Select Budget Committee 7/16/25

Good morning.

The July 16th, 2025 Select Budget Committee will come to order.

It is 9.31 a.m.

I'm Dan Strauss, chair of the committee.

Will the clerk please call the roll?

Council Member Hollingsworth.

Council Member Kettle.

Here.

Council President Nelson.

Present.

Council Member Rink.

Present.

Council Member Rivera.

Council Member Sacca.

Council Member Solomon.

Here.

And Chair Strauss.

Present.

Five present.

Thank you.

Those not present are excused until they arrive.

The four items we have on the agenda today are all for briefing and discussion.

And so we're gonna take as much time as we need to today to discuss the underlying elements of these bills.

Thank you, Council Member Solomon, for canceling the Land Use Committee this afternoon.

I know some folks will have hard stops, but we also do not have a committee this afternoon.

The four items on today's agenda are the Seattle Shield Initiative, the legislation that would make adjustments to the city's B&O tax, two ordinances relating to the mid-year supplemental budget.

The first is an ordinance accepting and authorizing grant expenditures, and the second is the 2025 mid-year supplemental budget ordinance.

We also have an ordinance relating to World Cup appropriations.

And finally, an ordinance relating to the financing of Human Capital Management Systems Project, more commonly known as Workday.

Councilmember Rivera is now present.

Before we begin, if there is no objection, the agenda will be adopted.

Hearing no objection, the agenda is adopted.

We'll now move into the hybrid public comment period.

Public comments should relate to the items on today's agenda and within the purview of this select committee.

Clerk, how many folks do we have physically signed up today?

We have nine remote and nine in person.

Wonderful, I'll take this and we'll start with the in-person speakers.

I'm gonna call everyone's name and if you could line up so we can tick through this rapidly.

With 18 signed up, we will still stay with two minutes.

That does mean that we'll exceed the 20 minute allotted time and we'll move forward.

So with that we have, Rachel Snell, Eugene Wasserman, Hallie Willis, Blake Garfield, Jason Austin, Dennis Sills, Venisha Zhang, Marta Kidney, and Lily Hayward.

Rachel, welcome.

Thank you.

Can you hear me okay?

Good morning, Chair Strauss and members of the committee.

My name is Rachel Snell, testifying strongly in favor of the Seattle Shield initiative.

In a time when our federal government is giving us massive cuts, now more than ever, it is critical to support reclusive revenue.

Now, more than ever, it's critical to provide aid to hard-working Seattleites and small businesses in order to create a robust city for all to thrive.

And thank you, Councilmember Rink, for your tireless leadership in this initiative.

Thank you so much.

Thank you.

Following Rachel is Eugene Wasserman, either microphone, followed by Haley Wilson and Blake Garfield.

How do I give this out to the members?

The box next to you, which says, please place here.

Okay.

Hi, I'm Eugene Wasserman.

Today, I'm here speaking as an individual.

Normally, I come here speaking for my organization, the North Seattle Industrial Association.

But we have not had enough time nor information to review this proposal.

So I'll tell you what I've come up with.

Most of the maritime community will be hit with this tax when people in the industry are having a lot of problems with tariffs.

And one day, the port is full.

The next day, it's empty.

There's a lot of competition from the Russian fishing industry.

This would not be a good time to do it.

I left you this, which is from one of your packets from the Council.

This shows you how out of whack your B&O taxes would be compared to the rest of the region.

And right now, Seattle's not doing that a lot economically.

It doesn't seem like it's pierced this area of City Hall.

But that's, I think, because you're doing too much comp plan stuff of dreamy employment numbers that I don't think will ever happen.

But we're at a competitive disadvantage in the city, and this will not help it.

Businesses, I've lost five major businesses in the last four or five years, NSIA has, and three of them are union.

Four of them.

Three of them are union.

I lost four.

And one of them was non-union.

And they just left the area.

I know other businesses who contemplated leaving the area.

And passing things like this, I'm not going to say this is the final word for them, but it just indicates how anti-business the city is to them, not to me.

I must say at this point, the city's made a lot of progress in the last several years.

Things are getting a lot better.

But things are still not good.

My members still carry guns to protect themselves.

And downtown's vacancy rate is like 31%, which is one of the highest in the country.

Thanks.

Thank you.

Up next is Haley Willis, followed by Blake Garfield and then Jason Austin.

Welcome, Haley.

Hallie, sorry.

Thanks.

Good morning, council members.

My name is Hallie Willis, and I'm the policy manager for the Seattle King County Coalition on Homelessness, and I live in District 5. I'm here to support Council Member Rinks and Mayor Harrell's proposed B&O tax reform that would help protect essential services like housing and shelter from local and federal budget cuts.

The $90 million this tax will raise every year is essential, and council should send this proposal to the voters.

But it's not enough.

Setting aside massive federal cuts, we have a $240 million budget deficit of our own creation.

This budget deficit will only get worse without permanent, new, progressive revenue sources.

The council needs to pass additional long-term progressive revenue this year and in the coming years to make sure that Seattle residents have food to eat and a safe place to sleep at night through this current federal administration and beyond.

Please send this proposal to the voters and pass additional long-term progressive revenue this year.

Thank you.

Thank you, Hallie.

Up next is Blake Garfield followed by Jason Austin and Dennis Sills.

Good morning, Blake.

Hi, I'm Blake Garfield.

My family owns Bedrooms and More.

It's a retail store in Wallingford that's been there since 1972. I'm also on the board for the Washington Retail Association.

I volunteer my time putting on the Wallingford Parade.

and I was recently elected the president of the Wallingford Chamber of Commerce, which is more of an honorary title because it really doesn't do anything yet.

But being a small business in Seattle is really hard, and we have 30-ish employees at any given time, or a little bit more than that, and we try and be the right kind of employer where we have full college tuition paid for someone who's working full-time for us, medical benefits, and a job where people, if they work for us for about five years, should be able to own a home where they're not commuting from Lacey to come in to work for us.

We get in this weird spot where we're too big of a business to not get caught up in a tax like this, but too small for it to not hurt.

So during the pandemic, we had $180,000 worth of damage done to our building on 45th, and we got no relief from the city.

We weren't getting support on that.

And here we are being caught up in a tax where we're not making money.

Our rent for our warehouse was gonna go up to $50,000 a month to have a warehouse.

in the city of Seattle if we renewed our lease.

And it's tough to try and thread the needle to be the right kind of employer in a city where you're getting caught up in attacks.

And it's so hard to find sources for revenue.

I empathize with your challenge because where are you gonna go?

I'm not a big enough business to threaten to leave the city and have it really be meaningful that if you tax me, this is tough.

And so, and if I was one employer and I had $7 million of revenue for one employee, yeah, tax the hell out of me.

I deserve to pay the tax, but it's tough when we're in this situation.

So I'd really hope that you'd reevaluate and tax based on the number of employees for the revenue.

Thanks.

Thank you, Blake.

Up next is Jason followed by Dennis Sills and then Phoenicia Zhang.

Good morning, Jason.

Good morning.

I'm very tall, so please forgive me.

Good morning, council members.

My name is Jason Austin, District 2 resident and the program director with the Meals Partnership Coalition.

I am here today to speak in favor of the Shield Seattle B&O tax reform proposal.

I want to thank both Mayor Harrell and Council Member Rink for championing this legislation and urge the full council to support.

The members of MPC are the front line of defense against hunger in Seattle.

Our 45 member organizations collectively produce over 4 million meals, nutritionally dense, culturally uplifting, ready to eat food for everyone.

Our members include programs such as the Southeast Seattle Senior Center, El Centro de la Raza, First United Methodist Church, and Cultivate South Park.

Every single neighborhood in Seattle contains at least one MPC member supporting everyone in the city.

In 2024, Seattle meal programs saw a dramatic increase in demand from the previous year.

Preliminary data suggests that 2025 will see even greater need across the city.

With our hunger relief system already stretched to maximum capacity, any reductions in funding will put our city in danger.

Tens of thousands of Seattleites are expected to lose their SNAP benefits as a result of the federal budget.

If we do not take steps now to defend our hunger relief infrastructure, our members will be overwhelmed and unable to respond to the dramatic increase in need.

Shield Seattle is a meaningful investment in public safety and community well-being that will help everyone in the difficult years that we have ahead.

Again, I want to thank the mayor and council member Rink for championing this proposal and urge the full council to support this beautiful city.

Thank you for your time.

Thank you.

Up next is Dennis Sills followed by Fenisha Zhang and then Marta Kidney.

Good morning, Chairman Strauss and Councilmembers.

My name is Dennis Sills.

I work at Plymouth Housing.

We provide permanent supportive housing to more than 1,300 formerly homeless adults.

We are grateful to Mayor Harrell and Councilmember Mercedes Rink for working on the B&O tax reform.

Plymouth Housing provides on-site services, including case management and property management, to support the needs of formerly homeless residents, including many with disabilities.

These services are made possible with support from many government funders.

Changing circumstances, including inflation and federal policies, are endangering our ability to continue to serve residents at a high level.

We strongly support sending a revenue proposal to the voters.

This $90 million proposal is a crucial first step, but cannot be an only step.

We're grappling with a $240 million structural budget deficit, and we're bracing for significant federal cuts that will undoubtedly exacerbate our problem.

To truly safeguard our community and ensure all Seattle residents have food to eat and a safe place to sleep at night, the Council must commit to passing long-term additional progressive revenue measures in years to come.

This proposal is imperfect, but addresses the challenges human service providers are facing now.

We would like to see this proposal provide dedicated support to the Office of Housing and providers across the city.

We also would like to see the proposal include a removal of the proposed four-year sunset to provide a more stable funding for Seattle's future.

We urge you to pass this proposal and continue working towards progressive revenue.

Thank you.

Thank you, Dennis.

Up next is Phoenicia, followed by Marta, and then Lily.

And then we'll transfer to a virtual public commenter.

So if you're called in, you've got about six minutes.

Good morning, Councilmembers.

My name is Finneke.

I'm Finneke Zhang.

I am the Policy Specialist at Solid Ground, and I'm also one of the co-chairs of the Budget Task Force for Seattle Human Services Coalition.

And we'd like to start off by thanking Councilmember Rank and the Mayor for introducing the restructure of the B&O tax, which simultaneously protects against deep cuts to homelessness and human services, while also providing some way to alleviate pressure on small businesses.

I'm sure many of you have heard tirelessly from advocates like us and from service providers about the real need for the city to identify more revenue.

And you all today are gonna be briefed on one of those tools.

And lots of folks have talked about how this has never been, the need has never been more acute with the federal government's defunding of Medicaid, SNAP, and housing services.

So just some examples from solid ground on Some of the services that the city stands to lose with these federal cuts include our rapid rehousing program.

So Solid Ground receives continuum of care dollars from HUD, which helps hundreds of families avoid homelessness by getting them quickly into housing with move-in costs, helping pay for security deposits.

Another program at risk is our community food education program, which helps food insecure youth and families across the city gain skills to cook and shop and eat on low budgets.

And the recent budget that the Congress just passed includes a total elimination of this funding source, which is funded through SNAP.

And this funding source is about 30% of this program's budget.

So just as an example of some of the real tangible cuts that could be coming our way to services in our city, this proposal in front of you could help shield services like this and give a tax break to about 90% of Seattle businesses.

So this is a good creative policy and we really encourage you all to approve it to voters and identify additional revenue for the city to prevent against cuts.

Thank you all so much for your consideration.

Thank you, Finneka, and apologies for mispronouncing your name.

Up next is Marta, then Lily, and then we will transfer on to online public commenters, starting with Emily Johnson, Randy Banneker, and then Carolyn Sanders Lundgren.

My name is Marta Kidana and I'm the Community Engagement Manager at Low Income Housing Institute or Lehigh.

Lehigh is a non-profit affordable housing and tiny house village provider that specializes in creating pathways to stable housing for our unsheltered neighbors.

I'm here today in support of the city's proposed business and occupation B&O tax.

and to support the addition of long-term progressive tax revenue.

Homelessness in Seattle is at a crisis level with thousands of people living unsheltered.

Last year, 359 homeless people in Seattle and county died from exposure, overdoses, suicide, and violence.

Lehigh would like to commend the City of Seattle Council for taking this step to increase revenue for housing, shelter, and human services.

This tax will be pivotal in reducing cuts to programs important to the Seattle community.

Unfortunately, this tax alone will not resolve this Seattle's 250 million budget deficit in addition to the federal cuts to come.

We need additional progressive revenue to protect community members from an uncertain future.

The number of shelter beds and tiny house villages must be expanded to support our community's needs.

Food banks, housing providers, clinics, child care providers, and human service providers as a whole are facing harsh funding losses that will ricochet across the region.

New permanent progressive revenue sources are required to save lives.

This is a fact that must be taken seriously as the lack of preemptive planning will lead to catastrophic outcomes.

In alignment with our Seattle King County Coalition on Homelessness Partners, we ask that the council eliminate the four-year sunset on the BNO tax and send this proposal to Seattle voters.

Thank you to the council for listening to the voices of community members here today as we represent not only ourselves but the many vulnerable populations to advocate for themselves.

We're all in this together, thank you.

Thank you very much, Marta.

Next is Lily Hayward, and I see you've also signed up online as well, so I'm going to just cancel that one.

I wanted to do both.

Just kidding.

Two minutes per person, even though, colleagues, I did forget to read the rules of public comment this morning because I did not turn the page.

I'm glad to see everyone is abiding by the rules.

Over to you, Lily.

Great, thank you very much.

Good morning, Chair Strauss and committee members.

For the record, my name is Lily Hayward, and I'm here speaking on behalf of the 2,500 members of the Seattle Metro Chamber of Commerce with concerns about CB 121028. While we support increasing the standard exemption to $2 million and creating a standard deduction, the Chamber has advocated for this similar relief, and we believe it is essential to keep businesses open, to spur development, and to fill empty storefronts downtown and across the city.

We oppose doing so, however, by raising the B&O tax on other businesses.

Many small and medium-sized businesses with gross sales over the proposed exemption have very small margins, and increasing taxes on these job creators is simply a bad policy idea.

You just heard from one of them and about the impacts that the many cumulative taxes the city and state imposes can have on a small business here in Seattle.

And just a month ago, you all received a presentation delivered by the city itself in a joint meeting with King County that laid out the facts.

Regional employment has declined, especially in Seattle.

Seattle office vacancy rate is one of the highest in the US.

Consumer spending has declined, and there are fewer international visitors expected this year.

Of course, choices made by the federal government make these conditions worse, but it's important to note that just last year, B&O was down year over year, pet collections were down, and these conditions happened when the economy was relatively good compared to right now.

And not to mention that this proposal comes after the state legislature just increases taxes to the largest degree in our state's history.

So we encourage you to give small businesses this needed relief right now, but use fund balance and underspend to do so rather than raising taxes on small and medium-sized employers.

Thank you very much.

Thank you, Lily.

We'll now transfer to online public commenters.

And if anyone wants to sign up in person, they are able to do so until the end of the public comment period.

I will read the rules just as folks are online.

The public comment period is up to 20 minutes.

Speakers will be called in the order in which they registered and they will.

start with in-person now to virtual speakers will hear a chime when 10 seconds are left of their time.

Seeing as we have eight, possibly nine more speakers, we will exceed the allotted 20 minutes.

If there's no objection, I will extend public comment until we have completed all speakers.

Hearing no objection, we'll extend public comment until we have moved through all of the public comment speakers.

Up next is Emily Johnson, followed by Randy Banneker, Carolyn Sanders Lundgren, Ender Moss, Laurel Gray, Alberto Alvarez, Kate Rubin, David Haynes, you are last to be signed up and you are not present.

Call in now if you'd like to comment.

Emily Johnson, I see you are off mute.

When you are ready, we'll start the clock.

Welcome.

Thank you so much.

Good morning, Council Members.

My name is Emily Johnson, and I serve as the President of the Board of Directors at the Hunger Intervention Program, or as it's known, HIPP.

I'm also a resident of District 4. HIPP is a proud member of the Meals Partnership Coalition, and I'm here today to speak in strong support of the Shield Seattle proposal.

I want to thank Mayor Harrell and Council Member Rink for championing this legislation.

HIP builds community connection by preparing and serving nutritious meals in North Seattle to our most vulnerable neighbors, low-income seniors, people experiencing homelessness, and families with children.

Last year alone, HIP serves more than 190,000 meals.

I'd like to share a quick snapshot of our Senior Meal Program, which operates three days a week in Lake City.

We served more than 30,000 meals in this program last year, and if you visit, and I encourage you to if you haven't already, You'll see a room filled with laughter, conversation, and connection.

And for many of these seniors, this lunch is the healthiest meal that they'll eat all day, and often the only opportunity to access vital social services.

As Jason mentioned earlier, most of our participants rely on federal programs like SNAP and Medicare to survive.

With recent cuts to SNAP and threats to public healthcare, we're already seeing more seniors come through our doors, while our budget is being stretched to the limit to fill the need.

The recent uncertainty and cuts of the federal AmeriCorps program recently only made it harder to continue to run those programs.

And while City of Seattle funding is just one part of our budget, it's absolutely critical.

The Shield Seattle program proposal would provide a progressive and sustainable revenue stream that allows programs like ours to respond to growing needs in our community without turning people away.

This is a smart investment in community well-being and public safety.

and I urge the full council to send their proposal to Seattle voters.

Let's meet this challenging moment with the compassion and leadership it demands.

Thank you for your time.

Thank you.

Up next is Randy Banneker, followed by Carolyn Sanders Lundgren, and then Ender Moss.

Randy, I see you're off mute.

Take it away.

We'll start the clock when you start talking.

Chris Rouse, Vice Chair Rivera and members of the committee, thank you for the opportunity to comment.

I'm Randy Banneker.

I'm here on behalf of the Seattle King County Realtors.

Increasing the B&O tax threshold to $2 million is a great idea.

It can and should be down without the proposed 54% increased B&O tax rate on businesses with revenue above $2 million.

You can fund it with the city's growing payroll expense tax cash balance or through the normal budgeting process.

Remember, the B&O is a tax on gross revenue, not profit.

Grocery and restaurants are prime examples of businesses with high gross and low profit after food and labor costs have been paid.

A good rule of thumb for anything you want less of is to tax it.

Grocery and restaurants are key to Seattle's high quality of life.

We don't want less of them.

As the Council Central Staff memo points out, there's been a barrage of new taxes that already robustly fund the stated goals of this B&O tax increase.

the payroll expense tax of 2020, the payroll expense tax increase of 2023, the social housing tax of 2024. In addition, voters have generously approved major increases in the housing levy renewal.

It grew 234% to nearly $1 billion.

The transportation levy renewal grew 67% to $1.55 billion.

And the proposed families and education levy renewal is growing 110% to $1.3 billion.

there is not a revenue problem here there is a problem in the confrontational message we're sending to business at a time when the city's own forecast office warns of a 40 to 50 chance of a national recession in the next 12 months the economy is fragile businesses can move out for bad business climate look at amazon's departure from seattle to bellevue many of our member real estate firms will be hit by this 54 tax increase and all of our members rely on a healthy business climate for a strong job base and plentiful employment opportunities.

Don't move this measure to the ballot.

Let's stop giving businesses a reason to leave Seattle.

Thank you, Randy.

Up next is Carolyn, followed by Ender, then Laurel Gray.

And for anyone who's joined us, if you'd like to sign up, you can sign up until public comment period is closed.

Carolyn, I see you're here.

Star six to unmute.

There you are.

Take it away when you're ready.

Carol Ann Sanders- Good morning, council members.

For the record, my name is Carol Ann Sanders-Lundgren.

I'm calling in on behalf of purpositing the action in support of the Shield Seattle proposal.

At PDA, we promote public health-informed solutions to public safety challenges.

Those challenges are growing, yes, in Seattle, but also in cities across the country.

And what's more, they are now compounded by a new public safety threat, which is a federal reconciliation bill that by design puts health and security further out of reach for every single member of our community.

This will destabilize our health and safety ecosystem.

Every member of our community will feel the effects of this.

And so against that background, we commend Councilmember Rank and the executive for taking what I am sure feels like a difficult action, but is also one that we cannot afford to delay with the proposed restructuring of our BNO tax.

This is a significant first step, and we look forward to counsel sending this proposal to the voters.

I do also want to take a moment to say that small businesses are some of the greatest champions of PDA's work.

They're mission-critical partners in advancing public safety, and so we appreciate and recognize the care that you've taken and will no doubt continue to take to thread this in a way that is not zero-sum.

Likewise, I really appreciate the small businesses who have taken their time to show up today and share their perspective on this.

In terms of implementation, it is incredibly important that we get this right.

We have to use these funds to buoy human service investments that are evidence-based, that are strategic, and that are positioned for collective impact.

At the end of the day, this is about the fraying of our social safety net and our social fabric And this council has recognized that we have a duty to repair.

And so we look forward to working with you on that at TDA.

Thank you.

Thank you.

Up next is Ender Moss followed by Laurel Gray, then Alberto Alvarez.

David Haynes, you are still not present.

You've got about eight to 10 minutes until we call on you.

Ender, I see you're here.

Star six to unmute.

I see you're off mute.

Take it away when you're ready.

Hello, council members.

My name is Ender.

I am a homelessness and foster care advocate and have been for about three years now.

I used to be homeless for almost four years.

I am 22 years old.

As most people here are aware, there are a lot of budget cuts that are going to be taking place that will severely impact all working class and low-income people across the United States.

Services for people who are in emergencies like homelessness or trying to prevent themselves becoming homeless, are going to not only greatly reduce in capacity, but in numbers as many resources will be lost that are needed for a lot of people to literally survive.

I'm definitely in the belief that the four-year sunset should be extended, if not eliminated, to secure the future for everyone to have the ability to make sure that our currently barely federally funded resources are able to be used.

that $90 million that is estimated to be raised by this tax would not be enough to prevent all of the effects from Seattle's $250 million structural budget deficit or the massive federal cuts, but would at least help to attempt to keep as many of these programs running and helping huge amounts of people, both homeless and not, that need them desperately.

This bill would not severely affect small businesses who need their funding to stay afloat and would only be a blip on the already very large radars of corporations that not only do not, but would not need that money to be profitable businesses.

And anyone who is working class that says otherwise should question who that money would be going to, because I can assure you that is not currently going to the working class Americans in these paycheck from these businesses.

Thank you all.

Thank you, Ender.

Up next is Laurel Gray, followed by Alberto Alvarez, and then Kate Rubin.

David Haynes, you are still not present.

Laurel, welcome.

We see you're off mute.

When you're ready, we'll just start the clock.

Welcome.

Good morning, members of the council.

My name is Laurel Gray, deputy director of OSL Serbs and District 5 residents.

I'm here today to speak in favor of the Shield Seattle B&O tax reform proposal, and I want to thank Mayor Harrell and Councilmember Rank for their leadership and urge the full council to support.

At OSL, we prepare and deliver nutrient-dense culturally and medically-informed meals at no cost to individuals in need across the city of Seattle and beyond.

Our meals support 59 programs, including shelters, permanent housing, youth services, veterans programs, senior programs, city-sanctioned encampments, and more.

For a Food in Motion program, we rescued and redistributed nearly 1 million pounds of food in 2024, food that would have otherwise gone directly into the waste stream.

This includes 432,000 pounds of recovered food and 554,000 pounds of donated food, valued conservatively at $3.9 million.

FIM distributed 749,000 pounds of this food to local organizations, including meal providers, food banks, and human service agencies.

Food in Motion is partially funded through our longstanding contract with the City of Seattle.

If this proposal fails and we lose this funding, we face deep cuts to our programs, including restrictions in our 17 vehicle fleet and food recovery operations.

That means fewer meals for our most vulnerable neighbors and more food ending up in land.

So while city funding does not make up the majority of our budget, it is critical to sustaining our work.

Hunger relief is public safety.

I'll say it again.

Hunger relief is public safety.

Shield Seattle is a meaningful investment in the wellbeing of our communities and the future of our city.

Again, I thank Mayor Harrell and Council Member Rink for their leadership on this issue, and I strongly urge the full council to support this essential proposal.

Thank you for your time and consideration.

Thank you, Laurel.

Up next is Alberto Alvarez followed by Kate Rubin.

Marissa Perez has also signed up remotely, but you have not logged in yet.

Alberto, I see you're off mute.

Take it away and you're ready.

Welcome.

Thank you.

Our city is a top five global economic powerhouse.

The threat of big companies closing sounds more like a hostage situation that they use to bleed our community more than they already do.

Call their bluff.

They know they need our workers, our families spending to keep their shareholders happy.

Council members mentioned Safeway stores might run the risk of closing down.

Their parent company, Kroger, has a stock that went up 15% this year and over 90% since the pandemic.

They underpay and overwork their staff, making the rest of us do the work of checking out.

Their slim margins are self-inflicted.

Big companies already get many tax breaks.

which they use to pay shareholders with stock buybacks and dividends.

Instead of more money being siphoned off to companies like Kroger, the big company tax can make sure our dollars reinforce our needs and services, not shareholders.

Vote yes on Shield to defend our city.

Thank you and have a good day.

Thank you.

Up next is Kate Rubin, David Haynes, Marissa Perez.

You are not present remotely.

We will move back into the last physical public commenter, but I see Kate, you are off mute.

So take it away when you're ready.

David and Marissa, please call in now.

My name is Kate Rubin.

I'm the co-executive director of the Seattle and a resident of Church Two.

Thank you to Councilmember Rink and Mayor Harrell for bringing forward the Seattle Shield proposal.

It's a welcome change in the right direction.

I also want to make it clear that raising $90 million, nearly a third of the city's own $251 million shortfall, is not enough.

The Trump administration and Governor Ferguson are pulling funding for critical programs, and the city's budget decision will determine who carries the burden.

Our communities are already hurting, and the cuts to important programs during last year's budget process like a 40% cut to the tenant services grants are making things worse.

As of April 2025, eviction filings in King County reached an average of 812 filings per month, up from 385 in 2019. We cannot afford to take money from our other programs or drain jumpstart when those funds need to be going to affordable housing.

You have the opportunity to make this much stronger, especially given that the sunset is only four years from now.

Things can change if it's not working in the way that you envision.

Seattle Shield should be passed and the funds should not be diverted for any other uses, but it's not going to save us from losing the vital programs that our communities need.

Council must act with urgency to close the full deficit at the city level and ensure that Seattleites are protected from harm that the federal administration is causing.

We need a permanent progressive revenue stream that ensures that resources go to the needs of the people, housing, food, public health, and community care.

funding for services must be mandatory and addressed with urgency.

Thank you.

Thank you.

Marissa, I see that you have called in, so we're gonna go with you and then the final public commenter in person and then David Haynes, if you call in, you'll be up next.

Marissa, as you're being promoted, you'll press star six and we'll start the clock when you're ready.

I see you have not pressed star six yet, Marissa.

Well, hold on, Marissa.

You can leave her in the presentation.

If we can have the final public commenter come on up.

I saw you registered, but I don't have...

Hello?

Marissa, we're going to have you give public comment now.

So when you start talking, the talk will start.

I'm so sorry.

Okay, I am so sorry.

I'm struggling with buttons this morning.

Good morning, City Council.

My name is Marcia Perez.

Thank you for having us.

I am the Executive Director of the Seattle Human Services Coalition.

We are strongly in support of the proposed restructure of the business and occupation tax.

This proposal is a really important step towards addressing the progressive tax structure while simultaneously generating revenue to support essential community needs, such as human services.

Washington has no income tax, which makes it essentially a haven for a lot of large businesses who are often infamous for not paying their fair share in taxes.

This means they can take advantage of our beautiful city while simultaneously ignoring the needs of the community they operate in.

I want to be clear that what I'm talking about does not apply to our small business partners who have lined up in support of this effort to reduce their tax burden while at the same time assisting the neighbors that they live surrounded by.

Our community members are struggling right now to put food on the table and we're being targeted.

Our agencies, our nonprofits are being targeted by the federal government because we refuse to bow to bigotry and hate.

Human service funding is desperately needed at this point in time.

As you know, we are looking at a $250 million, $260 million budget deficit in the city of Seattle, which means that our human services agencies are facing losing not only federal funding, not only state funding, but city funding as well.

This will be devastating to those community members that desperately need the services that our agencies provide.

I ask you to please consider asking the voters what they believe and where their values lie and sending this proposal to the ballot.

Thank you so much for your time.

a partnership on this effort.

Thank you.

We are going to go with David Haynes just since they're here ready to go.

David, star six to unmute.

You've got two minutes.

We'll start the clock when you start talking.

Welcome.

Thank you, David Haynes.

There wouldn't be such an economic and budget crisis of debt if the Democrats didn't exempt drug pushers from jail, then prioritize repeat offenders for housing and services before innocent homeless that are racistly discriminated and subhuman mistreated.

Yet we see the same bad spending priorities that have exacerbated the crisis on this agenda today with the amendments of taking from the jail to exempt more debt.

criminals from jail hiding behind drug addiction without nonprofits best practices in breaking their addiction because there's a more profitable wraparound service connected to unqualified nonprofits that donate and support elections.

We even see the same bogus, fraudulent, racist gun violence, like community safety line in their pockets with more tax money.

And they are somewhat suspect in their efforts to dial down the rival low level drug pushers.

Anyway, we need a Department of Government Efficiency applied to the Seattle budget because it looks like the executive is repeating the history of pulling the wool over the eyes of last year's counsel, using the same less than transparent storytelling central staff to pass the same bad spending priorities that originated from defunding the police, shifting the paradigm away from improving the war on drugs, and then creating bad spending priorities that exempt criminals, repeat offenders from jail.

given housing and services first, using homeless crisis money, while racist woke social engineering racial tool equities of scornless experience are applying a racist skin color discrimination against innocent white homeless who are purposely being denied a proper interpretation of shelter and capacity.

But yet we have these racists on the agenda where they wanna manipulate their skin colors as to who's being helped and who's not in jail anymore.

Anyway, we need to stop with the bad spending priorities and purge the racist woke.

Thank you, David.

Our final public commenter today is Amarintha Torres.

Amarintha, welcome, and then we'll move on to the first agenda item.

Once she's done talking, the first presentation can come on up.

Thank you so much.

Oh, is this on?

Thank you so much.

Good morning, council members.

My name is Amaranthea Torres.

I'm the co-executive director of the Coalition Ending Gender-Based Violence, and we support over 35 community-based organizations working towards an end to gender-based violence, such as sexual assault, rape, trafficking, and domestic violence.

I'm speaking today in support of ordinance CB 121028 relating to the restructuring of the B&O tax.

We're supportive of this ordinance because at the federal level, abuses of power are really forcing local gender-based violence programs to make an impossible choice, to deny life-saving services to immigrant and LGBTQ survivors or lose their funding.

This binary choice isn't really a choice at all.

It's an affront to the core values of our field, and it's a risk to all the gains that we have made in our sector over the last many decades.

This ordinance is a step in the right direction towards fair, equitable, and much-needed local revenue to protect our values and ensure that programs can keep their doors open to all survivors in our city as they seek safety, dignity, and self-determination from the impacts of abuse.

Thank you to Councilmember Rink and Mayor Harrell for their leadership on this proposal.

I urge the full council to support this ordinance, and thank you so much for the time to speak.

Appreciate it.

Thank you.

As seeing as we have no additional speakers physically or remotely present, we will move on to the next agenda item.

Folks, welcome to come on up to the dais.

Will the clerk please read the short title of item number one into the record.

Agenda item one, Councilable 121028 related to business occupation tax requesting that a special election be held concurrent with the November 4th, 2025 general election for submission to the qualified electors of the city of a proposition to lift the limit on businesses and occupation tax rates for briefing and discussion.

Thank you.

This is the second time that we've had this item in committee.

We did have it in the Finance Native Communities and Tribal Governments Committee, which is a smaller subset of this full select budget committee.

So we'll start with, we're joined today by Deputy Mayor Greg Wong, CBO Director Dan Eater, and Tom Mikesell and Jennifer Labreck of Council Central Staff, as well as Ben Noble, the Director of Central Staff.

We'll start with just some opening remarks from Council Member Rink and then Deputy Mayor Wong.

Since we've had these presentations in committee, but not this full committee, we will have Tom Mikesell and Jennifer Labreck walk us through their presentation.

And Deputy Mayor, if there's time as well, we can go back to the presentation that you provided at the last committee meeting.

With that, I'll turn it over to Council Member Rink for some opening remarks of her bill.

Thank you, Chair Strauss.

Thank you everyone for being here today.

Colleagues, I know a number of you have heard this presentation before, so I thank you again for taking the time and considering this proposal.

Fundamentally, this proposal is about giving Seattle voters the choice they deserve about our city's future.

The Seattle Shield initiative is more than just a policy proposal.

It's our response to an unprecedented challenge.

And while our city faces a budget deficit and federal cuts that threaten the services, so many of our residents depend on we have the opportunity to lead with values that make Seattle who we are.

And the Seattle Shield initiative reflects three core principles I believe we all share.

The first is that small businesses are the backbone of our local economy.

And this legislation provides immediate tax relief for businesses with a break even point of $5.7 million in gross receipts, meaning that 90% of Seattle businesses will pay less in taxes.

While we're asking for the top 10% of businesses to step up, we're providing concrete support where it's needed most.

This is more essential now more than ever, and it's particularly given the fact that big businesses received another big tax break on the national level with the passage of Trump and Congressional Republicans' big betrayal bill.

Second, workers deserve protection, and as federal workplace protections disappear, our Office of Labor Standards becomes even more critical, and this initiative ensures that we can continue protecting their rights that make Seattle a place where work pays.

And third, essential services protect all of us, and the $90 million generated will maintain programs that keep families housed, fed, and safe, these services that strengthen our entire community, not just those who use them directly.

And in developing this proposal, we met with, as I stated in committee last time, over 40 partners from small business owners and small business chambers to human services providers, labor advocates, and unions.

And since we met on this topic, my team has been doing additional work on the ground canvassing small commercial districts to engage with small businesses.

And we've had the opportunity to connect with 23 additional businesses to inform them about the proposal and garner feedback.

And so we've consulted and refined this to create both a meaningful opportunity for small businesses, but also to offset the tax increases coming from Olympia and focus these investments in a way that balances the harm coming from the federal government.

And since the release, we've received an outpouring of support from across the city.

We have several letters of support from human services providers, small businesses, and labor organizations asking us to let voters make this choice.

And building on that, I am grateful that Mayor Harrell and I have found common ground on this issue because the need is clear and the policy solution is sound.

And working with Mayor Harrell and his team, including CBO Director Eder, we've been able to walk the walk of true collaborative partnership between the council and the executive.

So the challenge of this moment requires no less, and I know that same spirit of collaboration exists in this chamber.

And with that, thank you, Chair, for allowing me to make some opening remarks.

Thank you.

And Deputy Mayor Wong, if you'd like to make some opening remarks, and then we'll turn it over to Council Central staff.

Thank you, Chair, and thank you, Councilmember Rink, for those opening remarks.

Deputy Mayor Greg Wong from Mayor Harrell's office, it's a pleasure to be with you all again today.

I will defer most of my comments to the presentation part, but I would just like to say that this is a policy we believe strikes the right balance.

Our city is facing several challenges, and not just as a city, but our residents, and our small businesses as well.

And so what we try to do is to find that right balance of how do we, given the federal, the state, the local economic headwinds we're facing, the challenges with affordability, particularly for our small businesses, and the need to protect our residents as we see different impacts come through on most basic services that we offer them to keep them safe and secure.

How do we do that all in one time?

It's a challenge you all face every day, and you have to make those hard policy decisions.

In this proposal, we're able to allow 90% of the businesses in Seattle who currently pay the B&O tax to either pay no or less city taxes.

I don't know, at least in my memory, if there's been a time that the city has actually lowered costs on small businesses.

And this is a policy that will actually do so.

At the end of the day, if you take into account all of the businesses in Seattle, 95% of businesses in Seattle will pay no or lower costs.

taxes as a result of this policy.

That is a good policy, in our opinion, for businesses, for the small businesses who want to stay here, who want to hire employees and do business and create strong communities.

At the same time, we're able to raise revenue to help mitigate some of the impacts that we're seeing.

And we don't pretend that this will entirely mitigate all impacts, whether they're from the federal government, the state, budget deficit that we saw or from the local budget headwinds we face.

But we know that they will take a little bit of the sting off and help to provide services that are necessary.

We also wanted to make sure that this was a proposal responsive to the time.

And that's why there's a built-in four-year sunset If the voters do approve this, the bill will sunset unless future counsel renews it and has a one-time renewal for four more years.

And then after then, it would go to the voters again.

Because ultimately, a policy of this weight, we believe, should go to the voters.

And they should have a say on whether or not it's the type of policy that they want in the state of Seattle.

So with that, I will turn the presentation over to central staff to walk through the logistics.

And then thank you, Chair, if there is time at the end, I'd love to be able to provide a little bit more context for the bill itself.

Thank you.

Thank you, Deputy Mayor.

Yes, if there's time getting back to the, in your slide, It was in particular, the fact that this one proposal won't solve the entire budget problem.

That there are multiple factors, multiple tools and multiple levers that have to be used to address this structural issue.

I will note that today's presentation is gonna be different than what we've done in the past.

I strive towards participation and transparency, which is by the end of this proposal, we'll have had this in committee three times.

So we had the presentation that Tom provided at the last committee and we asked to hold questions to the end.

Today I'd like a little bit more participation.

So if you do have questions along the way, please feel free to ask Tom.

The biggest headline that any of us on the dais need to take away from today is that amendments for this and the supplemental are due on July 22nd.

Because we've already seen this presentation before, if you do have ideas of amendments, having that discussion today is helpful.

And again, this one proposal will not solve our entire budget issue alone, and that is why multiple levers will still need to be pulled.

With that, I see Director Noble with some comments, and then we'll pass it over to Tom and Jennifer.

Just with respect to the deadline and amendments, I just wanted to notice that that is the last opportunity to bring us an issue.

You are welcome to bring them sooner.

And in fact, we are working with several of you on some ideas now.

It's a particularly complicated issue.

So the sooner you could get to us, the better.

So just in an effort to offer you better service rather than not, please come find us, anybody at the table, if you will, on the central staff or otherwise.

So just wanted to encourage that.

That was all.

Thank you.

Tom, Jennifer, over to you.

And again, questions as we go.

Good morning, Chair Stratus, Vice Chair Rivera, and members of the committee.

I'm Tom Mikesa with your central staff.

Hi, I'm Jennifer LeBrec, also with City Council Central Staff.

And this morning, we're going to be talking about Council Bill 121028, a business and occupation tax rebalancing proposal.

So...

In terms of a broad outline, we're going to first talk about the background of the existing business and occupation tax at the city, give it a brief overview of the proposal itself, dig a bit into the specific pieces of the proposal, talk about the use of the proceeds generated from the proposal, and then close out with some considerations for the committee.

So the city currently levies a business and occupation tax, which is a tax on the gross revenue of businesses, revenue earned in the city of Seattle.

And so I underline gross here, because this is distinct from what is more familiar, which is the corporate income tax, which is a tax on net revenue or net profits after deductions for operating expenses.

So again, it's an important distinction to remember.

But because it is a tax on gross, the total revenues of these businesses, the rates are actually fairly small.

The current rates charged in our city tax, there are two different rates depending on the type of business being conducted.

First is a 0.222%, so that is less than a quarter of a percent on activities from retail sales and services, wholesaling and manufacturing and extracting.

And so to kind of put that into some context, that basically grosses up to 22 cents per $100 of revenue.

The other rate is a 0.427% rate on service, transportation, freight for hire, and other, basically any other activity not covered in the other rate.

And again, so that's less than half a percent and grosses up to $0.43 per $100 of revenue.

There is currently a small business exemption, which is $100,000 of revenue.

So any business less than $100,000 in any revenue currently does not have to pay the tax.

The rates are at their current statutory maximum as stated in RCW, so state law 3521711. However, by pursuant to that state law, there is the opportunity for voters to approve a higher tax rate.

Thank you, Tom.

Before you move on, to clarify the words on your slides, on your sub bullets, 0.222% for retail sales and services, and then 0.427% for services, you have the word services on both lines.

Can you give us a little bit more flavor of what the difference is?

Great question, Chair.

So this would be services that are sold at retail as opposed to services that are provided.

So like accounting or lawyer services.

So that would be...

captured in the lower rate.

The top rate would be selling a service, some like a software service or something like that that's more packaged and can be sold discreetly at retail.

So there's a slight distinction of whether or not it's kind of at a transactional basis versus like a contract that's been provided.

We'll dig in more to this later, but I'd love a more full explanation later on, not necessarily in this moment.

If there are no other questions on the slide, feel free to keep going.

So just to close out the background description, in 2024, there were a total of 42,000 filers of the B&O tax.

So those are not all taxpayers.

As you can see in the pie chart, basically it breaks down considering the existing $100,000 exemption.

that about half, just shy of half of the total filers actually owed no B&O tax in 2024, meaning the remaining 21,000 or so of taxpayers did owe tax.

The total B&O tax generated in 2024 was $353 million.

The current projections based on the IPA forecast are $369 million in 2025. and 385 million in 26. And in total, this represents about 20% of general fund revenue each year.

And I would point out that there was a recent state change Engrossed State Senate Bill 2015, which did classify some, getting to the question, classified some technology services as retail and would in fact decrease B&O tax revenues as a result of that change because the city tax sort of piggybacks on the definitions, the base definitions in the state tax.

And so those estimates are not included in the projections that I cited in the third billet, which were from the April forecast, but they are included in the estimates of the rate and revenue generated from this proposal.

So now I'll move to the overview of the proposal in this council bill.

This proposal would do a number of things.

It would increase the exemption threshold, so that $100,000 would increase to $2 million.

It would create a new $2 million standard deduction.

There would be an alignment of the business license fee structure with the above mentioned changes.

So basically the business license fee is dependent on the definitions of taxable revenue and the B&O tax.

So in order to avoid unintended consequences, that change would be necessary.

And then finally, it would increase the B&O tax rates to fund the prior two adjustments and to generate additional revenue.

and would designate the use of those proceeds, all of that contingent on voter approval.

The bill would then submit that question in bullet one to the November 4th.

So this is a typo on the slide, November 4th, 2025 general election for the Seattle voters.

All the changes embedded in the proposal would be effective January 1st of 2026. And there is a kind of...

Contingent sunset, there is an initial sunset date of January 1st, 2030. However, that can be extended for an additional four years if Council approves an ordinance by July 31st of 2029 to extend it for an additional four years.

However, that is the only optional exemption.

In any case, this tax and the revenue generated from it would sunset in eight years.

So I'm going to now dig a bit into the details of the restructure proposal, going kind of in piece through the different components.

First, Tom, just one.

Keep going, and then Council Member Kettle has a question in just a second.

So the first piece of the proposal would be to increase the small business exemption threshold from $100,000 to $2 million.

So again, using the actual data at hand, the forecast office estimated that that would exempt an additional 16,000 taxpayers.

So, you know, remember, recall back that there was about 21,000 total taxpayers in 2024. This move would then exempt an additional 16,000, leaving the remaining taxpayer base to 5,000 taxpayers.

The forecast office estimates the impact of that change is about $28.4 million.

And so I put together a table here off to the side that shows how those additional exempted businesses would break down by business type.

So it shows the number of of taxpayers within each one of these kind of general business category, and then indicates within the final column to the right what percentage that number represents of the total taxpayers in the city.

And so just pulling one, you can see for restaurants, for example, there would be an additional 1,343 businesses that would be exempt, so not paying tax, and that would represent 82% of all the taxpayers.

So in inverse, there would be about approximately 18% of existing taxpayers that would be still paying some level of tax.

I'll pause for the question.

Thank you.

Council Member Kettle.

Thank you, Chair Strauss.

Mr. Mike Sell, thank you for your briefing.

Actually, Ms. Lebrack, Director Noble, Deputy Mayor Wong, and now Director Eder.

Welcome.

My question is, and it's playing off the public comment, and I'd like to add, I really appreciate the Crossley Board public comment received.

I also appreciate, you know, we got some young witness to the Democratic action as it relates to business, and I'm not talking about you, don't worry.

And so I really appreciate, you know, having our neighborhoods represented to include Wallingford.

And that was an important question, consideration.

My question now, though, relates to Mr. Wasserman, who has now left.

Given the fact that we are Port City, you know, maritime, we have industrial maritime, massive bill, thank you, Chair, and big sections of our city that are maritime, but there's no maritime business type.

And I was just curious, is it part trade?

Is it considered maritime manufacturing, considered manufacturing?

It just pops, particularly with Mr. Wasserman's question and point, that maritime is not really included as a business type, given the fact that we are one of the nation's major port cities.

That's a great question.

So in discussions with the Office of City Finance Tax Administration Division, so the activities at the port can encompass a broad range of business activities that are captured.

So it's not just one specific business definition.

It's more of a collection of different business definitions.

The actual tax return that a taxpayer would be filling out would actually include all those various revenue streams within that.

So it doesn't fit squarely in one specific tax sector in terms of business type.

And I don't know if that answers the question, but it's kind of into the complexity of how the return is filed.

I understand your answer.

At the same time, I'm almost wanting to ask that somebody brings it together.

Maybe it's a combination of associations, the port, all the people that Chair Strauss knows better than I come together and kind of give a snapshot of the maritime world, pulling the different pieces, just to have an understanding.

Because in terms of our, for the port, how it comes in, major revenue source for our general fund, we should have an understanding what the impact is on our maritime community.

So I'll follow up on terms of how best to ask that question.

And it's really a question for the community too.

I welcome the association, Mr. Wasserman and others to come together and kind of highlight what the maritime world is from their perspective.

So thank you, Chair.

Thank you, Councilmember Kettle.

Yes, a working waterfront is made up of a very diverse number of sectors of our economy, and that's what gives it its strength.

I see Councilmember Rank and then Councilmember Sullivan.

Thank you, Chair Strauss.

I wanted to thank Councilmember Kettle for that question, and building upon that, I wanted to ask if Tom could elaborate a little bit about just some of the parameters that we need to abide by based on the state and how...

Currently with B&O, this is something that the state has a B&O taxed and then authorizes the and empowers cities to be able to levy their own B&O, but jurisdictions are limited in terms of how they're able to create flexibility within B&O.

And so I'm wondering if you could speak to a little bit of that and the set categories that the state kind of requires us to operate within.

Thank you for the question, Council Member Rink.

So this is accurate.

So the B&O tax is a state tax that cities are authorized to levy.

One of the features that is part of that kind of broad state approach is what's called the model tax ordinance.

So essentially cities that have this type of a tax all have agreed to this kind of structure or an organization whereby the different tax structures that we impose in different cities across the state all have kind of the general similar facets.

So that is kind of the high-level constraint.

I don't have at my fingertips all those specific things, but it comes down to issues of uniformity of tax treatment.

So that's one thing.

provision where, going back to the rates that I showed you, that in any business that is in the retail sales and service has to be assessed at uniform rate.

So that's kind of one of those common features of the model tax that we have to abide by all cities in the state do.

and then the kind of definitions of different things and where they apply.

So for example, I cited the engrossed Senate Bill 2015, where they made some changes of how businesses are, how different types of business revenue activities, so basically, In this particular case, it was some type of tech services have been now classified by the state as retail services instead.

And so there are different rate impacts for that.

So those types of changes that happen at the state level translate down to all the various cities through that kind of model tax ordinance approach.

So it is a constraint, but then again, we, as a city, place where we do have some flexibility is in terms of specific deductions and exemptions and credits that can be applied so long as they don't impinge upon uniformity and things of that nature.

So that's kind of a very high level view of how the whole system hangs together and how we work within that system.

Thank you.

Councilman Rink, any further questions?

Yeah, thank you for that, Chair, and thank you for that explanation, Tom.

And colleagues, I wanted to just elevate that point because we've certainly heard throughout this engagement process, you know, asking if there were opportunities to exempt grocery stores, for example, but understanding because of the limitations on the state level to exempt grocery stores, we'd have to exempt all of the retail category.

So I bring this up as just a constraint in terms of what we're able to do on the local level in terms of operating within the parameters set by the state and certainly welcome a conversation too with our partners at the state about how we can tailor and adjust and have more flexibility with this tax in particular.

So I wanted to elevate that point.

Thank you, Chair.

Thank you, Council Member Rank.

Council Member Solomon followed by Council President Nelson.

All right, thank you, Chair Strauss.

Actually, a point of clarification that Chair Strauss alluded to.

If you could go back to slide two.

What I'm trying to get a sense of is looking at the different rates where you have sales and services, and you have services again.

Is one category that professional and business services and retail services, I mean, is that where it's kind of broken out?

I just want to get a sense of where that is.

In general, yes.

I mean, there are determinations that are made through the administrative process to determine whether or not a taxpayer is kind of reporting in the correct way.

That's kind of through the tax administration and audit process.

But it's basically if something's kind of being sold as a point of sale, then it's largely considered retail.

Okay.

If something is being provided on an hourly basis, and then you kind of get an invoice at the end, that's more closely could be considered a service.

And for that, which What are those services?

Again, I'm trying to figure out what are those professional services, those contracts, those hourly billing stuff, where does that fit on this chart?

Those would fit on the 0.427% rate.

Okay.

Yeah, that's clarity I was looking for, so thank you very much.

One last thing in relation to the sponsors coming about grocery.

I've been getting some information from Washington Food Industry, which represents small grocers, locally owned grocers.

And while on the state, the grocers are exempt from B&O, wholesalers are not.

And that would include those small locally owned grocers.

So just looking at, has there been consideration for our small mom and pop shops here as related to what we're trying to do overall related to this.

Again, just making sure that we don't have any disparate impacts on our small locally owned grocers.

I apologize, Councilmember.

I didn't quite follow the question.

Again, just looking at, as I'm saying, I'm receiving information, I think we all have, from Washington Food Industry who represents small, locally owned grocers, many of whom are considered wholesalers.

And while grocers are exempt from B&O on the state level, food wholesalers are not.

And that's what I'm trying to get at is, are we looking at the impacts of what we're trying to do on those small independent grocers?

Okay.

Appreciate the question.

So I would say if we, so we can't obviously change the state's exemptions and which they have provided and kind of pulling back to the uniformity discussion about retail, we don't really have the ability to make our own, even though we do have some ability to give deductions, exemptions, and credits within the retail space, given the kind of uniform rate application and the model tax ordinance, we don't have the ability to make those those specific targeted adjustments for anything that falls within the retail category.

If they're falling within the wholesaler category, then there might be some options to consider and look at.

But I mean, I wouldn't have the, I mean, you have to kind of know the specific tax taxpayers business specifics, which of course is confidential.

So we don't have that.

So we can't really tell on a taxpayer by taxpayer basis, but we can look at kind of the broad contours of our ability within working within the uniformity constraint to see if there are cases in wholesaling where an exemption can be provided.

Thank you.

Thank you, Council Member Salomon.

Council President Nelson followed by Council Member Rivera.

Thank you very much.

I believe this is probably more a question to DM Huang and also Council Member Rink, but the table can answer it.

So at the FNC meeting on July 2nd, when this concept was discussed, I asked what outreach had been performed by two small businesses And I asked that question because the GSEBA had just come out with their position in opposition, and they are the largest small business association in Washington state, if not multiple states.

And I reminded the executive and central staff that I was interested in having this information, specifically which businesses have you talked to, which business organizations have you conferred with to really get their input on the package as a whole.

So I asked that by email on the 7th of July and still have not gotten a response.

And so when will I get information about the outreach that had been performed?

And here's why I'm asking.

Now I'm speaking more as council president to say that the timing of this is really difficult because our committees, council members, and central staff are rushing to finish legislation that's in the pipeline before recess, or at least before budget.

And that's a lot of work in itself.

And then we've got the comp plan, on our hands, and that is a lot of outreach to neighborhood groups and stakeholders, and then also, of course, we've got a vacancy to fill, and all of this requires a lot of either one-on-one or group meetings off-site or in community.

That is a lot of time, and now we're being tasked with evaluating a proposal, and we need to confirm and do our due diligence, but confirm, as you just said, Deputy Mayor Wong, that it strikes the right balance.

So we need to just do our due diligence and the time is short and we have a ballot measure sort of on our plates at the last minute.

So can you let us know when we will be getting that information?

And this question also applies to Council Member Rink that I would like to be able to check off organizations that have already been met with so that I can pick how to target my communications going forward.

Thank you, Council President, for raising those issues.

And first, just go to your role that you mentioned as Council President.

Very much appreciate all of the very weighty and significant different policy issues that you're juggling right now.

And acknowledge the timing is one that, quite frankly, ideally would be done with the budget for this type of proposal.

We're constrained by the state law that it has to go to the voters, and that is what accelerated the timing here in a way that, unfortunately, was out of our control.

But acknowledge and appreciate the additional burden that puts on this council, and appreciate you taking the time, and Chair Strauss, for taking the time to have it heard three times, as you mentioned before.

As to outreach, so apologies that you did not get that response.

My understanding was that we had responded through our Office of Economic Development, but I will double check with that.

And we've met with all of the BIAs.

OED has a quarterly meeting with the BIAs in terms of groups that may have multi-members.

We've met with the chamber.

We actually had a conversation yesterday with the GSBA, and my understanding is that they have not actually taken a position on the bill, is what they expressed to us, and that they were polling members currently and may have a position in the next week or so.

And so they had made an initial statement on that, but that they were still in process for where they ultimately may land on it.

And so there's, and then, you know, there's thousands of small businesses and just throughout all of our community meetings, just raising this, it's mostly a lot of folks have questions, I think, like for example, you know, one of the questions we get a lot is a little confusion around the difference between the exemption and the deduction, right?

So people think, oh, if I make $3 million, I'm going to be paying higher taxes.

And we explain, well, no, the deduction goes up to $5.8 million in gross revenue.

So you actually benefit from this bill, even if you have those up to about $5.8 million roughly in gross revenue.

And so it's a lot of explaining of that through our community meetings.

Do you repeat that?

Excuse me, I'm gonna facilitate this meeting.

I will let you, Council President, have the floor until we're done, but I'm gonna let the Deputy Mayor finish their comments and then I'll return to you, Council President.

Thank you, Chair.

So the end, but we will follow up with you.

I apologize if you didn't, if there's specific groups you're wondering if we've talked to or not, or if there's specific businesses you want to know, we're happy to do that.

But we're doing it mostly through our Office of Economic Development, which has most of the relationships with the small business community and happy to have that conversation with you further.

And apologies if you didn't get that back in writing.

Council President.

Could you repeat what you were, the $5 million, the part that you were saying?

You just said that fast, and I was just trying to follow up in my mind.

Sorry, I should slow down.

No, I appreciate that.

And again, it's the question we get the most, so it does deserve a little bit of a slower explanation.

So there's a lot of numbers that get thrown around with this bill.

And so it is important for, I think, the community, for the businesses, and for all of the policymakers to understand that there's kind of two groups of businesses, I'd say, that benefit from this bill.

The first group is those that have gross revenues up to $2 million.

That's the threshold that Tom and central staff explained.

Those businesses will no longer pay any city B&O tax, so they're essentially down to zero.

We also built in a separate $2 million deduction.

And what that means is that all businesses, whether you make $3 million or $100 million, get to deduct the first $2 million off of their gross revenues before paying their taxes.

So, for example, if you are a $5 million gross revenue business, you can deduct $2 million of your revenue and essentially be taxed only on the remaining $3 million.

The net result of that is there's this tier of businesses that won't be paying zero taxes, but will actually be paying less than what they currently do under this proposal.

And that runs roughly between those who make between $2 million in gross revenue and around $5.8 million.

And central staff may have a, or budget may have a different number.

It's 5.7, 5.8, but it's roughly around that.

So those businesses, all businesses around that $5.8 million or lower in gross revenue will be paying less or no City B&O taxes under this proposal.

So that's what I was trying to explain with that.

Thank you for that explanation.

And you said that you will be talking to the GSBA because I have, you know, official response, right, if you can see.

So I thought they already put out their official response in opposition.

Yeah, I had a conversation with them yesterday on this to understand, because they still have lots of questions, too.

And so there's still, as with many of the business groups, I think, clearly there's mixed responses.

Some businesses really like it.

Some are not as thrilled about it.

And so they're working through with their members to understand where their membership is.

And they may have a more formal position coming up.

That's my understanding.

I don't want to speak for them from the table, but that was my understanding from our conversation.

Okay.

Thank you.

Thank you.

Vice Chair Rivera.

Thank you.

Thank you all for being here.

Deputy Mayor Wong, I just want, and or Tom, clarify on slide five.

These 15,906 businesses are not paying in this proposal, will not pay any B&O tax.

Or are some of these ones that, as you're describing, make $5 million, and so the first $2 million will be exempt, and they'll only pay on the $3 million, which you're saying is less than what they currently pay today.

Is this a combo of those two, or are these just ones that won't pay at all?

Tom.

Thank you for the question, Council Member Rivera or Vice Chair Rivera.

So this is purely those taxpayers that are exempt because of the increase to the standard exemption threshold of $2 million.

So there will be additional taxpayers that will find that because of the higher standard deduction, which is the next slide on the presentation, or not the standard deduction, but the, yeah, standard deduction, would have no tax bill as well.

But those taxpayers are not included in this specific table.

So you're going to go there next.

Sorry, I don't want to get ahead of ourselves then.

And then I guess I'll save my question, Chair, for the next slide.

um, because it pertains to that 5 million.

Thank you.

Yes.

So, uh, noticing that we are at eight minutes before 11 AM, the committee technically goes to 11 30 colleagues have asked that we stay longer today, just noticing time.

Uh, so Tom back over to you and I'm going to have council member Rivera ask her question on the next slide.

And then I will ask to hold questions until the end of the restructure so that we can get through this section of the presentation, and then we'll take up the next section of the presentation, which is how the revenue is used after that.

So over to you, Tom, and then Council Member Rivera, and then we'll hold questions until the end of the restructure.

Okay, so now continuing on the detailed analysis of the restructure, next piece is the $2 million standard deduction.

So what this would represent, so this is a novel concept, there is not currently a standard deduction in our current B&O tax.

This would allow taxpayers, when they file, to basically take an initial $2 million right off the top of their revenue and kind of decrease their total taxable revenue for purposes of filing their taxes.

So based on the analysis of this by the Office of Economic Revenue Forecasts, this would exempt about $10.8 billion of revenue from tax.

And the estimate of the impact, so the impact on revenues that we would otherwise collect, is $33 million prior to the rate increase.

So I'll pause there, perhaps, if the question is with regards to the standard deduction, or shall I continue?

Councilman Rivera.

Thank you, Chair.

My question was going to be on these businesses that make $5 million, where they get to deduct the $2 million.

How many businesses are we talking about for that level?

And then I want to know how many businesses are paying.

They're going to be paying more.

Everybody else will be paying more.

That's a great question.

So I don't have that specific detail at this time.

I've heard, you know, so the prior, the standard deduction or the exemption threshold increase would get to 75% of businesses would be exempt, leaving leaving 5,000.

The additional number of businesses that would be exempt, I can follow up with that specific detail.

I've heard that it's about an additional 15% of businesses would be exempt.

But again, I don't have the breakdown in that same categorization, but I can follow up with that.

Sorry, Tom, did you say 50% of the remainder, so 50% of the 25%.

So, yeah, I apologize if I misspoke.

The exemption threshold would get to 75% of the current taxpayers would be exempt.

The standard deduction would be an additional 15%, so about 90%.

And again, I've heard this information from the executive.

I haven't seen the specific numbers.

at my hands, but I can come up with the breakdown by business type of what those additional businesses represent.

So we'll get that later, like the actual numbers of businesses percentage?

Yeah, we can provide that detail for sure.

Broadly speaking, there would be about 5,000 businesses left in the pool, if you will, of businesses that are still paying the B&O tax after both the exemption and the deduction.

Um, about half of that roughly 5,000, um, number would be, uh, folks who are paying less, uh, rather than paying more.

Um, so it's, it's about split half and half.

That's important, um, director, because I've heard that a lot from a lot of businesses that 5 million sounds like a lot of money.

It's gross, um, sales.

And so, um, You know, you have those middle businesses where it's actually they're not making as much as you think, even though five million sounds a lot, which it is to me as an individual.

But, you know, when you're paying staff and everything else in the overhead, it winds up not being a ton.

So I just I want to make be clear on how many.

of those businesses are paying more than they are today.

I think that's important.

We can set aside the large, large businesses.

I understand that.

But this little, you know, this area or these number of businesses is important in light of what we've heard, actually, even in public comment today.

But I've heard prior to today this concern as well.

So I just want to be clear on how many those businesses we're talking about.

We'll follow up with you, but it's on the order of 2,500 businesses would be paying more.

And the other businesses, are either paying nothing for B&O tax or they're paying somewhat less.

And the break-even point is about $6 million of currently taxable gross receipts.

If you are a business that has about $6 million of currently taxable gross receipts, you are either no longer paying any B&O tax or you're paying less than you're currently paying.

If you have $6 million or so or more in currently taxable gross receipts, you'll be paying a higher amount of a tax under the restructured tax bill.

Okay, so we'll get follow-up information.

And I point at another, just to clarify, nonprofits are not exempt from these totals as well.

So do we know what the nonprofit percentage is versus the for-profit institutions?

And I'm thinking specifically here, obviously, came to my attention actually just today, that Fred Hutch would be subject to paying for this, our main cancer research institute in the city.

They're exempt from the state BNO.

And so I'm getting more information on that, but I just wanna make sure that we've looked at the nonprofits and impacts on places like Fred Hutch.

I have not seen any numbers on nonprofits.

As was mentioned earlier, we can't get individual taxpayer information.

Um, and I don't know, um, if we break it down by nonprofit versus for profit, but we can ask and see if we're able to get kind of at least the aggregate number on that.

I'm not sure.

I haven't seen if we've, if we, I have not seen that yet.

I appreciate that deputy mayor.

And I know we touched base just a second ago and transparency, cause I had this question.

So I appreciate you.

working with me to figure that out and figure out the Fred Hutch and other similar institutions.

So thank you for that.

Thank you, Chair.

Thank you, Vice Chair.

Colleagues, I'm breaking the good rule of facilitation, which is being consistent and predictable.

I'm noticing that the next few slides are summaries, and so, colleagues, if you do have questions about the deductions, happy to take them right now.

As we move forward through this presentation, there are two more sections, and in the next presentation, there are sections of the presentations.

We'll hold questions until the end of the sections and then we'll ask so it's a little bit different than usual.

But just want to check in to see if there are any other questions about this restructure and the deductions.

If not, then we will hold questions until I see Council President.

I just want to make sure I heard correctly.

Nonprofits are covered by this.

They will be I mean, if a non-profit brings in more than $2 million, could you please explain how non-profits are treated with this proposal?

Yeah, so thanks for the question, Council President Nelson.

So this specific proposal wouldn't change anything with regards to non-profits specifically.

If a non-profit is...

below $2 million in annual revenue, it would be exempt.

So that would be a change as a result of this proposal if a, and again, kind of, going ahead to kind of some of the kind of descriptions of the comparative impacts.

But if a nonprofit is higher than annual revenue of $5.7 million, it would be a higher tax.

And so I'm not aware that there is a broad blanket exemption in the tax for nonprofits.

They are eligible at a kind of in a broad level.

to pay the tax.

So really, this change with respect to nonprofits is really whether they fall above $2 million or below.

And then if they are above $2 million, whether or not they have $5.7 million of annual revenue or below.

If they have below $5.7 million revenue, they will pay a lower tax.

If they have above $5.7, they will pay a higher tax.

Thank you.

Thank you.

Any other questions, Council President?

Nope.

Colleagues, any other questions on the deductions section?

Seeing none, if you wanna tick through your next slides, we'll take questions from council members on slide 10.

Okay, so continuing the next change in the proposal would be a conforming change to the business license fee.

Kind of at a high level, as I mentioned, the business license fee and the B&O tax are linked through the definition of revenue, specifically taxable revenue.

And to pull back even further, the city has two, a fee and a tax.

So just a business license fee is assessed for just the privilege of doing business in the city of Seattle.

And then if you are a business license fee holder, then you then you may be liable to pay the B&O tax.

This change will basically change for all taxpayers what their taxable revenues are by virtue of the new standard deduction, and because of that, there would have been an unanticipated change in the fee, the schedule of fees for folks paying the business license fee.

So this is simply a conforming change to mitigate against any unintended revenue loss from the business license fee as a result of this change.

So finally, The final piece of the tax restructure is a rate increase, which increases the rates to the new proposed rates of 0.342 for retail wholesale trade and manufacturing, and 0.658 for services and all the other activities.

You can see here in the table at the bottom of the slide what that means for a business with a million dollars for each incremental million dollars of revenue.

For the retail rate, it's basically $1,200 per additional million dollars of revenue as a result of this tax change.

For the services and other category, it's 2,300, a little over $2,300 with regards to the change per million dollars of revenue.

And I would say that all these numbers and estimates come by way of the city's independent forecast office, who estimate that the rate increase would generate $151 million of additional revenue in 2026. However, there are embedded caveats and risks in all revenue estimates, including this one.

to kind of pull back a bit and look at what this means for Seattle's rates with regards to rates charged by our neighboring cities.

You can see kind of first the Seattle's current rate in the bold red bars and then the Seattle proposal, the proposed rate with this council bill of what it would look like and how these compare to other cities in the region.

And you will note that The cities of Redmond and Kirkland are not included in this chart.

That's because they do not currently assess this type of B&O tax.

They instead assess head taxes.

And so now a few examples.

We've kind of talked about this a bit with regards to where the impacts are within this restructure.

There was mentioned we do not know specific businesses.

That's really highly confidential information.

So we've kind of just put in terms of business A and business B just for purposes of comparisons and different kind of annual revenues for each of these sort of example businesses.

going from $250,000 revenue up to half a billion dollars.

And I don't know how many businesses would fall in any one of these categories.

These are just really for purposes of example of impacts.

And the way the tables sorted it shows the tax due under the current structure that's in place today, and then what the tax due would be after the restructure.

And so you can see clearly that at around the $5.7 million revenue point, is where the tax burden is lower under the restructure or higher depending on where you are with regards to that inflection point.

So essentially anybody under $5.7 million of revenue would owe a lower tax, above would owe a higher tax.

And then looking at the half a billion dollar revenue level, The difference is a little bit shy, or a little bit above half a million dollars of additional revenue impact after the restructure.

And this is the, again, since there are two rates, this is describing the changes for the retail, wholesaling, and manufacturing rate.

The higher rate, the services transfer rate and rate for higher and other rate, kind of similar examples.

Again, the inflection point is about $5.7 million.

And then the additional tax for a half a billion dollar taxpayer would be about $1.1 million per year.

And so this, a lot of different pieces of the proposal, of the restructure, but this pulls it all together to show how fiscally it all hangs together First, there is a cost of increasing the small business exemption.

That's $28 million.

So that would be a revenue loss, all else being equal.

The $2 million standard deduction would reduce revenues by $33 million.

Again, all else being equal.

However, the impact of the higher tax rates brings in additional $151 million, which nets to $90 million of annual general fund revenue.

And now I'm gonna turn it over to Jen Labreck to explain the use of that $90 million.

Hang tight, hang tight.

We're gonna pause on slide 10 and see if there are council member questions at the end of this section.

All right, now over to you, Jennifer.

I'm gonna ask that we now go through your section.

So there are three slides and we'll have questions from council members at the end of your third slide here.

Thank you.

Sounds good, all right.

So I will talk about the use of the net revenue.

And here again, just as Tom covered, the net revenue is the money that's left over after paying for the loss of revenue created by the standard deduction.

and the higher exemption.

All right, so under this council bill, the net revenue would be required to be used for several purposes.

Those purposes are areas of food access, gender-based violence programs, homelessness prevention, emergency shelter, and support for workers' rights and protections, and small business supports.

There is currently roughly about $145 million in general fund, supporting these program areas and about $10 million of PET.

I wanted to take a few moments to talk about what this ordinance would do and also what it wouldn't do in terms of specificity.

At heart, the ordinance or the council bill states the city's priorities for use of this net revenue in the face of both a general fund and PET deficit in the coming years.

It is intended to provide flexibility in the face of a lot of unknowns.

And that includes what the August and October revenue forecasts will look like.

And if those forecasts will increase the projected budget deficit.

As a result, the ordinance doesn't specify funding amounts or percentages for each of the above uses.

It also does not require that all of these uses be funded or that the council maintain today's investment levels.

Overall, I would say that it is the intent of the legislation that the net revenue be used to backfill for programs that are currently funded with general fund and to an extent also programs that are funded with PET, which has increasingly become fungible with general fund.

But the ordinance does not explicitly say that, but that is the intent is the backfill of existing general funded programs in these five areas that I just mentioned.

Next slide.

All right.

The ordinance also says that up to $30 million in net revenue may be used for implementation costs and the ongoing administration of the tax.

Give me one moment here.

All right.

As we talked about last time, implementation costs include $2.3 million for system changes in 2025. That's a one-time cost and potentially another $2.7 million in one-time cost if there is a needed update to the city's legacy system for administering taxes.

And then there would be approximately 1.5 million in ongoing costs to administer the tax, including personnel.

The second use here for this up to $30 million is to mitigate the impact of federal funding reductions in four different areas, housing stability for low-income tenants, food insecurity, financial stability for affordable housing providers, and emergency shelter and homelessness.

As written, the legislation says up to 30 million, so that is an eligible use for this funding to mitigate the impact of federal funding reductions, but it does not necessarily have to be used for that purpose.

Net revenue, the legislation doesn't require that it be used for that purpose.

It preserves flexibility to use net revenue to backfill for general fund if needed as well, depending on future forecasts.

Next slide, please.

The council bill does require the executive to provide some information to council, both in advance of transmitting the budget and also with transmittal of the budget.

It requires that at least three months prior to the mayor submitting the annual budget, the executive consult with council on the impact of actual and anticipated revenue reductions and federal funding cuts on the identified program areas and inform council how the new revenue generated by this ordinance will be utilized.

Once the budget is transmitted, the council bill also requires a written proposed plan outlining how the new revenue generated by this ordinance is to be utilized again in the identified program areas.

And I will stop there for questions.

Thank you, Jennifer.

Councilmember Kettle.

Thank you, Chair Strauss.

Thank you, Ms. Lebrack.

I'm looking at your last slide, so I just wanted to say first, since this is up right now, that I do support you know, these bullets, these points about, you know, having the mayor submit the budget, you know, the shall, and then the second bullet regarding how the revenue generated by the ordinance would be utilized.

My question, going back, bringing up my other briefing combination is, you know, we have a deficit.

And so my question is, for all the slides in this section, I don't see the word deficit.

Was that a conscious, I mean.

And Council Member Kettle, I'm gonna actually leave that one to the sponsors of this bill, unless there's a response that Jennifer Tom has.

My only response is that although the word deficit was not on the slide, I said the word deficit a lot.

And I did say that because I think this was constructed, the ordinance was constructed to maintain flexibility about uses.

Yes, there are buckets, but within those buckets or those identified program areas that are priorities, there's flexibility about how the funding will be used.

And also flexibility, for example, not around maintaining investments.

It doesn't say the city will maintain investments.

It doesn't specify the amount of spending or percentage of spending in each area.

And that really is because flexibility is needed given the projected budget deficit and because we don't know with future forecasts if the deficit will get worse.

I see Director Noble has a question.

I'm going to give a high-level budget response.

Deputy Mayor.

Deputy Mayor, you can go before Director Noble.

Over to you, sir.

I'll just add on to what Jennifer said, which is in the executive's presentation, we do talk about the deficit because we talk about the context of why this is all arising quite a bit.

To the extent that we have time to cover that, we're happy to talk about that and how that factored into are thinking on this.

Thanks.

Director Noble.

And I just want to make the general observation that the budgeting process is inherently dynamic, and I think it's going to be a lot more dynamic over the next few years.

So when we talk about a deficit, we tend to be thinking about shortfalls in the city funding that's supporting a variety of activities.

But I suspect and anticipate that over the next few years we're going to see losses of funding from various other directions.

They may all ultimately be tied back to the federal government.

Not clear.

But for instance, we receive state pass-throughs of federal money.

The county supports many of the same activities.

One tries to get too rigid in saying we're going to fill in for this loss of money with this particular source or that one for this particular priority or another.

I'm going to go out here on a limb.

I think you're playing a fool's errand.

It is really going to be more dynamic than that.

We're going to lose track of what the base is because the funding that has for many years supported certain activities, I think, is going to be shifting around.

So as you approach this all, I just a recommendation that you recognize that dynamic nature and I think flexibility.

And I understand that there's a real tension between accountability, commitment, and flexibility, and you're all going to struggle with it because of the environment you're in.

So editorial comment and potential advice.

Thank you.

Council Member Rink, I'll let you have a response.

And I've got a budget level response as well.

And Council Member Kettle, you still have the floor.

Thank you, Chair Strauss.

I don't think I have too much to add, but rather just to contribute that the executive in my office in the development of this tried to really walk that balance of providing that flexibility, creating also opportunities for accountability.

That's why we have the inclusion of the report from the executive to ensure, again, we are making sure that these funds go towards the outlined areas in this ordinance.

But again, we have a lot of uncertainty coming our way.

We've heard discussions from the the president and Congress about cuts to critical housing services, housing and homelessness services, a number of which we've discussed in the Select Committee on Federal Administration and Policy changes, but a number of them haven't come through yet, but who's to say what tomorrow holds?

And so trying to create that amount of flexibility while creating also a plan and opportunity to be able to backfill for those, that was the balance we tried to provide with this.

Thank you.

Thank you.

Director Noble took what I was generally going to say, which is that as we move into the budget process, there's gonna be a lot of different revenue sources that we already have within our budget, not including the proposal before us.

Those sources can be shifted around so that we can do our best to serve Seattleites to the best of our abilities.

I started this presentation off by talking about Deputy Mayor's slide about, we have three general buckets of tools, efficiencies, reductions, and revenue.

We cannot rely on a single one of those to get us out of the situation that we're in.

And while it is easy, it's not easy for us to say today what those reductions would be, we know that some reductions will be coming in this budget.

If we are not preparing ourselves to solidify the very programs that have already received reductions at the state and federal level, these would end up as triple cuts.

And what I have seen through budgeting processes from the Great Recession to over the last number of years is that oftentimes the services that support the least amongst us are the first to get reduced.

And this is a way to balance against that.

I think that's very important, Director Noble.

Thank you.

This is one of the points I've been saying about this.

We should not be looking at BO in of itself.

We should be looking in this comprehensive way with PET, all the various pieces, and have comprehensive budget reform and set ourselves up for success in 2027. And part of our thing is the mayor has his responsibility.

I'm not a fan of these buckets or these lines.

And to go to this point, I would have had this third slide be the first slide because that goes to that, and I really appreciate that.

Second is I appreciate the second slide still being the second slide because as it plays to the points raised, the federal funding reductions, you know, that's something that we have to offset.

That goes to all the, that goes to having a strategy and have a plan, okay, if we lost the federal piece, okay.

And then third would be say, hey, under these federal pieces to the budget buckets, we tend to be impacted here, from FEMA for OEM to all the pieces here.

For example, I don't see FEMA on this list, but where the federal dollars really have an impact, as opposed to leading with this.

And because ultimately, I think we start doing this, we take away from the idea that the mayor has the responsibility and the accountability to have the budget cover the needs of the city.

And then we have our role in this process.

And like with PET, I'm not a fan of that, because I think it distorts that process a bit.

So a little bit editorial at the end, but I would say thank you, Ms. LeBrecq, for the briefing.

And for me, I would have done the third slide first to highlight that point.

The second slide, hey, focusing on the federal reduction, and then Where in the areas of federal funding do we need to support?

Like we had the DV piece, this goes back to public comment, so thank you for being here by the way.

Like hey, how do we adjust for those areas where we're being hurt because of the federal cuts?

And since I am the public safety chair, I will do a plug for the FEMA related areas too, so thank you.

Chair Starrows, can I say one clarifying thing?

Just to clarify, and maybe I'm just misunderstanding you, Council Member Kettle, but up to $30 million may be used to mitigate the impact of federal funding reductions, but the remaining estimated 60 million is intended to backfill existing programs that are funded with general funds.

So that's not really, that 60 million is not related to offsetting federal funding reductions.

Just wanted to clarify.

I understand.

Thank you.

Council President and then Vice Chair Rivera.

Just getting at some of the spending buckets.

So you, Jen, mentioned the figure $145 million.

So I think that that's what you said, that we are already spending on the first category of expenses, right?

I'm just trying to just hear me out though because I have I want to know how much is the deficit as it is right now I don't know and I know that well perhaps Deputy Mayor Wong will be addressing that in if we can finally get to his presentation but what is the deficit now and then will this will this proposal then solve the long-term general fund and jumpstart or PET shortages going forward.

So just knowing the big number and what we're walking back from would be good to know.

And another question that I have is having to do with forecasting, Ben.

The last three or four quarterly forecasts, even before the PET shortfall, The figures that are in the red are always sales tax and BNO and sometimes REIT, and that shows decreased economic activity.

And now we have adopted the pessimistic outlook or forecast.

And so when we're looking at the revenues or the income coming from this proposal going forward from the BNO, I assume that there's a de-escalator on there somewhere where we can account for decreased economic activity and thus revenue.

Right?

I'm going to take a shot at all of that, and these guys will try to keep me honest.

Here we go.

So based on the April forecast, we did a presentation that provided an estimate of the combined deficit of general fund and payroll expense tax.

And I really do think that's a useful way to be thinking about this because of the fluidity between those two funds that you have now established in policy, working with the executive to do so.

But our estimate of that deficit is between $235 million and $240 million.

I would put some carrots, you know, some grains of salt on that, but it's well north of $200 million.

This revenue proposal is well short of that.

So I very much appreciate the question because I think everybody here and candidly the voting public need to understand that this is not going to solve that problem.

I think you will see that when the budget comes down in the fall that we are going to get through if you choose to implement as proposed 2026 with reductions but in some sense minimal reductions but the challenge that sets up for 27 now is going to be significant and severe if you will because 230 235 minus 60 really because 30 this is really intended for something else isn't is well above 150 million again just even put this in a ballpark and And again, I remind council members that the idea of streamlining the city budget sounds great in theory, the actual practical reality, that the reductions that have come to council in the past few years that I have seen in this chair and in that chair, that is to say budget, are ones that are always difficult to swallow.

The city is providing services that are of value to citizens in all different frames.

And again, I just want to emphasize the challenge that you're facing and looking ahead.

So it doesn't.

Now with respect to the, I'm just going to shift to the other part of your question, with respect to the forecasts, when you see the forecast, what red generally means is that it's, we're usually comparing, there are two different things we're comparing.

Sometimes we're comparing this year to the previous year, in which case red actually shows a decline in revenues.

Other times we're showing the current forecast for say this year or next year, and we're comparing it to the previous forecast, and if the forecast goes down, you get red, even if potentially the actual underlying revenues are going up.

Only to describe when and how red appears, if you will.

The bigger point is that, and it's consistent, I think, with what you're observing, we're not actually seeing necessarily a decline in economic activity, certainly not broad-based, but what we are seeing, and this is, we were painfully right, maybe for all the wrong reasons, because we certainly didn't anticipate what was happening in the federal government, But a year or more ago at the forecast office, even when I was just leaving, we were anticipating a period of lower growth going forward, that the U.S. economy as a whole and this region in particular, and we are seeing that.

We are definitely seeing slower growth and anticipate that going forward.

And that is a challenge for the city because our expenses are going quickly and because the demand for services some level was always infinite, and with the changes in federal policy is actively growing the kinds of services that the city provides.

So it's less that we're seeing economic decline, but rather that the pace of growth has been slower, and we're expecting it to be slower going forward.

Council President, I'll let you continue.

I just want to say, Director Noble, I believe you are the only person who has sat in the director's seat of the City Budget Office, the Forecasting Office, and Central Staff.

Is that correct?

Well, it gets to be true because the Forecast Office only existed for a couple- it's only existed for a few years, so- but I- yes, the answer is yes.

I raised that fact because of the warning that you just provided, that every time efficiencies or reductions have come, it has been very difficult to implement because of the reality of the impact that it has on everyday lives of everyday Seattleites.

Council President Nelson, you've still got the floor, so feel free to continue asking questions if you have them.

When I say red, we might be slower growth, so therefore still growing.

What matters to me is when I see red, it means something is coming in less than we thought it would come in, and therefore a problem.

Yeah, and I didn't mean to...

I wasn't right at it yet.

That is certainly true, and again, the story that...

we're telling and that is driving us is the fact that the April forecast revealed that the economy, particularly on the technology side, has been growing slower and we predict will be growing slower.

So, I mean, the economic impacts are landing here as revenue impacts and leading to this conversation, no doubt.

Thank you.

Thank you.

Vice Chair Rivera.

Thank you, Chair, and thank you, Councilmember Kettle, because I find your points compelling in that we have all these funding sources we're dedicating specific things to them, but we have this budget deficit.

And at a certain point, there doesn't seem to be a holistic plan for how to tackle our budget and the deficit.

And toward that end, for instance, this particular revenue source is not gonna backfill for the deficit.

You can't even get to the federal cuts if you can't even get to our city deficit.

Those are two different things.

And we don't know, and I think you're going to tell us what the impacts, the federal impacts are to the city.

So we need to know that.

And then hard choices will have to be made on do we pay for something we're losing from the feds or do we go to the deficit, and then I suspect some of the stuff we're losing from the feds is actually goes to our city deficit anyway, because we're probably getting some federal money that is not coming in and is contributing to even a bigger deficit than that you just outlined.

So maybe it's more than 235, depending on whatever this is.

At the end of the day, you know, it begs the question, why not just put all of this in the general fund, and as you're doing the budget process, then you're delineating where it goes.

Because we keep doing these funding sources, and then we are narrowing what we can use to spend with it, thereby, in some cases, we're continuing to create this general fund deficit, because now we, once we allocate the use to that particular fund, we can't use it for other things.

So I think Council Member Kettle, correct me if I'm wrong, but some of that is what was going through your mind is you were making the statements about budget reform and how to best tackle all of these different revenue sources and how we think about them.

And do we just think about them all as general fund and during budget time do those allocations?

Or do we continue to do this in a way where it's very, in my mind, ad hoc because to your point, Council Member Kettle as well, in terms of these revenue things that are, I don't know how these got determined to be in here, because there are other things that are not in here that people really care about the city funding as well.

You mentioned FEMA, but there are other human service type things that people care about that aren't on this list.

Not really sure how this list came to be, I do have a question.

And my question is, given all of that, was there consideration to just not single out things to be funded, but just said this will go into the general fund to help backfill for our deficit and the federal impacts, and then during budget time, allocate to, you know, depending on how those impacts were going to be.

Thank you, council member for the question.

And I'll just make an observation too, that I appreciate both your and council member cuddles very, I think a good governance policy and a logical approach to the budget.

It's something, I mean, in a way the budget we send down and that you all approve is the roadmap.

We do have a plan.

But I think you're asking for a little bit of going up a level of trying to think about how does this all really work together proactively?

It is, And I think that's the right approach.

I will say it's incredibly challenging with our federal government in the place it is because it's one that's governing a little bit honestly by chaos.

And so it's hard to anticipate and respond and to plan in the responsible way when you have such an unpredictable lever.

And to Ben's point earlier about we're not sure where those federal impacts all will land, right?

The potential impact is broad.

We know it's a question of when, not if.

I think that there'll be a briefing on the Trump so-called Big Beautiful Bill in the Federal Response Committee coming up, because that's where we're going to really see some impacts in the coming years.

But more directly to your question that you raised, absolutely, there's consideration always, and I think we were trying to strike a balance of assuring the public that these funds would be going to things that were covering the most basic needs, as was pointed out, you know, whether it's food or domestic violence, things that we know are important priorities for the people of Seattle, while allowing for flexibility in a way that we know there's a number of different areas that could be covered in that, you know, housing, homelessness, obviously very broad, and what we fund there, and we know that the need will be great.

So it tries to strike that balance between flexibility and a little bit of accountability on it.

I don't think there's a perfect mathematical equation for how you find that balance.

It's a policy decision, but that's what we're going for.

And I'll also defer to Council Member Rank as a sponsor as well, if she had further thoughts on that.

Council Member Rank.

Thank you, Chair, and thank you, Deputy Mayor Wong.

Yes, colleagues, the outlined areas in this legislation are intended to speak to where we are anticipating the cuts will be the deepest, and these services, as we know, have have offered tremendous benefit to our community in terms of taking care of our most vulnerable neighbors.

Now, we've been exploring the level and extent of prospective federal cuts coming our way in the Select Committee on Federal Administration and Policy changes.

Councilmember Rivera, I know you were asking a little bit about how we understand those changes, and we have been discussing those in committee over the past couple of sessions.

I know you haven't been able to always join those sessions, but I'll offer this reminder to the full body that we will be meeting this Friday to be talking specifically about the nature of the cuts outlined in the as I call it, the brutal betrayal bill.

And we'll have a number of providers who work in the areas outlined in this legislation who will be speaking to the direct impacts to their work.

And so these outlined areas are informed by the findings of our select committee meetings.

Additionally, the information that has been brought to my office by a number of folks across community and what we continue to hear are the largest concerns.

We know that homelessness continues to be one of the number one issue that Seattleites care about.

And some of the cuts that have been highlighted as potentially coming our way are related to continuum of care funding, as well as the emergency housing vouchers.

And I'll remind the body that the continuum of care funding, the Seattle King County pot of money, that keeps 4,500 households housed.

And that's households, not people.

So, we're talking about thousands of residents in the region, and paired with that, we also, it has been indicated that the emergency housing vouchers that came through the American Rescue Plan, these housing vouchers were intended to have 10 years of housing affordability associated with them, but it's been indicated that these will end in the coming months.

Through Seattle Housing Authority, we have about 500 households and vouchers associated there.

Those are folks that would be losing their housing.

And so with this legislation, this offers an opportunity to backfill for some of those pieces.

Last thing I'll name is the matter of the cuts to SNAP.

SNAP because of the big betrayal bill is being cut by about a third.

My office has asked for a subsequent analysis of particularly what does that mean for Seattle residents, how many people will be impacted, but that's a major cut.

And so by being able to address some of that need while also locking in on our current investments in human services will be a real need.

And I'll close by saying again, this is an opportunity to send something to voters.

I think we need to be clear with voters about what we intend to use these funds for.

So having some amount of outlining of what we intend to spend these funds on, I think will be really important for sending a clear message to voters.

Thank you.

Council Member Rivera, you still have the floor.

Thank you, Chair.

And thank you, Council Member Rink.

Please be assured that when I'm not able to attend, I watch.

to get the information.

I have not seen information data at that committee, of which I mean, and I just mean holistic data on what all the cuts are from the federal government.

I appreciate you bringing community-based organizations and chambers.

It's important to hear from them on the impacts they're directly facing, one by one, But there is a bigger landscape here, and as a government, we need to get to that information, not just a one-by-one, because we don't have all the CBOs coming in here telling us this is how much we're losing on food, et cetera.

And I will say I support all of these investments.

And that's why I want to make it clear that's not what I'm trying to say.

There are other investments that aren't here, and I want to know whether there was data that informed this list, because we know other folks are going to be asking for support in these other areas.

And so I'm just trying to get to how these particular, what is the data by which informed these particular ones versus, like I said earlier, putting it all into general fund and then making sure that we have enough to cover all the various human services that we support, including housing vouchers.

And a particular question to the housing pieces.

I know we have a number of housing dollars we're not utilizing currently.

Can that go to backfill for some of this emergency shelter or voucher rental assistance?

et cetera, rather than utilize some of this money that's not going to cover the full deficit and any federal impacts for all these other human services investments.

Thank you.

I'll take – well, I'll respond a little bit on the federal piece.

I will say, just, you know, as you know, we are doing everything to fight these federal cuts, right, whether it's litigation, which we're in, or working with our congressional delegation, which I acknowledge is not the party in power, but they are strong advocates nonetheless.

And so we have been doing everything from day one of the administration to ensure that we're protecting the funding that we have and try to assure it going forward.

And so that, adds to the fluid nature of being able to find the exact data.

You can't say, we are going to face X dollars in transportation versus FEMA versus housing today, because it's an ever-shifting landscape of what the courts are doing and, honestly, what the federal government is doing as well.

But it's something we're continually getting a sense of where are the biggest threats that we're seeing.

To your question, and I want to make sure I understand it right, on housing money that could be used.

Are you referring to money that, for example, the Office of Housing has that's sitting?

We have that housing levy money that we're starting to collect now.

So I think that what, and I'll start this, and I may rely on Director Eder as well for this, too, if I'm understanding it correctly.

There is money that is dedicated to housing that kind of rolls over from year to year because, like with many long-term or capital projects, they're not projects that...

Start and finish within a calendar year, right?

And so that amount of money is there.

It has been promised and dedicated to mostly affordable housing projects is my understanding.

And so there would have to be a choice to take that money away from a dedicated purpose of housing and kind of reallocate it.

other purposes.

And so we know that affordable housing is one of the most important needs.

I mean, a lot of this discussion is just around affordability in general for our city, and that maintaining those strong investments in affordable housing is a priority.

And so that's not a pot of money the executive has wanted to touch, because we want to maintain our promises and investments in affordable housing.

And I don't know if, Director Reader, if you have anything to add to that, but that's my understanding of, I think, where your question was going.

And I understand, Deputy Mayor, on the we encumber and then the we award, the ones that are, the awards we've made aren't actually encumbered as contracts yet.

I do know, though, things aren't getting built, and this money's going to continue to come in.

So if it's not being used today, we know money is continuing to come in.

We can make good down the line on the, the, the, um, the award or the, you know, the investment.

But we have needs today, and we have money sitting somewhere today.

So it seems to me from an accounting purpose, and I'm not an accountant, but it seems to me that we should be able to, and maybe this means that we might not put out a new RFP or NOFA, whichever thing it's called, so that down the line we have the money to cover what we've promised today.

But given nothing is being built, it seems like there should be a policy decision here at some point soon whether we use this money that we have available today to cover some of these really important like this list and many other human services that we need to cover.

today, particularly in light of the federal cuts.

And I will say last year when it was a different administration, we still had our $200 million deficit about.

So we would have that no matter what was happening at the federal level.

So that's important too to note.

And of course, it's made it all the more horrible because of the federal government.

So not taking away from that.

And I will say that as to the lawsuits, You know, I'm really proud of the AG for joining a lawsuit to try to get the $7 billion, and we know it's $7 billion that this state will be losing in education cuts.

So there are aspects of this where we do have information more than maybe we think we do on what we will be losing.

tying it back to your earlier comment.

But on the housing stuff, it's why are we not making policy decisions to utilize money we have today to backfill today?

Since this is one of these things that is listed as a possible use of this new B&O tax rather than sitting on money.

You've already gotten into our next presentation.

Okay, great.

So I'm going to ask the presenters to hold questions.

Colleagues, it's my understanding that the first hard stop that we have of council members is at 1 or 1.15, which leaves us one hour and 15 minutes.

We have a lot more to get through, and we're going to come back to Council Member Rivera's question in our next presentation that starts talk.

And this is why having a tax proposal with the carry forward and the supplemental in one meeting is a heavy lift.

and is important budget practices because it's all interwoven as council member Rivera just mentioned.

So we have one more section here, which are considerations for this tax.

And then we will move into the next presentation that has three sections, carry forward grant appropriations and the supplemental budget.

Is it correct that everyone is good until 1 PM at Wonderful.

Jennifer, I'm gonna pass it back to you to go or to Tom or whomever for the consideration slide one and two colleagues will ask questions at the end of the second slide about the considerations and then we'll move on to the next agenda item.

I'll reserve about an hour for the next three topics in the next agenda item and a minimum of 15 minutes for the final two just so that we can at least cover them today.

With that, Tom, over to you.

Thank you, Chair.

So these next two slides will just cover a few considerations.

to keep in mind when thinking about this tax.

First is with regards to tax-based risk.

So these two points came from the Office of Economic and Revenue Forecasts when they were putting together the rate estimates that are embedded in the tax proposal.

First, as we've discussed during this presentation, this would narrow the tax base from 21,000 current taxpayers to 5,000.

So you would have a higher overall tax burden being paid by a smaller number of taxpayers, which adds volatility.

So when you kind of are expecting a higher revenue collection from a smaller pool, then the impacts of any one of the members of that remaining pool have a larger outsized impact on the total result.

And when you think about that, you think also about the The number of successive city tax changes that have occurred over the last few years, starting with the payroll expense tax in 2020, an increase to those rates in 2023 for student mental health purposes, and then a social housing tax proposal that was approved in 2024. All of those are business taxes impacting businesses.

impacting businesses who would also be paying the current and higher business and occupations tax.

And in fact, about a third of the tax increase in this proposal would be imposed on 65 taxpayers that are paying about 87%, so nearly 90% of the total payroll expense tax revenues that were collected in 2024. So there's also a revenue forecast risk.

So there's always a revenue forecast risk as council president kind of revealed in her questioning.

When we review each forecast, sometimes the numbers are higher than what they expected or sometimes they're lower or in the red.

So it's always a professional estimate, professional guess of what revenue collections will be in total and that same level of potential imprecision is for this tax estimate as well.

At the April forecast, the Forecast Office noted a 40% to 50% chance of a recession in the next 12 months.

We're going to get an updated forecast in August of this year, I believe around the 5th.

That actual chance of a recession may be lower based on information that I've seen, so that's good news, but we'll leave it to them to how that comes in the August forecast.

But with the recession, total revenues could come in lower than expected, the revenues from this proposal could come in lower than expected as well.

And then there are also the estimated impacts of state law changes that I touched on briefly and how the changes of the state law are changing the tax base that we use here at the city.

So the forecast office is looking at the information that they have, doing their best work to see how those changes impact our base, and that is embedded in their estimate.

So to the extent that the source information that they're using is imprecise, that level of imprecision could could impact the revenue estimate as well.

Going to the next slide.

So these are more kind of internal to the city risks, not necessarily with regards to the revenue estimate, but one, we implement the business and occupation tax here at the city using a legacy system that has been in place for a number of years.

And in fact, the city, the, there's a capital improvements project to replace this city.

in the future, though it's currently we're working with the legacy system.

To meet the January 1st implementation timeframe, staff would need to begin work now and incur these costs to get the system in place prior to actually knowing whether the voters approved the tax.

There are risks that are embedded in all tech systems with regards to implementing these changes.

Things like key personnel and then facilitation across interdependent systems are important.

The executive intends to position measures to mitigate these risks to the extent possible.

And then if there is a change to the scope in the proposal versus what is before you today, then that would require a reassessment of those risks.

And then finally, the executive will submit a 2026 budget, assuming the $90 million of revenue if this passes council and is sent to the voters.

However, if the measure fails on November 4th, then council will need to quickly rebalance the resources and expenditures as needed to meet that unanticipated shortfall.

And then there will also be a third and final revenue forecast presented to Council in October.

If those numbers come in in the red, then that would be an additional challenge on top of this that would intensify the pressure to rebalance resources.

So those are the final considerations, and I believe that's the last slide.

Thank you, Tom.

Colleagues, any questions on these last two slides of considerations?

Going once, going twice.

And Deputy Mayor, my apologies, we don't have time for your presentation.

I will just highlight again, it is attached to the agenda today and the three large considerations, efficiencies, reductions, and revenue are the three large levers that we have.

Colleagues, I see Council President has her hand.

I will give Deputy Mayor and Council Member Rink last word on this after Council President, and then we'll need to move along.

Council President.

I was, nevermind, I was going to ask for more information, but I will just reach out one-on-one.

Thank you.

Thank you, Council President.

Council Member, I'm gonna go Debbie Mayer, last word, and then Council Member Ink, last word.

Thank you, Chair and Council, for your thoughtful consideration and questions.

I really appreciate it.

You know, these are, as we've said many times, you know, difficult issues, and we don't look at them in isolation or take them very lightly.

And so I appreciate the really significant consideration of this policy.

I'll just end.

I think we've touched on most of the things that I was going to cover in my presentation anyways.

I just want to end on two points here, one of which is, Chair, to your comments about this is really just one piece of a bigger budget puzzle.

The executive and this council has repeatedly, through the past few budget cycles when faced with declining revenue forecasts, taken hard decisions.

We have done reductions.

We have had to, unfortunately, do layoffs.

We've taken efficiencies.

And even in light of this revenue proposal, we will continue to be looking at those same levers right now.

We're already actually asking our departments under spend for the current year.

We all did hard work together, the mayor and the council, to get a balanced budget passed last year that should have taken us through this year and next.

Unfortunately, the revenue forecast in April upset that.

balance that we had struck, and that's why we're here today.

But we're committed to solving this together.

The other point I want to make sure to make clear is that the mayor has been committed to businesses and making sure we have a vibrant business community throughout the past three and a half years in office.

whether it's the Downtown Activation Plan, our Downtown Activation Team, Unified Care Team, addressing the issues we hear the most from businesses, which often come into issues around public safety, around homelessness.

And those are things that we are committed to doing.

So while we understand that this measure will have impacts on businesses, And again, the vast majority will be better off financially under it, but some will be worse off under it.

We know that we need to be continually doubling down on making sure our communities, our neighborhoods are safe places that people want to go, want to be able to hang out late at night, to use the sidewalk cafes, the restaurants, the local coffee shop.

And so we are committed to all of those investments at the same time.

We're encouraged by some of the things such as our higher number of applications to Seattle Police Department.

We've spoken about some good trends in that regard, and we will continue to do so because we are committed to having a vibrant business community in Seattle, and we will continue that work with you.

So thank you for your consideration.

Please do reach out with questions that you may have of the executive.

We're happy to work with you and answer those.

Thank you, Council Member Rank.

Thank you, Chair.

I promise to be brief with consideration of time today.

And thank you all for your time and engaging on this proposal.

I want to take a moment to respond to some of the points raised from our partners in business, particularly larger businesses and some of the larger business chambers.

When folks are naming about their concerns about our city becoming less business friendly, I want to take a moment to remind everyone that the only other state in the United States that has a more business friendly tax code than ours is the state of Florida.

And so while I welcome the discussion and certainly with some of the medium sized businesses that we've heard engagement from and certainly want to ensure that we're supporting them, I just think it's important to state that from a factual basis.

As we've discussed with the outlined spend areas in this legislation, not only is it morally imperative that we do our best to keep folks housed, healthy, and safe, I wanna be mindful that what for us as a community that is friendly for business, how do folks think it will do for our competitive advantage as a city if we have thousands more of our neighbors living unsheltered?

And that's a reality that we're looking at and we're trying to grapple with.

And so we've worked hard to put together a balanced proposal that I think meets this moment.

This is our chance to prove that local government can step up when federal leadership steps back.

And this is our opportunity to show that Seattle remains a city that invests in each other, that chooses collaboration over division, and that builds a future we all deserve.

And the coalition of support behind this proposal from small businesses, unions, human services providers, I think really speaks to that.

And I believe that when we give Seattle voters the choice they deserve, they will choose to shield our city and protect what matters most.

And I'll close my comments by giving a special thank you to special staff, to central staff from Director Noble and Tom and Jen.

Thank you for your hard work on this.

It was definitely a journey to get here.

And I want to thank you for all your work in helping craft this proposal and for walking this body through all of the details today.

So special thank you to you all.

Thank you, Council Member Rink.

We are gonna move on to the next agenda item.

Clerk, can you please read the short title of items two and three into the record so that we can transition in the presentation easily?

CB 121030, an ordinance relating to acceptance of funding from non-city sources authorizing the mayor or the mayor's designee to accept and authorize the expenditure of specific grants, private funding, and subsidized loans.

And CB 121031, an ordinance amending Ordinance 127156, which adopted the 2025 budget, including the 2025 through 2030 Capital Improvement Program.

changing appropriations to various departments and budget control levels and from various funds in the budget.

Thank you, sorry.

And if somebody can confirm with me if council president is leaving for the day or if she's joining remotely just so I can manage quorum.

We can find that out from staff.

With that, we're gonna transition into this next agenda.

Sorry, I tried to ask her as we were exiting, but the clerk was speaking.

We're gonna move on to these next two agenda items, and there's a third item that is contained within here regarding the carry forward bill that has been transmitted but not yet introduced.

And so we will take these three items up together.

In this presentation, you will see it is divided into three sections, carry forward, mid-year grant acceptance, and mid-year supplemental budget ordinance.

Within here, I'm gonna ask that we hold questions until the end.

We've got about 45 minutes to go through these three very dense topics.

And just to kind of set the stage again, where we left budget last year was that we were predicting slow growth to return and that we were in it.

We had closed a $250 million or so budget hole.

And then at the beginning of this year, that hole came back in a new form after all of the budget efficiencies that we had taken.

So we are now in a worse, a harder place than we were last year because we've already gone through the exercise of making those tough decisions.

And so here we are.

With that, over to you, Tom and Ben.

Thank you, Chair.

I think we've already introduced ourselves for the record, but just for the sake of belt and suspenders, Tom Mikesell is your central staff.

Ben Noble, central staff director.

And we are going to be talking specifically, going in detail on Council Bills 12030 and 121031, which are the Mid-Year Grant Acceptance and Supplemental Budget Ordinances.

But we will be leading off with a discussion of the Carry Forward Ordinance.

And this gives kind of an overview of the presentation.

First, we'll touch on the Carry Forward Ordinance update, then talk about the Mid-Year Grant Acceptance Bill, the mid-year supplemental budget ordinance, and then talk about next steps in the budget process.

And I'll turn it over to Ben.

Thank you, Tom.

So as described, the principal point of this discussion today is to talk about the mid-year supplemental and the grant acceptance.

But in doing so, we're taking things up a little bit out of order.

Normally, at this stage in the year, the carry-forward ordinance would have been considered and likely approved.

What's going on and why?

So before I answer that question, I'm going to start with just a background on what the carry forward is so you have some context for what I'm talking about.

So what is the purpose of the carry forward ordinance?

In general, unless otherwise specified, operating appropriations, as opposed to capital appropriations, lapse.

That's a technical term.

It's the opposite of an appropriation, essentially.

It's what happens to an appropriation once it expires.

And they lapse at the end of the calendar year.

So that means that the department appropriated $100 million.

They spend $95 million.

They've got $5 million left at the end of the year, and they lose the authority to spend that $5 million.

January 1 comes, and they'll have authority for the next year's budget.

But again, the unspent money from the previous year, they do not have authority to spend.

But it could well be that that $5 million was allocated for is something that the city wants to continue.

And when I say the city, I mean you and the mayor at some level.

And if that's the case, the department can request to carry forward that appropriation from last year, that money that didn't get spent, that, using my language here, that wants to get spent, if you will, still on whatever that activity program, whatever it might be.

So that's what it's for and what it does.

It's money we'd balanced assuming that the money was going to get spent.

It hadn't.

It's an important investment.

We still want it to happen.

So normally, given that we're dealing with things that didn't happen in the previous year and we want to get going on the next, we deal with the carry forward in the first quarter, or sometimes council doesn't vote until the beginning of the second.

But that's generally the timeline.

So why are we still talking about it?

And why isn't it even before you yet as a referred piece of legislation?

And the short answer is that April forecast.

So the legislation actually had been transmitted to the council in advance of that forecast.

And we were about to take it up.

And when that forecast arrived, the impact, particularly on the payroll expense tax in terms of reduction in the forecast, meant that the total appropriations proposed in the budget that had been approved, the 2025 budget, and that had been prepared to be requested, if you will, in the carry forward, so unspent dollars from 24, that that combination of appropriations was larger than the forecast for the payroll expense tax at that point, again, in April.

So it did not make sense from our view for the Council to be appropriating more money than we understand ourselves to have.

I say understand ourselves to have because it's a forecast.

The legal requirements for balancing passing a balanced budget likely only apply in November.

So in some sense, you could still appropriate more money than you expect to get.

But in my view, that makes no sense.

And it really hides or avoids the underlying issues about the fact that there has been a meaningful resource, excuse me, a meaningful reduction in resources.

So we need to make, some changes need to be made to the carry forward and spend some time working with the exec, particularly the exec on its own, figuring out what the best of those, the best way to approach that would be.

So, next slide, yeah.

All right.

So we now have, Executive has proposed an additional piece of legislation that, in combination with the carry forward, will bring the requested additional expenditures into balance.

And we're reviewing that right now.

In addition, as part of that, we need to complete some changes to the original carry forward ordinance.

So we're going to make some pre-introduction changes so that the package together will now be balanced for 2025. And fortunately, just in terms of timing, you're going to hear about the midyear supplemental and the grant acceptance today.

But at the next meeting, you'll hear and see all three.

So you will have an opportunity to tie this all together, if you will.

As a bit of a preview, let me talk about, next slide, how how are we going to solve this problem, and how is the executive proposing to solve this problem?

So again, the key issue here is on the payroll expense side.

If you recall, on the general fund side, there was a reduction in revenues forecast for 2025, but actually the underspent resources from 2024 meant that that was more or less a wash.

But it was really the PET that has been driving the increase in the deficit looking forward, and created a deficit if, again, if we want to carry things forward, 425. So what the executive is proposing to do, interestingly in this case, is to reduce, so again, we have overcommitted in some sense, or because of the carry forward and things that are in the carry forward, we want to, or the executive, to over-commit PET resources.

So we need to reduce somewhere.

And the proposal is to reduce, actually, the transfer to the general fund.

And as a technical matter, this does work.

And the reason it works is that when we balance for 25 and 26, The overall strategy was one that involved running down some balances, fund balances, in the general fund and also in PET, over 25 and 26. We have accumulated resources for a variety of reasons under forecasts, under spending.

And the strategy was to spend part of that one-time resource in 25 and to spend part of that one-time resource in 26. That meant and means that The expectation is that 2025 was going to end with a positive fund balance in the general fund of about $35 million.

The 26 endorsed budget then anticipated spending that $35 million down to zero, because that's generally over a biennium we were going to get to zero.

So what the executive is able to do here is to reduce the transfer to the general fund, which means that that fund balance that we thought and we anticipated we would have at 2025 won't necessarily be there because we are going to have less general fund resource because the transfer in from the payroll expense tax will be lower.

So it does potentially create a challenge for 26, right?

But it does solve the 25 problem.

So again, what we're going to do is reduce how much PET is going to the general fund, run down the fund balance that we have in the general fund, and thus enter 26 in a slightly worse position.

Except, and this is an important except, that the executive is simultaneously working to underspend the 2025 budget to try to build up general fund fund balance so that they can take on the 2026 problem.

That is essentially the set of transactions that are going on here.

Given that the executive is working to underspend, technically another possibility would be to try to reduce 2025 general fund appropriations.

But the executive doesn't yet know where that underspend will occur.

So that's not a practical way to do this.

This is a practical way to solve the problem of over-appropriating PET.

Another approach would be to look elsewhere to reduce PET appropriations.

This isn't on the slide, but it's come up earlier today, so I am just going to point it out.

As has been observed, there is fund balance, unused resources, PET resources on the housing side that we fully do not anticipate to spend this year.

and some of them not even next year.

So an alternative approach would be to reduce appropriations on the PET side.

I referenced housing on the PET side, because that's one I know that there's resources that we're not spending.

There may be others.

But again, at the end of the day, either one of these will leave the city in the same fundamental place.

because the money won't get spent out of PET whether we transfer it in or not.

So in some ways we're solving an appropriation problem, and that's important because appropriations need to be balanced.

The actual cash flow here is fundamentally below these appropriation levels.

The executive is operating in a way where they're not being constrained by appropriations in most places.

They're being constrained by their own management of the resources and the knowledge of the deficit that we have.

And I'm now going to very cleverly tie this to the mid-year supplemental.

Think tight.

Before we go to mid-year supplemental, do you need to say anything to finish, carry forward?

Just to say that, as I said, the executive is managing the budget not because of appropriation constraints, but really because of their own recognition of the deficits ahead and trying to underspend cash.

There are exceptions, and the mid-year supplemental are the places where they do want to spend additional, where they are being constrained by limits on appropriation.

And that's all I wanted to say.

Thank you.

And we're going to sit on the carry forward.

I see Director Eder, Vice Chair Rivera, we're going to come back to your questions from the last presentation now, and then Council President, I see you have joined remotely from your office, and we'll go with you after that.

Director Eder.

Thank you for the opportunity.

Dan Eder with Central Budget Office.

I didn't introduce myself earlier.

I apologize.

I agree with everything that Ben said.

I would just point out that we are no worse with the proposal that we've made, no better.

It's just an evening out of the funds.

The bad news already came in April, and that's that the Office of Economic and Revenue Forecast has told us on a point-in-time basis that they will update in August, that they expect that there'll be significantly less revenue coming in in both the general fund and the PET, the Payroll Expense Tax Fund, for 25 and 26. As I said, we're going to get Another look at that, another point in time look at it in the beginning of August.

We hope there'll be better news, but hope isn't a plan.

We're going to figure out where we really are.

What we know is that as of April, things were worse than they were when the city adopted its budget in the fall of 24. This is a recognition that for 25 only, we can rebalance between general fund and the PET where that problem lives.

We'll have to solve that.

We, the executive, will have to solve that in our proposed budget, and we intend to do that.

We will take the latest news that comes in August.

Hopefully, that's better than what we found out was the look forward from April.

If it is exactly the same or worse or better, no matter what the forecast is, we will have a proposed budget to you that addresses the current-looking revenue picture.

So with that, I'm just happy to answer any questions.

Thank you.

Councilmember Rivera, do you want to restate your question?

But I might ask maybe a little bit more focused than last time.

Well, there were many points I was trying to make sure, but thank you.

I will just keep it to the point about the housing dollars.

I understand.

And our trustee central staff, I want to give Tracy Ratcliffe a shout out because she watches and then she answers questions while we're going.

So I see you, Tracy, and I appreciate you.

There she is.

She sent some information that we got from the Office of Housing on this piece about what's been encumbered, how much has been encumbered, how much has been awarded but not yet encumbered, meaning we don't have a contract for those dollars.

It's almost like a future promise, if you will.

And so on the awarded side, and for some reason my computer now has decided to hide that email.

that I had pulled up with the information, but Director Reeder, you can talk about this.

Bottom line is we have funding that has been awarded, not encumbered.

We have needs today.

We can decide as a policy matter to...

nothing is getting constructed.

So I wanna, that's important because people keep talking about building of housing and things are not getting built.

So Ben, go ahead.

Oh, and so I just want to, from a policy standpoint, we could, you know, why are we not utilizing some of these funds now to backfill for some of the needs we have now, knowing that we're gonna continue to collect this money for housing And as long as the money is available when building actually starts again, that is another way to tackle this problem.

And I want to hear a little bit about that.

And Ben, you look like you were either going to help set up the question or add to what I was saying.

I'm going to allow Director Eder to respond first.

And if Director Noble has additional context, we'll take that.

Council Member, I would reach a different conclusion than I think the plain words that you just spoke did.

We are opening hundreds and hundreds of affordable housing units, so there is a lot moving.

already.

In 2024, there were nearly 1,300 new units of affordable housing that were brought online with a combination of funding that the city provided and other entities who are partners in those endeavors.

It is true that the way the city budgets, we award projects and fully fund those commitments year one, if you will.

In any given year, we put all of the money aside for the future payment that we owe when we award a new project that's going to be built.

If we put in, say, $100, we put that $100 aside and we don't spend it on anything else.

That allows us, when the project needs the money, to know that it has the full backing of the city.

Typically, projects that get $100 from the city get another $100 or more from other entities, so it takes some time once we award the project for the project to have full funding complete all of its design and permitting and be ready to start construction and then complete construction.

So typically, that's three or more years from the date that we make the award.

And there is a policy choice that we have made to put that money into essentially our fund as locked down and not available for other spending.

The city could make different choices.

We have not historically chosen to do that because we want, when the future year comes, A, to ensure that we have the money to pay those bills, and B, that we don't use the money for ongoing other purposes that this is one-time source for.

And so there are other reasons that I don't want to go elaborate too much on because I know that there are other questions.

But those in combination have led us not to repurpose the money that has been committed but for a future year to current year needs.

Can Ben answer it?

Ben, if you want to add to it, and then...

No, Director, you covered that, Pete said I was going to say, which is that the housing production is ongoing.

It always takes a certain amount of time.

I don't know what the existing conditions have slowed it, but the low-income housing production continues.

It was never driven by a profit motive, which, candidly, has closed down private building, but on the public side, there is some level of production still ongoing.

Yes.

And still, my question is, I mean, it is a policy choice because as long as you have the money to cover in the future years when things are actually going to get completed, those projects, then, and you could decide not to put an RFP out to catch up.

I mean, it's a lot of money.

And it also has reserve, not reserve, sorry, it's earning trust.

And so I'm not sure what happens to the money not trust, excuse me, earning interest.

And I'm not sure where the interest is going because that also can be utilized.

For some of these other housing things, they're all housing.

Rental assistance is housing in my mind.

These housing projects that are struggling, that's still housing.

There are housing providers that have had to close buildings.

I'm not sure how many units we've lost.

So I understand we've gained 1,300.

Not sure how many we've lost because some of these providers have had to close buildings.

there's an unclear picture on the housing space, which is why council member Kettle and I have talked about this housing plan for the city.

And I know there's a slide, I'm asking OH, I think we get this response back in a month or so on what's your five year plan for housing so that we know all of these pieces that are interrelated.

We are planning in this holistic fashion, strategic fashion as a plan.

Director, sorry, I didn't mean to cut you off.

That's okay.

I'm just making the point that we are making policy choices that we can both support the building of more housing, at the same time make different choices about how we do that so that if we need the money today, there is some available money today, particularly funds if they haven't been even encumbered yet.

and still make good on that later on so that we can build, we do need more housing, but how we're doing this in my mind is not working.

And so I wanna daylight that and it is contributing to this deficit piece.

And so I would love to see a better way of handling the housing dollars and the housing space so that we are able to cover all the needs, including the rental assistance, current providers need help keeping those current units online.

All of that is part of the same housing, should be part of the same housing plan.

Thank you, Chair.

Thank you, Vice Chair.

Director Eder, Director Noble, anything else to add there?

Nothing further from me, thank you.

Thank you.

Council President, did you still want to ask a question?

I'll just note that we are at 1220, so we've got about 25 minutes until we need to move on to the next item.

Council President, I see you there, but did you want to ask a question or no?

She's on mute.

Yes.

Yes, I do.

I need to miss.

Please take it away.

Just a moment.

Thank you.

Helpful information to build upon what we were just saying.

The Office of Housing's cash balance is $624 million as of May, at the end of May.

And some of that's encumbered, some of it isn't, but bottom line is that 107 million is anticipated for future NOFAs.

So that is not encumbered or committed, et cetera.

And so far as of the end of May, 36 million has been expended.

So that just gives you a kind of a sense of how the flow of money out versus what is left in you know, in various accounts in housing, just to fill in the fill in the blanks of the last conversation.

My question is, I know that there there aren't numbers here and we're going to keep we're going to keep talking about this.

But my understanding was that the carry forward that we first received was about 30 million short because of the the shortfall in P.E.T. revenue.

And so the fix is to.

take money out of finance general, I believe, 32 out of finance general that will not go forward to pay for general fund costs in 2026. And if that is if I've got that right, how much is left in finance general is my question.

Director Eder.

Yeah, so there was originally about $35 million in the adopted budget that was, as central staff mentioned, available to buy down the anticipated, then anticipated cost as of the adopted budget.

That number has evolved as we have lapsed some money from the underspend from 2024 that is not implicated in the carry forward.

And then also, so that increased the amount of revenue that would otherwise, all the things being equal, have been left over, if you will, to help pay for 2026 expenses.

And then there was a decrease in the April forecast that decreased some of the revenues.

There was, bottom line, enough money to leave a positive balance greater than $30 million, $32 million, that we have transmitted legislation to essentially decrease.

It's decreasing the payroll expense tax funds support for the general fund that isn't needed in 2025. That means that we either need to have a decrease in 2026 general fund expenses or a decrease in 25 or 26 payroll expense tax funds in order to be balanced across both of those funds come the proposed budget and ultimately the adopted budget for 2026. Does that answer your question, Council President?

So basically all of it, I mean, the 32 million that sort of balances the carry forward is pretty much doesn't leave anything left going forward.

I mean, 35 minus 32, got it.

It leaves 30 some odd million dollars less than would otherwise be there for 2026. But that was the news that came out of the April forecast is the city has less money.

We have enough money.

to pay for the adopted budget and the mid-year and the carry forward in 2025. We have a problem come 2026, and we are addressing that, as central staff alluded to, through purposefully underspending our 2025 budget and looking for reductions in spending for 2026 that we will be working on over the summer and in September.

have a proposed budget for your consideration.

Thank you.

I look forward to that slide that shows history of underspends because it's always good to have to find the money when you need it.

We're working on it.

Thank you.

Thank you, Council President.

Any further questions?

Hard to tell.

Council President.

No.

Any further questions?

No.

Thank you.

Colleagues, any other questions on carry forward?

Any other questions on carry forward?

I'm just going to summarize what I've heard is that you sent the carry forward legislation down ahead of the April forecast.

The April forecast came in with jumpstart coming in under an expected general fund coming in above what we expected.

As we said last year when we were having the Jumpstart policy conversations, we said that at that time, Jumpstart had only gone up.

I said, we have to be careful because that is unreasonable and we haven't even had five years of tax collection to do five years smoothing.

So if, in a future state, Jumpstart came in under, then the General Fund would support those Jumpstart dollars.

That is what I have received today.

That is what we are doing today.

This is actions meeting the words that we have said.

Maybe I shouldn't have said that, that Jumpstart could come in under because only three months later it did.

This policy choice does, in fact, give us fewer reserves to address 2026 budget, understanding the current practice of funding housing in particular.

But with that, I'm going to move us on to the next section of this, which is the grant acceptance and appropriation.

So Tom, take it away.

Okay, so now we're going to talk about first the mid-year grant acceptance and then follow with the supplemental.

So this is the second grant acceptance of the year.

There's already been one that has been accepted and approved by council.

The Q1 grants, there will be a third with the mayor's budget proposal, I would assume, to close out the year.

This specific bill would authorize city departments to accept $23 million from external providers and appropriate $22.4 million of that for use by the city.

There are limited matching requirements, so basically any instances where the city would need to come up with money to kind of go along with the funds that we are receiving.

But they're all met through the existing budget appropriation, so there's no additional city impact of accepting these monies.

So I'm just going to cover a few of the highlights in the $23 million in the bill.

So first, there's $4 million that is being received by the Seattle Center from State Department of Commerce.

That money is for Memorial Stadium redevelopment, and it's consistent with the ILA and development agreement.

$3.7 million to the Human Services Department, HSD, from State Department of Social and Health Services.

And this is for the Washington Cares Program, which is essentially Washington State's long-term care insurance system.

The grant does fund nine new positions.

They're not in this bill.

They're actually in the next bill that we'll talk about, which covers increased new positions.

Those new positions are ongoing, and we'll talk about that in the next bill.

There is a $2.5 million increased HSD from State Criminal Justice Training Commission.

So that's for criminal diversion services for homeless people in Seattle.

The funding will actually be administered by a community-based organization on contract with the city.

And then there's $2 million to Office of Planning and Community Development from State Department of Transportation for the engagement, evaluation, and planning activities for leading the I-5.

And that is the mid-year bill at a very high level.

This bill just requires a simple majority vote from council for approval.

Thank you, Tom.

Colleagues, questions on grant acceptance and appropriations?

Colleagues, I go once, go twice.

I will make my only comment, and this kind of comes back to the comp plan conversations that we're going to be having.

I will be looking to engage with the Office of Planning and Community Development regarding the lidding of Interstate I-5, because we see especially between 45th And it's almost 65th, really 55th, even though there's an overpass at 55th.

In that area, it's already primed and ready to be lidded in the similar way that it was done in Washington DC with zero public dollars.

It reconnected the grid and created new office space, which generates, I believe, It was $20 or $40 million a year in property taxes for Washington, D.C. In that area, we have a great potential to reconnect the neighborhoods.

And with the Revive I-5 work having been paused, even though this weekend starts the first 30-day closure of some lanes, The work between the Ship Canal Bridge and 65th has been delayed, which gives us the ability to, as we do that work, or as WSDOT does that work, ensuring that they do the work in a way that allows for pilings to be put in place for a lid is critical.

That was commentary, not a question.

Colleagues, seeing as we have no further questions, I'm gonna ask Tom to tick on to usually this time of year, the meatiest subject that we have, but today it's coming in third with the mid-year supplemental budget.

Over to you, Tom.

And we're gonna hold questions until the end of this section and then ask questions.

We only have 14 minutes for this section.

Okay, thank you, Chair.

So this would be our first comprehensive supplemental budget legislation considered by Council in 2025. Typically, we've talked about this.

Typically, it would be the Carry Forward Bill, but given the extingent circumstances, this is actually the first comprehensive bill before you.

It's a mid-year appropriation position and capital project change bill that's intended to meet needs that were unforeseeable or assumed to be unforeseeable when the 2025 budget was adopted in the fall of last year.

This bill actually would decrease in total city appropriations by $221 million and adds 11 FTEs.

So I'm first right off the back and then get to how an appropriation bill is actually in total decreasing city budget.

And that's because the city utilities, when they do their capital projects in the budget process, they do their full allocation in the budget process, including funds that they assume to be carried forward in the next year.

What that does is then, when they get into the next year, because all capital appropriations by state law carry forward, and I believe Director Noble covered this in his earlier comments, because those appropriations carry forward automatically, that would be a double count.

So this is a very consistent thing with past practice.

The utilities, to account for that double count, abandon all of those preexisting carried forward capital appropriations.

So basically that total amount of that reduction, so basically backing out any amount of carried forward capital appropriations is $263 million.

So when you account for that very technical exercise, you then unearth a $43.6 million total increase in this mid-year appropriation bill.

and breaking that down into kind of funds of interest.

First, it would be a $3.3 million general fund decrease.

I'll get to the details on that in a bit.

$1.5 million payroll expense tax fund increase.

Again, I'll talk about the details in a later slide.

And then a $44.3 million increase to other city funds, and I'll talk about some of those highlights.

And in distinction to the mid-year bill, this actually, because it is a supplemental appropriation, a bill that includes adding new positions would require a three-quarter vote of counsel for passage.

So as promised, here are some general fund highlights.

The one thing that this bill does is it reduces the jail services budget to fund a drug diversion program that would be managed through both the law department and the Seattle Municipal Court.

there's funding included for partial year funding since we are halfway through the year for four FTE positions in the municipal court and two FTE positions in law.

This is envisioned as an ongoing program.

So the amount that's included in the bill is kind of half year funding and position authority.

But again, this is a transfer of monies for an original use for the jail services contract and instead repurposing them for the drug diversion program.

Next is the implementation of the social housing tax that was approved in 2024. This adds $724,000, two FTE positions to City Finance's tax administrative function.

But this is entirely funded from proceeds received from that tax, and it is an ongoing ad given the ongoing nature of the tax.

Next is a $298,000 increase to the city attorney's office and two FTE positions to basically augment the resources available to respond to actions taken at the federal level.

And this is also part-year funding envisioned to be ongoing after this year.

And then finally, I've talked about several additions to the budget.

So the question is, how does that add up to a net $3.3 million reduction in this bill?

And the answer to that is that there is about $4 million of reduction to grants across city departments that reflect them truing up the actual amounts that they expect to receive with the amounts that have been budgeted.

So that's kind of a housekeeping exercise.

But because these grants are part of the budget, they need to actually make the formal request to reduce these amounts and clear those grants out.

Payroll expense tax highlights.

So as I mentioned, there was a $1.5 million total increase.

So the first change that I want to to point out is actually a transfer.

So this is taken independently.

It's just a revenue neutral, budget neutral change that shifts $1.2 million of monies from the Office of Housing's multi-family housing program to the Human Services Department's Supporting Safe Communities program.

And the purpose of that shift is to fund homelessness shelter rental costs through HSD.

Next change, this is an increase.

It's a $1 million increase to HSD that would fund street level activation and neighborhood impacts related to the stability through access and resources center.

Next is a $527,000 increase that is really a technical correction in a sense that aligns the use of payroll expense taxes with a proposal that was included in the 2025 budget.

Those rental assistance adds that $527,000 was originally budgeted.

It was included in the budget from the Human Services Fund, which was an error.

It was intended to be funded from the payroll expense tax fund, and this corrects that to align with the council's intent.

Now I'll turn to the other fund highlights.

And again, I'll just say that there are quite a few items in this bill.

Most of them are much smaller than the items that I'm discussing today.

So after this presentation, if there are follow-ups on any of the detailed items, then please let us know.

But then kind of looking at these high-level changes, there is a real estate excise tax, so REIT 1, reduction of $7 million in 2025, and that's to the Seattle Police Facilities Project.

But the money, in fact, is being spread to future years in the Capital Improvements Program, so it's not envisioned as a as a total reduction of resource in the CIP, just a reduction in the 2025 use of that resource.

Next is a $12 million add to replace the sewer at the Memorial Stadium because of the way we manage our money, particularly with regard to the utilities, where we have to be very precise about aligning rate charges with uses for customers.

The $12 million is also budgeted in the Drainage and Wastewater Fund.

the Seattle Center spends the $12 million, sends it to the utility where the utility does the work.

So that's a bit of a double count.

And then finally, with the Parks and Recreation Fund, there's a $1.7 million increase for capital improvements at city golf courses and a $2.6 million increase for community center rehabilitation and development projects.

This funded from insurance settlement proceeds attributable to the arson at the Camp Long Lodge.

Final slide on the appropriation changes.

In the transportation fund, there is a $3.3 million increase for downtown street cleaning and graffiti abatement, and a $2.4 million increase for phase two of the Thomas Street redesigned project.

And that's funded with developer street vacation proceeds.

And the Move Seattle Levy Fund has a fairly large change that's essentially a transfer of $8.3 million from various projects to the Madison Bus Rapid Transit project also adds $3 million in total to that project from interest earnings.

And those changes are necessary to close out.

The projects essentially have been finished.

However, there were cost increases above what was originally budgeted.

And in order to close it out, they need to put these funds in the place to fill those gaps.

So I did mention that there are a total of 11 new positions added in the bill.

This table summarizes those positions, and I've talked about some of these with regards to the appropriations that were increased to support them.

In FAS, Finance Administrative Services, there are two positions added to administer the social housing tax.

Office of Arts and Culture has a new position added for administrative support to the public art team.

The Law Department has four positions, including the Drug Diversion Program and the federal response needs.

Seattle Municipal Court has four positions added for the Drug Diversion Program, Human Services Department.

So these are the nine positions that I referenced earlier in the mid-year grant acceptance, and those would be managing the Washington CARES grant funds.

There are two positions added in Seattle Center for waterfront landscaping, and those are positions that are ongoing.

However, they are three year term limited, so they're ongoing for a limited time.

Then Seattle City Light and Seattle Information Technology are swapping to tech positions from Seattle IT into City Light itself.

And then finally, there are sunset positions in the Seattle Department of Construction and Inspections that were extended for six months in the budget.

However, for the year in total, they are meant to be abrogated from the positions staffing rosters of the city.

So that's an 11 position reduction, and in net, that is 11 positions.

There are a few other changes embedded in the bill, including the creation of two capital projects in the transportation program.

These include a Better Bike Barriers project and a Graham Street Station Access and Complete Street project.

And then finally, there is a proviso lift that's included, which would lift the proviso restriction on $500,000 in the waterfront budget for waterfront shuttle transit service.

Essentially, this one, the executive has determined that the transportation benefit district fund is not an appropriate place for this purpose, the waterfront shuttle.

And actually, within the supplemental, there is a shift of $500,000 from the payroll expense tax to this use to align those funds with funding the shuttle instead of using the transportation benefit district funds for that purpose.

And those costs would be funded out of the Office of Economic Development.

And I'll just wrap up with a couple of considerations in review of this bill.

One, given that we have talked a great deal about a budget challenge in the general fund and the payroll expense tax fund, this bill does add in the supplemental process ongoing new positions, which would then be considered technical additions in the 26 budget presentation in the fall.

So I just want to highlight that.

And then next, again, given the ongoing challenges that we have with the payroll expense tax fund, this bill would actually increase payroll expense tax appropriations by $1.5 million.

Finally, so we'll talk about the next steps in the budget process.

There is a July 30th select budget committee, so two weeks from now.

which will include the final hearing and possible vote on these two bills.

And kind of consistent with the timeline for amendments for the B&O tax proposal, we would ask that we would be made aware of any concepts that we can help you develop them by July 22nd.

The final action on the bill is scheduled for August 8th, both bills.

And then we'll, of course, get the mayor's budget in late September.

Thank you, Tom.

Very comprehensive.

Just noting the only next slide says questions.

So we'll end here, you know, stick on the next steps.

Colleagues with one minute remaining before, if we do have questions, I will also offer of everyone that is presented today, we have the greatest access to Tom as he is on our central staff.

And so he's available to us if we don't have time for all the questions today.

I do see council member Kettle's hand.

And Councilmember Rivera, do you also have a hand or no?

Okay.

Councilmember Kettle.

Thank you, Chair.

Really quick, just looking at the long list of different pieces, I just wanted to note from my colleagues that I have been engaged with the executive on what we call the drug prosecution alternative from the city attorney.

It says capital D, drug diversion.

It is that, but the program is drug prosecution alternative, and that's been coordinated.

Also, the Star Center.

I just wanted to note we engage on this too.

It's a human services project, but it also has a public safety piece, and it's been relocated to basically the boundary between D7 and D1 across the pit, right to my right.

And finally, thank you for highlighting the Memorial Stadium, very important project, and to make this work, I really appreciate the efforts that are exhibited here in this briefing to get that there and to make sure that that happens, so thank you.

Thank you, Council Member Kettle.

Any responses not needed?

The takeaway from today, if there's only one thing that you have learned today, is that amendments for both B&O and supplemental are due on July 22nd by noon.

We are now at 1245 with 15 minutes reserved for the final two items.

Council President, I see you have a hand, but we called last call.

Is it okay if we continue moving forward?

Hard to tell without your camera on.

That's fine.

Okay.

Thank you.

So will the clerk please read item number five into the record.

Short title, please.

Item number four into the record.

Short title, please.

Thank you, gentlemen, for attending.

We'll have Tracy and Kylie join us now.

CB 121032 and ordinance amending ordinance 127156, which adopted the 2025 budget, including the 2025 to 2030 capital improvement program, changing appropriations to various departments and budget control levels and from various funds and the budget.

Thank you.

We are joined by the amazing Tracy Ratzliff and Kylie Rolfe.

And as council member Kettle and I were just discussing, we'll start with ole, ole, ole, ole.

Sam and bae, Sam and bae.

USL two playoffs start tomorrow.

With that, Kylie, over to you for introductions and Tracy introductions and take us away on the presentation.

You have four minutes for the presentation and four minutes for questions and answers.

So colleagues, if we don't have questions and answers, then they get eight minutes and then we'll just keep ticking.

Thank you.

Okay, thank you.

We'll be brief.

I'm Kylie Rolfe from the mayor's office.

Tracy Ransom, council center staff.

So, is the presentation going?

We're going to bring you some tech support right now.

And if you want to just start talking and we will just keep clicking.

Yep.

Thank you, council members, for the opportunity to brief you on Council Bill 121032 today.

Oops.

Sorry about that.

Sorry.

I was last here before you all with a local organizing committee in March where we gave you an update on our overall planning efforts for the World Cup next year.

So you'll remember that this World Cup will be the largest ever with matches being held in 16 cities across three countries taking place between June 11th and July 19th overall.

The six matches, there we go.

The six matches that Seattle's hosting are between June 15th and July 6th, so about a four-week period there.

Our top priorities as a city continue to be creating a safe, accessible, and enjoyable experience for both visitors and residents.

In order to ensure that we achieve those goals, strategic investments in right-of-way infrastructure and public safety, as well as staff planning and execution resources are needed.

So this brings us to the piece of legislation before you now.

Last year, council dedicated 12.2 million for needed World Cup investments in the 2025-2026 budget, including 2 million of operating funds in 2025, $4 million of operating funds in 26, and 6.2 million in capital funds for work this year and next.

Today's revenue neutral action moves $6.2 million of those funds to operating departments.

Specifically, Seattle Center, Seattle Department of Transportation, Seattle Fire Department, and Seattle Parks and Recreation who have identified needed capital and operational expenditures for event management and public safety related needs.

These include various maintenance, repairs, and improvements in transportation infrastructure and park features, as well as emergency management-related equipment and communication improvements, as well as temporary staffing related to the fan celebration.

All of the investments contained in this legislation are directly germane to public safety risk mitigation, right-of-way accessibility, and mobility improvements, and needed operational support.

If passed, and you'll see if passed as proposed, the remaining resources to be allocated are $200,000 of 2025 operating reserves, $4 million of 2026 operating reserves, and 1.8 million of capital reserves.

So here you'll see the breakdown by department.

In terms of public safety risk mitigation, Seattle Fire Department investments are largely for scaling up equipment related to hazardous and chemical weapon detection and identification, as well as emergency medical service supplies.

The majority of this equipment is already in use by the Seattle Fire Department, but given the scope and scale of the tournament, and the fan celebration, they need to purchase more to be able to handle the increased need at both venues at the same time.

Seattle Center and Seattle Parks and Recreation expenditures are to implement vehicle ramming risk mitigation measures on the Seattle Center campus as well as at Westlake Park.

SDOT capital investments are for right-of-way improvements, such as signage signals and street and sidewalk improvements in key areas surrounding Lumen Field, where increased foot and vehicle traffic are expected.

And then finally, the remaining Seattle Center expenditures are related to fan celebration management, specifically for them to bring on four temporary positions, beginning in Q4 of this year and ending at the end of 2026. And with that, I can take questions.

Thank you.

If you want to tick back to the one previous slide and then Tracy, any comments or analysis or concerns?

I have no comments to make about the proposal.

A memo that I have sent that gives you a little bit of background and context about where we are in our discussions with the LOC as it relates to a memorandum of agreement that we would expect to come to Council, hopefully before the budget, that will give us a better sense for expectations as it relates to our additional costs that we might incur as it relates and reimbursement of those costs as it relates to the World Cup.

Thank you, Tracy.

Just to put a finer point on this, one of the reasons why I was comfortable having a little less time in committee today is because we had part of this conversation during the budget this last fall where we set this money aside.

This is appropriating some, not all of the money, and you've been very specific about what you are funding.

Yes.

Again, revenue neutral because we already set the money aside.

We're just appropriating today.

Councilmember Salomon, I see you've got your hand.

I will say we've got about another minute or so before we have to move on to the next item.

Understood.

Because I'm going to have to get to my one o'clock.

Quick question.

Could you go back to the previous slide?

I just want to see the numbers related to SPD.

Are there numbers related to SBD specifically called out?

I will address some of that, and then I'll pass it over to you, which we had additional items in the appropriations.

Those items need to go through the SERS process, surveillance review process, and so it would be inappropriate for us to appropriate those funds without doing the surveillance review ahead of time.

So that's been one of the reasons why this bill has been held up overall.

Okay, good.

Thank you for that explanation.

I appreciate it.

When we look at the vehicle, next slide, the vehicle running mitigation members, measures rather, Have you drilled down as to what those exact measures might be?

Are we talking bollards, planter boxes?

What kind of stuff?

All of the above.

For Sandler Center campus, my understanding is it largely consists of hardscape bollards.

And at Westlake Park, kind of a mixture of both.

But I can certainly get you more details about that after this, if you'd like.

Yes, I would appreciate that.

So, all right.

Thank you very much.

And if you haven't already, you don't have to pay a consultant fee for Council Member Solomon because he's a council member now to provide analysis on the SEPTED opportunities of Seattle Center and West Bay.

Excellent.

With that, any other questions?

I'm an in-house resource.

Any other questions on FIFA World Cup?

Don't miss the USL2 playoffs starting tomorrow.

Ballard FC is in the games.

Thank you both very much.

We will see you soon.

If the clerk wants to read the short title of item number five into the record and presenters, come on and join us.

CB 121033, an ordinance relating to the financing of the Human Capital Management System Project, amending Ordinance 127131 to increase the amount of an existing enter fund loan, creating the 2026 multipurpose LTGO bond fund and allowing it to be a borrowing fund for the loan.

Thank you, and we've got Director Carnell with us today, and Jesse, can you remind me?

Central staff, Tom, should be returning to the table any minute now.

As the presentation is getting uploaded, I'll kind of give a brief overview.

We are changing the amount of a revolving loan that can receive.

Revolving loan being one that has a certain amount of money that can be borrowed against but must be paid back before it can be borrowed against again.

We are changing the ceiling of that revolving loan and the loan has already been utilized.

So all of the money has been taken out and then it has all been paid back.

So we are at zero, but we're gonna change the ceiling of this loan and I'll have Director Carnell share this presentation as well as I've asked Director Carnell to bring at the next committee meeting another slide in this presentation that goes in a little bit more detail of what do, and you'll have to remind me the title of these individuals' names, but the people who do the work, what are the tasks that they're doing.

With that, Director Carnell, and unfortunately we only have four minutes, so I'm gonna ask colleagues to hold their questions.

And I don't think your mic is on.

Is green button go?

There we go.

There it is.

That took up one minute, sorry.

Good afternoon, everyone.

Jamie Cornell, city finance director, office of city finance.

This is related to council bill 121033, which is the HCMS Interfund loan.

To the next page, sorry.

So this council bill is for the HCMS Information Technology Project, also known as Workday.

This is replacing the, it's a critical replacement of the city's timekeeping and payroll system.

In November 24, as Council Member Schultz pointed out, we had authorized a revolving Interfund loan for up to 11 million to pay for capital development costs related to the system.

And that loan expires in December 31, 2026. As stated, that has been fully drawn down and repaid.

And this current legislation amends Ordinance 127-131 to recognize changes in the ACMS budget and the Interfund loan limits that are needed to bring the project to completion.

So this proposed legislation amends that ordinance to increase the loan authorization ceiling from the additional 11 million to 13.2, to change the borrowing fund from the 25 multipurpose LTGO bond fund to the 26 fund, reflecting the loan payment for the new 13.2 million interfund loan amount, which will come from the proceeds of the 26 LTGO bond issuance.

This Interfund loan remains current with the term which expires in December 31 of 26, and it increases the CIP project budget appropriation by 13.2 million.

So once approved, we will complete the HCMS system implementation, paying for the updated project costs by drawing on the Interfund loan, and then we will repay the Interfund loan with proceeds from the 26 bond issuance.

Thank you, Director Carnell.

Tom, can you share your analysis and review of this legislation?

Anything that we need to be concerned about or anything aware of issue ID?

Thank you.

Thank you, Chair Strauss.

No, staff didn't reveal any concerns with the proposal, and I apologize that I missed the presentation, but this was reviewed by the city's debt management policy.

advisory committee for any center technical issues to elevate.

And that process was clean.

And the impact committee endorsed the proposal, not endorsed it, but reviewed the proposal and found no issues with it and forwarded it to the council for review.

And staff's analysis is similar in that regard.

Thank you, and I will just note for the record and for colleagues, Director Carnell has committed to providing a more detailed list of what the tasks and accomplishments, but any flavor that you wanna give us today, Director Carnell, of what are these folks doing?

Right, so this is primarily used for what we call system implementers.

So that could be Deloitte, who is our primary system implementer.

We've also maintained a number of smaller consulting firms to help with this.

And so this 13.2 is really to finalize the implementation projects.

Excuse me, I want to get to my notes.

And that includes ensuring that our biweekly payroll is stable, ensuring that the many nuances of the city as we're going from a 30 year old plus system into a new state of the art system that we have accounted for all of the nuances that the city of Seattle has, including scheduling, as well as the departmental timekeeping systems that departments like SDOT or public safety teams have.

So it's really also supporting HR and payroll staff as we move them towards providing additional training and support as they start to use the new system.

So this is truly around utilizing the system implementers and our consultants to finalize the project.

Thank you, Director Carnell and colleagues.

Just as a brief reminder here, Workday is the first time that we've updated our payroll system since 1994. I believe the year that Clueless came out, if anyone remembers my previous time here on the dais.

So 30 plus years ago that we, and so this is old technology that we have now updated.

It takes system implementers to customize the workday product for the city of Seattle.

So we have 39 departments.

SDOT is different than the parks department, which is different than the fire department, which is different than the police department, which is different than the mayor's office.

All of these aspects need to be customized.

And it's my understanding that that's what system implementers do.

With that, if there are no, and so that's, why we're here today.

So this, this bill would again, increase the ceiling by $2.2 million and then appropriate these funds for this work to be accomplished.

Is that correct?

13.2 and, uh, change the capital appropriate appropriation to 13.2.

Yep.

Great.

Colleague, uh, council president, I see you do have your hand.

Um, yes.

If I, uh, Thank you.

It's disappointing to me to know that we are paying our implementers more money when my understanding is that a whole bunch of problems ensued from the way the Workday was implemented.

And I don't know what the status of the resolution of many of those problems.

But I just because HR reports to the governance committee, I would like some more information on the status of those resolutions and maybe a little bit more information about why we are, um, why the, uh, the bill has gone up, so to speak.

Thanks.

Sounds good.

I'm so noted.

We will follow up.

Thanks.

Great.

Any other questions comes president.

No.

Thank you.

With that, we have reached the conclusion of today's agenda.

We will have a more robust conversation about workday at the next meeting.

As this concludes the Wednesday, July 15th, 2025 Select Budget Committee, these next words are some of the most important.

Today, we have taken a long time to walk through all of these presentations and allow for as many questions as possible, which has resulted in a three and a half plus hour committee.

At the next committee, we're gonna take up all of these same items again and we will have to be much more judicious with our time.

So I just, today was the breathing room to ask all the questions.

The next meeting that we take up all the same issues is gonna be our working meeting where we will have to stay focused and I might ask colleagues to rein in their comments in duration, not in content.

With that, as you can see, again, please have your amendments in by July 22nd, and our next select budget committee is July 30th.

Thank you for attending.

We are adjourned at 1.03 p.m.