Economic Development, Technology & City Light Committee 7/13/22

Present.

Council Member Herbold.

Here.

Council President Juarez.

Here.

Council Member Sawant.

Present.

Council Member Nelson.

Present.

Four present.

Five present.

Greetings, everyone.

There are two items on today's agenda.

The first is a presentation and discussion of Council Member Peterson's draft legislation regarding caps on delivery service fees.

And Council Member Peterson will be joining us to discuss his legislation, which is also sponsored by Council Member Strauss.

He cannot stay for the whole discussion, however.

The second item is our second discussion and possible vote on Seattle City Lights 2023 to 2028 strategic plan and rate path.

If there's no objection, the agenda will be adopted.

Seeing no objection, the agenda is adopted.

We'll now move into public comment on items listed on the agenda.

Let's roll them.

Hello, Seattle.

We are the Emerald City, the City of Flowers and the City of Goodwill, built on indigenous land, the traditional territory of the Coast Salish peoples.

The Seattle City Council welcomes remote public comment and is eager to hear from residents of our city.

If you would like to be a speaker and provide a verbal public comment, you may register two hours prior to the meeting via the Seattle City Council website.

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As a speaker, you should begin by stating your name and the item that you are addressing.

A chime will sound when 10 seconds are left in your allotted time as a gentle reminder to wrap up your public comments.

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Once speakers have completed providing public comment, please disconnect from the public comment line and join us by following the meeting via Seattle Channel Broadcast or through the listening line option listed on the agenda.

The council reserves the right to eliminate public comment if the system is being abused or if the process impedes the council's ability to conduct its business on behalf of residents of the city.

Any offensive language that is disruptive to these proceedings or that is not focused on an appropriate topic as specified in Council rules may lead to the speaker being muted by the presiding officer.

Our hope is to provide an opportunity for productive discussions that will assist our orderly consideration of issues before the Council.

The public comment period is now open.

and we will begin with the first speaker on the list.

Please remember to press star six after you hear the prompt of, you have been unmuted.

Thank you, Seattle.

All right, we will start with our remote speakers and everyone will have two minutes to speak.

Please state your name.

Hello, Seattle.

Please state your name and the item to which you're speaking.

Let's see, we'll begin with Steve Hooper followed by Anna Powell.

Steve?

Press star six.

Do we have him?

One moment, please.

I'm here.

Sorry, Councilmember, there was a little bit of a technical difficulty there.

Chair Nelson, thank you for having me today.

My name is Steve Hooper.

I'm the president of the Seattle Restaurant Alliance and share the same title at Ethan's Stole Restaurants as part of my day job.

I wanted to speak to the third-party delivery legislation that Councilmember Peterson and Strauss are presenting today.

As I think many on the council know, this was a critical lifeline for nearly every restaurant group across our great city through the bulk of the pandemic when restaurants were fully shut down.

However, it was not just about the pandemic and the delivery-only window.

There is a complete pricing power disparity when it comes to these third-party delivery services, which existed before the pandemic, but the pandemic only allowed us to actually see in very real terms.

The result of this new kind of business model of customers demanding delivery has been that restaurants have had to kind of change how they operate.

And the fact that there are only a handful of players in the delivery market means they can charge 30% or greater in many cases for a fundamental service that all should be able to access.

The second part of the equation is one of equity.

I know this Council is completely committed to an equitable and just economic recovery.

One of the things that the large 3rd party delivery platforms are able to do is price differentiate based on the size of the business.

Restaurant groups like mine enjoy a very very steep discounts on those delivery services whereas the average immigrant owned small mom-and-pop restaurant is paying many multiples of what a restaurant group like ours would need to pay for the exact same service.

That's just fundamentally unfair and really just taking advantage of the situation.

So I encourage the council to support Council Member Peterson and Strauss's legislation, and I appreciate everyone's time today.

Thank you very much.

Thank you very much.

Our next speaker is Anna Powell.

Hi Chair Nelson and members of the committee.

My name is Anna Powell and I am the Government Relations Manager for DoorDash in the Northwest.

DoorDash knows that price controls lead to higher costs for customers, fewer orders for local restaurants, and fewer earnings opportunities for our dashers.

That's why we're eager to work with the City Council to find a better solution that won't hurt consumers and workers.

While we recognize that the pandemic is not over restaurants continue to reopen and restrictions on businesses have lifted.

Seattle restaurants have options when it comes to serving their customers including through our new tiered pricing system.

In April 2021 DoorDash debuted new pricing plans that give small and medium sized restaurants the ability to choose the level of service they want which includes a 15 percent commission rate and the flexibility to change their plan whenever they want.

DoorDash does not support permanent price controls and we know it is imperative to get the details of this legislation right as to not hurt the very restaurants you're trying to protect.

We look forward to working with you to find a solution that works for everyone.

Thank you.

Thank you very much.

The last speaker that we have on our list is Destiny Sund, and if anybody else out there would like to speak, you can sign up using the link on the agenda.

Destiny, welcome.

Star six.

Okay, well, we'll come back to you after our in-person comment if you'd like to speak.

One more chance right now, though.

Please press star six.

All right, hang tight.

We'll get back to you.

Okay, our first and only in-person commenter is Alex Zimmerman.

Please begin.

OK.

Where is my two minute?

Oh, so sorry.

Let's make sure his mic is on and then start the timer.

Sieg Heil, my dirty damn Nazi fascist, my bandit and psychopath.

My name Alex Zimmerman and please show my face, stupid face, but this is my face.

Okay.

I want to speak about Seattle Light.

Before damn Nazi revolt, you know what it's been.

I come to Seattle Light commissioner every time for a couple of years and give my opinion, professional opinion about business about money only, nothing political.

They never listen to me, never, never, and don't have sense.

Because manager, for example, have approximately $400,000 salary.

So for $400,000 salary, we supposed to be hire somebody who's smart, not stupid or crook.

Yeah.

Same happen here, for example.

People who cover the Seattle light sometimes have a PhD.

So they supposed to be smart.

No, nothing happen.

It's exactly what has happened here for many year.

And I come to this place 3,000 times.

Guys, when you pay $400,000, approximately $400,000 for manager, or you have a PhD, you must be not so very stupid.

And exactly in business, you know what I mean?

Because I don't understand, and I'm a professional, you know what I mean?

Consultant.

I don't understand who this freaking idiot who steal money from us and acting like a psychopath and crook is stealing money from us.

So Seattle lies steal money from us.

We're talking about this for many years.

Nothing changed.

And consul here who have a PhD, nothing changed this too.

So what is going on?

We're falling in Seattle and falling and falling.

Right now we're totally in bankruptcy, totally in deep hole right now.

You cannot stop on this because you are crook by definition.

Thank you very much.

Council Member Nelson, Destiny Sun has joined the line again.

Okay, go ahead Destiny, you've got two minutes.

Hi, this is Destiny Fund, and I'm speaking on behalf of the Food Delivery Services, capping the fee to 15%.

And my apologies, I do have my infant in the car, and she has chosen this time to complain.

I am pulled over, however.

So my business is The Confectional.

It's a small bakery in Pike Place Market.

I was closed the majority of the roughest part of the pandemic.

And food delivery services taking 30% is not an option for me.

So if it goes back to 30%, I won't be able to use them.

I'm currently in debt, like many businesses are, over $150,000.

And it's, my profits on one cheesecake are not 30%, so it's not sustainable for me to use a food delivery service.

If they go back, I've tried to negotiate with them in the past, and they just won't negotiate with me.

And it's my understanding that they will with larger businesses, chains, that sort of thing.

It just seems to me that a small business with one location should have the option of at least, you know, being able to negotiate.

And I would like to use the food delivery platforms.

So I just, I am for keeping the 15% cap.

Okay, I'll save everybody.

Sorry.

Thank you.

Thank you for your time.

Thank you, Destiny.

Okay, our public comment period is now closed.

Will the clerk please read item one into the record.

Agenda item number one, an ordinance relating to regulations of food delivery platforms, establishing requirements for food delivery platforms providing delivery services to restaurants and amending chapter 7.30 of the Seattle Municipal Code for briefing and discussion.

All right, I'll just tee this off briefly.

There are over 4,000 active business licenses for restaurants and other businesses in the food industry, which was one of the hardest hit when the pandemic began, and many came to rely on delivery services to stay afloat.

So I was not on the council when the 15% cap was imposed, but it's now my job to support small business recovery.

So I am hosting this item in this committee and I will turn it over to Council Member Peterson.

And let's see, Karina Bull is also on central staff and she will be presenting as well.

All right, Council Member Peterson, take it away.

Thank you, Chair Nelson.

Thank you for making time during your Economic Development Committee to discuss this draft bill, which I believe is consistent with your steadfast support of Seattle's small businesses.

I appreciate your hearing this bill today as a draft on your agenda and making room to vote on the bill at your next committee meeting on July 27, because we are racing to beat the clock to get this adopted so that Seattle restaurants do not fall off a financial cliff.

and to support Seattle's diverse restaurants and co-sponsoring this small business legislation with Councilmember Strauss to make permanent the 15% cap on fees that third-party delivery companies can charge.

This legislation would add flexibility by enabling a restaurant to opt out of the 15% cap if it wants to receive additional services from the delivery companies.

A sensible 15% cap on fees was originally adopted as part of the mayor's civil emergency order in 2020 and has been helping many local restaurants survive the pandemic.

Before the pandemic, out-of-town delivery corporations were charging Seattle restaurants delivery fees as high as 30% on each food order.

Because the pandemic-related civil emergency is likely to end soon, Our diverse local restaurants face a financial cliff unless we take immediate action.

Let's adopt this legislation as soon as we can so Seattle's diverse local restaurants can not only survive, but also thrive in every neighborhood.

Thank you.

Thank you, Council Member Peterson.

And Karina, you're up.

Thank you, Chair Nelson.

I am Karina Bull.

I am with City Council Central staff and I am going to put up a PowerPoint presentation.

All right, can everyone see that?

All right, so this morning I am going to provide some background on food delivery services in Seattle and also provide a summary of proposed legislation that is co-sponsored by Councilmember Peterson and Councilmember Strauss that would permanently cap delivery service fees.

The policy objective of the legislation would be to require food delivery platforms to engage in agreed upon reasonable and transparent business transactions when operating in Seattle to protect the interest of consumers and restaurants.

And the way to achieve that goal would be to amend existing regulations on food delivery platforms, and that is SMC 7.30.

As a reminder, right now food delivery platforms are required to enter into an agreement with restaurants before the food delivery platform offers pickup and delivery services.

Background on food delivery services is that consumer demand for food delivery services is steadily growing.

As a public commenter noted that growing demand started pre-pandemic, but it did sharply accelerate during the pandemic.

Food delivery platforms charge up to 30% or more for their delivery services.

Although many restaurants are interested in providing delivery to their consumers and to their customers, if they are not able to provide those services in-house because they don't have labor capacity, then food delivery platforms help to bridge that gap so that they can provide that service.

Restaurants do have narrow profit margins of 10% or lower, with full service restaurants having even more narrow profit margins of around 3% to 5%.

So if food delivery platforms are charging up to 30% or more, restaurants have narrow profit margins.

You can do the math and understand that high fees can equal drastically reduced profits.

As restaurants are increasingly relying on food delivery and customers expect this kind of service, it can add to struggles to stay in business for restaurants.

And also, as noted in public comment, there are about three major companies who are operating in the country for providing food delivery services.

And because of this marketplace dominance, restaurants do have limited bargaining power to negotiate different fees.

As I mentioned, the use of delivery services did sharply accelerate during the pandemic.

And noting the impact of these high delivery fees on companies, the mayor issued a civil emergency order in April of 2020 that capped all fees for platform delivery services at 15%.

A number of months thereafter, the Washington governor issued a proclamation for across the state to have a 15% on just delivery fees cap and then an 18% cap on all platform fees.

Across the country, there were numerous cities that were in states that had these emergency orders capping delivery service fees.

In June of last year, the governor rescinded the state proclamation in anticipation of easing restrictions on in-house dining that happened later that month.

Presently, the mayor's civil emergency order is still in place, but it will expire upon the impending termination of the civil emergency.

Trends in recent developments is, as I said earlier, just some statistics on how food delivery platform services have grown from pre-pandemic through now, and similar growth is expected through 2026. Food delivery platforms are becoming a standard business operation with 77% of restaurants, this is national data, offering services through these platforms and business resulting from these platforms facilitating delivery is 21 to 30% of current restaurant sales.

Recognizing the need to address these problems, four cities have enacted laws that permanently cap delivery service fees, Minneapolis, New York City, Philadelphia, and San Francisco.

I understand that Portland is also considering a permanent cap on delivery service fees.

This legislation would permanently cap delivery service fees.

It is similar to the emergency order, but does have some unique provisions.

The first is that it would clarify that there must be an agreement between a food delivery platform and a restaurant for any fees related to delivery services.

There is mutual consent, there are no surprises.

Next, food delivery platforms would be required to provide delivery services for no more than 15% of the purchase price of each order.

What is different about this permanent cap is that there would be an option for restaurants to opt out of the fee limitations and pay higher fees for additional services.

There would be conditions for that opt out to pass legal muster.

Food delivery platforms would need to offer a service package option that includes delivery services for no more than 50%.

So there would always be an options for restaurants to pay no more than 15% for delivery.

Food delivery platforms would need to provide this option without penalty to the restaurant within 30 days of the restaurant's written request for it.

And then restaurants would only be allowed to charge higher fees for services in addition to delivery services.

Which brings us to the question of what are delivery services?

The legislation provides a definition that delivery services at a minimum would need to include listing the restaurant and making the restaurant discoverable on the food deliveries platform.

And delivery services would not, and also, I'm sorry, facilitate or perform the delivery of food and beverage orders And delivery services would not include other services provided by food delivery platforms, such as advertising services, search engine optimization, business consulting, or credit card processing.

Quick note that the language on the slide does not exactly track the legislation.

So the legislation does say that the restaurant would need to be listed and discoverable on the food deliveries platform.

It doesn't specify all modalities.

Enforcement would be the same enforcement protocol as exists for the existing regulations.

The food delivery platforms, the Consumer Protection Division would enforce it.

That division is in Finance and Administrative Services.

It would be a civil infraction with a maximum penalty of $250 to the food delivery platform.

Each day a violation would be a separate violation.

Restaurants could also have a private right of action.

So there could be an individual or class action lawsuit.

And then any penalty that is collected and retained by the city would be put into an account in the general fund that would support outreach and education to restaurants on the regulations so that restaurants would be aware of the requirements.

The effective date of this legislation would be on the later of the mayor's termination of the civil emergency.

or 30 days after the mayor approves the legislation.

The idea is that the current regulations would stay in place as long as possible.

Then the hope is that there would be a seamless transition from the end of the emergency to these permanent caps.

Next steps is that the legislation would be introduced on July 26th.

It is not yet introduced.

This is just a draft that we're discussing today.

This committee would discuss and possibly vote on the legislation the very next day on July 27th, and then Council could vote on it as early as August 2nd.

If there were to be a second committee meeting to consider the legislation, the earliest full Council vote would be August 16th.

That is it for my presentation, and I'm happy to answer questions.

Thank you very much.

I am going to give the floor to Council Member Strauss as co-sponsor.

Thank you, Chair Nelson.

Thank you to Council Member Peterson for allowing me to co-sponsor this legislation.

I'm co-sponsoring this 15% cap on delivery fees that can be charged to restaurants so that our restaurants are able to continue surviving and thriving so that residents of Seattle are able to still order to go from their home and be able to afford the sandwich that they want.

As has been mentioned a couple times, the 15% cap on delivery fees, it was connected to the COVID state of emergency.

And it's important that as we continue transitioning out of this deep part of the pandemic, that we are also able to keep this protection that has worked so well.

Thank Steve Hooper as well for bringing this forward.

Chair Nelson, I think I've spoken to you about the different case conferencing that we do in Ballard for people who are homeless, for people who are homeless and criminally involved, and for people that are just committing crimes.

And this has a direct impact on our economic vitality, our economic environment.

And it was actually Steve Hooper that brought this and started working with me on this last December.

And so Steve, I just wanna thank you personally for continuing to keep your eye on the ball of the things that restaurants and small businesses need most.

This is one of those things.

And so, We know that Minneapolis, New York, Philadelphia, San Francisco all have enacted laws that permanently cap delivery service fees.

And so we have model legislation to go off of so that we're not caught in litigation between small businesses and big businesses, because we know that we need both types of businesses to have a very vibrant city and economy.

So thank you Council Member Chair Nielsen for having this in committee.

I'm very excited about this legislation and thank you again to Council Member Peterson for letting me join you in this.

I will need to excuse myself for another speaking event and then I'll be right back.

Okay, thank you.

I misspoke when I mentioned that this morning you will be back.

Oh, you're great.

Thank you.

Thanks Chair Nielsen.

Council Member Peterson, would you like, do you have anything to add before we open it up to comments and questions from our colleagues?

No, thank you.

Okay.

Council Member Herbold.

Thanks so much.

Yeah, I do have a couple questions.

So, The slide four includes some background information.

Just wondering if the data provided is focused on national numbers or a local study.

And also just wanting to ask whether or not the four cities identified here that have enacted laws to cap the delivery service, whether or not that's limited to delivery fees or they include all fees that an app-based delivery company can charge a restaurant.

Thank you for those questions.

The data that I presented in today's slideshow is national data.

I couldn't find Seattle-specific data for those items.

However, there is some Seattle-specific data in the findings and the legislation For example, Open Table, which is a reservation system, online reservation system, they are reporting that Seattle's bookings are lower and they haven't rebounded at the same rate as is happening across the country, which is indicating perhaps that more customers are maybe still ordering from the restaurant or still eating at the restaurant, but getting takeout or delivery, or perhaps it's that there's fewer customers in general, which again, underscores that restaurants are struggling to stay in business and could need assistance as they navigate the post-pandemic world.

Also, Washington Hospitality Association did indicate that, and this is in the findings too, that restaurants incurred substantial debt during the pandemic, and it will take a number of years for them to get back to the same starting place as they were before.

As far as the other cities, your question was about how do they distinguish between all fees and then delivery service fees?

And so, okay, let me think about this.

Well, I know that New York City, I believe, caps all fees at 15%, and then that's it.

and there's no opt-out.

Our emergency order did as well, correct?

Correct.

Our emergency order kept all fees.

The state order distinguished between delivery fees and then other fees, 15 percent delivery fees, only allowed to charge 3 percent more for other fees.

This legislation would just have the 50 percent cap on delivery services.

In San Francisco, currently, there is a 15 percent cap on all fees, doesn't distinguish between delivery and other fees.

However, there is an amendment that is moving through their board of supervisors right now that would define core delivery services with a definition that is very similar to the one proposed, which is delivery services are listing the restaurant and then actually performing the delivery.

And then San Francisco would also have a provision where the caps wouldn't apply to food delivery platforms that met certain conditions, providing the 15% option and making it available to restaurants.

So that is distinguishing between delivery fees and other fees.

Minneapolis and Philadelphia both distinguish between delivery fees and marketing fees as well, having a flat cap on delivery services and then allowing either restaurants to opt out or for the cap not to apply to platforms that at least offer that 15% option, and then the platforms can charge more for additional services.

So if San Francisco's amendment goes through, there will only be one city that doesn't distinguish between delivery fees and marketing fees.

That'll be New York.

Thank you.

Madam Chair, one more follow-up if I could?

Sure, go ahead.

Thank you so much.

correlate what my brain is telling me here on slide five around the profit margins and what we're proposing the cap to be.

If profit margins are 10% or lower as indicated on slide two, how are small businesses going to afford the cap of 15% or more?

That's a great question.

I think that it underscores that paying for delivery services is really hard for restaurants.

And in some cases, restaurants may lose money on delivery.

And so restaurants may want to continue offering delivery because it could help the restaurant keep customers and get new customers that maybe eventually will dine in-house, where there won't be this added fee to pay for them or to have them get their food.

I think your point is well taken, that even with the 15% cap, this is going to land hard or could land hard on restaurants.

But in the interest of maintaining a customer base and having customers still have access to food, this is one way to address the situation.

Thank you.

Just a follow-up question from that.

Is this a 15% cap?

We talk about it on the delivery, but is this 15% of the price of the food or is the tax and whatever tip somebody might've given and the $2.50 hazard pay for drivers, is that all?

What is it 50% of?

It is 15% of the purchase price of the food.

So it would not be 15% of those other charges that you just mentioned.

It would not include taxes, fees, or tips, just the menu price of the food.

Okay.

And relatedly, has there been any, so in the olden days, restaurants, if they wanted to deliver, delivered on their own.

Is there any information about self delivery out there?

I have not been able to find information on self delivery.

I know that delivery, what I've learned is that delivery is a tremendous part of restaurant sales across the board.

I think because there's things like pizza delivery, which have been around for a very long time.

There's a lot of pizza delivered, but I, and I think a lot of pizza delivery staff could be employees in-house delivery, but I don't know those stats.

Okay.

Are there any other questions?

Madam Chair, I do have a quick question just it might just be, I might have missed it in the beginning.

When Councilmember Peterson was discussing this legislation, he catch.

Correct me if I'm wrong, that there is a sense of urgency that we needed to do it soon.

I didn't really understand why that was so sure, happy to speak to it.

Thank you, Council President Juarez.

It's nice to sit in your old seat here.

I think I still have...

Yeah, I saw you in my chair.

You could have used my blanket.

It would have been fine.

Glasses.

Anyhow, the urgency here is that it's connected to the state of emergency.

And if the state of emergency is to end at any time in the near future, we wanna make sure that there's not a gap for this type of legislation so that small businesses and restaurants aren't having an uneven playing field for those moments between a permanent regulation legislation and the civil emergency index.

Okay, thank you.

Madam Chair, may I ask another question?

Sure, go ahead.

I was gonna ask Karina, so did we get, have we gotten any information in the last two years about when we've been doing the 15% cap back from any of the restaurants, or have we been collecting any other data?

I think Councilor Herbold's question, did it kind of touch on that?

Maybe I misheard that, I'm sorry.

Anecdotally, what, I have heard about the 15% cap is that food delivery platforms are complying with it.

I haven't heard complaints about it being violated.

I've heard that restaurants are very appreciative of it.

And I contacted Seattle Police Department, which is the department that enforces the emergency order.

They do not have records of any reports of violation, nor does Finance and Administrative Services have any records of complaints for the existing food delivery platforms regulations requiring the agreement.

Thank you.

Thank you, Chair.

Are there any other questions?

I have a couple.

Okay, so how would it work?

Is this, because we mentioned, Council Member Juarez mentioned, asked a question about the civil emergency or what is the reason for urgency.

So would it work that restaurants have to renegotiate?

Because I note that the legislation says opt out and not opt in.

So what are we anticipating for whatever existing agreements restaurants have with delivery services?

Yeah, so that's a great question.

The legislation does say that restaurants have to opt out, which means that when this legislation goes into effect, restaurants won't be charged more than 15% for delivery services unless they opt out and renegotiate their contract, which would be the opposite of if food delivery, if they had to opt in, then there could be a bump in the in-between.

And so restaurants will need to renegotiate their contract.

If they want more than delivery services, then they, if the food delivery platforms meet all those conditions, then they would need to renegotiate and sign up and pay for additional services if that's part of the offer from the food delivery platforms.

Also wanted to mention in this presentation, although it was shared during public comment, that right now the three food delivery platforms that dominate the market, making up about 96% of all food delivery platform sales, all offer delivery services for 15%.

There's a tiered plan where it would be 15% for baseline delivery, could go up to 25 or 30 for additional services.

This legislation would make sure that tiered pricing plans like that don't ever go above 15%.

for the baseline services for delivery.

So people could buy other services, but they would have to, okay.

All right, so it's hard for me to see you Council Member Strauss with the reflections of all these guards.

It looks like you have your hand up.

No, I'm good to go.

I have nothing further to add.

Okay, sorry.

Thank you, Chair.

Okay, so I am, and you mentioned Karina, you did a comparison and you spoke of other cities that have done this and there are other models that we can go with some which carry more legal risk than others.

So I'll be looking at those issues.

And I know that you have spent a lot of time also with our law department.

So if there aren't any further questions or comments from anyone, I'm happy to move on.

I didn't put it together that the actual legislation would be introduced the day before our next meeting.

For some reason, I thought we might have a little bit more time and we know from pay up that the proposal changed significantly between the first discussion this year in committee and discussing the actual legislation.

So let's continue this conversation and I am just saying I hope for a a second conversation and vote on the 27th.

And I look forward to talking about this more and seeing the actual legislation that is final.

Chair, if I may.

Sure.

You raise a really important point here where pay up had a lot more time that it needed from introduction to final passage.

And that's in part because pay up was a first of its kind in the nation.

What we've seen is that this legislation has already been tried and tested in many other jurisdictions.

And with San Francisco in particular, they had initially crafted without the opt out and that created a lot of tension between restaurants and the delivery services.

And they have since gone back and added their opt-out, which has created a more seamless and it's allowed for coalescing around the legislation.

So I absolutely hear you that the similarity is delivery fees and the differences are pay up was first of its kind in the nation and this is a tried and tested model.

Thank you very much for that clarification.

It's good that we do have other cities that have done this, that we can follow best practices.

Thank you, Chair.

I'll be back in just a moment.

Okay, thank you.

All right, if there's nothing else, will the clerk please read item two into the agenda?

into the record.

Agenda item number, excuse me, agenda item number two, resolution 32056, a resolution related to the City Light Department adopting a 2023 to 2028 strategic plan update for the City Light Department and endorsing the associated six-year rate path for discussion and possible vote.

Okay, this is, will the presenters please come to the table while I tee this off?

This is our second discussion of City Light's 2023 to 2028 strategic plan, which sets out the rate path that will follow.

And we're not discussing and possibly voting on a change of the rate today, we are simply discussing.

the strategic plan that is the foundation of the rate path going forward.

We will begin discussing the actual legislation to change the rates in August.

Okay, cutting to the chase to remind folks while people are assembling, at our last discussion, The bottom line for rate payers is that the average animal rate increase was laid out, and I believe that a six-year average was about 3.5%, and the Seattle City Light Review Panel has recommended adoption of the proposed plan and endorsement of the rate path.

And so with that, I will let our presenters introduce themselves and continue, thank you.

Good morning, my name's Deborah Smith, and I'm the general manager and CEO of Seattle City Light, and we're so pleased to be here, and I'm happy to be here in person this time.

I was not able to be in person for the full item, but we're here today, and looking forward to hearing any comments.

I don't think we plan to do a full presentation, so we're just really here to answer any remaining questions that any of our council member or your committee members may have, and then hopefully be prepared to look for a positive vote.

So to my left.

Good morning.

I'm Kirstie Granger, City Lights Chief Financial Officer.

And good morning.

I'm Leigh Barreca, the City Lights Manager of Strategic Planning and Performance.

Thank you for having us.

Thank you for coming.

And of course, Eric McConaughey from Central Staff.

Please go ahead.

I'm here and happy to be a part of this and I will tune in.

Thank you.

Okay, so last time, the strategic plan laid out many of the initiatives and ongoing work that the utility is responsible for.

And in the intervening time, I believe that City Light has reached out to council members or solicited questions from any of my colleagues.

So I would like to now open the floor for any questions or comments.

I don't see anyone.

Again, this is a resolution adopting the strategic plan and rate path.

So if there are no other questions or comments from anyone, I have one.

And it is simply on, I think it was page, I don't know, 11 of the actual strategic plan.

I believe that one of the cost drivers incorporated into the rate path is inflation increases.

And I think that the one that's noted there is 7.1% in 2023, and that is partially to adjust for higher 2021 and 2022 inflation.

that we're currently experiencing.

My simple question is that after that, from 2024 to 2028, average inflation is projected to be 2.4.

And I know that we have experts in our forecasting office, and in your shop you do too, but I just wanted to ask, is that realistic?

Very good question, and certainly with this morning's news about 9.1% inflation and busting last month's record-breaking numbers, or 40-year-breaking numbers, it's hard to know.

I think what we are very clear on and we are very committed to, Chair, is that we intend to flatten the curve.

And I know we all talked about that during the pandemic, but we talk about that internally with respect to rate actions.

And we want subsequent future rate actions to look like cost of living types of increases that our customers are experiencing elsewhere.

So in the plan that we brought forward last year, before we had all these inflationary pressures, we were moving towards that point.

And we have been using 3% as a placeholder for what traditionally CPI type increases have looked like.

And so that's why you saw us taking a couple of years to get to those kinds of increases in the outer years.

And our intention has never been to, I guess, do what we have done before, which is to project lower increases in out years and then come forward and, in the early years have big bumps.

Unfortunately, with the inflationary pressures we're experiencing now, we had to make an adjustment, and it kind of looks that way.

And I'll be honest with you, do I believe 3 percent or that we will be able to get there?

It depends on what happens.

But again, the commitment that we've made, which is to hold future rate actions close to or consistent with inflationary pressures that we are generally experiencing, that is our commitment, and it remains our commitment.

So I'm hopeful, as we all are, in talking with folks around supply chain disruptions and some of our major vendors, there seems to be a sense that at least those pressures will hopefully flatten out in 2023. So we don't expect it to happen before then, but we expect in talking to some of the general Pacific and some of the folks that we buy a lot of commodity products from mid 2023 or so, which would bring us back hopefully to more inflationary type numbers in 2024 and beyond.

So I can't read the future, none of us can, and we are absorbing some of those inflationary pressures and we will continue to do so.

and our commitment remains.

Thank you.

And I have no idea how elastic our rates are to inflation changes.

You mentioned another one, supply chain.

There's also climate, which changes infrastructure needs, et cetera.

Maybe inflation is, go ahead.

Well, and we have some significant project work ahead that we intend to talk to council and talk to committee about in coming year, coming months.

Undergrounding is one area that's a pressure area.

And even as we start to think about, is it Fort Lawton?

the infrastructure costs associated with a potential project there.

So there continues to be a lot of uncertainty, but our commitment is to work with council to prioritize unforeseen expenditures or needs so that any rate impacts associated with those are fully supported by committee and council.

Got it, and my committee is always open for any revisions.

Okay, all right, any other questions, comments?

Okay, seeing none, I believe that we are about to go forward with the vote.

I move that resolution, let's see, just a second, let me get to my, resolution 32056 be recommended for passage at full council.

Is there a second?

Okay, it's been moved and seconded.

Will the clerk please call the roll?

Council Member Sawant.

Yes.

Council Member Strauss.

Council Member Herbold.

Yes.

Council President Juarez.

Aye.

Chair Nelson.

Aye.

Four in favor.

Okay, the motion carries and the committee recommendation that the bill pass will be forwarded to the city council on July 19th, 2022 for final consideration.

Thank you very much chair.

Thank you.

Thank you for all your work.

All right, this concludes the July 13th meeting of the Economic Development, Technology, and City Light Committee.

Our next committee meeting is scheduled for July 27th at 9.30.

If there are no other issues of business, this meeting will adjourn.

It is 10.20, yes?

No, I said thank you.

Thank you.

All right, meeting adjourned.

Bye-bye.

Bye.

Recording stopped.