, the intent is really great, but we've always been out of compliance by one or two seats.

Right now, if you look right now, you'll see our, we have two seats that are open, but we have a great kind of spectrum of folks that represent different aspects of the neighborhood, from residents to small business to churches to the University of Washington.

And so we've done a good job of having that, but it's just we're always out of compliance, and I worry because we're, you know, it's a law, and I want to make sure that we're doing what everybody wants us to be doing.

So this is our, and we also have two boards, which most people don't realize.

We have the nonprofit board and the BIA Ratepayer Advisory Board.

So this is the Ratepayer Advisory Board.

The nonprofit board is additional folks.

And if you think about a community and how folks have to plug in and help guide the work, you're asking a lot of the community with 40 positions, 45 positions to fill to get engaged.

And so just thinking about letting them as much flexibility as possible.

That's really all I wanted to say about that.

I'm happy to entertain questions.

I know Casey was willing to talk about this too, so I'll open it up to the council.

Thank you.

Councilmember Rivera, as the council member who represents the district where the BAA is, please go ahead and make a comment or a question.

Thank you, Chair, and I'll be fast in the interest of time, because I know we're at time for this committee meeting, but thank you, Don, for being here.

And more importantly, thank you and your team for such a job well done in the university district.

You are such a great partner In the, not just the university district, but throughout the district, because there are other businesses that are not part of the BIA and you always have time for all of them.

If they have questions, you know, to ideate with them as they're considering how to best move forward in supporting the businesses and those corridors, everyone's experiencing public safety issues and you do such a great job with the BIA and the U district.

And you also provide advice to the, like I said, the businesses in the other corridors.

So you are a great resource to the district in general.

And then the work that you and your team are doing in the U District is just invaluable.

I very much appreciate it.

I talk to residents who very much appreciate it.

So though you are business focused, you really are providing a service to the entire neighborhood.

And whenever I call you, if I get a reach out from either a business or just a resident that things are happening in the district, public safety things are happening in the district, you are always at the ready to help.

And you have the ambassador program and the ambassadors have been such a great resource to folks in the district providing help to anywhere between the residents that live there to Our unhoused neighbors who find their way into the university district and your folks match them up with services and all of that is such a great resource.

So I could go on and on about your work and your team's work, but I'll leave it there.

Thank you.

That's very nice of you to say.

Chair, thank you.

And of course, I support this, so support.

I'll be voting.

Are we voting today, Chair?

Yes, this is a possible vote.

Okay.

Thank you.

Council Member Kettle.

Thank you, Council President, Mr. Blakeney.

I just wanted, and the whole team here, I just want to say thank you for coming.

And obviously, Council Member Rivera speaking from a district perspective.

But your work is known beyond the district.

And this kind of goes to the discussion that we're having on Tuesday night.

You know, your voice, A, I appreciate the work that you're doing.

We have our District 7 equivalents in various ways in terms of community involvement, making that extra step, much as we'll hear up next too.

And that's very important.

But you've also, and as I've mentioned, when it comes to public safety, I hear across the entire city.

And I know you've made your voice And that's kind of an example of when the outreach that we do on a regular basis, talk to individuals who have that pulse of the neighborhood, the issues that are facing, in this case, particularly businesses, but not just businesses.

And that's very important.

And it goes to the point how we, as council members, I mean, we're engaged in a way.

I mean, obviously, Council Member Rivera's engaged in the D-Force in such a strong way and comes to our public safety and committee meetings, even though she's not on the committee.

There's a representation of her commitment to public safety, but it also is a vehicle to see your work in this area too.

So as the chair of public safety, and again, echoing some of the points made Tuesday night, thank you for your service to the community to include along the public safety line.

So thank you.

Thank you, council member.

Thank you, chair.

Thank you.

Well, I will not belabor the point.

Suffice it to say that since you in particular have been director, two light rail stations have opened up.

There's now a boba tea festival.

There is a cherry tree festival.

I mean, it seems like there's something going on all the time in addition to the...

What is the one in May?

What is that one officially called?

U District Street Fair.

Yep, the U District Street Fair, et cetera.

And then you're constantly educating policymakers about what's going on there.

So thank you very much for your work.

I am not seeing any additional questions.

So...

Oh, Council Member Sullivan?

No, I'm just ready to vote.

Got it.

Something out of the corner of my eye.

I move that the committee recommend passage of Council Bill 121076. Second.

It's been moved and seconded to recommend confirmation of Council Bill 121076. Will the clerk please call the roll?

Council Member Rivera.

Yes.

Council Member Solomon.

Aye.

Council Member Hollingsworth.

Yes.

Council Member Kettle.

Aye.

Chair Nelson.

Aye.

Five in favor, none opposed.

Thank you very much.

Thank you very much, council members.

The motion passes.

Thank you.

And then for our last item, this is not going to be...

Did you have anything else?

Okay.

Goodbye.

See you later.

Our last item is not a vote here, but it does concern the SOTA BIA.

And what I want to say is that we are solving a problem that is very important to get ahead of because of the changes down there having to do with Link Light Rail.

So this legislation is technically council-generated, so Jasmine will go over the legislation, and we also have Director Aaron Goodman here, who knows everything that's going on down there and in the Soto BIA and will also present.

Would you please introduce yourselves and then you can begin.

Good afternoon.

Thank you.

I'm Erin Goodman as we- Pause a moment, please.

Will the clerk please read the item into the record?

Agenda item five, an ordinance relating to Soto parking and business improvement area, changing the assessment rate and exemptions and amending ordinance 125678 as previously amended in ordinance 126191 for briefing and discussion.

Thank you very much.

Please proceed with introductions and then go ahead.

Hello, this is Jasmine Marwaha on your Council Central Staff.

Casey Rogers, BIA Policy Advisor, Office of Economic Development.

And I can go ahead and kick us off to set the context.

Go ahead.

Good afternoon, Council President and members of the committee.

I'm just going to share some introductory remarks on the bill and then turn it over to Erin.

So Council Bill 121073 was developed at the request of Soto BIA based on their experience over the last few years administering the BIA and is intended to streamline Soto BIA operations and maintain consistent services.

I'll let them, again, go into more detail about the reasonings for these changes in a minute, but just to establish the context and what we're doing.

So right now, the current rates are based on a property's total taxable value.

So non-profit properties and government-owned properties that are leased to commercial tenants are assessed differently, using a rate based on their lot square footage, which has stayed at a fixed rate as other properties have increased in their appraised value.

The bill would change the basis of assessments to total appraised value with an exemption for government-owned properties unless they are leased or available to be leased by a non-governmental tenant, and therefore assumed to not be in governmental use.

Using this approach, all non-profit-owned properties and more government-owned properties than currently would be subject to additional assessment, and that would escalate if a property's appraised value were to increase as well.

The bill also includes a section directing OED to convene stakeholders to develop further recommendations for changes in assessment rates to additional government properties that are included in this change that's before you today.

OED would then report back to Council by July 1st with any recommended proposed changes.

And finally, the bill would establish a fixed cutoff date each year for pulling the assessment data to serve as the basis of the rates to be assessed.

This change was also requested by CETO BIA due to instances where significant delays had caused quite a bit of burden for the BIA and administration, significant delays in the assessor's data release.

This process is all happening, rest assured, in accordance with state law.

There will be a public hearing for this council bill in December, and the resolution that sets the public date The public hearing date is going to be voted on in full council on September 16th.

And then at that next committee, on December 11th, there will be the public hearing on the council bill.

We'll consider any proposed amendments, and the committee will possibly vote on the bill.

I believe that's all I have.

Unless there are further questions, we can turn it over to Erin.

Thank you, and good afternoon.

As I said, I'm Erin Goodman, the Executive Director of the Soto Business Improvement Area, a role that I have held since 2014. The Soto BIA is a collaborative mechanism that allows property owners to invest in projects and services that enhance the Soto District and create a better environment for employees, tenants, customers, and visitors.

The Soto BIA's work focuses on improving transportation and public safety, maintaining a clean and welcoming environment, enhancing economic vitality, and fostering a cohesive and inclusive working district.

These services go beyond the City of Seattle's baseline and benefit the private businesses, the government entities, property owners, tenants, and employees in the district, as well as the hundreds of thousands of visitors to its commercial, industrial, sports, and entertainment venues.

However, several factors are putting the Soto BIA's ability to sustain these services at risk.

The Soto BIA is seeking this amendment to streamline operations, resolve ongoing billing challenges, align our assessment practices with other BIAs in Seattle, and promote greater equity among all ratepayers.

The amendment before you, as Jasmine mentioned, is in two parts.

The first part would transition the BIA's assessment formula from one based on total taxable value to total appraised value.

This would address the lack of escalation clause for those properties that are government-owned but commercially tenanted.

The lot square foot rate was first set in 2018 to be comparable to a similar commercially owned property.

However, over time, the lack of an escalation formula has created a widening disparity between comparable properties.

This amendment would ensure that properties are assessed consistently and equitably.

When the Soto BIA was renewed in 2018, there were no tax-exempt nonprofit properties in Soto.

Since then, two nonprofit organizations have either opened in Soto or acquired properties that they had previously leased.

In 2025, both properties were retroactively designated as tax-exempt by the King County Both nonprofit organizations are actively engaged with the Soto BIA, and we actively partner with them to support their operations.

One of these organizations has had a seat on our board for the past seven years.

Adopting a total appraised value assessment formula would provide a fair and consistent method for including nonprofit properties in the assessment framework.

It would allow the SOTO BIA to recognize the value these organizations receive from BIA services while ensuring all ratepayers contribute equitably to the health and vitality of the district.

Our current authorizing ordinance requires the BIA to update its assessment list every two years using the data from King County.

However, in both 2022 and 2024, significant delays in the assessor's data release forced the BIA to bill based on incomplete information, resulting in the need to back bill or issue refunds to correct under assessments or overpayments.

The BIA has also observed fluctuations in commercial property values within a given tax year after assessment invoicing, which has also resulted in the need to back bill or issue refunds.

To address these challenges, the BIA proposes adding ordinance language to establish a fixed capture date Each update year for pulling the assessment data.

The values recorded on that date would serve as the basis for the following billing year, regardless of any subsequent changes from the county.

Establishing a fixed capture date would reduce administrative complexity, prevent unexpected charges to property owners, and create greater predictability and fairness in the assessment process for both the Soto BIA and its rate payers.

And I should note at this point, we don't send out the bills.

The city's Office of Financial and Administrative Services does.

So I should actually say that this would also create greater predictability in the assessment process for the city.

But while these changes are a necessary first step, there is more that still needs to be done to ensure that the Soto BIA will continue to serve the community for years to come.

The second part of the amendment directs the City's Office of Economic Development to conduct a study of the remaining issues and determine the appropriate next steps.

Those issues are as follows.

Except for the few that are commercially tenanted, when a property is sold to a government entity, whether its intended use is for actual government services or not, it is no longer accessible.

Since 2019, government purchases of previously commercially owned properties have removed roughly $15,000 from the Soto's budget The pace of these types of purchases has increased, and in just the past couple of months, two formerly rate-paying properties were purchased by government entities, resulting in an additional loss of $9,000 to our annual assessment.

While this is not a massive sum in the government budget world, it is significant to our budget.

And further planned mega projects in Soto over the next 10 years will exponentially increase the rate of government purchases in Soto.

Additionally, while government-owned and government-tenanted properties will remain exempt under the amendment before you, many of these properties still receive the benefit of BIA services, which undermines both fairness to their neighbors and the Soto community And to our long-term sustainability.

The OED study will look at these properties and the benefits they receive to determine solutions to address this inequity.

Creating a more consistent framework would ensure that all properties that benefit from BIA services contribute fairly regardless of ownership status.

I look forward to working with them and returning to this chamber in July with additional refinements that further promote equity among all Soto properties, maintain assistive services, and support the sustainability of the Soto BIA.

Thank you and I'm happy to answer questions.

I fully acknowledge that this is a lot of technical stuff, but I tried to squeeze it in since I know we're under time.

Are there any questions from my colleagues?

Council Member Sutleman.

Thank you very much, Council President.

Erin, you knew I wasn't going to let you get away without me saying something.

I wanted to be clear on the timelines that were laid out before us in terms of decision-making.

Did you say the changes for SOTA are not going to be voted on until December?

That is correct.

And the reason for that timeline is what?

Other than we got budget coming up.

You've got budget coming up is exactly why, and due to a lot of the technical issues, it took us a little longer to work out how we wanted to do this.

As you are well aware, I originally had proposed some additional changes that the city would like OED to study further, and that And that is how we came upon this two-part solution.

And so now we're here, and we've got this.

And so we will come in December with the first part of the amendment, and then we will spend the first part of 2026 looking at...

A lot of information that is going to go into that study to support my proposals, and so I'm very confident that when I come back in July that we will be looking at some additional refinements.

But at this point, yes, we will be coming back in December, and the amendment would go into effect in January of 26, which is when BIAs bill semi-annually.

We bill in January and we bill in July.

This will cause a little bit of a crunch for FAS in January, but if we're really well prepared, we should be able to make it as smooth as possible.

OK, great.

Thank you.

And one other question, and I think this is probably more for the public that may be watching.

You had mentioned that there are a lot of properties, formerly commercial properties, that have been absorbed by government, and more is coming.

And my brain immediately goes to light rail expansion.

Is that what we're talking about or one of the things we're talking about in terms of some of those formerly commercial or currently commercial properties coming under a different tax umbrella?

So that is only one of two major infrastructure projects that are slated to begin in Soto that are already in the property acquisition process.

We also know of at least two others that are still in the planning process.

And I think it's important to understand that when a major infrastructure project happens, there's the properties that they buy to build the line.

There's the property that they buy to do storage.

There's the properties that they buy to do access.

And then there's the fact that a lot of times when these properties are purchased, they sit vacant.

And an impact of a vacant property in a district cannot be underestimated.

It causes such significant impact with additional graffiti break-ins.

And so when a property becomes vacant, it actually creates a lot more work for my staff for different elements.

So when a property is vacant, it is actually a much bigger Problem or an impact than when it is fully tenanted.

And so what we are looking at is not for properties that are going to become a right rail line or that are going to provide services, but two of the properties that I mentioned earlier are not where government services are being performed.

They're being used as warehouses for stuff.

And so what I think is that as we look at this, that we look at kind of the uses and whether those are fundamental uses or uses that could be a different way.

And one of the things that's happening in the BIA, so I also serve on the International Downtown Association Board, which is the body that is representing my type of organization across the globe.

And there is a big movement away from this term business improvement area or business improvement district towards something called urban place management organization or urban place management district.

Because I think the word business really confuses people.

I am not a chamber of commerce.

I don't help people promote their businesses in the way that a chamber might.

We create, we work on the district.

We make sure that it is safer for employees to walk.

We pressure wash.

We clean.

We do safety.

And we work with agencies on transportation solutions.

These types of activities benefit All of the employees in Soto, whether they are going to a government job or to a private job.

And we specifically work with government agencies, like as ratepayers in our district.

They don't pay into the system, but they use us.

They call us when they have issues, and we help them.

And so I'm not coming at this with an arbitrary, you know, an arbitrary, oh, I think you should pay.

And there's a lot of documentation across the state and across the country of the other cities that pay into their BIAs.

So I'm looking for, this is not the day to have that conversation, but I am really looking forward to having it in July.

Okay.

Thank you very much.

And I just also wanted to note you had mentioned You know, the buildings or the properties where there's storage and properties that have been acquired but are sitting empty right now.

And the concern about the vacant buildings is not only do they become magnets for graffiti and vandalism, they also become arson magnets.

Oh, yes.

So that's something from a public safety standpoint that we also need to be very, very much aware of.

So thank you.

Thank you.

Thank you, Council President.

Thank you.

And Council Member Kettle, and then I will close us out.

Thank you, Council President.

I just quickly wanted to say thank you for your leadership in the district and the community.

It's well known and appreciated.

And much like I was saying with Mr. Blakeney, you know, you're part of this, you know, the outreach, you know, the ears and eyes on the ground and understanding what's happening and you know everything that's happening in SOTO.

And so I really appreciate that, particularly along the public safety side of things.

You're very influential in that area and a very important voice, so I just wanted to say thank you.

And I recognize the points you're making, and I also recognize that Soto is changing, and this change really demands that we look.

And this part goes to working with the county as well and understanding these pieces, like the vacant buildings.

We have a vacant building abatement bill.

Does it apply to King County?

These are the things, or chronic nuisance property.

All these bills that we've been passing on public safety, these are the things that we bring together and we need to bring them together for SOTO.

I realize the Sound Transit piece is really important, but it's funny.

The first thing that came to my mind wasn't light rail, it was the wet weather treatment facility, which in my mind is going to take up seven acres.

That's my guess, informed guess.

We'll see if it's true.

This is going to have an impact.

It's huge.

For its mission, what it's meant to do.

But the impact on the BIA is going to be substantial, I think.

So these are the things that we do need to think through.

And getting ahead of it, Council President, with your advocacy, Ms. Goodman, I think that's really important.

So thank you.

And you are absolutely correct.

That is the other mega project.

And I want to just be really clear.

We are actively engaged with both Sound Transit and King County on these projects.

We are already helping them with their community outreach.

This is not an attempt to say that there's anything wrong with these projects.

It's just to acknowledge that they have an impact on the district and how do we make sure that we We want to mitigate that impact so that we can continue not only to serve the businesses in the district, but to do the work that we've been doing for Sound Transit and King County with the community in our district.

I'll second the emotions of your tremendous value to the city.

You're the go-to person that so many people call, so thank you very much for all of your work that extends far beyond Soto.

So just for everybody, for the public, because it's going to be a while before we come back to this, and so I just want to say, put it very clearly why we're doing this.

It's the first step in solving an extremely important and unique problem to Soto.

Between King County, the Port of Seattle, Washington State Patrol, Seattle Public Schools, and the City of Seattle, and especially Sound Transit with the West Link, West Seattle Link Extension coming, there are an increasing number of government-owned properties in the business district.

Erin has done a great job of working with these agencies to provide services they need, which are often different to that of business.

But how the fees are collected matters for the viability of the organization.

And so by passing this legislation, we really kick off that much needed conversation and solution.

So Erin, thank you so much for the work that you do and your team there in Soto.

I see your staff all over the place as well.

And for taking the initiative to help solve this problem.

A public hearing will be held for this item at our committee meeting in December.

And if there are no further comments, I will just liberate everybody.

Thank you so much for staying to the end.

Like I always say, this is the time of year when we rush.

We don't rush.

We try to complete all the legislation in our legislative pipeline So that it can go into effect when it matters.

So thank you very much for coming.

Jasmine, thank you so much for your work on this.

And Chris, thank you all very well, too.

Thank you.

All right, this concludes the agenda of the September 11th meeting of the Governance, Accountability, and Economic Development Committee.

I would like to note that today is as September 11th.

I'm sure that we have all been thinking about the events so many years ago, and that is in our hearts going forward to the end of the day and then beyond.

So I just wanted to say that I notice the importance of today.

All right, our next committee meeting is scheduled for Thursday, December 11th.

Seeing no further business, it is 4.58, and we are adjourned.

Thank you, everyone.