Finance, Native Communities and Tribal Governments Committee 7/2/2025

Good morning, the July 2nd, 2025. Finance Native Communities and Tribal Governments Committee will come to order.

It is 9.31 a.m.

I'm Dan Strauss, Chair of the Committee.

Vice Chair Rivera is excused.

Council Member Saka let me know he's running a couple minutes late and will be excused until he arrives.

Will the clerk at this time please call the roll?

Council Member Kettle.

Here.

Council member Saka.

Here.

Council President Nelson.

Chair Strauss.

Present.

That is three present to excuse currently.

Thank you.

And all council members have been invited to today's committee, so if anyone joins, we will announce them.

We do have a packed agenda today.

At the last committee, we had discussed having our tribal relations director come back and present additional information.

We have asked her to come back in September due to the packed agenda and packed month that we have before us.

We have three items on today's agenda.

The appointment of Dan Eater as director of the city budget office for a term to July 1st, 2029. We have an ordinance relating to the financing of the Seattle social housing developer, authorizing the director of finance to enter into a loan agreement with the Seattle social housing developer.

And the third item is the proposed business and occupation rebalancing act known as the Seattle Shield Initiative.

As I mentioned during council briefing on Monday, this is gonna be a long meeting.

I'm asking folks to be ready to stay until 1 p.m.

These are hefty and important topics and I'd like to reserve as much time for a full discussion as possible.

So please stay with us until 1 p.m.

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

Hearing no objection, the agenda is adopted.

We are going to now move into the hybrid public comment period.

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

And clerk, I see that we have five signed up in person.

We're gonna go with the in-person names first and then the online commenters.

We have six people, seven people signed up online.

We're gonna take two minutes for comment.

And we will take two minutes for comment.

If you do not need your full two minutes, please...

or at least the remainder of your time.

Each speakers will have two minutes.

We'll start with the in-person speakers first.

The public comment period will be moderated in the following manner.

Public comment period is up to 20 minutes.

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

We'll begin with in-person speakers and then move on to remote speakers.

Speakers will hear a chime when 10 seconds are remaining of their time.

Speakers' microphones will be muted if they do not end their comments within the allotted time to call on the next speaker.

I'm going to read all the in-person names, and then we'll go through in order.

So we have Tanya Nguyen, Andrew Tran, Jordan Crowley, Caleb Fitzgerald, and David Haynes.

So with that, if you'd like to line up on the microphone, please come on up.

And if you want to line up in order, again, that's Tanya, Andrew, Jordan, Caleb, and David.

Welcome and good morning.

Whenever you're ready, the clock will start.

Thank you so much.

Good morning, council members.

My name is Tanya Nguyen.

I am the owner of Chumin Tofu and Vegan Deli, located in the Chinatown International District.

I am here today to speak on behalf of thousands of small business owners in Seattle, especially those of us from immigrant communities.

cultural district and historically underserved neighborhoods.

Running a small business right now is like swimming upstream in a storm.

We are dealing with skyrocketing rent, utilities, food costs.

and wages, which we support, but margins are shrinking fast.

At the same time, we are being taxed based on gross revenue, not on actual profit.

That really is not just hurt, but punishes survival.

For small businesses like mine, we are not a big corporation.

We are community hubs.

We support elders.

We feed and house the neighbors.

And we also preserve historical culture.

So this proposal to raise the business.

Thank you.

Oh, sorry.

If you have any additional comments, please do feel free to submit them in writing in the box to your left.

Thank you so much.

Thank you, Tonya.

Up next is Andrew, followed by Jordan.

Good morning, council members.

My name is Andrew Tran, and I want to sincerely thank you for allowing me to speak today.

I have two questions in regards to the proposed business and occupation tax rebalancing.

My first question is in regards to fiscal accountability.

How will you ensure that the new revenue from this tax change will actually produce better results for public programs beyond current efforts?

I'm currently not seeing any clear connections on how increasing the budget will improve public program performance.

What's currently lacking and how does more money solve that problem?

For example, using Seattle's public budget dashboard, I see that $210,000 is being allocated to a UCT director role without clear performance metrics or any justification for this role.

What specifically justifies this new director role?

And how will you track and measure whether or not this role will improve encampment resolution efforts compared to current methods?

This is one of many budget line items that have no clear justification and no clear measurable performance metric.

My second question is in regards to economic impact responsibility.

How can we be sure that this tax increase on large corporations won't result in job loss?

What analysis or private partnerships have been done to mitigate or prevent the potential unintended consequences of job loss or higher consumer prices?

What I'm asking for here is fiscal accountability and economic impact responsibility.

Thank you for your time.

Thank you, Andrew.

Up next, we'll have Jordan Crawley, followed by Caleb and David.

Good morning, council members.

I'm Jordan Crawley, representative of my family's small business in West Seattle, chair of the 34th District Democrats, and a dedicated advocate for small business.

And I stand proudly in support of the proposed changes to the B&O tax.

We're at the edge of yet another fiscal cliff.

Between our failures to enact better tax policy and the Trump regime's defunding efforts, this council is going to be in a tough position.

With some impactful change, Seattle can ease the burden on virtually every small and medium-sized business while supporting essential city services with new revenue.

For too long, small businesses have bought the narrative sold to them by huge corporations and more conservative policy makers that shielding the wealthy from sharing equitably in community investments is the only path to prosperity.

Budgets have been balanced on the backs of the working class.

Wealth has evaporated out of our communities, and none of it has ever trickled down, and it never will.

Economies grow when small businesses thrive, when communities are supported, and through sustained, reliable public investment.

The status quo is failing us, but we have the chance now and must have the courage to change course.

These changes won't solve all of our problems, but it is a good and necessary first step.

This isn't just about who pays what, it's about answering a more fundamental question.

Who do we serve and how do we serve them well?

The local Democratic Party, business representatives, labor leaders, and human service providers from across the city are calling on all of you to do the same thing.

Get this proposal to the ballot and let the people take it from there.

Thank you.

Thank you.

And I see that we have two more people in addition to David Haynes.

Has anyone not signed up that would like to speak?

Great.

I'm going to pass this to you to add after David's name.

So Caleb, welcome.

Just give us one second.

And then when you start speaking, we'll start the clock.

Thank you.

Good morning, council members.

My name is Caleb Fitzgerald, and I'm the owner of...

We're going to restart the clock.

I'd say use the other microphone.

Other microphone.

There you go.

And just real close.

Good morning, council members.

My name is Caleb Fitzgerald, and I'm the owner of Black Aena Consulting.

We're an accounting and consulting firm that specializes in small to medium-sized businesses, particularly the ones that will be directly affected by this business and occupation tax change.

We are also contracted with the Office of Economic Development with the City of Seattle as part of their accounting and business consulting program.

Our clients are the mom and pop shops across the city.

They're the cafes, the coffee roasters, the restaurants, the bars, the salons, the gyms, everywhere that we love.

If you ask any Seattleite what they like to do in the evening, or what they like to do on the weekend, our small businesses are going to come up.

I've worked with hundreds of small business owners across every stage of their business, from having an idea and wondering what they should do, all the way through I'm done and I'm ready to retire, and I want to figure out what I'm going to do to exit.

Starting out is by far the hardest part.

It requires the most time, effort, and capital.

And owners need to be incredibly diligent in their financial planning.

Many work very long days and still struggle to get to the median income in the city of Seattle.

Raising the business and occupation tax threshold from $100,000 to $2 million is a step towards showing that the city of Seattle cares about the small business community and that they are a valued part of the city.

The vast majority of the places we go to celebrate and have fun will see a direct impact from this.

When businesses of this size are able to save a little extra money, we see that those funds go towards really tangible things.

It's things like saving for their kids' college fund.

It's things like giving their employees a raise.

It's things like can I offer retirement or other benefits.

It's things that will be investments back into the city.

I am very excited to see this proposal in the council, and I'm looking forward to hopefully voting on it in November.

Thank you.

Thank you.

Thank you, Caleb.

Up next is David Haynes.

Welcome.

Good to see you in person today, David.

Thank you, counsel.

I just wanted to reference the 145th Avenue, if I could, the sidewalk and the concerns about Jackson.

The real dilemma on the 145th coming from...

David, we do have to speak to items on today's committee agenda.

I'm sorry.

All right.

Is it moral to...

add an interest rate to money that's from taxpayers that then is given to the social housing, why can't you just give the principal and make them repay it?

But I thought that I could address the 145th, because you referenced it during the briefing, regarding the sidewalk that's not supposed to have a whole bunch of pricker bushes sticking out of the fence that needs to be pulled away.

David, if I could help you.

If you were to speak to the budget-related aspects to that topic, it would be appropriate.

All right, well, it just seems like when it comes to the budget, you're going to spend money to move the fence when you could just have people tear down the pricker bushes that are kicking out and grabbing people's faces as you're walking down the sidewalk.

But the real part of that sidewalk, there's a problem at 145th, is that 17th, one block to the King County Regional Housing authorities, senior living, none of those elders can get to the grocery store because it's completely unsafe for any of their assistant walkers.

That needs to be addressed.

But the sidewalk going to the link-like rail by the golf course just needs to have the bushes trimmed on the other side of the fence, not the fence moved.

If you could just go down there and take a look.

I mean, anyway, sorry to bother you with that.

Thank you, David.

Up next, we have Zach Hunting.

Hello, and thank you for letting me speak today.

I am Zach Hunting.

I've owned more than 10 businesses here in Seattle.

And I also work with the Office of Economic Development to consult with small businesses.

So I've worked with hundreds more.

And I'm in support of the B&O tax reform.

It is really hard right now as a small business.

As I mentioned, I also know how hard it is and have run and had to close businesses because of margins that were roughly the same size as the amount taken out every month by the B&O tax.

So I know that, especially right now with increasing costs and with just rents and everything, that it's really tough for people.

And so I think this is a really good step in the right direction.

Thank you.

Thank you.

We'll now move on to remote public commenters.

We do have seven, we have a few who, one, two, three, four, five, we have six already present and a seventh that is not present.

So Garrett Moore, if you are listening, please call in with the email that you received after you signed in.

I see you've signed in twice.

With that, the online public commenters are as follows.

B.J.

Last, Wes Reed, Hallie Willis, Alberto Alvarez, Astrid Galvez, and Kate Rubin.

You will each, if we could promote B.J.

at this time, you'll each have two minutes.

If you don't need your full two minutes, please do release the rest of your time as soon as B.J.

is promoted.

I see B.J., you're here.

Star six to unmute.

For all call-in, you will be promoted into the meeting, and then you will have to press star six.

I see BJ is off mute.

Whenever you're ready, the clock will start.

Welcome, BJ.

Good morning.

My name is BJ Last.

I'm a former small business owner.

I want to point out the deficit that the city is looking at next year is $251 million.

The B&O tax proposal is estimated to just raise $90 million.

So this is...

This isn't going to get around Seattle's austerity that has been set up by fire refusals to actually take action, just keep kicking the can down the road at the city level, let alone this will not be able to give anyone protection from any acting happening on the federal level by the Trump administration or any of the cuts on the state level by the Ferguson administration.

So we need actually like big, bold action to close at the bare minimum the city's own projected deficit, let alone what we know is coming from cuts at the federal and state levels.

I also want to point out in terms of what's happening, like also at the federal level, large businesses are getting hundreds of billions of dollars in tax breaks right now.

So this is, while yay that this would put some additional money on them, they are still coming out massively ahead with huge savings that are going on to them.

And I really do emphasize with the small business owners who've mentioned how hard it is to run a small business right now, what's the cost of everything going up.

This is absolutely true.

This is also completely true for all of the workers who pay sales tax, which is where the plurality of general fund revenue comes from.

It's the largest source going in there.

There's no more for people earning revenue right now.

There's no flow when someone goes to buy something.

There's nothing that if they're making minimum wage, they don't pay sales tax.

There's nothing where if they were recently laid off, they don't pay sales tax.

So people who are struggling to feed themselves, their families, and stay housed, are still getting hit really hard.

And we've also seen proposals coming to raise the sales tax.

So I'd have to ask, where's going to be the exemption for them?

Where's the exemption for people where they don't have to pay sales tax if they make under a certain amount?

Why is there only an exemption for businesses to get out of taxes if they're considered to be too small?

Where's the protection for people?

This isn't actually going to end austerity at the city level.

Thank you, BJ.

And if you have additional comments, please feel free to write in to us.

Up next is Wes Reed, followed by Hallie Willis.

Wes, I see you're here, star six to unmute.

I see you're unmuted.

Wes, whenever you're ready, we'll start the clock.

Welcome.

Thank you.

Good morning, council members.

My name is Wes Reed.

I'm a resident of Northgate in District Five.

I'm here today to ask each council member to fully support the Seattle Shield initiative.

As you all know, we're facing a critical moment.

Seattle has a budget deficit that demands immediate attention, and the federal landscape is shifting in ways that threaten our city's funding.

We cannot afford to be dependent on federal dollars that may disappear without warning.

The Trump administration has already signaled potential cuts to programs that Seattle relies on.

This proposal will help alleviate, although not fully solved, as the previous commentator noted, the cuts we know are coming to Seattle and continue to support everyday people in Seattle.

Other cities are already preparing for this reality and Seattle cannot afford to wait.

We need to act now while we still have options rather than being forced into crisis cuts later.

I'm asking you all to champion the Seattle Shield initiative because you understand, as I do, that good governance means planning ahead and protecting what matters most to Seattle families.

Please give us the opportunity to vote on this in November.

Thank you so much for your time and service to our city.

I'll yield the remainder of my time.

Thank you.

Up next is Hallie Willis followed by Alberto Alvarez and then Astrid Galvez.

Hallie, I see you're here.

Take it away when you're ready and we'll start the clock.

Welcome.

Thank you.

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 the B&O tax reform that would help protect essential services like housing and shelter from local and federal budget cuts.

This proposal is necessary, but it's not nearly enough by itself to fix our structural $250 million budget deficit, much less backfill federal cuts.

The council should send this to the voters and raise additional progressive revenue to truly protect our community.

This morning, I sent you a sign-on letter supporting this proposal and additional progressive revenue signed by the following 27 organizations.

Protect 17, OPEIU Local 8, Asian Counseling and Referral Services, B Seattle, Compass Housing, DESC, Economic Opportunity Institute, El Centro de la Rava, Evergreen Treatment Services Reach, Hunger Intervention Program, Emanuel Community Services, Lake City Partners, Mockingbird, Neighborhood House, OSL Serve, Porch Light, Puget Sound Stage, PDA, the Queen Anne Helpline, the Queer Power Alliance, Real Change, Roots Young Adult Shelter, the Seattle King County Coalition on Homelessness, Solid Ground, Teen Feed, the Transit Riders Union, and White Center Food Bank.

Please send this proposal to the voters and raise additional progressive revenue this year.

Thank you.

Thank you, Hallie.

Up next is Alberto Alvarez followed by Astrid Galvez and Kate Rubin Garrett Moore.

Please call in.

You are not present.

Alberto, I see you're here and you're off mute.

Clock will start when you start talking.

Welcome.

Thank you.

So I want to respond to the first people that said that the SHIELD legislation would lead to job loss.

First of all, in the world, we are in the top five of global economic powerhouses for cities across the world, not just the nation.

The honest truth is that these corporations need us more than we need them.

even if they move jobs across the water to Bellevue, those people living there or even still residing here in Seattle will still provide business for our local small businesses.

So they can light rail or bus it in or take an Uber.

They'll still be providing economic activity in our city.

So this threat, it's an empty threat that they're going to take jobs and move them somewhere else.

Even if the worst happens where they somehow managed to move them to Texas or wherever, a whole other state.

We are a growing city.

We just hit 800,000 Seattle residents.

Again, the corporations need us more than we need them.

So thank you, Councilmember Rank.

Your SHIELD legislation is what we need now more than ever.

After six months of federal chaos and a looming sense of dread, we can finally take a strong first step to rally the city and protect the people that we value.

As you propose, this would provide tax relief to over 16,000 local small businesses.

In turn, this will make the greediest corporate factions pay the fair share they have long avoided.

Fair is fair.

Overall, your SHIELD legislation would bring in about a third of the 250 million we need to protect our city.

Thank you, and have a good day.

Thank you, Alberto.

Up next is Astrid Galvez, Kate Rubin, and Garrett Moore.

You are still not present.

Astrid, I see you're off mute.

When you start talking, we'll start the clock.

Welcome.

Good morning.

Thank you, council members, for the opportunity to speak today.

My name is Astrid Galvez.

I run and operate Salinas Tax and Accounting, LLC.

We are a small business in a small accounting and tax practice.

I'm also an independent contractor for the City of Seattle's Office of Economic Development under the ABC program, where I help small business owners navigate their finances, and I also help them stay compliant with tax filings and so on.

I want to express my full support for this change.

I see firsthand the impact of the B&O tax on entrepreneurs across the city.

And heavily impacted also are the Hispanic businesses that I support and I assist because this filing is based on gross receipts, not profits.

Small businesses are taxed even when they are barely making it or operating at a loss.

For many that have tight margins like restaurants, child cares, independent contractors, it creates this as an enormous burden for them.

The clients I serve are the majority in the Hispanic population or the bilingual population, and they're constantly reinvesting every dollar into either payroll, rent, supplies, materials, et cetera.

They're keeping people employed and they're contributing to the neighborhoods, but they also face tax obligations that don't reflect their financial health.

In addition to this, there is more complexity in reporting.

It becomes overwhelming for them, especially immigrant and first-time business owners.

So I strongly encourage the council to move forward with raising the exemption, simplifying reporting, and providing assistance to immigrants.

and his family's businesses.

These changes will relieve the pressure off of them.

Thank you for your time.

And again, I fully support this change.

Thank you, Astrid.

Up next is Kate Rubin.

Garrett, I see you have signed in again on the online form.

You will receive an email after signing in.

You have to use the directions in the email that you've received.

So please follow the directions that you have received in your email.

Kate, I see you're already off mute.

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

Welcome.

Good morning.

My name is Kate Rubin.

I'm the co-executive director of the Seattle and I went here living in Beacon Hill.

The Seattle Shield proposal is a welcome change in the right direction.

And I appreciate council member Rick and Mayor Harrell for bringing it forward.

Seattle itself is facing a $250 million budget shortfall.

So raising $90 million, barely a third of the shortfall is not despite needing the moment.

Our communities are already hurting, and cuts to housing, human services, food access, and healthcare will only weaken that harm.

This isn't going to solve it.

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

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

Seattle Shield should be passed, but this proposal should be treated as the floor, not the ceiling.

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

We need a permanent progressive revenue stream that not only redistributes wealth, but ensures resources go towards the needs of the people, housing, food, public health, and community care.

Funding for services must be mandatory and it must be full covered.

Thank you.

Thank you, Kate.

We are gonna give Garrett another 30 seconds to see if we are able to get him in.

Garrett, if you are not able to access the directions that were emailed to you after signing in, you can send in your written public comment.

Can I just double check with our legislative information technology?

Mr. G, do we have Garrett present at this time?

Negative.

Thank you, Mr. G. With that, seeing as we have no, and Garrett, please do feel free to write us all your public comment and we'll have it added to the public record.

Seeing as we have no additional speakers physically or remotely present, we will move on to the next agenda item that took 24 minutes and we had all speakers able to provide comments for two minutes.

We've also been joined by Council President Sarah Nelson.

We'll now move on to our first item of business.

Will the clerk please read the first item of business into the record?

Appointment 3189 appointment of Dan Eater as director of the city budget office for term to July 1st, 2029. This item is for briefing discussion and possible vote.

Presenters include Dan Eater, interim director of the city budget office.

Thank you.

And welcome to deputy mayor Greg Wong and interim director Dan Eater, the city budget office.

We had you at committee a few weeks ago.

I know that there were a number of pressing issues at that time as well.

You did answer a few questions, but you had not yet answered us in writing.

Today we have your written answers attached to the agenda.

I'll turn it over first to Deputy Mayor Wong and then to Interim Director Eder for opening remarks, and then colleagues, this time is all reserved for your questions.

With that, Deputy Mayor, welcome.

And if you want to introduce yourselves as well.

Thank you.

Deputy Mayor Greg Wong from the Mayor's Office.

I'm pleased to be here.

Thank you for having us and considering Interim Director Eder's confirmation.

I know that a couple weeks ago, my colleague, Chief of Staff, Jeremy Rock, was here to provide the introduction of Interim Director Eder, and so I will not repeat that here, and I will let you all get to your questions.

Thank you.

Thank you.

Thank you, Chair Strauss, members of the committee.

I'm happy to be here again.

I appreciated the exchange we had on July 2nd and the opportunity to answer written questions.

I know you have a packed agenda.

I'll just very briefly note my thanks for the mayor for the appointment and the vote of confidence.

I'm appreciative to you for considering my confirmation, and I want to thank the CBO team and all of the hardworking staff throughout the city who support the work that we do here at the City of Seattle.

I remain thrilled about the prospect of continuing to make a contribution at the city budget office.

I also appreciate each of you taking time out of your schedule to meet with me in the last two weeks to discuss my vision for the city and for the city budget office.

And with that, I'll just say I'm here to answer any questions you have.

Thank you, Director Eder.

Colleagues, questions?

I have some, but I will hold them to the end.

And I will jump in with one, and maybe that will spark some interest here.

I will oftentimes say that running a campaign is the largest panel interview that one will have.

In the case of our relationship, Interim Director Eder, we've worked together for seven years in many different roles.

When we first met, I was your far junior, and then we worked together as your Central Staff Deputy Director and now a CBO.

So those have been different types of relationships.

I can say that it has been a pleasure to work with you in all those roles.

But I was wondering, so in that sense, that's the longest interview you've probably ever had without knowing it.

In all of those various roles you've served across city government, how does that enable you to perform in this job at a higher level?

Well, as you were alluding to, I spent most of my time with the city, about 13, 14 years, working directly for the city council on the city council central staff.

I have a deep appreciation for the hard work that you do in the public eye, making difficult trade-off decisions and evaluating your options.

I will prioritize working with each of you to make sure you have all the information you need, both you and your staff, to make the kind of hard choices that you were elected to make.

I work directly for the mayor in the organizational chart, but my role would just simply not work if I didn't have the trust and confidence of each and every one of you.

So I will continue the work that I've been doing over the last year as interim budget director if you decide to confirm me moving forward.

to support your decision-making, making sure that you have all the information you need to make the hard trade-off decisions.

Thank you.

And colleagues at any point, oh, I see Council Member Sacca.

Take it away and I've got my standard questions that I'll get to if they are not asked by others.

Council Member Sacca, the floor is yours.

Thank you, Mr. Chair.

Thank you, Director Eder.

would love to better understand.

So we are facing a $250 million plus budget deficit.

There's obviously a lot of pending uncertainty about the budget, revenue, new revenue options.

This is an important job now more than ever.

And so against this backdrop, what gives you the most heartburn or anxiety about stepping into this role and the outlook ahead?

And how are you prepared to address that?

Thank you for the question, Councilmember Saka.

You know, I think no city lives entirely by itself.

We are part of a region and a state, a nation, an international community.

I guess my What keeps me up at night is those things that we can't control that will affect our ability to deliver critical services and projects to the people of Seattle.

Things like macroeconomic forces that make our costs of delivering those services more expensive.

and threats and even actions now that the federal government is undertaking to pull back money that has historically been used to support the work that we do and the work that our partners do.

So in brief, I worry about the curveballs that are coming at us that we can't control.

I am incredibly hopeful, however, because I know that our city is full of innovative thinkers, world-class businesses, creative people.

not to mention great beauty.

And I know that we are a resilient city, and we will plan for and deal with these eventualities as they come, as we have in the past.

I'm privileged to work with, as I mentioned in my opening remarks, a team of incredibly smart people, not only at CBO, but especially at CBO, but throughout the city.

The leaders and the workers of the city have incredible resilience, and I know together with the leadership of the mayor and of you, the city council members, we will prevail.

Thank you, appreciate the response.

Follow-up question to the same question before I move on to another question.

So totally understand the circumstances beyond our span of control keep you up at night, cause some consternation with you.

Generally, that's the case with me as well, just for what it's worth.

We can't control that.

We can't control those external factors.

Well, we can't directly control.

But we do have an enormous amount of direct control and influence over any number of factors.

And that is what I think, in my view, we should be spending the bulk of our time on.

And so against that backdrop, of those facts and circumstances that we can directly control and levers, what keeps you up at night for those circumstances that we can control?

Well, the city budget is a place for us to make choices about how to spend our limited resources.

I think that it is unlikely that the mayor's proposed budget is going to dig us out from under a A problem that we've identified in mid-April of this year, about $250 million of revenues just disappeared from the endorsed and adopted budgets for 25 and 26. We aren't going to be able to dig ourselves out merely by reducing spending.

I think that we are going to have to do a variety of strategies.

We're going to have to look hard at what the most effective way to spend our money is, and we may need to make some reductions in the kinds of services that we provide and be more efficient in the dollars that are left.

And we are also going to be looking at, as I know you have later on your agenda, the possibility of increasing the amount of revenues that we have to work with.

In combination and striking the right balance, that's the hard work that Policy leaders, elected officials like yourselves and the mayor are going to be doing starting today, but continuing through this fall's budget process.

And I look forward to supporting your work in that regard.

Thank you.

Flip side of the coin of my earlier question is, what gives you the greatest hope for the future?

Again, focusing on the things that we can control.

I fear repeating myself somewhat.

I am hopeful in that I think we are led by smart people who are informed by all of the work that's happening in the departments.

and outside of the city as well.

People are free with their ideas and their smart ideas, and I'm hopeful that we will make wise decisions about how to spend scarce resources moving forward so that we can address the most critical needs of people who live, play, and work here.

In this role, Director Eddard, you have one boss, the executive, the mayor.

you would be one of his 40 something direct reports or through his leadership team.

So in every job I have, always important to keep my boss happy, right?

But in this, as a department head, you're also in the unique position of being responsive to this body, members in this body.

Maybe a good analogy would be you have sort of a dotted line reported relationship to each and every one of us on this body.

So you got to keep your boss is, plural, happy, understanding that you have, there's every conflict or tension, there's one and only.

And during the amended or during the budget process every year, we add various council and legislative priorities.

And collectively, the final adopted budget that the mayor signs into law reflects the city's priorities, executive, council, everyone's, right?

So in this unique position that you have, How would you ensure that you're gonna be and remain responsive to all of us?

And also how would you ensure during the budget process and after during implementation and execution of the budget and delivery of those budget priorities that to the full extent possible, all of the priorities reflected in that budget, including council priorities are spent and invested in.

Thank you for that question.

You have just described how challenging this job is.

I, as a budget director, have many bosses.

The mayor, I serve at the pleasure of the mayor, and he can certainly decide when I'm no longer doing a good enough job to stay in the role.

But he's not my only boss.

I view my relationship with the city council as boss-like.

I am responsive to and report up to you as leaders of the city, just as I do to the mayor.

I know that in order to make the kind of hard choices that you're called on to make every day, You need enough good information, crystallized in digestible ways so that it's usable in the moment.

And I will work to make sure, to continue making sure that my staff, in coordination with your central staff and your LA's, and you directly get everything that you need in order to make those hard decisions.

Thank you, and just as an aside, thank you for some of the earlier information you shared with me offline about some spending within our transportation network.

We'll be asking our central staff experts here within the department to work closely with you and your office to provide a more fulsome analysis, just as a heads up.

So appreciate your continued collaboration and cooperation on anything pertaining to that and other stuff.

Final question, and thank you for your indulgences, Mr. Chair.

This is an important, very important nomination here.

In all your accomplishments and successes, Director Eater, professionally, personally, in the community, over many, many years and decades, that's a good thing, by the way, wisdom.

Not that old.

over all that you've accomplished in life, again, professionally, personally, in the community, what accomplishment, singular accomplishment, are you the most proud of?

What are you the most proud of today?

Well, that's a tough question, Councilmember.

I'm going to set aside the pride I have and love for my family and those kind of personal life accomplishments.

and I'll stick to professional accomplishments, becoming the budget director, if that is the will of this committee and ultimately the council, would be the crown jewel and the sort of the culmination of the work that I have done in my professional life for decades now.

It would bring together the strengths that I have from working at Sound Transit for, over a decade working for the city council, working in the mayor's office for two and a half years as policy director, and give me an opportunity to bring together the strengths, the aptitudes, the energy that I have been drawing upon for many years, as you mentioned, in a way that I think will be most beneficial to the city.

It gives me a chance to serve and use my talents in a way that I think supports the elected officials such as yourself who are ultimately making the challenging choices and helping move our city beyond the challenges that we face to achieve the benefits and the services that we all are here to provide to our fellow city residents.

Thank you.

Good answer.

You don't have to put your family aside for purposes of answering that question.

Speaking of generations, that's a classic Gen X answer.

I'll speak all about the professional.

All good, but still a great answer.

Thank you.

Thank you, Council Member Saka and legislative IT.

I see Astrid Galvez is still a presenter.

I think they have already spoken for public comment.

With that, I see Council Member Kettle followed by Council President Nelson.

Council Member Kettle.

Thank you, Chair Strauss.

I should note for clarification, given that I too am a Gen Xer.

I just wanted to add that really quick.

I wanted to thank Mr. Eder for coming today, along with Deputy Mayor Wang.

I appreciate it, as I appreciate the very many, I don't know how many meetings we've had over the last year and a half, but I appreciate them all and the counsel that you've been given during the course of all those meetings on, you know, bigger topics, small and across the board.

As you know, my approach is, you know, looking for the long term, the strategic and, you know, haven't planned for that.

I recognize there's these trade-offs, these challenges that we face.

And I was wondering if you could speak to the idea of like, you know, long-term structural reform, long-term budget kind of approach, like how do we set ourselves up for 2027 and beyond, but at the same time, the challenges of dealing with the day-to-day, the year-to-year, you know, more tactical, more present challenges.

Can you speak to that?

that process and that challenge that we have in terms of really trying to look forward in terms of setting, again, setting ourselves up for success long-term, but the challenge of dealing with those short-term pop-ups and the like.

Can you speak to that dynamic and how you look at it and the like?

to do that.

It's one of the parts over the last year as I've been working as the interim director of CBO, it's one of the parts of the job that I love the most, that tension that you're talking about between, that I know you deal with every day as well, between dealing with the problems as they arise in the moment, and that are sort of the immediate decisions that have to be made day-to-day, week-to-week, month-to-month by every department in the city.

Things like whether we decide to hire staff now in the face of a hiring freeze.

We're looking at We are trying to reserve money this year so that we can lessen the impact of the loss of revenues in the coming budget cycle.

But we are weighing the tradeoffs of the work that each department's proposed staff member will do or not do against the longer-term need to have a balanced budget in the coming cycle.

And there's 1,000 different examples of what departments are looking at day-to-day that need intervention and feedback from the budget office.

And weighing that against the longer-term sustainability of the city's finances.

We're looking at $100, $200-plus million of a problem out of a $1.8 billion general fund total spending annually.

It's a big percentage.

We're talking about a need for some structural strategy.

And as I mentioned before, I don't think there is one answer there.

I think it's a multiplicity of answers where we're going to be reducing our spending and the services that that spending supports.

We're going to be more efficient with the resources that are left.

by folding together departments and workforce efficiencies.

And we're looking at some new revenue proposals that will bring us back into longer-term balance with the rising costs of delivering the services that we will continue to provide.

I hope that answers your question.

I'm happy to answer any follow-up.

Yes, and I appreciate that answer.

It kind of gets to the, you know, it's complex piece.

And I think we can have both things in hand where we have that strategic kind of longer term focus and plan at the same time work the day to day as well.

And on the day to day, that's transition for me that, you know, when I sought this office, you know, I focused on public safety, public health and homelessness and how those three entities interacted.

And we've been working, I've been working the public safety piece quite a bit.

Also now working the public health angles to that and in terms of what we see on our streets today.

And I recognize I.

I can't remember exactly how it was phrased, but in terms of what we're doing now, in terms of dealing with the deficit challenges, is the prioritization on those kinds of programs.

Can you speak to that body of work, that area of interest, the more current piece of public safety, public health, and homelessness in terms of what the administration's looking to do and is doing on that front?

Absolutely.

Those are three of the top priorities of this administration as well, so we're certainly in sync with you on that, Councilmember Kettle.

With respect to public safety, just about half of the general fund is devoted to paying for police, fire, and care, the civilian-assisted response.

So we prioritize, we put our money where our mouth is, About half of our general fund pays for public safety.

We are experiencing an excellent kind of a problem.

It's not really a problem except financially, in that we are attracting a substantial increase in the number of police officers.

And we are simultaneously keeping employed all of our firefighters and hiring care team members.

That is a great thing for the city of Seattle.

It does mean that we have to pay those salaries and benefits to keep people able to live and work in the city.

So we need a sustainable way to continue to make those investments.

to deliver those services to the people of Seattle.

Homelessness is a major problem for the city, and it's one that we have been addressing through the mayor's three and a half years of his administration.

And we've made great strides in providing new responses and new solutions for people who are experiencing homelessness and for the disorder that that causes on the streets and in the parks of the city, and I'm proud of the work we've done on that front.

And with respect to public health, we've made new investments in KCRHA and the King County Seattle Public Health Department, and we have ramped up our efforts with the fire department, with Health One and other programs.

I'm very proud of the work that this administration has done, and we share the emphasis that you've been describing as the top priorities of the city.

Thank you.

And there has been quite a bit.

And I think that is somewhat underappreciated sometimes because we do still have our challenges, but where we were two years ago compared to today, it's relative to how you look at things.

Well, thank you.

And by the way, your answer kind of leads me to, I think my last question is when you brought up King County, on the public safety front, uh pillar six of the strategic framework plan is engaging in a one seattle way which meaning the city needs to be ensuring that the executive and the legislative branches are working together um in a in a one seattle way to use the mayor's term which is really our term now to the county and the state.

And so, for example, yesterday I had a conversation, phone conversation with my counterpart, King County Council, Council Member Jorge Barón.

And I'm curious, particularly in light how you finished that last question, what is the engagement and understanding in terms of what the county's doing and what the state's doing in terms of budget you know in this lane you know and how that informs you um what is the relationship like you know is there you know deep coordination or is there you know can you characterize the the engagement with the county and the state i know there's a focus on the federal but that is kind of on its own, but it's a very different dynamic with the county and the state.

And I was wondering if you could speak to that part.

Sure.

Yeah, just in terms of the budget side, I've worked with Dwight Dively, the head of the budget shop at King County for a couple of decades now, back to many years when he was the city's budget director.

So we have an excellent relationship.

He was among the first calls that I made when I started as interim budget director to make sure that we were in sync and that we had open lines of communication, and we maintain that today.

I can only answer from the budget perspective.

We are talking regularly with our counterparts at King County, and I know that our Office of Intergovernmental Affairs maintains close coordination regionally and specifically with King County government, and our departments are also very much in sync.

The SDOT, for instance, has very, very close ties to King County Transportation, and in particular, King County Metro.

So, yeah, at the department level, at the budget level, at the elected level, the mayor and the county executive are certainly very much coordinated on homelessness response, regional transportation, and a host of other issues.

I don't know if there's anything you wanted to add.

Sure.

I'll add to Council Member Cuttle because I think your question goes to the relationship beyond just the budget context a little bit.

I think what you've identified and certainly the mayor has is a lot of the issues that we see on our streets that we as a city respond to have some nexus to our public health issues and that those are concerns for us as a city.

As a city, as you know, we don't get all of those public health dollars.

Those have traditionally been through the county and through the state.

And so what we've been looking to do is figure out how can we build those relationships because we know that we need to work together to address these problems.

We can't do it in a silo.

We can't say this is just Seattle's problem or just King County's problem or just the state's problem.

And I think this actually struck me a little earlier today as I was reading some of the headlines about the Medicaid impacts on Washington State.

Saw a headline that Washington State will actually see the largest decrease in people receiving Medicaid services in the entire nation under the bill that the United States Senate passed yesterday.

So as we see increased pressures on the health of our populations, that also increases the pressure on us to have good relationships and collaborations to figure out ways that we at the local county and state level can provide for our people.

Well, thank you for that.

Since you raised that point, I do have to say, because for the public, that is massive, that point you just made about Medicaid.

And I have been speaking for quite a while now on the public safety front, because this is where the nexus with public health, public safety, and homelessness comes in big time, is that If these Medicaid cuts go through the way they're designed and quote unquote reform, as they say, which is not really reform, it would have massive impacts on us.

And so this is where we need to be thinking ahead now.

And I've already been talking to different people because we need to ensure that we have a system where those that are on Medicaid and are not able to work, and we all know the circumstances of some of those individuals, that that is covered because if the system which is dependent on Medicaid is cut like that, that is gonna have massive ripple effects.

And so the more that we work together now, and by the way, this is not just with King County and the state, this is with nonprofits.

This is one reason why I've been talking about LEED and some of these other groups on the public safety is kind of, you know, the interface between public safety and public health.

And it's going to be massive.

So since you brought that up, I just really needed to highlight that.

That's going to be so important that we create a process now to, you know, to ameliorate or mitigate that challenge because it's going to be massive.

No other word than massive.

So thank you for that.

And sorry, Chair, for that quick interlude there.

But I just wanted to end.

I really appreciate you working closely with Mr. Dively.

I know him as Professor Dively from a decade ago.

And so I think that's great.

And I think that's really important.

And I really appreciate this kind of collaboration because we need to be partnering and working together with the various levels of government, particularly in the face of what's happening in Washington, D.C. And I just wanted to close, Chair, by saying that I've found Mr. Eater to be a stand-up civil servant who's working for the best of our city, and I respect that and support him in this nomination for confirmation.

Thank you, Chair.

Thank you, Council Member Kettle.

Council President Nelson.

What is a structural deficit and do we have one?

I would describe a structural deficit as something that is long-term in the making and will take some deep changes to address.

I do think we have one, and in the general fund in particular.

One of the major revenues for the general fund is the property tax.

not the property taxes that are levy-type property taxes that voters approve periodically for libraries and transportation and housing.

Those don't go in the general fund.

Those are specialized funds just for the levy proceeds.

The kind of property tax that goes into the general fund is the kind that is acted upon councilmanically for the most part, and it has been capped by state law since 2001 at 1 percent growth plus the value of new construction.

That has not kept up with the rate of cost increases that the general fund pays for.

And as I mentioned earlier in my remarks, about half of the general fund is for salaries for police officers and firefighters and care team members, which have risen by inflation.

So when you have one of the major fund sources in the general fund rising at a lower rate, than the rate of the expenditures that the general fund revenues need to pay for, I would describe that as a structural budget challenge.

And we have been able to buy our way out of that structural problem through some short-term boons.

It was a silver lining that there was federal support during the very, very difficult years of the COVID pandemic.

I don't think it was a good trade.

I would rather not have had the pandemic, but since we had the pandemic and we had an administration that wanted to support municipalities during the pandemic, we got some significant hundreds of millions of dollars of one-time grant resources that helped us continue to pay for the costs of doing business at the city.

We also, in this last year's budget cycle and in several cycles before that, have used one-time uncommitted resources from the payroll expense tax to help shore up the general fund.

But our unexpended fund balance from the PET, the payroll expense tax, has been fully expended or will have been fully expended by the end of 26. That puts us, starting in 2027, in a deficit expectation that I don't have an expectation that we will reduce spending enough to address.

I think we wouldn't like the city that leaves the dearth of services that would result.

I don't think we would all collectively like that.

And so that's why the mayor has proposed, in conjunction with Councilmember Rink, some ideas for how we can have new revenues.

Follow up, if I may.

I ask that, you probably understand why I ask that, we use this phrase structural deficit a lot.

It sounds scarier or worse than just simply deficit.

And it implies that there is something intrinsically wrong that we are always going to, our balance, our revenues and costs will always be out of balance.

And usually, I am not an economist, but my understanding is that usually a structural balance is attributed to something like when you're at full employment and you're still there's still an imbalance on the negative side.

So implying something that one cannot change.

I suppose the tax structure of Washington state because of that 1% limit could, I don't know if that would count as contributing to what is considered structural as in unchangeable by us.

But the point is that This council must make difficult choices, and so does the mayor's office and the budget department, too.

And so you're going to be conscripted with really trying to always make those difficult changes.

And I'm always wanting to make sure that you do look at the pros and cons of the decisions that we'll be seeing coming down the pike.

have you looked at the reasons for, have you dug, how deep have you dug into the reason why PET revenues are down?

Because, you know, you answer the, you posit many reasons for that in your response, but is it because of declining employees here in Seattle, or what is it?

Well, you're referring, I believe, to the news that the city got in mid-April from the Office of Economic and Revenue Forecasts, the independent office that does the forecast for our revenues for upcoming years.

I have spoken to the director of OERF to ask that very question, and the Forecast Council, which I know you sit on, has dived into that question a little bit.

The payroll expense tax has had a deep decline in the 2025 and 2026 expected revenues compared to what we all collectively were counting on in the adopted 2025 budget and the endorsed 2026 budget.

It's over $200 million just in those two years for the general fund and the PET combined.

But most of that, I think $167 million, is from the PET, the payroll expense tax.

My understanding from OERF is that they believe that there are two main contributors to the declining The first is that a lot of the payroll expense tax is paid for by tech companies, big tech companies, who pay their well-compensated employees in large part based on the value of their stock.

And at the time that the April forecast came out, there had just been a several-month period where tech stocks were in significant decline.

So that's one main reason why the payroll expense tax, which is paid as a measure of what businesses are paying their employees.

For tech employees, that's tech stock value driven.

The second main component of the decline in revenues is that we are not growing and in fact are shrinking in those same large tech employees, the number of employees who work in Seattle.

They are flat or decreasing and increasing in other parts of Washington State, such as Bellevue and other cities.

So those two factors combined to have the independent Office of Economic and Revenue Forecasts determined that we were not going to get as much payroll expense tax revenue in 25 and 26 as it was previously expected.

Did you say that the number of employees is going down in Bellevue as well?

No.

Sorry, if I said that, I was a misstatement on my part.

Flat or decreasing in Seattle, increasing outside of Seattle.

Suggesting that those employees are being moved to outside the city to Bellevue.

Yes, that's right.

Okay.

We'll follow up as to your thoughts on why that is later.

Thank you.

Thank you, Council President.

Council Member Sockeye, I see you have a new hand.

Thank you, Mr. Chair.

Just a quick follow up on that earlier line of questioning.

You indicated aptly so that tech stock Volatility, especially in earlier this year, April timing, that was a contributing factor to the bleak forecast.

Since then, many, most of the tech stocks have rebounded.

Microsoft, for example.

$380 per share at the low end in April, now it's almost $500 per share.

That's just one example.

How do you anticipate a potential rebounding effect of stocks, of the stock market locally to impact the next forecast and therefore the budget, the proposed budget.

I wish I had a crystal ball and could answer that more definitively.

That really is a question for the Independent Office of Economic and Revenue Forecasts.

They will ultimately answer that question in August.

We will get another forecast.

That is what will inform the mayor's proposed budget.

And then there will be yet one more forecast that comes in August.

late October that informs the council's deliberations and ultimately adoption of the 2026 budget.

I think it could be good news.

It could be neutral because there are other factors at play.

And ultimately, I know that it also, at least logically, could be bad news, further bad news for the PET and the general fund in the upcoming forecast.

I do not know what the answer will be.

Thank you.

Thank you, Councilmember Saka.

My questions were mostly asked.

I have two follow-ups here.

One that you aren't expecting.

One of the questions which you answered, which was asked in you in writing, what criteria do you and your team use to evaluate program effectiveness and the level of funding that they receive?

Thank you for the question, Chair Strauss.

As I noted in my written answer to that question, I think there are sort of one host of collection of questions that needs to be asked if we are adding a new program.

And there I would focus on, you know, trying to determine if we were to add this new book of business that we're not currently employed in, how will we determine and measure success for that program?

How should we scale the program to get started and leave room for growth if the program is successful?

And how does the change address disparities in the population?

I think those are the kinds of questions you ask for a new program.

Questions which I think we would want to ask ourselves when, as we're currently doing, we're thinking about how do we scale down the business that the city already is employed in.

And here I would want to focus on which members of the community will be most impacted by a reduction.

Can the department maintain the current level of service with fewer staff members?

And is the program that we are currently delivering services on still meeting its original purpose and intent?

or has its priority perhaps changed?

These are the kind of questions and categories of questions depending on which bucket we find ourselves in, adding a new program or looking for ways, as we are currently, to reduce spending and the services that are supported by that spending.

Thank you.

And my final question, and I see Council President has a new hand, Deep in your appointment packet, you note that you worked for Sound Transit between 1997 and 2007. That was, for colleagues that may or may not be familiar, 97 to 2000 was entering into a storm for Sound Transit that ultimately led to a re-identifying a pathway forward that has gotten us to where we are today.

Can you share what did you learn from that experience?

And I don't need you to go into your duties as otherwise assigned, which will be to help us get through this next round of sound transit through the city of Seattle.

What were the lessons learned from that time at sound transit?

Well, thank you for the question.

At Sound Transit, I was, for most of the time, working as a project manager.

I was developing capital projects, transit centers, park and rides, HOV ramps, high occupancy vehicle ramps, and one commuter rail station up in Mukilteo.

It was my first job working in the public sector, and I think the lessons that I learned there were not only that it's really hard to build anything, but also what prepared me for work ultimately here at the city was the work that I did with the elected officials on the board of Sound Transit.

who are all separately elected officials in their mayors and city council members and the like, throughout the region who have been appointed to serve on the board of Sound Transit.

And I began to get an appreciation for the challenging role that it is to be an elected official and also how exciting and interesting it is to work in that realm to support the decision-making that the board does that the city council does, that the mayor does.

And it's an opportunity ultimately to make our region and our city an easier, better place to live.

And I'm proud to be making a contribution in that regard.

Thank you.

Look forward to following up with you more on that.

Council President, I see you have another question.

What was the underspend last year and what is the projected underspend in 2025?

Or, um, if that, if that's impossible to say, what is it right now?

Uh, the underspend last year for 2025 was about 67. Uh, sorry, I beg your pardon.

I misspoke.

2024 was about 20, uh, 67. Let me start again.

In 2024, our underspend was about $67 million.

That money that we didn't spend but was appropriated is net of any amount that we have proposed to carry forward for future spending this year and beyond.

So that money lapsed into our general fund and payroll expense tax fund and is available to help address the deficit that we are facing this year and next.

We are in the process of determining what the underspend will be this year.

We're not waiting, so for 2025, we are not waiting until the end of 2025 sort out what the underspend will be.

That's what we have historically done as a city.

But this is unusual times.

So we have engaged with each department, given them a target, and asked for them to give us strategies and approaches to meet an underspend target this year, affirmatively, not just have it happen to us.

We are looking at tens of millions of dollars, but we haven't determined exactly what the number will be.

Any number that we use that we can arrive at and be confident that we have a strategy for underspending this year's appropriations, our formal spending authority, also becomes a resource to help address the budget deficit in 2026. So I don't have a final number for this year yet, but we will have one, and I'll be able to answer that question by this false budget process.

unlike last year where we had to wait until all of the spending was done by the end of the year to determine what the underspend net of carry forward was.

Thank you.

Thank you.

Colleagues, are there any other questions for Interim Director Eder?

that will last not much longer, seeing as there are no further comments.

Bringing myself back into the script.

Without any final comments before we move forward, I would like to recommend the confirmation of appointment 3189. Dan Eater is director of the city budget office.

Is there a second?

Second.

It has been moved and seconded to recommend confirmation of appointment 3189. Any final comments?

Seeing no final comments, will the clerk please call the roll on the recommendation to confirm appointment 3189.

Councilmember Kettle?

Aye.

Councilmember Sacca?

Aye.

Council President Nelson?

Aye.

Chair Strauss?

Yes.

That is four in favor, zero opposed.

Thank you.

The committee recommendation that the appointment 3189 be confirmed will be sent to the July 8th City Council meeting.

And Director Eder, there is a small chance I won't be at the July 8th City Council meeting, but I will have colleagues speak on my behalf in support of this confirmation.

Well, thank you all very much for your support.

I really appreciate it.

Thank you.

We're going to now move on to our second agenda item.

Will the clerk please read the short title of item two into the record?

Council Bill 121012, an ordinance relating to the financing of the Seattle social housing developer authorizing the director of finance to enter into a loan agreement with the Seattle social housing developer authorizing a loan of funds in an amount of up to $2 million from the general fund as a bridge financing to be repaid from future tax proceeds and ratifying and confirming.

certain prior acts.

This item is for briefing, discussion, and possible vote.

Presenters include Jamie Carnell, Director of the Office of City Finance, Christopher Bias of the Mayor's Office, Roberto Jimenez, CEO of the Seattle Social Housing, and Jennifer Labreck of Council Central Staff.

Thank you.

We'll now have presenters introduce themselves.

I believe that there is, double checking this, yes.

Do you have a presentation for today or just the...

We do not.

We assumed that central staff was taking the lead today.

Nope.

So do you have a presentation from the last time you were here?

Well, we submitted one several weeks ago when we were here last time.

Okay.

I'm going to take just a moment to pull that up.

We're just going to tick through it again.

While I'm pulling that up, if you could go down the line, introduce yourselves, and then we'll get into the meat of this discussion.

Thank you.

Chris DeVias, Mayor's Office.

Roberto Jimenez, CEO of Seattle Social Housing.

Jamie Cornell, City Finance Director.

Hi, Jennifer LeBrec, City Council Central Staff.

Thank you.

We're just pulling up the presentation from the June 18th committee meeting just to refresh folks.

No need to create a new PowerPoint for information that we've already gone over but I'd like to take this moment and we don't have to go through the presentation to the same level of degree.

I know with the last committee meeting we were running short on time so the majority of this will be on for questions, I would say if you wanted to start on slide four, focus on slides four and five for council members and then we'll open it up for council member questions at this time.

And I'll pass it over to you Krista for opening remarks from anyone sitting at the table.

Thanks, Chair.

So as council members may recall, we were here at the last committee going over some of the history of the social housing PDA, talking about the need to provide a bridge loan until the new revenue source comes in, expected in the first quarter of next year, and then to talk specifically about the terms of the loan that we are proposing to provide to the PDA.

So with that, and then we have Obviously, the executive director here again today, who's happy to take any questions you may have for him.

And I know we didn't have a lot of time for that the last time.

But for now, I'd like to just turn it over to Director Carnell, whose office will be the department entering into the actual loan agreement with the PDA.

And she can speak a little bit more specifically about the loan terms that we are proposing.

Thank you.

So as we discussed before when we were here, the proposed legislation really does authorize the director of finance to enter a loan agreement with the PDA.

It's going to allow the PDA to continue operations until the tax reserves come in.

And this loan is really the most efficient and financially responsible way to provide that interim or bridge funding to the PDA so that it's able to carry out its missions.

OK.

So just getting more into the details, this is a loan that's not to exceed the $2 million via disbursements with the PDA.

The accrued rate of return, as we talked about last time, it's about 3.65, which is really the rate that we have on our cash pool.

So we need to make sure that we are maintaining that rate to make us whole once the loan comes in, the payments come back in.

And we will go ahead and deduct those amounts necessary once those taxes start coming in for the first quarter.

We'll take those payments off the top and then we'll continue to intercept, which is not the greatest word, but we'll continue to use the tax proceeds coming in until that loan principal and interest has been fully repaid.

And we expect that to be fully repaid from the 25 tax proceeds and the loan maturity is December 1, 26, which is really to give ample time for those tax proceeds to come in and for that loan to be repaid.

Thank you, Director Carnell.

I'm gonna call on Jennifer Labreck from our city council central staff to provide any context or analysis from the city.

Seattle City Council Central staff.

Thank you, Jennifer.

Thank you.

I do not have much to add here.

I think I mentioned last time that I had done my own separate analysis of the social housing developer sort of cashflow position and concurred that this loan is needed in order for them to essentially meet even existing operational costs.

And certainly if they want to be able to grow the organization to prepare for receiving the additional tax revenue in 2026.

Thank you.

And with that, I'll turn it over to Roberto for short introduction of, I'll prompt you with a couple questions of how are you planning to administer the PDA?

What does success look like for the PDA?

And what are you planning to spend this money on?

What happens if we don't approve this loan today?

Thank you.

As I think most of you know, I was hired last September, so we're coming up on 10 months here of employment, and we've made good progress.

In May, we adopted our first three-year strategic plan, and it was adopted unanimously by the Board of Directors.

We're currently working on the work plan or operating plan to support that over the next three years, and this week, particularly focusing on the three-year budget to support that work.

The work, to some degree, has been quite slow because I'm the only staff person to date, and the resources would be used to hire staffing.

It's just put a lot of pressure on the board to be very engaged.

It's very much a working board, and I want to acknowledge that the recent appointment by Mayor Harrell of Brianna Beale, who was recently appointed treasurer of the board, is a really sound appointment, and he brings a lot of financial skill from his years in finance, particularly at Boeing.

So the major focus over the next six months will be hiring of staffing, finalizing the work plan, the additional work of systems internally, financial systems, management systems.

We will be building out a property management company.

That won't happen immediately, but we still have to think through what those systems will look like and what the needs are.

We have four properties that we are currently reviewing and assessing for feasibility.

They're all substantial properties, and they are all spread across the city.

We hope to have one property under contract by the end of the year, and we're on schedule to do that.

We plan to have two others under contract by the end of 2026. That's a lot of real estate development work.

It's a lot of financial work.

And it's a lot of relationship building with a lot of folks.

We're currently talking with DAFL CIO, who has a very substantial housing trust fund of $7 billion.

They'll lend up to $300 million for any particular property.

But we're also talking with KeyBank and Colliers and other more business-oriented folks, commercial lenders.

I also think we know that we're working on governance and support for the board of directors, so building out stronger recruitment plans, onboarding plans, and ongoing training plans to support that work.

Thank you.

Colleagues, I'll check in with you to see if you have questions.

I've got a few that I always like to let my colleagues go first, as per Robert's rules.

Thank you.

Councilmember Sacco.

Thank you, Mr. Chair.

And can you help me better understand this slide five, specifically that timing bullet?

Am I reading that right?

So we expect, as a city, the...

the principal and interest to be fully repaid by January 2026?

We hope that it's fully repaid within the first quarter based on the tax revenues that are coming in.

In the first quarter of 26?

26, yes.

So the idea here is just to give enough buffer.

We don't know what the tax revenues are going to be like as they come in, but this gives enough buffer for that loan to be fully repaid in 26.

Okay.

Thank you.

Thank you, Council Member Sacco.

Colleagues, other questions?

Council President Nelson.

That raises, when will the tax begin to be collected?

start coming into the inbox here.

Yeah, so it's part of the Q1 is all of our taxes come in the first quarter of 26, so it's part, we will have the ability to start collecting that the first quarter of 26. I think the deadline for all taxes for the first quarter filings is around the end of March, but I can, end of March, I'll follow up with you on that just with final dates.

And my understanding is that that should be all of the revenues that are due for 2025, and then those will come in in early 26. And then after that, revenues will be collected on a quarterly basis.

Is that correct, Director Carnell?

Yes.

So end of year, sorry, apologies.

End of year is always collected the first quarter of the next year.

So we're looking at 25 revenues coming in, starting to be collected in Q1 of 26.

Okay, so am I understanding that this additional payroll expense tax has already started to be paid?

When did that go into effect?

It is going in effect for 25. We are getting the systems ready, but for this it's an annual filing, so it'll be filed.

People can pay it at the first quarter of 26 for 25. So when they go to file, we'll have all the systems in place for them to start paying that the first quarter of 26. It takes a little bit to get it up and running.

I understand.

I also like to know when the people that are paying into the fund, when they experience it.

And it's just good data to know so that we can see what are potential things that happen after that.

So, thank you.

Thank you.

Any further questions, Council President?

No.

Okay.

Other colleagues?

I prompted you with one of the questions but I didn't quite hear the answer so I'll ask you again and I'll add one to it.

What does success look like for the PDA and what do you need to do in the next six months to set the PDA up for success?

I think there are two different areas.

One is more technical, and that is, are we developing housing at a reasonable pace and utilizing the resources toward that end?

And so budget and fiscal responsibility is very much part of that.

Are we hiring the appropriate staff in at the right pace to be able to do the work as we're ramping up?

There's also, I think, anecdotal evidence, and one of those is how are relationships and how is communication with the council, with the mayor, with voters, and with the business community and affordable housing developers.

We haven't always had the most smooth communication and relationships, but we've been working on that, and I believe it's improving, and we want to continue to improve it.

We want to be good partners.

So I guess digging into that, maybe I'll prompt you with what I heard you say in the first opening.

The importance of this loan is to hire staff.

That's correct.

First and foremost.

Because right now you have a working board, which means that you have a board of volunteers who have expertise.

and full-time jobs, most likely.

And so one of the things that you really need right now is to turn that working board into an administrative, you know, into a typical board so that you can have your staff doing that work.

What other things do you need to do in these next six months to set yourself up for success?

Well, I think building off what you just said, It's been a lot of work for board members who have been on the board, and a couple of board members have departed simply because of the volume of work.

But I've recently, in the recruitment process, had a couple of folks say, this is a lot of work, huh?

And board members are like, we can't lie to you, it is a lot of work.

That work needs to transition its time.

That's expected in a startup that has a board of this type.

So we have had some of the expertise, we haven't had all of the expertise, and therefore it's more important to bring staff on.

Are we, again, looking at our staffing structure that we built out and our work plan or operations plan we're building out, are we meeting the metrics?

The point of the work plan or operating plan is to build off of the strategic plan, and that builds in the metrics in the operating plan and puts them to a timeline so we have clear metrics to know whether we're meeting our goals.

Thank you.

And one of the reasons that I find this to be so important is so that you can have your staff doing the work so your board doesn't have to be doing it.

Council President, I see a new hand.

I've said before in this room and also just out and about that it's our responsibility, Council's responsibility at least, I would say the city's, to set you up for success.

You're going to be working with a whole bunch of money and we want to make sure that you are putting it to the best use possible to get people housed and housed in a way that is not burdensome.

I'm in full support of this legislation.

I just want to make sure that you are able to hire the people that have the specific knowledge or the specialties that you need right away from the get-go as soon as this money starts coming in.

And I don't know how to write a job description for that kind of person or those people, but I'm going to have to trust that you do.

Because your board is...

I haven't looked at the bios of the people on the board, but, you know, it all comes down.

That's right.

And additionally, we're about, or we just put a name forward to Jen Labrack on a potential council appointee who is very high caliber.

So that will be very helpful.

But yes, I have 20 years' experience in recruitment and hiring of executive staff and oversight of those staff.

That is probably one of my strongest skills.

I don't think we'll have trouble.

This is a unique, innovative operation that people are hungry for, and there's a lot of talent here in Seattle to recruit from.

I don't foresee a problem, but yes, I think my board members will appreciate having a break and getting back to doing the work that this type of board should be doing, which is governance and oversight and fiduciary responsibility.

Thank you.

Thank you.

Any further questions, Council President?

No.

Council Member Saka, I see you have another hand.

Thank you, Mr. Chair.

Just curious.

So this money will be spent, we learn to help you grow and scale and do more operationally and help eventually transition your working board to a more traditional governance and oversight board.

So what is the specific hiring plan for staff and what kind of functions and roles are you seeking and that will have the most immediate impact as part of your hiring plan?

We've been talking about this a lot because we're working on a three-year operating budget this week.

Since we don't know what the revenue is going to be, we can't fully build it out, but we have the model built, and we can start inputting the staffing.

We'll do that tomorrow.

Executive assistant is the first thing.

There's just a lot of administrative work that is falling on me and the secretary.

project management and real estate development.

We're utilizing consultants right now, and they're very good, but we only can afford a bit of their time.

If we had full-time staff, we'd be able to analyze all four of these potential deals that are in front of us much more quickly and determine which move forward first and which move forward later, and we could build out the three-year development plan from there.

A COO will be needed sooner than later, and that person will lead the building of the infrastructure systems with support from a CFO.

We have CFO caliber talent already, both as a consultant and on the board.

but we need somebody to lead the groundwork in building that out.

And then building a property management company.

We're going to have to hire.

There are two sides to this.

We will eventually be recruiting a senior property management person, as I've done in the past, to work with me and a COO to build out an entire company around that.

There's also a real need for community engagement, and that gets back to the communication and responsiveness to the voters and to everyone in the city.

And we don't have the capacity right now to do nearly enough of that engagement.

That's a kind of high-level picture of it.

Thank you.

Thank you, Council Member Saka.

Colleagues, any further questions on this item?

Seeing no further questions or comments on the bill before us, I'm ready to move this bill.

Seeing no further comments, I move to recommend passage of Council Bill 1206. 1-2-1-0-1-2.

Is there a second?

Second.

Thank you.

It has been moved and seconded to recommend confirmation of passage of the bill.

One last call for final comments.

Seeing no final comments.

I see the council president has briefly stepped out, so trying to stall, stalling, stalling.

Here we go.

Will the clerk please call the roll on council bill 1-2-1-0-1-2.

Council member Kettle.

Aye.

Council member Saka.

Aye.

Council President Nelson?

Aye.

Chair Strauss?

Yes.

That is four in favor, zero opposed, zero abstain.

Thank you.

Council Bill 1-2, the committee recommends passage of Council Bill 1-2-1-0-1-2 and it will be sent to the July 8th City Council meeting.

Any other questions before we continue?

If not, thank you for your time coming to committee today and two weeks ago.

Thank you, council members.

We'll now move on to our third item of business.

As they're coming up, I'll have the clerk read the short title into the record just to provide a little bit of order of operations to this third item.

Again, it's 1115, so we had 30 minutes of public comment.

From 10 o'clock to 1115, we took up two items of business for an hour and 15 minutes.

As I've stated, I'm hoping that I've asked colleagues to stay until 1 p.m.

So from 1115 to 1 p.m., that's an hour and 45 minutes on this topic, this singular topic.

And all presenters can come on up just so we don't have to keep moving around chairs if you want.

The order of operations here will be Central Staff Director Ben Noble will provide an overview of all revenue options before us today.

We'll then move on to Council Member Rink and Mayor Bruce Harrell's team to speak about their bill with a presentation and then we'll have Tom Mikesell and Jennifer Labreck provide central staff analysis on the topic.

I will be treating the mayor's team and council member Rink both as sponsors of the bill in the sense that I will be calling on them for first and last word and to respond to questions of the sponsor.

With that will the clerk please read the short title into the record.

Item number three, proposed business and occupation BNO tax rebalancing.

This item is for briefing and discussion.

Presenters include Greg Wong, deputy mayor, mayor's office, Dan Eder, interim director of the city budget office, Tom Mikesell, Jennifer Labreck and Ben Noble of central council central staff.

Thank you.

And director Noble already on it.

I don't know that we need to do introductions, but maybe just for the record and then we'll dive right on in.

Ben Noble, central staff director.

Tom Mikesell, analyst.

So this ideally brief briefing is designed to provide you some context for the remainder of the discussion, which is going to be about a specific revenue proposal.

I thought it was important to give you a sense of the potential range of significant revenue options.

And I say significant, and I'll explain more about what I mean by that.

But we wanted to give you that broader context before you dove into here's the details about this specific proposal regarding business and occupation taxes.

So that's the intent here.

Whoops.

Let's see if I can do this right.

So I'm going to, again, give you a little bit of background and explain why the group of specific revenue sources that we're going to talk about were selected.

And then I'm going to give you just brief comments on sales tax options, property tax options, capital gains options.

I'm going to say very little about business and occupations, only because you're going to hear a whole bunch about it.

And then I'm going to make a reference to the payroll expense tax, although I don't have a specific slide, and I will explain why when we get there.

So in terms of context and background, I'm about to quote you some deficit numbers, and I want to explain that as I do.

I'm quoting a deficit as the combination of the payroll expense tax and the general fund shortfall.

So what we're looking at is the things that those are paying for now, what it would cost to continue the things that those revenue sources pay for now, and compare that cost to the revenues that we are projecting.

That gives you this notion of a deficit.

So before we had the April revenue forecast downgrade, as I described it here, we were facing a structural deficit of about $90 million in 2027 and beyond.

So what has happened there is we had balanced 25 and 26, but part of that had been done with one-time resources such that we weren't going to be able to sustain that same balancing strategy into 27, and in fact that there was going to be this $90 million problems.

When I say structural, that means it's a problem in 27 and it's essentially the same problem in 28 and in 29 and going forward.

It's one that you need to resolve either by structurally reducing your expenditures or structurally increasing your revenues, the second half of that sentence being the reason for the discussion today.

What's challenging is that the revised revenue projections did two things.

First, and we've talked a fair amount about it, for 25 and 26, they created a $150 million problem, so that the biennial budget that you had approved, which again had used some one-time resources for balancing, was out of balance and is out of balance.

We are to the tune of about $150 million.

That has led the executive to work on some underspend strategies and more.

But looking forward, that revenue downgrade had a bigger impact in the years beyond.

And in fact, the $90 million, 89 per the slide, structural deficit, based on the new forecast, increased north of 230 million.

So again, every year from 27 and beyond, you're facing a $230 million problem, which means you need to increase revenues or reduce expenditures by that amount.

And again, that's the combined general fund and PET.

So the problem that big didn't make a whole lot of sense to spend a lot of time on revenue changes that would just bring you a little bit of money.

I mean, you could try to stack up a million dollars at a time, but you'd literally have to stack up 233 of them to do it on the revenue side.

So discussion day focuses on big moves, and in particular, ones that are $10 million or more.

So again, noting that time is of the essence, sales tax.

So currently, the sales tax rate in the city of Seattle is 10.35%.

Six and a half of that comes from the state.

The remaining 3.85, a variety of local sources, the county, the city, Sound Transit, some others.

We collect from our base sales tax about $350 million.

And this should say 0.1%.

There's a period missing in that number.

So a 0.1% increase is worth about $35 million.

And then just to say it, sales tax are regressive, so not usually an ideal source of revenue, but one that we consistently are granted the authority for by the state.

So is there any sales tax increment available?

The short answer is yes.

So the state authorized, the state legislature this past session authorized a councilmanic, which is a funny word, but means that the council can approve it by itself without approval from the voters.

So you can impose a 0.1% tax for public safety purposes.

Public safety is relatively broadly defined.

The county can do the same, and they are, as we understand, pursuing that specific authority.

There is also on the books and has been a voter approved option for 0.1% for public safety.

That would be in addition.

And then it's not for general government purposes, but there's also 0.15% available under the Transportation Benefit District.

Some of that is available for councilmanically, some that would require voter approval.

So that's, again, there is sale tax capacity in the order of $35 million.

It directly, twice that if you could go to the voters.

Property tax.

We generally think of property tax in terms of, well, A, the base property tax that feeds the general fund, and then also the series of very special, excuse me, specialized levies that we impose.

Let me give you a sense of the overall structure here.

The city can impose a maximum tax rate of $3.60, and again, a typo here, it should say per $1,000 of assessed value.

So your maximum rate that you can impose, excuse me, that the city can impose either through your actions or that of the people, is $3.60.

The part that you impose can only grow at 1% per year, plus the value of new construction.

Given the pace of new construction of late, that's a lot more like 1% than anything else.

And another thing that's important to understand, and it's unusual about the state, is that changes in property values don't inherently change the city's tax revenues.

So as property values increase, other things being equal, what happens is tax rates decline, and we collect 1% more money than we did the year before.

So it's not that change in value that drives the revenue we collect, what changes in value do, and this will be important in a moment here, is that they change the rate.

So as I just described, as property values go up, rates tend to come down.

The problem is that the reverse is also true.

So that if rates, if property values drop, then the rate required to generate the same amount of money increases.

So I'm going to bring it up in just a moment here.

So currently, for 2026, if the families in ad levy as proposed passes, we'll be at just short of $3 per assessed 1,000, which means that there's about 60 cents left under that 360 capacity.

If you do the multiplication, that's worth about $180 million per year.

Again, this would only be accessible through a vote of the people, but you could, and other cities have done this, you could put a measure on the ballot that is a general purpose levy lid lift.

This is what a levy is technically called.

So you could ask the voters to tax themselves essentially up to 60 cents per 1,000 for general government purposes and raise basically 180 million a year.

This is another significant way to raise revenue.

But that business about the rate becomes potentially problematic, because if you were to go all the way to 360, if property values were to start to decline, then you wouldn't be able to collect as much money, and you'd have to make choices about how much of each of the levies to collect versus the general fund.

And that is actually something you decide every year.

When we bring you that pile of legislation in the budget, one of those ordinances is establishing how much revenue we collect for each of the levies.

And we generally collect the maximum amount, the amount that we told the voters we were going to.

But if we got into a pinch, you could technically be collecting less.

It's called proration, and it's something that can happen.

In any case, there is some property tax capacity, some significant capacity, but we should probably not go up to the 360 limit and leave some amount.

Property values drop by as much as 10 percent during the Great Recession, so if you tried to leave something like that, then you're more likely around $100 million of effective capacity if you try to leave yourself some room, maybe a little bit less.

Capital gains, switching to another source.

So again, as context, Washington state imposes a 7% tax on long-term capital gains above 200, it was originally $250,000 exemption that's increased with inflation to 270. And then this past session, they added a surcharge on that.

So there is an existing capital gains tax statewide with a maximum rate of 9.9%.

It appears that the city has the authority to impose such attacks.

We haven't done so.

Don't know if it would garner a legal challenge.

it does appear we have the authority.

And there's no constraints imposed by the state on what the rate could be.

To give you a sense of the revenue, last fall there was a proposal from a council member to impose such a tax at a 2 percent rate, and the revenue estimate at the time was broad, 16 to 51 million.

And it is broad because capital gains vary a good deal year to year based, among other things, on the overall and generalized stock performance.

And as the state discovered here, the particular actions of some particularly wealthy people who are driving the capital gains at a state level.

So that's, at a local level, again, the variability would be a challenge.

I also think you could run into issues about whether, about our ability to enforce this tax on residents, and we could get into that if there was interest.

Business and occupation tax, as I said, I'm not going to actually go through this slide because Tom will cover all of this background in his.

As I mentioned, there is not a slide on the payroll expense tax.

That is a tax that you have complete authority for.

You could raise revenue there by adjusting those rates.

However, given that rates were adjusted just last year and are being adjusted again this year because of the voter-approved measure, it's probably prudent to see how that revenue stream evolves under these new rates before you were to move to increase, but it is a legal possibility, if you will, and that is under councilmanic authority.

And that's my high level survey.

I would note that when I first started this, I started with a slide on income tax and then was reminded that income tax has been precluded at the state level by the legislature.

So that is no longer an option, even though previously court ruling suggested we might have an opportunity for a 1% flat tax, but that is now off the table.

So that slide is not here.

With that, any questions?

Thank you, Director Noble.

Colleagues, questions?

I can say, Director Noble, you and I have had this conversation many times over and over in depth and in detail.

And so I don't have further questions at this time because we talk about it so often, but do wanna just double check for my colleagues any questions at this time.

If we don't have questions on this topic, I am going to bring additional folks up from the mayor's team, Deputy Mayor Wong and still Interim Director Eder.

And we'll move on to the next section of this presentation.

So I will turn it over first to, and I'm gonna have, I think that that computer is movable, so I don't know how we shift and move around that table.

With that, I'm gonna now turn it over to Council Member Rink as the sponsor of the bill, and then I'll turn it over to the mayor's team.

Council Member Rink, the floor is yours.

Thank you, Chair Strauss, and thank you for that presentation, Director Noble.

Colleagues, the legislation coming before you today 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 that our residents depend on, we have the opportunity to lead with values that make Seattle who we are.

The Seattle Shield Initiative represents three core principles that I believe we all share.

Small businesses are the backbone of our 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 under taxes under this proposal.

While we're asking our large corporations to step up, we're providing concrete support where it's needed most.

The second core principle here is workers deserve protection, and as we've seen federal workplace protections disappear, our Office of Labor Standards becomes even more critical, and this initiative ensures that we can continue protecting the rights that make Seattle a place where work pays.

And third, essential services protect all of us.

The 90 million generated annually will maintain programs that keep families housed, fed, and safe, services that strengthen our entire community, not just those who use them directly.

And in developing this proposal, we worked with over 50 partners from small business owners and business chambers, human services providers, labor advocates, and unions.

And my office started crafting this legislation with three simple goals in mind.

shield critical city investments from cuts in a very challenging budget environment that we just discussed, shield small businesses from the impacts of rising costs, and shield our community from the massive cuts in federal funding we all know are coming, possibly as soon as today if Congress passes the president's obscene proposed budget.

And we consulted and refined this to create both a meaningful opportunity for small businesses to offset tax increases coming from Olympia, which I know is a part of this equation as well, but also to focus these investments in a way that balances the harm coming from the federal government.

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

We have a letter of support from the Seattle Human Services Coalition, and just this morning, council received a letter signed on by 27 community and labor organizations in support of this legislation.

And we're continuing to receive emails in support of this from people across the city every day.

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.

Working with Mayor Harrell and his team, including the soon to be permanent City Budget Office Director Dan Eder, we've been able to walk the walk of true collaborative partnership between council and the executive.

And the challenges of this moment require no less.

And I know that same spirit of collaboration exists in this chamber.

So this is our chance to prove that local government can step up when federal leadership steps back.

This is our opportunity to show that Seattle remains a city that invests in each other, that chooses collaboration over division, that builds a future we all deserve.

And I believe that when we give Seattle voters the choice they deserve, they will choose to shield our city and to protect what matters most.

And I look forward to working with each of you as we move this legislation forward.

And with that, I will turn it over to Deputy Mayor Wong.

Thank you.

I'll take that last step for you, passing it over to Deputy Mayor Wong and also answering the question that Council Member Hollingsworth asked during Council briefing this week.

The draft ordinance is attached to this item in Legistar.

So with that, over to you, Deputy Mayor Wong.

Thank you, Council Member Rank.

Thank you, Chair Strauss, for having us here today.

to discuss this important proposal.

I'm here to provide some context.

This proposal is not arising out of thin air.

It's not arising just as a one-off, but it's done very deliberately to try to find a reasonable path forward in a very challenging time.

So first I'd like to zoom out just a little bit to talk about three significant external pressures facing the people who live, work, and do business in Seattle.

And I know Councilmember Saka during the prior part of this hearing, you talked about external pressures with Interim Director Eder.

And these are very real things that have been identified.

First, it's no secret that affordability is just on everybody's mind.

And honestly, I'd say pretty much for 98, 99% of Seattleites, you don't have to just be low income.

to be worried about affordability these days if you go out to eat or to just live here.

Some data that we've seen, and I know you probably every day read articles about this, we're now at the 11th most expensive city to live in, and if you think about that, comparing it to essentially mostly other cities in California and New York, We are in a very high tier for affordability crisis.

Our average rent in June rose to $2,110, which is 30% above the national average.

And our housing index score, which is kind of thinking about both home prices and apartment rents, is 112% above the average.

This is hard on working families.

It's hard on our businesses.

It's hard on our immigrant and refugee communities, on our elders.

It can be tough.

We love this city, but we know it's expensive.

And this is not a new problem.

We've all been addressing affordability issues for quite some time, but it certainly is escalating these days.

That's true also for the second external factor.

Our businesses are feeling this.

Nationally, and you know, this is not just a Seattle issue, 30% of those small businesses couldn't pay rent in November.

And the net margins for restaurants here decreased from 4% to 1.5%.

So our smallest businesses, our ones that are struggling, the ones we heard from earlier today during public testimony talking about how tough that is, they are really facing this challenge as well.

And then while I know we've talked about it some, I'd be remiss to not mention the state and federal challenges and uncertainties we're facing because these are not theoretical anymore.

They are very real.

We just went through a state legislative session where we saw billions of dollars talked about in the state budget to be cut or changed.

those cuts will impact the people of Seattle directly.

Federally, we have been doing all we can to mitigate the Trump administration's aggressive approach to cutting our funding through ways that, quite frankly, we believe are illegal and unconstitutional.

We've stepped up in litigation.

We've been defending them, making sure that our budget and our people are protected against these federal actions.

But as we're seeing now in the current debate in Washington, D.C., this is not a question of if, but when.

The one big, beautiful bill that is being discussed, as referenced earlier, there's a headline just today that it would hit Washington State the hardest in terms of loss of people for their Medicaid and insurance coverage.

We already are seeing over a billion dollars in lost food benefits through the SNAP program.

And we will continue to see that throughout all levels of federal funding.

So while we continue to fight, and we've had great partners both in this council and in the city attorney's office in continuing that fight for the people of Seattle, those pressures are real and they will be felt by us.

Next slide.

To zoom in just a little bit more locally, last year we met with a number of small businesses, the mayor's office did, to do a small business work group, to really understand the factors of what's going on in terms of the pressures.

And they're complicated.

Again, we heard from some of our commenters this morning about the different things that have happened.

But as we all know is true throughout this country, inflation and costs have just gone up across the board.

And it's true for everybody.

And it's definitely true for our small businesses.

This is data that we did basically a poll of our small businesses to actually get into their books to see.

And this is what they saw just in this five year period.

between 2019 and 24, where you see double digit increases and most of them over 20% increases in their core costs.

And they're seeing everything from maintenance costs, we all know construction expensive, insurance costs, their property taxes, their utility bills, we heard earlier wage pressure.

These are all things that are very real pressures that our small businesses have to face every day.

And we've talked some already too about our local city budget snapshot here, right?

We have the federal pressures, the state pressures, these things that, some of which are outside our control, but then we also have our local pressures as well.

Each of you know, because you've been part of the budget process, that it has been challenging.

These have been tough conversations that we've had the past few years.

Because of the pressures that our folks are facing, we're seeing ever-increasing demand for services every year.

Costs continue to go up, inflation goes up, and that doesn't hit just our businesses and our residents, but it hits the city of Seattle itself.

The cost of our doing business goes up at the same rate.

As was alluded to before, we got some not great news this April.

You all did the hard work last year, late last year, to pass a balanced budget.

And I think at that time, we're like, this is great.

We are balanced through 20. 25 and 2026. We did the hard work together.

Unfortunately, in April, that picture drastically changed when the Forecast Council lowered its forecast for 25 and 26 by $250 million in revenue.

As has been discussed, we already face a 2026 budget.

and then a larger projected deficit starting in 2027. We've used those one-time funds, such as the COVID relief funds and one-time fund balances.

We've been creative.

We've been efficient.

We found reductions, all without raising new revenue.

And that's thanks to the hard work and partnership between the executive and the council.

In fact, the past three years we've seen revenue forecasts that we've had to budget against where we've seen declining revenue.

And each year we've proposed through the mayor's office budgets that are not only balanced, but take those programmatic reductions, identify business efficiencies, and unfortunately, We have had to lay off employees as part of that.

We've streamlined functions to provide high-quality services through coordination and efficiencies in teams such as our UCT, DAT, and our new permitting and customer trust team, our PAC team.

We've added flexibility to spending regulations, and again, we've done that all without proposing any new revenue in this space because we've heard loud and clear times are tough for a lot of folks, and we want Seattle to be and to remain a place where businesses feel welcome and it's a desirable place to be.

We've proposed budgets, and you all have approved them, that have done the hard work to date.

was alluded to a little bit earlier we've actually even started that now once we got the april revenue forecast we had to shift gears very quickly we've already asked our departments to start underspending their current year budget which is something that is a new step we've implemented freezes on non-essential hiring trainings travel and we know that we in our proposed budget that we'll be sending out later we already or asking departments to take further cuts on top of the ones that we asked for last year.

All that to say, we have been turning over every stone to try to find solutions to the issues, the fiscal issues we've been facing.

And what we're finding is that there's no one single solution that will solve this gap.

Which brings us to today, and why we're in front of you with this proposal.

With that context in mind, after looking through multiple strategies, we've been talking through, and I appreciated Ben Noble's presentation on the different tax options you have.

Clearly we've been thinking about those too, and weighing pros and cons.

But what we bring to you today is what we think is a reasonable, smart, and responsible approach to some of the challenges we've described today.

So central staff will hit the kind of nuts and bolts of the legislation and be able to go through it.

I just wanted to do a few highlights that talks about, again, meeting some of the needs I just described.

So this proposal really does three key things in our mind.

The first is raising that small business threshold from $100,000, which it has sat at since 2010, to $2 million, so a significant increase in small businesses who will no longer pay city B&O taxes.

Our estimate is that of those current taxpayers, 76% will no longer be subject to paying the B&O tax with that increased threshold.

We also, in concert with that, create a $2 million B&O deduction.

So those businesses who do make more than $2 million in gross receipts will be able to take that deduction.

So this means that there's a good section of middle-sized businesses, let's say you have $3 million in gross receipts, who will actually see lower taxes under this.

If you combine those businesses who no longer will pay taxes with those who will pay lower taxes, that equals 90% of current city-bano taxpayers will be better off paying less taxes or no taxes under this proposal.

And if you combine those with those who already are exempt under the $100,000 threshold, that is 95% of all businesses in Seattle who will be better off under this proposal.

The third piece I'd talk about is this also generates the revenue.

As has been identified, budgeting is policy decisions.

There's tough decisions we have to make.

How do we provide the services?

How do we provide the city that is vibrant and good for all of our residents, for our workers, for our visitors, and do so given these fiscal constraints?

And so we want to raise $90 million to this proposal for critical human services and programs.

And most importantly, we think it's the voters who ultimately will want to have a say on this.

And it's why that with the BNO tax threshold, it's one that you send to the people to vote on this November.

So let me give you a couple of snapshots, because I work better with illustrations than Excel spreadsheets.

And so here's what this would look like for hypothetical businesses in Seattle.

And so we put forward some gross receipts that a business would have in a year.

So those who are at $100,000, business A, they're already exempt under the B&O tax, so they don't see any change.

They don't see an increase.

but they already are not paying anything.

Business B, going up to $2 million in gross receipts, are going to save over $6,000 annually, $6,500.

And while that may seem like a small margin, what we've heard from all businesses is that makes a big difference.

It adds up to when your margins are so thin, it makes that difference.

And whether you can stay open, whether you can provide the neighborhood community benefits, as our small businesses do, and pay their workers.

Business C, getting up to a $5 million gross receipts business, they will see lower taxes under this proposal.

They would save about $1,300 annually.

And when we're getting to $5 million gross receipt businesses, we're getting into the upper tiers here.

Once you get up, and I think Council Member Rink referenced it, the kind of tipping point is around $5.7 million, above $5.7 million.

That is where you'd see increase in taxes.

So in our hypothetical business, the $12 million gross receipts would see $10,000 more annually in city B&O taxes against those $12 million.

Next slide.

So what will the money go to?

Certainly one of us is this is a small business relief proposal, first and foremost.

That is where a significant piece of this revenue is.

It's because we need to have a healthy business ecosystem here.

a healthy business environment, and we want businesses to be able to say, this is a better place to be.

And so when we can provide tax relief for 90% of our businesses, we think that sends a strong message for our communities.

It also will support general fund investments.

We already have talked about the pressures in food access, gender-based violence, small business supports, the emergency shelter, homelessness prevention, and then the workers' rights and protections.

And the third bucket is really getting to mitigating what we think are the inevitable reductions we're going to see from the federal government.

While we know that this up to $30 million may not dollar for dollar match what we see in reductions from the federal government, and in fact, I would wager it will not come close to covering that, we have to do something, in our opinion, to be able to protect our people, particularly those who are most vulnerable, who are going to hit be hit the hardest.

And so these investments would be in our housing stability, food insecurity, financial stability for affordable housing, and emergency shelter and homelessness.

Again, if you can pick up the common theme among what is being supported, it is how do we make sure that our small businesses and our individuals who are most at risk these days are able to stabilize their ability to live, and work in Seattle and continue to be members of our community.

I saw a New York Times headline just this morning.

You could open up the paper, whether it's the Seattle Times or New York Times every day, and see some of the news that's coming out that just simply said for the Senate bill that just passed last night that the poorest Americans are dealt the biggest blow under the Senate Republican tax package.

And so those are the vulnerable in our community and those are the folks that we wanna look out for here.

So finally, just a piece on timing, and central staff will talk about this a little bit more, but we do see this as being responsive to the needs of the day.

This is not implement a tax just for the sake of taxation.

Again, we've done the hard work to find the different ways we can reduce spending.

We will continue to do so.

That will be forthcoming in our budget proposal as we continue to examine that.

But this is trying to be responsive to this moment in time, but that is particularly challenging and complex for us.

And so it was very important to us that we put in a sunset after four years.

So if the voters approve this, the tax and the revenue supports will go away after four years with one option for council to renew it after four years for one more four year period.

After that, it would need to go to the voters again.

So trying to create that reasonable balance in supporting our communities while understanding the potential impacts this proposal may have.

So with that, I will answer any questions you may have for the executive.

Thank you, Deputy Mayor.

I'll just now check in one more time with Council Member Rink to see if you've got any further comments at this time.

With that, I'm going to pass it over to Jennifer and Tom for the central staff presentation, and then we'll open it up for questions across the panel.

Thank you.

Hello again.

I'm just going to load up the presentation.

So bear with me, please.

OK.

Shall we begin, Chair?

Yes, please.

Take it away.

And introductions, if you could, for the record.

Good morning, members of the committee.

Tom Mikesell with your central staff.

Jennifer LeBrec, central staff.

So this morning, we're going to continue the topic's discussion about the Council Member Rink's business and occupation tax rebalancing proposal in concert with the mayor.

So I'm going to cover, we're going to cover a general outline to kind of first give some background on the existing business and occupation tax that we have, give an overview of the proposal before you today.

then dig into some of the details of that proposal, talk about the use of proceeds, and then close out with some staff considerations for the committee to take away from this discussion.

And some of these themes are gonna be, of course, familiar, because they were covered by Deputy Mayor Wong's presentation, but they are in a bit more detail.

So first, our city currently has a business and occupation tax, which is a tax on gross revenues earned by businesses in Seattle.

And so I underlined gross here because it's different than, say, the corporate income tax that exists at the federal level, where business operating expenses can be deducted and the taxes instead levied on a...

I apologize, it's not on screen.

So the B&O tax is on the total revenue, not the net profit.

So that's an important distinction between the city's business and occupation tax and, say, the federal income tax.

The rates that are charged because it is based on gross revenue are actually small in nominal terms.

So as you can see here, there are two different rates depending on the type of business activity.

There is a 0.222% rate for retail sales and services, wholesaling and manufacturing and extracting.

So again, that is a little less than one quarter of 1%.

in terms of a rate.

If you kind of gross it up in terms of revenue, it's 22 cents for every $100 of revenue.

For services, transport rate for hire and other, like all other activities not covered in the lower rate, it's 0.427%, so just shy of half a percent, which grosses up to 43 cents per $100 of revenue.

There is an exemption for small businesses.

So any business with gross income that's lower than $100,000 in a year needs to file a return.

So they will transmit a tax return, but they will indicate no tax is due because they will be exempt.

And then finally, for this slide.

The rates currently are at the statutory maximum by state law, which is, I'll cover a little bit later, 0.2%.

Seattle's rates are actually higher because those rates were in existence prior to that change, so they were grandfathered in.

However, a voted increase, which is part of this proposal, is authorized by RCW 3521711. So I'm going to now touch briefly on the composition of the tax base in 2024, prior to the proposed changes in this bill.

So in 2024, there were a total of about 42,000 tax filers.

And so these are businesses that are submitting a tax return.

But as you can see in the pie chart, For anybody with a gross revenue of lower than $100,000, they're exempt.

And that's about 21,000 taxpayers.

Anybody above pays tax.

Again, that's about half, about another 21,000 taxpayers.

B&O tax in 2024 generated about $353 million, and the April forecast forecasted $369 million in 2025 and $385 million in 2026. And this is a significant revenue source for the general fund, bringing in about 20% of annual revenue.

And I would note there was a state bill that was passed in the last legislative session, which classifies some technology services as retail.

So that has an impact on the B&O tax as well for the city.

And those impacts are included in the estimates that were used to generate the rates in this proposal.

And so this is a high-level overview of the proposal.

So what it does is it increases that exemption threshold from $100,000 to $2 million.

It creates a new $2 million standard deduction.

So for non-exempt businesses, they would be able to deduct the first $2 million of revenue from the basis of their tax.

It would increase the B&O tax rates to a level to offset the prior two changes.

and then generate additional revenue, which will cover about $90 million.

And then all of that is contingent on voter approval.

It would submit a question to the actually November 4, 2025 ballot.

So that's a typo on the slide.

That would include all of these changes.

And the changes would be effective January 1, 2026. And then finally, there is a sunset date included.

It is actually included as part of the question asked to voters, which would essentially sunset all the provisions, the rate change, the deduction, the exemption, all of the changes as proposed on January 1st, 2030, unless council votes approves an ordinance to extend it for an additional, one additional four year period.

So now I'm gonna dig into some of the details and It looks like this slide did not carry through, so apologies for that.

But this table on the right is to show you the number of taxpayers in each individual category.

And then on the column, the farthest to the right show how many of the total tax filers that represents.

And so, for example, with the new exemption, In looking at the construction category, 2,457 additional businesses would be exempt from the tax, which represents 74% of taxpayers.

So 26% would still be eligible to pay the tax.

So this is looking at increasing the exemption threshold from $100,000 to $2 million.

And at the bottom of this table, which didn't format properly on this slide, that shows the total of the 16,000 taxpayers, which represent 75% of the total tax filers in 2024. So that would drop the number of businesses owing tax to approximately 5,000.

And then the Forecast Office and establishing the rates for this proposal indicated that the impact of that higher exemption threshold would be $28.4 million.

The new $2 million standard deduction, again, relying on the forecast office analysis, would exempt $10.8 billion of revenue from the tax base for those 5,000 remaining taxpayers.

The forecast office estimates the impact is about $33 million for that piece.

There is actually an additional change to the business license fee, which is based on taxable revenue.

Because the exemption and send a deduction impact would impact the taxable revenue, an adjustment needs to be made to not have an unintended consequence for the business license fee by way of lost revenue through that change.

The final piece at the bottom is the actual rate changes in the ordinance, showing the two different large sectors of business type, the current rates, the proposed rate, and then the change, so the actual change in the rate, and then a column to show how much that rate change equates to per each million dollars of revenue earned.

So for the lower 2.22% rate, each additional million dollars of revenue would incur a $1,200 additional tax.

Similarly, for services and other, the rate change would incur an additional $2,300 of tax per million dollars of revenue.

And the total rate change would then generate $150 million revenue in 2026 based on forecast office estimates with stated caveats and risks that I'll cover a bit later.

So this shows, because Seattle is obviously operating in a regional context, this shows the different rates charged by regional peers and Seattle, both in terms of our current tax rates and the proposal.

And so as you can see, Seattle does currently charge the highest rates in the region on the two business types that are assessed rates, with the next largest being the city of Tacoma.

I would point out that Redmond and Kirkland do not impose a business and occupations tax.

They oppose a different type of business tax closer to a head tax.

So they're not included in this chart.

And just to close, the light shaded red portion of the bars would show the increased rates for Seattle's tax.

This chart then shows the kind of builds a bit on the proposal on the presentation that you were shown in Deputy Mayor Wong's presentation showing individual taxpayer impacts for different example business types.

And this is a point where I'll pause and say a lot of the information that we present is kind of in generic terms, and that is by design.

Business taxpayer information received and administered by the City of Seattle is very confidential, and we, in fact, do not have direct access into that information and are similarly not able to provide it.

So instead, we can provide kind of example numbers of size of business to give a sense of how this tax impacts different levels of income.

So with that said, this is looking at the impacts of the change to the retail, wholesale, and manufacturing rate, showing the taxes that would be due with the current structure and then what the taxes would be due after the restructure.

And as has been mentioned, you can see on this chart that about the $55.7 million of revenue level is where you, is the inflection point between whether there is a lower tax bill or a higher tax bill as a result of this proposal.

So essentially, taxpayers below $5.7 million of revenue would owe a lower tax or no tax, and taxpayers above that level would pay a higher tax.

And again, I'm unclear if there are any taxpayers of the half-a-billion-dollar revenue at the lowest row of this chart, but for that half-a-billion-dollar in annual revenue taxpayer, the difference in the tax due would be just shy of, or a little bit over half a million dollars.

And so this chart shows the similar comparisons for the The higher rate, the 0.427% rate, and again, models that the inflection point is about $5.7 million, whether the tax bill is lower or higher.

And looking at the bottom, the simulated half a billion dollar taxpayer, the impact would be approximately $1.1 million a year.

So this fairly simple slide is important because it recaps how these pieces of the rebalance hang together.

So as I covered, the cost of increasing the exemption threshold from $100,000 to $2 million is about $28 million, as estimated by the Forecast Office.

The cost of the new $2 million standard deduction is $33 million.

So those two changes have reduced the size of the tax base and then The proposal includes higher tax rates for those taxpayers remaining in the tax base, which generates $151 million.

The net result of those changes is the $90 million of general fund revenue in the last point.

And now I will turn over to my colleague, Jen.

Yeah, thank you.

All right, so I will spend a few moments talking about the net revenue and the use of that net revenue in this ordinance.

Again, the net revenue is what's left after accounting for the cost of the higher exemption threshold and the $2 million standard deduction.

Under the ordinance, the net revenue must fund investments in the following program areas, food access, gender-based violence supports, homelessness prevention, emergency shelter, and support for workers' rights and protections, and small business supports.

Just for some overall context, there is roughly about 145 million in general fund and about 10 million of PET currently supporting those program areas in the 2026 endorsed budget.

Next slide, Tom.

So out of that 90 million, the ordinance says as well that up to $30 million in proceeds may be used for two purposes.

And I think you can think of sort of that first slide as being 60 million available for backfill or to support sort of existing investments that the city is making.

And then up to 30 million of the 90 being available to support one of two things, or I should say to support two things.

One is the implementation costs related to implementing this restructuring of the B&O tax and also costs related to the ongoing administration of the tax.

City finance staff estimate that the initial cost to implement this program is about 2.3 million and that's just needed changes to the IT system that is the IT system that the city has to administer the tax and then approximately $1.5 million in ongoing costs, including personnel.

I'll also note that there is a potential that implementing this change to the B&O tax system could cause the city to have to make some additional changes or improvements to the IT system that administers the tax, and so that could result in an additional $2.7 million administrative cost.

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

So again, this is to help mitigate the impact of federal funding reductions in these areas.

Just a couple examples of, and these really are just meant to be illustrative examples, of places where this kind of funding could be used.

You know, there are indications.

I haven't had a chance to look at the bill that the Senate just approved, but looking at the continuing resolution, which the House passed a couple months ago, you know, there is a risk that continuum of care funding, which supports over 28 permanent supportive housing and transitional projects in Seattle, that funding, continuum of care funding could be reduced or eligibility criteria could be changed such that those 28 projects would no longer be eligible to receive that COC funding.

And that's to the tune of about 21 million.

So that's a potential federal impact.

That's sort of one on the horizon that hasn't occurred yet.

An example of one that has occurred is that HUD had funded during COVID something called emergency housing vouchers, EHVs, for households experiencing homelessness.

It was essentially a rental voucher for those households.

Funding was in, HUD had committed to providing funding through 2030, but earlier this year, they said that funding, they would essentially be ending funding in 2026. And there are currently about 500 households that have EHVs through the Seattle Housing Authority that are at risk of losing that voucher next year.

Next slide.

So use of these proceeds, I think for lack of a better phrase, will be more of an art than a science.

So the legislation says that funds shall be used for this purpose, but how exactly that plays out will depend on a number of factors, including what updated revenue forecasts look like this summer as well.

Part of the ordinance really requires the executive to consult with city council around their proposed use of funding.

At least three months prior to the mayor transmitting the budget to city council, the executive is required to consult with council on the impact of actual and anticipated revenue reductions.

and federal funding cuts in the identified program areas.

So the program areas that we just discussed in those two prior slides.

And also requires the executive to inform council how the new revenue generated by this ordinance is to be utilized.

And then when the mayor does transmit his budget, a written and proposed plan is required outlining how the new revenue generated by this ordinance is to be utilized in the identified program areas.

And I'll turn it back to Tom.

Thank you, Jen.

So now I'll just cover in the next few slides a few policy considerations for the committee to consider with this proposal.

As I previously mentioned, this proposal would really decrease the size of the taxpaying base for the B&O tax.

It would decrease from 21,000 to 5,000 taxpayers.

So what that does is adds volatility, so you have fewer taxpayers in the mix, so the decisions of any one of those individuals becomes more important in terms of the total.

Similar to some of the kind of risk characteristics that we have seen in the payroll expense tax, though that's even focused on an even smaller base.

But with regards to the payroll expense tax, this is one of the recently adopted and modified city taxes, as you can see here, paid from the same tax base.

There was a payroll expense tax was adopted in 2020. It was increased with new revenues to generate monies for student mental health in 2023. Then the social housing tax ballot proposition approved in 2024, added a new tax, which we have not yet seen the first full year of collections from in 2024. So all that to say that the tax base that's paying the B&O tax is also paying the payroll expense tax, and there have been a series of successive changes, which could generate an adverse business response for businesses operating in Seattle who are paying both taxes.

And that's made more acute by the final observation, which is about a third of this tax increase would be imposed on the 65 individual taxpayers that paid the bulk of or about 87 percent of the total PET in 2024. So there's a focused impact that we want to note, and that was noted by the forecast office in their assessment of this proposal.

Next, also coming from the forecast office, there is always a present forecast risk with not just this estimate, but with any estimate of revenues.

As we will harken back to the assessments during the April forecast presentation and these risks continue, that there was about a 40 to 50 percent risk of a national recession over the next 12 months due to changes at the federal level and, you know, still recovering from the COVID pandemic.

So again, that could impact this estimate.

It could also impact other city revenues as well.

And then in the memo that's attached to the summary fiscal note, which I suggest the committee might review, The impacts for the state law changes that I noted earlier from Senate Bill 5814 is based on imperfect sourcing information.

So the forecast office is making an assessment of how that reassessment of the tax base is impacting B&O taxes, which then feeds into the estimate they're providing.

Again, it's really just a matter of all revenue forecasts are a guess, well-educated guess.

But in this particular case, the information is imperfect for making that guess.

And so now turning from kind of the revenue side, looking at more the implementation side, There are two key implementation risks that I would highlight.

One is SLIM.

And I should know what SLIM stands for.

But I will tell you, it is the city's license and tax administration system.

It's a legacy system.

It's been around for quite some time and has a series of modifications to keep up with tax changes.

Office of City Finance has indicated that to meet the January 1st timeline, so they would have to have all these changes in place.

They would need to begin that work now to meet that timeline and incur those costs prior to actually having a vote on this proposal of the voters in November.

So that kind of implementation would need to start now if council sends this proposal to the voters.

And there are risks with doing that implementation.

Some of them, or many of them, are just commonplace with any type of a system change.

Key personnel who have insights into how systems work need to be available to make those changes.

And then there are interactions between city systems and between the larger file local database, which is kind of maintained at a regional level for cities that have a similar B&O tax.

So all of that integration and implementation would need to be closely coordinated amongst within city and external partners.

However, the executive does intend to position resources to meet those risks.

But if there's a change in scope in the proposal, that would require a reassessment of the risks.

And then the next risk is just, it's kind of somewhat perhaps an obvious one, but this, because of the sequencing of this, if approved by council to go on to the vote, the executive would then be able to submit a budget that depends on this revenue and balances with it.

If the measure were to fail in November, then council would be in a position to need to swiftly figure out how to resolve that difference.

So basically this would result in 90% estimated $90 million of revenue that had been assumed in the balanced budget that would no longer be there.

And if the October revenue forecast is, in fact, comes in lower during the council's deliberative process in the budget, that would make that pressure even more focused and acute.

And that is the end of my presentation.

Available for questions.

Thank you, Tom.

Thank you, Jennifer, for your presentation.

We've had about 62 minutes of presentation on a pretty dense topic.

Council Member Sockets, my understanding you need to leave in about 10 minutes.

Is that correct?

Yes.

And so I'm going to turn it over to Councilmember Saka for questions first, and then that means Council President and Councilmember Kettle, if either of you leave, we lose quorum.

So I'm going to need you to, if you need to use the restroom, now's the time to go.

Councilmember Saka.

Thank you, Mr. Chair, and thank you, everyone, for the presentation today.

I've been consistent since I've been in office that we always...

need to rely on a balanced approach to insert your thorny societal problem that we need to address.

Here, the budget deficit crisis, some of the federal uncertainty.

And so with respect to the budget, Balance approach, as I've always maintained, includes a mixture of streamlining functions, consolidating various programs and services, aligning investments to current city priorities, not legacy priorities of yesteryear, reductions in spending, and yes, new revenue options.

mixture, a balanced approach.

And so that's why I want to thank Mayor Harrell and Council Member Rink for putting this framework together.

I think before it goes to voters, we need to fine tune some of the details because details matter.

And but It is, in my view, a solid initial framework, and I ultimately trust voters to make the best decision.

But again, I think we'll need to fine-tune a few things.

I am a little confused, or, yeah.

$6.5 million in initial operational implementation costs, $2.3 million in initial costs to administer the tax, $1.5 million of ongoing costs, $2.7 million of additional ongoing potential costs, totaling $6.5 million.

That's roughly 14% of this tax potentially going to overhead alone.

Now, mind you, whenever launching a new investment program service in the private sector offering widget, there's always gonna be a non-trivial amount of overhead and burden associated with that, including financially.

But 14% of the 90 million is a lot for for this proposal.

So, and I understand that, you know, I think a lot of this was put together thoughtfully, but also under a very tight timeline.

And so, over time, I would like to see the mayor's office work with FAS and the appropriate departments to get that number down to more palpable number.

I'll just say that.

But like I said, I think it's a good initial framework and that needs some additional fine tuning before voters decide.

So that is no questions.

But if anyone wants to respond to that, that's fine.

Thank you, Councilmember Saka.

I do see some hands on the committee table.

I'm going to first start with Jennifer Labreck and then pass it to Interim Director Eder.

we may say something similar here.

So just, I just wanna be clear that the ongoing cost related, administrative costs are 1.5 million related to personnel.

There will certainly be 2.3 million in one time cost related to system changes and potentially another 2.7 million in one time cost to allow for an accelerated system replacement.

So out of that total, what about 6.3 million?

Three, five million is one-time cost, not ongoing cost.

Director Eder.

We are certainly hopeful that we won't need to spend all of the noted potential administrative costs, especially if we don't need to do anything dramatic because the system holds up.

We won't have to incur that last, I don't remember what the number is, million and a half dollars or so of costs.

The base is $90 million, so if it does cost $6 million, I calculate that as substantially less than 14%.

We can compare notes afterwards.

Somehow I'm doing a different division than you are.

But I would also note that we're talking about bringing in enough revenue for net $90 million to address the several categories of spending.

But there is an additional approximately $60 million of revenue that needs to come in in order to address the threshold change and the deduction.

So the gross amount of revenue which the staff and the systems have to account for is more like $150 million, 60 of which is a shift among the remaining taxpayers.

90 million is the net new revenue available to fund the general fund deficit, administrative costs, and some backfill of any federal pullback of grant supports.

Thank you.

Councilmember Sokka, anything further on this?

No?

Thank you.

Council Member Kettle, I see you have a hand.

You're still on mute.

There you are.

Yes, thank you.

Thank you, Chair Strauss.

I appreciate it.

I also wanted to thank Deputy Mayor Wong and interim director for now, Eder, along with our central staff director Noble and Ms. LeBrecq and Mr. Mike.

So I really appreciate the presentations.

I will have to say that I've not seen the actual legislation yet.

I have had some verbal briefings but i've not seen the actual legislation i just wanted to you know make some observations um from my perspective on this and related to the bno tax legislation i i don't think we can be looking at this legislation in isolation i think we should be you know mindful of what the state's been recently doing with the bno tax and also you know with the other tax and revenue options revenue options, the actions that have been taken by the state, but also what's been happening here locally.

And that was included in the presentation, so thank you for that.

Also, I believe any action on the B&O tax should be part of a broader tax strategy.

It cannot be like a one-off.

We tend to do one-offs.

with the original payroll expense and then the mental health add-on piece and then we have the social housing piece and you can count other levies too.

We have this kind of incrementalism and sometimes we really need to embed it in a overall strategy and structural tax reform strategy as well.

And I would argue that this is good governance And ultimately, I know we're talking, we're in 25, we're talking 26, but in a lot of ways, we really need to be setting ourselves up for success in 2027.

You went on mute, Council Member Kettle on accident there.

We heard you say we need to be setting ourselves up for 2025 and 2026 and then the mute button.

No, you know, so we're working 2025 and, you know, obviously we're working towards 2026. Sorry about that.

Um, and, but we really need to be setting ourselves up for success for the 27 biennium, you know, and this kind of goes to, it kind of goes to the questions that we had earlier, you know, having a more strategic long-term piece, you know, and in, in that respect, and it kind of was alluded to in the, um, in the briefings more practically is that we have to understand how this interacts with the payroll expense tax.

And one piece here too, And I am not a fan of the allocations, you know, these buckets that we keep having, you know, we have our responsibility.

The mayor has his responsibilities to the city.

And, you know, as director Eater was saying, there's a lot of smart people working these things and these buckets that kind of situations change, but buckets don't necessarily change.

And so, or these allocations don't necessarily change.

And then we find ourselves in a situation where, you know, we have to go back and change those allocations.

I, for one, am not a fan of the allocations that we tend to be budding on all these pieces of legislation.

I wanted to add to, and I'm gonna make a plug right now that we need a Seattle housing investment plan.

I've been talking about this.

This is something that's come up last year's budget.

The bottom line is OH, Office of Housing really needs to go through the same process SDOT does, goes through and went through in terms of building out our Seattle transportation plan.

And why is this important?

It's because we need to really have a revenue lay down, lay all these pieces out in terms of the housing to gain understanding along with what are we doing with the various housing options.

It could be affordable housing, could now be social housing.

and all the like, and then have a plan that shows the strategy and how we're going to be doing these housing pieces and make sure that's done right.

And, you know, the way SDOT does with the sale transportation plan, it's all out there now.

And I recognize pieces are here and there, but we need the same thing for housing.

We need a Seattle housing plan or Seattle housing investment plan.

So that's there.

And I bring this up because then is part of the strategy we can look at because there's multiple pieces to the housing revenue pieces and we cannot be doing this in isolation again from the bno from payroll expense tax and the like and so you know as a good governance you know we talk about audits and everything else the seattle housing investment plan putting oh h to the same process s doc goes to would be good governance and you know helping in terms of developing these tax strategies that we're looking at.

So I think that's an important piece that we need to be talking about.

This is not just about BNO.

And so in addition, Now we have, as mentioned previously in different fora, you know, the 0.1 public safety sales tax piece, you know, that's there.

And not really spoken to a lot is the levies piece, you know.

This kind of goes to the ship, you know, the housing piece, you know, the housing levy, the social housing levy and the various pieces, but it goes to other areas as well.

And so as alluded to in the briefings, and again, thank you for the presentations, is understanding the second and third order effects that what we're trying to do, making sure it's in sync with a broader kind of strategy, tax strategy, is gonna do us good, you know, and this is good governance at the bottom line.

And, you know, and I also say good governance is also like, what can we do to enhance and build up the traditional revenue streams?

And this is where I think the council and the city's done some good work.

Cause, you know, some of the, you know, we have sales tax, BNO, we have REIT and all the like, we've done the commercial, the residential, we've done design review holiday.

So we're trying to promote these traditional revenue pieces.

We need to be, you know, supporting them and, you know, the, you know, the import-export piece, because it's so huge in terms of our budget revenue, you know, how can we support them?

And then finally, as part of the strategy too, and it's been alluded to here and there, we really need to be engaging, you know, in that one Seattle way.

This is a question I had for Mr. Yeter with the county and the state.

The county is responsible for public health.

The state is responsible for mental health.

And as someone and as we as a group have been dealing with our public safety challenges, we know the intersections with public health, but we also know that as a state, mental health spending is previously has been dismal.

And even with the upticks of spending on mental health over the last better part of a decade, we're still not even the top 50% of the states in our country.

We're like 32nd out of 50 states.

We should be top 10, top 20 at least, at least in the top half, but we're not.

So this is a piece where when you talk about those buckets, if the responsibility falls with the county and the state, we should be engaging on those pieces and ensuring that those pieces are there.

and highlighting that and doing it in a good one Seattle way.

So, Mr. Chair, I just wanted to note these pieces.

Again, I've not seen the legislation.

I do need, I recognize the point that we do need to take action.

We do need to, because of, you know, nevermind what's happening in the federal level, we were going to have these challenges, you know, in the first place.

And unless the federal was to come in positively, that's not going to happen, obviously, you know, with the, current administration so yes we we need to be doing this and so my call is okay let's look at the bno tax legislation let's see what's the possibilities make sure the t's are crossed and i's are dotted but importantly not look at it again as a one-off that's that's kind of like our tradition is one-off now this really needs to be part of the overall strategy in terms of you know tax strategy, broader tax rights, but structural tax reform strategy to settle ourselves up for success in the long run.

I know that was a bit of a long point, but I think it's important to make, and I really appreciate all those involved in this process as we look to address our deficit and basically our fiscal challenges that we face.

So thank you, Chair.

Thank you, Council Member Kettle.

I will second your comments regarding getting our Seattle housing plan in ship shape.

I think it's important that we do that to make sure that we are investing in housing in strategic and correct ways.

I see Council Member Hollingsworth has her hand up.

I will note she has been with the committee since 1145. And Council Member Hollingsworth, before you joined, I noted that the draft ordinance is attached to the Legistar clerk file today.

So I'll just go ahead and share my screen to show where that is at this time.

Okay.

And so colleagues, you can see we move from all of the meetings of this week within the Finance Native Community and Tribal Governments, we have the council bill, the informational item before us, and the draft ordinance attached here.

Chair Strauss, may I add something quickly?

Please.

I just want to note for council members that we sent out an update, or Tom sent out an updated version of the ordinance yesterday afternoon, and we will replace what's, or add the updated version of the ordinance to Legistar after today's meeting.

thank you with that council member Hollingsworth I will be calling on you next and then I saw council president's hand but great okay council member Hollingsworth thank you thank you chair and I know I don't sit on the committee but I appreciate you always inviting other council members to join and I also apologize that my camera has been wonky so I'm just gonna use the audio today I just wanted to thank you Mayor Harrell and then council member Rank for bringing this legislation forward.

I think it's a great start.

And, you know, the framework is there.

One of the things I wanted to elevate, and it's not necessarily a question, and I've talked to the executive about this and other council members and brought this our um grocery stores especially those in dense urban centers like seattle are struggling more than what i think people realize and they operate on razor thin margins between one to three percent and they're really facing growing pressures um to shrinkage theft supply chain issues and rising costs and security and i know um they might appear profitable from the outside due to their gross revenue, but the net income tells like a completely different story.

And I just want to elevate not all big businesses are the same.

I think grocery stores are very different than your traditional other businesses that could be potentially in the city that are bigger.

Some of the people that we've really relied on for a lot of the tax revenue from head tax and other sources.

And we've seen in our city a lot of pharmacies shut down from Rite Aid to Bartels.

The list goes on.

And grocery stores, particularly Safeway, they have those pharmacies still in their store to service people.

And so we talk a lot about food access deserts, but we also have pharmacy deserts that are all across our city right now.

And when the merger was going to happen between Safeway and Kroger, they listed 60 stores that were going to shut down And a lot of them were in the Seattle area and now they have, or we're going to be sold.

And now Kroger has come out and said, Hey, we want to sell some stores or we want to close some stores.

And I am very nervous about the two QFCs that are on Broadway.

And so when, and so basically, you know, and I know there's some legal challenges when you're talking about a carve out and there's, you know, all these things, but I just want us, to when we're thinking about taxes and increasement that we are treating grocery stores very differently than other different types of businesses because they are lifelines to our community.

for food access, particularly.

I know we have buckets for food access.

That is through our programs, whether it's Fresh Bucks or food banks, meal providers.

There's a slew of food programs that we have for our city.

But our grocery stores are places where people have SNAP.

They do SNAP benefits, where they do different types of Fresh Bucks or they have different types of programs that those grocery stores do.

Food banks also get a ton of resources from those grocery stores.

A lot of the food that is not sold gets replenished back into our food bank system and our meal program system.

Those donations are done.

So I just want to elevate grocery stores right now when we're thinking about taxes, because those businesses are very different than your traditional big businesses that we're talking about in Seattle.

Thank you, Chair.

Thank you, Councilmember Hollingsworth.

always focused on food because that's how we keep our kids out of trouble is how we keep our kids safe.

And if our kids are staying out of trouble and our kids are safe, then everyone's safe with that council president.

I see you've got your, uh, council member rank.

Did you have something that you'd like to respond to right there?

Yeah, I did.

If I may just chime in on this point, and I want to express my appreciation to Chair Hollingsworth for elevating these points.

None of us want grocery stores to close.

We want to maintain our food access and understanding, you know, as we were engaging on this proposal, trying to understand all the parameters here, understanding that grocery stores is one of the points that has been raised in this discussion.

We have found in some of our engagement with folks working in the food realm that we are seeing actually a number of our food banks and food recovery from grocery stores actually going down, which has been a concerning trend that we've heard from our food access folks that we want to try and find balance again in this proposal to keep steady streams of resources going in.

But we've also come to understand that particularly with Kroger and Albertsons, their net revenue seemed still seem to be very high in terms of profitability, but rather they continue to be profitable, but have found that they are cross-subsidizing with some of their other streams of business.

And so I know there's a larger picture going on here with that particular industry, and that's just specific for some of our largest grocers.

But I thought as we're going about this discussion in terms of grocery stores in particular, it's important to elevate some of the the new information we're coming to find out about the sector, and we'll continue to engage as it comes to smaller grocers as well.

I think what we've put forward here offers a good opportunity as well in terms of the federal backfill component, to find ways to scale up our FreshBooks program.

Again, we see time and time again that that program is a great local reinvestment tool, getting dollars back to our local grocers.

And so I wanted to offer that and invite further discussion about the element of grocery stores in this proposal while offering those facts.

So thank you, Chair.

Thank you.

Council President.

Thanks.

Well, first...

Who proposed this?

Is this your proposal or the mayor's?

That would help me figure out to whom I should direct this question.

So as I stated at the beginning of the meeting, we're treating both the mayor's team and Councilmember Rink as co-sponsors, co-proposers of this.

And so if you have questions for the sponsor, I will delegate to either or both.

Okay.

What small business outreach has been conducted so far and with whom?

So I can take that first.

Our Office of Economic Development has been sending out information about the impacts of this to their small business networks.

They're the most in touch with this community of small businesses.

We've reached out to individual small businesses as well.

I know the council member had some as well.

We had a number of them at the press conference announcing this.

who are able to speak about the impact of this on their community.

And we look forward to really educating folks more as well.

As I mentioned, we think this is greatly beneficial to the vast majority of small businesses, if not all of them.

And so we welcome those conversations.

And Councilman, I don't know if you wanted to add anything on that.

Yeah, certainly.

As this is a joint proposal, the mayor's office as well as our office has been engaging with small business stakeholders, whether they be individual businesses from restaurants and coffee shops or even video game arcades, but also some of our small business chambers.

So looking at like West Seattle Chamber, I know we've had some conversations with GSBA, Soto BIA, Georgetown, Beacon Hill Business Alliance, as well as touching base with U District Partnership, all of varying opinions and understanding that each of those chambers has a range of members from large and small, but want to voice that we've had touch points in our office with some of those business alliances as well as individual businesses.

Council President.

Because it's being called the Small Business Relief Fund, I don't know how you presented it, but I do want to, because now, I feel like I'm in the position of needing to do outreach as well to find out what people think.

That's our job is to talk to our constituents.

So I would love to have a list of the folks that you've already spoken with so I don't have to repeat that.

I do note that GSBA, which is used to be, it's now usually referred to as just GSBA, used to be known as the Greater Seattle Business Center.

association.

Um, anyway, they represent, um, LGBTQ plus businesses and, uh, they are not supportive really.

It says GSBA supports the idea of giving a B and O tax breaks to Seattle's smallest businesses.

And then it goes on to say, we should do this already.

And then it says, however, the tax increase on medium-sized businesses will further contribute to our city's stagnating economy.

Two million in gross revenue might sound like a lot of money, but factoring in the extremely high costs of doing business in Seattle, many of these businesses struggle to stay afloat.

So I am, is there any comment on that?

I'll take Deputy Mayor Wong and then Council Member Ring.

Sure.

My understanding is that the, and there was outreach to GSBA on this beforehand, your first question, is that they may have a more nuanced view on that.

I believe there's a quote in the paper, but we've had ongoing conversations with them, and again, we'll welcome those conversations.

You know, the proposal will lower taxes on 90% of businesses who pay them now.

And that feels like a good business proposal, a good business environment.

And again, we always welcome the conversations so people understand what it is.

And any materials you need as you go forth and do your constituent engagement, please let us know.

And we're happy to provide those materials to you so that you can also have those conversations.

Small business community, as I think Council Member said, is diverse, or business community is diverse overall in terms of what they do and their perspectives on things.

But when we look at 90% of businesses benefiting from this, on balance, we think that's a healthy proposal.

Thank you.

Council Member Rink, and then we'll come back to you, Council President.

Certainly, and just building on that point, thank you, Deputy Mayor Wong.

You know, this proposal was iterated upon as we started some of the early engagement, at least on part of my office, and the addition of this standard deduction of $2 million was an attempt to try and address some of the medium-sized business concerns, so I want to be clear about that point.

And I know the last conversation we had with GSBA before going public, they expressed appreciation for moving the proposal and being responsive to some of those points that they had raised, particularly about those that made businesses that had that $2,000,001 in gross revenue.

And so I wanna name that point that we've tried to take feedback into account when developing the proposal that we've landed on, but we're gonna continue our engagement.

to make sure we get there and certainly welcome those conversations.

Thank you.

Council President?

Yeah, I just wanted to, what I was going to say to the executive and to Council Member Rank is that one would think that, yeah, eliminating or exempting a business from B&O would naturally be greeted with enthusiasm and therefore result in support of the proposal.

However, a lot of small businesses do rely on medium and large businesses for their business, et cetera.

So that is why it's important to me to know what kind of feedback you've gotten because there are a lot of different small businesses and also depending on the sector and their classification, their profit margins are all wildly different.

And that's really what ends up really making the difference about the success of a business, being able to survive in this business economy right now.

Is there any provision to perhaps exempt the other city taxes that will be charged?

So, for example, PET, if a business is, was that ever considered?

Or could there be an...

Sorry.

Hang tight.

So is this a question to central staff or to the sponsors?

Whoever thought of the proposal.

So I'll pass it to Deputy Mayor and then to Council Member Rankin.

Tom, if you've got additional information from there, go for it.

So I think there's two pieces to respond on that.

First is that when we were developing this, we were looking at different proposals.

And I know over the years, you're familiar, there's been discussion of are there changes in PET that should happen, expansions or different categorizations.

And we took this as the most reasonable approach for what the outcomes were that we wanted was this proposal that's before us.

There was not a tradeoff on what that PET would look like.

I think that maybe gets to Council Member Kettle's kind of desire to have kind of this larger conversation about how does our tax structures, how do they all play together in this cumulative impact?

And one of the things that's, it's not in this legislation, but that the mayor is committed to is commissioning an independent business environment study, which as we talked about before, there's a lot of factors that go into what makes a business thrive or not thrive.

Taxes are one small part of that conversation, but they are a part of it.

And we want to know, is Seattle a good place to do business or not?

What are the challenges?

Because once we can get that independent data, then it can help inform the policy decisions that you all will be able to act on.

So we will be doing that.

I also think about how we approach business in a much broader sense than just taxes.

I think it's been very clear the mayor has been Uh, very, very supportive of our business community, uh, and specifically helping our downtown businesses thrive, but throughout the city, um, you know, and what we hear from businesses the most, and this gets a little bit to the, uh, question on grocery stores, which I share the concerns, CM Hollingsworth is, is that the number one thing we're asked is actually not around taxes.

It's around public safety.

when we see shrinkage from stores through losses, when we see, you know, people who may be acting out or criminal and there not being enough enforcement mechanisms And that's where we've really engaged with them.

And, you know, I know you all have seen some of the doubling down we've done on public safety in terms of police recruitment.

Thank you for your confirmation of Chief Barnes the other day.

He's going to be a significant change factor.

You know, we received over 4,000 applications to SPD last year.

When we came into office the year before, 2021, that number was at 2,500.

So by increasing things like public safety, our investments in economic development, storefront repair, all of these things that we do, we look at how we support small businesses holistically, and we are committed to continuing to do those things while working through also this tough revenue and taxation question.

Councilman Reed.

Yeah, I'll just speak from the perspective of my office on this matter, and I don't think it should be a surprise to anybody of this body about my support for progressive revenue.

After all, in my first council meeting up here when we were discussing our state legislative agenda, I brought forward an amendment to add urging the state legislature to look at progressive revenue options first when considering tax policy down in the state legislative session.

And I want to go back to a really great point raised by Councilmember Kettle just about larger tax strategy for, frankly, our state.

As we heard from the report from Director Noble, we have limited options here on the local level in terms of being able to raise new revenue, and our tax tools have their limitations.

And so consider this also an invitation to be working together as we think about what we approach Olympia with for this incoming year.

It's clear a number of local governments are facing structural budget deficits and challenges, and so just wanted to voice again, when we were considering tax proposals before us, we were looking at being able to bring in new revenue and to be able to address these budget challenges and make sure that we're safeguarding these services.

And we landed on B&O as one of the options to meet this moment.

Council President.

Those are my questions for now.

I appreciate you responding.

I'll follow up to find out just so that I can narrow down my inquiry.

I just And you do mention public safety.

It's funny, one of the directors of one of our business associations basically said, well, are we going to get more public safety as a result of paying a higher tax?

So I think that that was in jest.

The work is cut out for, I think, me and my colleagues to really try to now get feedback from the people that will be impacted.

So I would like to think that it really is seen as positive from the majority of small businesses because, of course, they need the most help.

And so I hope to come to that conclusion myself independently as well after talking to folks.

Thank you.

Thank you, Council President.

I will just say that I think that this proposal provides a lot of benefit from my perspective for many businesses in the city of Seattle and does a good job of shoring up the potential revenue loss that we'll be seeing for a number of different agencies addressing some of our budget shortfalls here.

One thing that I wanna note is that for a lot of the programming that I see in the spend plan, they're already having federal funds cut.

And to be frank, they could be on the chopping block for the city of Seattle as well.

And so it's not just a singular cut, but it's a double cut.

at a time when some of our most vulnerable communities really need our support.

And ultimately, it's not our decision.

It would be the decision of the Seattle voters.

And I think that that's a really critical element to this proposal.

With that, I will provide Deputy Mayor Wong and then Council Member Rink with the last.

Sorry, not checking Zoom there for you.

Council Member Kettle.

Sorry, I didn't mean to give my remarks before I called on you.

There you are.

Thank you for making yourself known.

Thank you, Chair Strauss.

I didn't want to have you make last remarks twice.

So thank you for letting me jump in really quick.

I just wanted to thank Deputy Mayor Wong, your point that you raise in terms of the broader strategy piece is really important.

So the way you phrased it is going to the points that I made in my comments.

So I appreciate that.

And this is an opportunity to kind of have a refreshed look at these other pieces you know, not just B&O and see how they interact.

And then how can we ensure that everything is good to go?

You know, maybe there's a tweak or something.

I don't know.

But I appreciate the points you made.

And in addition, the outreach and that environment point that you had made too, that's a little bit longer term, but that goes to the same kind of thinking.

And I think that's really important.

And thank you.

And also thank you for bringing up public safety.

As it turned out, as I was getting towards the end, I knew I was going a little long.

I skipped over a bullet that I'd written to myself.

And that was, you know, key to this and good governance and the more broader piece, you know, instead of finance and budget and that is the public safety piece and the point that we have to create a safe and inviting environment for our businesses so then they can pay, you know, sales tax, REIT, all the above.

And we have made progress on that front.

but there's still much more work to be done because as everyone knows, because everyone gets the same outreach that we do in terms of the challenges that we still face, that there's still more work to be done.

But at the same time, we're definitely moving forward in terms of creating a more safe and inviting environment.

Now, the challenge is making sure that it is far and wide and across all elements of our city.

So I just want to jump back on that to follow up with what Deputy Mayor Wong said.

and um and to council member rank yes we need to work with the county and state um on all those pieces so um i think we have opportunities there all right sorry uh chair now over to you for your last

Thank you, Council Member Kettle.

You gave me the opportunity to check the last bullet on my speaking points that I had also skipped over as I was getting ready to pass the mic.

Just to say that it's now what I will be doing in these next few days is reviewing this legislation in detail to understand what changes may or may not need to be made because it is important that we get the details right so that we minimize unintended consequences.

and unintended externalities.

So with that, I will be passing the mic back to deputy mayor Wong and then council member rank for final word.

Thank you chair and council members.

I appreciate all of your questions and points.

They're all very well taken.

These are, I think a very difficult, um, problems we're trying to solve.

And I think we do so better when we have these discussions and do it together.

And so I appreciate that.

I look forward to following up with you as necessary and working with you and ultimately hope for your support in sending this to the people to decide this November.

Thank you.

Thank you, Deputy Mayor.

Council Member Rank.

Thank you, Chair.

I want to thank you all for your time and your engagement on this legislation and just want to also welcome opportunities for us to be working together on this and hopefully have the opportunity to send this to voters.

I want to touch on three quick points before we close out today, the first of which being...

Council President, if you leave right now, we lose quorum.

Thank you.

Just a few more minutes, if you would.

One o'clock?

Hopefully before then, but yes.

I promise not to speak for more than five minutes, Council President.

Just three quick points on this.

I want to make sure we elevate and really emphasize that the timing of this, should it go through, is intended to be a bit strategic.

This would kick in before the state B&O increases kick in, and so I think the timing of this is really important to take into account.

Secondly, just wanted to touch on, I know in my other capacity on this body, I serve as the chair of our Select Committee on Federal Administration and Policy Change.

And Jen helpfully walked us through some of the most concerning cuts coming our way that we're aware of that could be coming our way related to continuum of care funding that could go away.

This, between the city and county share, this houses 4,500 households.

using this funding.

Many of those include PSH.

And so that paired with, I know in the federal committee, we've also unearthed that much of some of our core service providers such as DESC, a solid chunk of their budget comes from Medicaid billing reimbursement.

which presents a challenge to our system should Medicaid cuts go through and what that means for providers that care for our most vulnerable.

I don't think any of us are interested or want to see a permanent supportive housing unit or building need to shut its doors and turn folks out to the streets.

And paired with that, the emergency housing vouchers challenge with about 500 households, those vouchers being administered through Seattle Housing Authority presents another challenge as well.

Those are just a couple that I want to elevate to just contextualize and also really center the humanity of the kind of cuts that we're talking about and the real impacts that it would lead to our city.

And with that, I'd also close by saying small business engagement will continue.

I know, and I wanna thank the mayor's office for preparing some helpful materials explaining what this B&O tax change would look like.

really walking through and having some helpful tables about, you know, what you currently pay, what it would look like under this proposal based on the kind of business you are, and happy to share those materials as folks are going through their engagement with small businesses in their districts and around the city.

And with that, I want to thank you again for your time on this today and invite your engagement in the next couple of weeks as we hopefully get this through.

Thank you.

Thank you, Council Member Rink.

With that, if there are no further questions or comments, this item will come back before the committee, whether it's this committee or the Select Budget Committee.

And seeing as we have no further questions, thank you for sticking with me until 1 p.m.

This does conclude the Wednesday, July 2nd, 2025 Finance Native Communities and Tribal Governments Committee.

Is there any further business to come before the committee before we adjourn?

Hearing none, we are adjourned.

Thank you.