Seattle City Council Select Budget Committee 11/15/23 Session I

the November 15, 2023 Seattle City Council Select Budget Committee meeting.

Today is Wednesday, November 15, 2023, and the time is 10.05 a.m.

I'm Teresa Mosqueda, chair of the Select Budget Committee.

Madam Clerk, will you please call the roll?

Councilmember Herbold?

Here.

Councilmember Juarez?

Here.

Councilmember Lewis?

Present.

Councilmember Morales?

Present.

Present.

Council Member Nelson.

Present.

Council Member Peterson.

Present.

Council Member Sawant.

Present.

Council Member Strauss.

Present.

Chair Mosqueda.

Present.

Nine present.

Thank you, Madam Clerk.

Thank you, colleagues, again, for participating in this day three of three briefings that we're having today.

First day was a briefing on all amendments related to the 2024 budget.

Yesterday was a vote on all 121 amendments related to the 2024 calendar year budget, the second part of our biennial budget process here.

And today we're finalizing our conversation focused on legislation.

Mostly today we will be talking about items that relate to the budget generally but do not have a 2024 impact.

And we'll have a presentation from central staff.

That's item number 28 on our agenda to get an update from the Revenue Stabilization Workgroup and to hear additional budget-related legislation.

Again, this is track two legislation according to our budget calendar timeline.

The other item that we have for discussion today and vote is item number 22. This is Council Bill 120706. ledge network company fee ordinance, and there's eight amendments that correspond with that.

Colleagues, today, instead of taking item 22 first, I'm going to ask that that be added to the agenda last, and that way we can conclude our day with the vote.

That will start today with briefing.

Briefing and for information sharing purposes and discussion, item 28 will go first, and item 22 will go last on our agenda.

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

Hearing no objection, the agenda is adopted.

I want to thank you, colleagues, for having the, I was going to say tenacity, but the sustainability to stick with us for day three as we think about broader impacts of budgetary legislation that can help us create greater transparency and, in some cases, allow for greater revenue sources.

Yesterday, again, we teed up that there would be a conversation today on that last item, item number 22, but the most part of our agenda today will be focused on this Track 2 legislation, budget-related legislation that is not necessary to balance the 2024 budget.

Given the reordered agenda, we're going to start with that item and have central staff teed up to walk us through some of the presentations and legislation that corresponds to the broader concepts around legislative policy.

legislation related to budget transparency and other possible revenue and fee pieces of legislation that provide the city with additional revenue streams or change revenue streams for our consideration.

I want to remind people on this track two item for item number 28, there is no vote today.

We will have an opportunity to do briefing and discussion today, and then we'll come back to these items on the 30th of November.

After the 30th of November, where we will consider any additional amendments to legislation and vote on final items, those items will then be sent to the full council for December 5th for final vote.

I'm excited to turn it over to central staff.

Thank you for your flexibility, central staff.

If you could tee us up and get us going on item number 28, that would be fantastic.

And Madam Clerk, do you need to read any items into the record today?

We don't, but I can if you'd like me to.

Why don't we go ahead and read item number 28 then?

That sounds great.

Agenda.

Chair Muscato, you can just.

Oh, I'm so sorry, Council Member Swan.

I didn't see your hand.

Please go ahead.

Thank you.

I appreciate it.

I didn't mean to interrupt, but I just wanted to let you and the members of the public know that unfortunately, because of unavoidable reasons, I will need to leave just before noon.

Thank you.

Before noon.

Okay.

Thank you for the heads up.

And, um, I will definitely try to keep that in mind as we think about the possible votes today, because we do have some votes.

So want to make sure that we have you there.

So we'll stay in touch with the colleagues about the agenda.

Council Member Swan, I know you've been under the weather, so I appreciate the heads up on that and for participating while you've also been under the weather.

Okay, Madam Clerk, let's read item number 28 into the record and we will, Start our day.

Agenda item 28 update on Seattle revenue stabilization, workgroup options and additional budget related legislation.

Track two legislation for briefing and discussion.

Great, thank you.

I'm going to turn it over to central staff for a walkthrough here.

Good morning.

Chair Muscata, Council Members, and Alec Panucci of your central staff.

For item 28, we're going to be briefing you on six items today.

First, I'll do a brief update of the Revenue Stabilization Workgroup.

And then there'll be a briefing on items two and three related to fiscal transparency and the budget process, a presentation on proposed wage equity policy, and then a presentation on two bills, one that would repeal the water tax and another that would impose a capital gains tax.

I will just note that for items two, three, and four, that legislation has been attached as draft to the agenda and we expect that to be introduced Next Tuesday, for an items two through six will continue that discussion in committee on November 30, where those that legislation may be voted on at that date if council members coming out of the discussions today.

have any amendments they'd like to propose to any of those items, items two through six on the screen.

We ask that you let central staff know about your amendment request by 5 p.m.

tomorrow so that we can prepare those amendments for consideration on November 30th.

Unless there are questions about process, I'll move on to the update on the Revenue Stabilization Workgroup.

Okay, we can move on.

And we can just go right to the next slide.

Thank you.

So today, we're just providing a brief update on some work that came out of the Revenue Stabilization Work Group.

This is a follow-up from a presentation from August 10th at the Finance and Housing Committee.

So on background, as part of the 2022 adopted budget, the Council adopted Statement of Legislative Intent FG2B1.

this expressed the city council's commitment to working with the mayor to identify options for making seattle's tax structure more equitable and generating new revenue for city to fund city priorities and as the conversations evolved about addressing the projected deficit the statement of legislative intent requested that this work included in paneling a task force of community experts to develop a report listing progressive revenue options next slide So that work group was formed in October of 2022. And in response to that slide, the work group included 13 members and two co-chairs.

The group met nine times between October of 22 and August 23. There was a lot of conversation on background and understanding the problem.

And after those initial discussions, THAT INCLUDED REVIEWING OVER 60 POTENTIAL REVENUE IDEAS.

THE WORK GROUP IDENTIFIED NINE OPTIONS FOR FURTHER CONSIDERATION BY THE COMMITTEE.

IT LOOKS LIKE I HAVE A QUESTION FROM COUNCILMEMBER NELSON.

I could be confused, but I thought that the SLI calling for a revenue stabilization work group was in 2021.

It was, I believe it was, let me just double check.

I could have the year wrong.

It was adopted in...

Mary Pelletier, fall 21 as part of the 2022 annual budget that's right okay, so it was fall of 21 yeah right okay like we adopt the slides in the fall prior to the.

Mary Pelletier, Prior Thank you okay.

Okay.

So as I said, so the work group reviewed about 63 different revenue ideas, created a short list of nine revenue options for further consideration by the council and the mayor.

Those nine options are listed on the screen here.

And the full report is posted to the August 10th Finance and Housing Committee meeting if anyone would like to review that again.

We can move to the next slide.

So the final report was released in August of this year.

And as I said, there was a briefing on August 10th at the Finance and Housing Committee.

At that meeting, we noted that there were a few options that the group identified that were most ready to be considered on a shorter timeline.

That included changes to the jumpstart like increasing the rates.

That option was contemplated by the committee yesterday, and there was a small adjustment to those tax rates as passed by the committee yesterday to increase revenues to support investments in school-based mental health.

And as well as a city level capital gains tax that we already had legislation prepared, and there will be a briefing on a proposed capital gains tax later today.

So those two were identified as most ready to be considered on a shorter timeline.

And then we also at that point had thought that a high CEO pay ratio tax may be the other option that is technically most ready to pursue.

So at that meeting on October excuse me, I keep moving to October, August 10th, Chair Muscata asked central staff to be prepared for potential consideration of those three ideas, the changes to the payroll tax, capital gains, and a high CEO pay ratio.

So we began work on developing a high CEO pay ratio tax because the other two were already developed.

Moving on to the next slide.

So we began the analysis to try to understand the options for how a Seattle high CEO pay ratio tax could be implemented.

We looked at other cities that have implemented similar taxes.

This primarily included Portland and San Francisco.

We looked at the data available to help implement and administer the tax and to understand the potential amount of revenue that such a tax could generate.

What we've learned as we've been doing this work is that there are a number of different ways that this tax could be structured.

that both impacts the amount of revenue that could be generated, but also the administrative complexities and what legal authority we have to implement taxes.

So we have been looking at sort of three ways to structure a tax.

One would be a surtax on the existing jumpstart payroll expense tax.

Another would be a new standalone tax that might be structured similar to the payroll tax, but with a unique nexus to business activity in Seattle.

So it wouldn't be a surtax, it would be a standalone tax.

or adapting our B and O tax that would be more similar to what San Francisco and Portland have done, but that requires some unique processes to Washington state and may require a vote of the people.

So if we can move on to the next slide.

So I'm just going to quickly summarize what we found in Portland and San Francisco.

Portland's pay ratio is a surtax.

It applies to publicly traded companies, and it is a surtax on a percentage of the business tax amount.

So the business tax rate is 2.6% of adjusted net income.

So it's similar, but not exactly like our B&O tax.

And then businesses that have a high CEO to median compensation ratio of 100 to one, but less than 250 to one, they pay a 10% surtax on that business tax.

And those with a 250 to one ratio would pay a 25% tax surtax on their existing business tax rate.

We have not been able to narrow in on a recent revenue forecast for the Portland tax, and we will be reaching out to that city.

But initial estimates for the surtax was between $2 and $4 million annually when structured like a surtax.

The second example, if we could move to the next slide, is San Francisco, and there's labeled an overpaid executive gross receipts tax.

This is a tax on gross receipts and it scales with the executive pay ratio.

So the table on the right on the slide sort of shows the different tiers of how that tax is applied.

And the ratio of the compensation is looking at the highest paid managerial employee to the median employee compensation.

And again, the rates range there.

The most recent by any budget for the city of San Francisco assumed that this tax would generate about $100 million annually to support city spending.

So this those are two differences.

So you can sort of see how one structured like a surtax in certain ways would be simpler to implement because it's building on an existing tax, but it does not generate a significant amount of revenue.

This other tax that is a standalone tax is expected to generate additional revenue.

If we can move on to the next slide.

So given that we have identified there are a number of different ways the tax could be structured, a number of different policy choices and some significant work to understand sort of the administrative complexities of implementing these tax.

There hasn't been a decision about a specific strategy to pursue.

So we will continue exploring options to implement a Seattle high CEO pay ratio tax should a council member or the mayor wish to pursue it.

and then again the capital gains proposal will be considered at the november 30th select budget committee meeting with the first briefing later today and we will continue to work with the next council and the mayor to consider and pursue other options that were identified by the revenue stabilization work group or other ideas that may emerge as we discuss strategies to adjust to address the projected deficit in 2025 and beyond that is all i have today

Thank you so much.

I appreciate the overview here Thanks for allowing for council members to have a reminder there.

You can go back to the last slide if you don't mind.

I just wanna make some comments on this and I'll also let folks know as I make these comments, I wanna make sure that we do have a chance for the full council to weigh in on item number 22. My apologies, I didn't know that we didn't have the full council this afternoon.

So I appreciate that.

folks have been under the weather and want to accommodate that.

So after we have this just general briefing, I will note for all of you, we are going to go back to item number 22. But this gives us the chance to sort of settle in today.

And I can offer some additional space for us to then take on all of the different legislative pieces that we will then get a briefing on as item number 22 later in the day.

I do see Councilmember Peterson's hand up, but I want to just make a quick comment if I might, Councilmember Peterson.

Colleagues, thank you again for all of the work and interest that you've put into the Revenue Stabilization Workgroup.

The Finance and Housing Committee did hold some meetings in September to receive the report.

And as central staff have noted, based on that report and the nine items that were listed in the report, there was only three that we technically had the statutory capability to advance at this juncture, some of which I know probably many of us might be interested in, something like a vacancy tax or a progressive real estate excise tax.

Some of those tools, we would need additional legislative authority to advance.

Given that we have council members who had already been preparing legislation on expanding the Jumpstart Progressive Payroll Tax, thanks to Councilmember Sawant, who brought forward that legislation every year since 2020, as she noted in her comments yesterday, and that was used as the vehicle for yesterday's amendment, we knew we had legislation already in the hopper for that item.

Thanks to Council Member Peterson and his work to advance a potential capital gains tax.

He has, as you know, sponsored a corresponding piece of legislation that would offset a water fee.

The capital gains proposal was already in the hopper and being worked on with central staff as well.

So my focus really turned to the high CEO pay ratio tax.

And I want to thank central staff for all the work they did.

As you can see, we looked at various models from California and in Oregon, trying to emulate our West Coast partners.

And given the timing of when we received the report and the upcoming budget session, we knew we wanted to try to see how we could expedite the creation of a CEO pay ratio tax using the jumpstart progressive payroll tax as a potential vehicle.

And as you heard from the analysis that was provided, one of the assumptions was the fastest way that we could potentially put together a access to, in essence, treat Jumpstart as a vehicle and create a surcharge for those who were paying already into Jumpstart and had high ratios for their CEO relative to the median wage worker in their company.

Unfortunately, when that sort of initial threshold is used, it does limit severely the number of individual entities that would be assessed.

Again, Jumpstart is an assessment on a relatively small number of corporations.

And then if you then only apply the CEO pay ratio math to just those corporations, the yield was relatively small.

And by small, I mean single digits, $7.5 million.

And that is hard news to have received at the beginning of the week last week or early November and challenging because I definitely had hopes and I think many of us had expectations and assumptions that it would be coming in much higher.

As central staff has noted, I think that it is critically important to continue exploring options, options that don't just use Jumpstart as the vehicle and start anew with exploration of a policy that would allow for a CEO pay ratio tax to be generated that would be more akin to the dollar amounts that are being brought in from either San Francisco or Portland.

Single digit return at this juncture did not seem like a viable option and appreciate that there's been a lot of work that's gone into that.

I do also want to underscore our ongoing interest in ensuring that there is a sincere interest in advancing some of the other revenue strategies and fee strategies that are on the docket for our discussion throughout the month because of the severe cliff that we're facing.

And would also note that while our budget relative to the mayor's proposed budget does decrease the gap between expenditures and revenue, we talked about receiving one that had an annual gap between expenses and projected revenue in the out years at about $247 million.

Our proposed budget currently coming in at 221 average annual projected gap, that is going to be significant.

And so I know you all know that, but just wanted to underscore the finer point on that.

And that's not any one thing that happened.

That's a accumulation of increased need, increased population, use of one-time federal dollars, use of one-time city dollars as well in some cases to fund ongoing needs and just increase and escalating needs in our community.

It also includes a decline in certain revenue sources.

So I would point us back to many of the materials that the Revenue Stabilization Workgroup looked at to really continue to understand the scope of the problem.

And the scope of the problem is in addition to increased need and increased population, we do have an increased reliance on these regressive sources and regressive sources that are dwindling in their returns to the city.

So it's accumulation of various factors that is leading us to the situation it currently is.

Finally, we will later today talk about the legislative transparency document that we've been working on in partnership with the Seattle City Council central staff and the city budget office.

As you know, they had a work group that we requested via statement of legislative intent last year, thanks to that work group and the report they put forward.

part of those recommendations are being codified into statute in the legislation that we are bringing forward.

And with your support, my hope is that we will have an opportunity to advance these two pieces of legislation on fiscal transparency, one of which requires us to daylight in a proactive and regular way the six-year fiscal outlook.

The financial plan of the city used to be buried within a fiscal, within a footnote.

And if my memory serves correct, at early 2021, I believe we received a report that said, you know, if you look at this footnote on page 650 and then 750, then you will see the six-year financial plan.

Well, that's not a really great way to demonstrate the fiscal health of the city in the out years.

So what we're gonna be doing through the fiscal transparency legislation that will be forthcoming is identifying some of those recommendations that were jointly created by CBO and the central staff workgroup and really elevating some opportunities to see the fiscal health of the city year over year so that this type of scenario, while it was unprecedented given the pandemic, that this type of scenario is easier to identify much further in advance.

And with that, I just want to thank central staff for the work they've done.

It is heartbreaking for me that the numbers came in as low as they did, but it's not the only way to apply a CEO pay ratio tax.

And given the stark income inequality that we see growing in Seattle.

and the growing needs that we have to invest in the basic infrastructure that creates the workforce, that creates the streets, that creates the corridors, that create economic opportunity for corporations to be successful.

I think it's a great nexus and a good tie-in for us to continue to look at how we do an assessment on CEO pay ratio, not as a punitive measure necessarily, but as a way to create a more level playing field and reinvest some of those dollars directly into the city that makes these entities and individuals so successful.

So more work to come.

And clearly, clearly, I wish there was more conversation on that specific item.

But with that, I'm excited that we have other pieces that are teed up for discussion later this month.

And one of those is from Councilmember Peterson.

So thank you, Councilmember Peterson, for your proactive work in this regard.

And we will have more conversations about the two items that you have put forward earlier this fall as we progressed in our conversation today and later this month.

I'll turn it over to you, Councilman Peterson.

Thank you, Chair Mosqueda, and thanks for reminding us about the fiscal transparency efforts.

You're right that those important financial pieces are usually buried far back in the appendices of the budget thank you for your leadership and wanting to to lift that up make it more transparent um i i just wanted to i know we're going to get back to these other items soon i just and the next step slide here in case for the hundreds of thousands of people watching this show right now at the edge of their seat i just want to let them know that there is also a proposal to eliminate a regressive tax.

So as we try to build a more progressive tax system, there is the proposal to eliminate the regressive tax on our drinking water for everybody.

Council Bill 120602. So I'm hoping that that's part of the next steps as well, because I'm not seeing it here.

I just didn't want people to think we're just talking about raising taxes, but there is a proposal to eliminate one of the most regressive taxes and that's something that I had announced back on June 7th, so just hope that, it sounds like, I think there's a PowerPoint I see on the agenda for that later today, so that's good.

Chair Mesquita, it's okay.

I just wanted to note the reason why that is not listed on the next steps here is that was not an option or anything that came out of the revenue stabilization work group.

So just to be clear, yes, that is part of the items that we're briefing.

It will be part of the ongoing conversations.

But in terms of follow-up on the revenue stabilization work group, that's why I didn't list it there.

So I didn't mean to suggest that that was not part of the ongoing conversation.

But thanks for that clarification, Councilmember Peterson.

And that is good clarification as we take a pause on this because I want to make sure folks know that we're going to come back and we're going to talk about items two, three, four, five, six, and come back to next steps as well.

So we're going to pause after this general revenue stabilization workgroup update and go back to item number 22, just that we have all of our council members present as we have only one item on the agenda.

That's item number 22 that requires a vote.

And the rest of this, again, is briefing.

So apologies for moving things around on you this morning, but I think that that would be ideal.

And this is actually good.

This is helpful to get a little grounding, sit with it for a little bit, and then come back to the legislative item.

Council Member Nelson, please go ahead.

so um when when this is amendment deadline for items to be discussed today um that's tomorrow and so should we am i understanding correctly that the uh the ceo tax is not ready for any kind of action this year um so just that's kind of what i was getting at i i was hearing right

Yep, that's right.

Council Member Nelson, there is not a bill for a high CEO pay.

So we just wanted to provide an update on where things are.

But if that's something the Council does want to take up,

That will happen in 2024. Okay.

So the other two possibilities, and let me just make clear for the hundreds of thousands of people watching the Seattle channel, the report that came out of the revenue stabilization work group did not call for a new source of revenue.

It presented options, but it did not recommend that we adopt one.

Is it, am I understanding correctly then that it's possible when we're calling for amendments that there could be an amendment to the increase to the PET that was voted on yesterday?

So not 20 million, but it could just go up.

So that is a likely scenario.

And perhaps with the capital gains, which is also on the table, the two percent could go up to three or five or whatever.

I mean, is that are those the kind of amendments that we should be anticipating?

So, Councilmember Nelson, the the the change to the payroll tax rates was was voted out, was recommended and voted out of committee yesterday.

So that is right.

We are not requesting or accepting amendments to that legislation for November 30th.

The vote already happened on that bill.

It would be amendments to any of the other bills.

So it could be amendments to the capital gains tax.

So that could include adjusting those rates.

It could also be proposed amendments to the policies in items two, three, and four.

So if you, the draft legislation is linked on the agenda today for items two through six.

any amendments to those that legislation that I'll just um for the public we're all posted publicly um and available for Council member review on uh November 8th so they have been out there for review for about a week and the deadline for tomorrow is 5 p.m to let us know what you want to do and part of that is we have a short week next week um for the holiday and so for us to have time to develop the amendment and get legal review we need those ideas by close of business tomorrow

I know that they've been out for a week.

I just haven't been able to focus on them.

And I was looking forward to the presentation on them to see if there was anything in there that I might want to focus on.

But anyway, thank you very much for that explanation.

Appreciate it.

We are going to come back and talk more broadly about items two through six on this slide here.

They have all been posted on the agenda.

That's where we're not thinking ideas that I might be thinking about.

But we will come back and talk a little bit more about revenue in a moment.

I would like to just pause here to see if there's any additional comments on the revenue stabilization workgroup.

And I would offer that no one used the word recommended revenue sources or that there was a recommendation, but there was not anything in the document that said that they don't recommend doing anything either.

It was simply a list of possible revenue approaches.

Nine were listed after an in-depth analysis, thanks in large part to the city budgets office and transit writers union has incredible staff who have dug through various revenue streams.

And of all of the discussion that we had, there was nine that were put forward as possible ideas that seemed to be of interest to the group.

And then three that had the legal viability, the statutory capability to potentially proceed.

That is why we are focusing on reporting out on those three right now based on that earlier presentation in the Finance Committee and the request that I made of central staff.

Okay.

So with that, I think we're going to go to item number 22. And Madam Clerk, just for the purposes of the record.

Do you mind just reading item 22 into the record?

Sure, agenda item 22, council bill 120706, an ordinance relating to the regulation of network companies, imposing license and fee requirements on network companies, adding a new chapter 6.700 to the Seattle municipal code and amending section 3.15.007 of the Seattle municipal code.

Thank you so much, and welcome back, Karina.

Sorry to have you come and then go, but I want to make sure that we're accommodating everybody here.

It's been a long few days, and I know folks are under the weather, so we want to get as many council members in on this conversation, given this is the only item here for a vote today.

Thank you again to Council Member Furbold.

She briefed us on this bill yesterday.

Councilmember Humboldt, I think for the purposes of getting the item in front of us again, would you like to go ahead and move the bill so that we can discuss it this morning?

So many screens.

My apologies.

I would like to move Council Bill 120706. Second.

It has been moved and seconded.

The legislation is now in front of us.

Thank you very much, Councilmember Herbold, for being sponsor of the legislation.

You made some remarks yesterday and we know that we have eight amendments today, but before I turn it over to central staff to provide any additional orientation to the base bill and before we get into the amendments, would you like to offer some opening comments again?

Sure, absolutely.

So this is necessary legislation in order to support the Office of Labor Standards in its enforcement of legislation that this council has broken ground in passing both the minimum payment ordinance for people who are independent contractors and working for network platforms and also legislation that is sort of a guard against unfair deactivation something that some people call a just cause deactivation and these funds are necessary for um ols to enforce the legislation um ols is empowered uh by its um the legislation that enacted the department to notify Council um independently outside of the executive and the mayor's office to notify us independently of what its resource needs are.

That is when we refer to the certification memo that we get before the budget process.

That is their exercising of their independent powers to notify the council of what its resource needs are.

They have been clear and persistent in identifying what the needs are.

And we have received letters in the last couple of days from very knowledgeable stakeholders in this area, folks who have a unique experience in in assisting workers and enforcing these these types of ordinances.

We've heard from the Washington State Budget and Policy Center.

We've heard from a worker center, the Workers Rights Clinic.

We've heard from professors who have studied this issue at the University of Washington.

We've even heard from Workplace Justice Lab at Rutgers University.

They all refer to the fact that the Office of Labor Standards is able to robustly enforce workers' rights not just because of the legislation that we pass, but because of the resources that are provided to the Office of Labor Standards to hire adequate staff to enforce, but also to contract with trusted community partners who have the skills and the abilities and are trusted by workers to make sure that people who are doing this work know their rights.

The Rutgers Workplace Justice Lab refers to the city's Office of Labor Standards to have proven itself to be one of, and I quote, if not the most effective local agencies in the United States.

They go on to say the success is due in no small part to OLS's enduring dedication to partnering with local community based organizations on outreach, education and enforcement efforts.

And so since they they they have this proven reputation of ensuring that dollars that workers deserve get into their pockets.

As we pass new laws to protect more workers, we have to make sure that they continue to be adequately resourced.

So with that, I'll pause.

I'll have more to say about the importance of enforcing and the funds to enforce as we go through the amendment process.

Thank you.

Excellent.

Thank you.

Council members, any questions on the base?

Okay.

I'm going to turn it over to Karina.

And Karina, if you have anything else you'd like to add as an orientation to the base legislation?

Well, we've already, we've gone over, oh, first of all, good morning.

Karina Bull with Council Central staff.

We've had several briefings on this legislation.

So I'll just, the only thing I'll say is to remind council members that it would establish a fee to recover regulatory cost of two at-based worker labor standards, the deactivation rights labor standard and minimum payment labor standard.

the department of finance and administrative services would implement the fee and any fee revenue would be used to recover the cost of fas and then the cost of ols the office of labor standards implementing those two laws as far as the eight amendments under consideration none of them are mutually exclusive so if all of them pass they all could be layered into the legislation And I think that about covers it.

Thank you.

Okay.

Thank you so much.

Council Member Herbold, would you like to move your amendment, amendment number one?

Absolutely.

I will move amendment number one, the amendment that would require the FAS director to recommend a reduced fee for Marketplace Network companies.

Second.

It has been moved and seconded.

Council Member Herbold, you're recognized to speak to Amendment No.

1.

Thank you.

I think this speaks to the recognition that marketplace network companies are not covered by both ordinances.

and a recognition that the charge to network companies may not accurately reflect the cost to fully enforce the laws that they are covered by.

So, again, this would not affect The revenue generated by both types of companies for 2024 or 2025 and the recommendation would not come until 2026 with the idea that it would give FAS the flexibility to be basing this decision on on the actual data that they receive from OLS.

Are there any additional comments?

I think I need to understand this amendment just a little bit more.

I apologize that I didn't get a chance to ask about this when we were briefing it yesterday.

I'm worried if we're trying to fully and adequately fund enforcement to the extent that workers need and deserve it, that this potentially would reduce funding for marketplace network companies' implementation and education and enforcement in the future.

Can you speak to that concern?

Again, it's based on the fact that the current conditions for marketplace companies is there's only one of the two ordinances that they are held to adhere to.

So marketplace network companies are only regulated by the ordinance related to deactivation, not minimum compensation.

Okay.

Are there additional comments or questions on this?

All right.

Let's go ahead and bring this to a vote, unless there's any additional comments.

Madam Clerk, could you please call the roll on the adoption of Amendment 1, Version 1?

Councilmember Herbold?

Yes.

Councilmember Juarez?

Yes.

Council Member Lewis.

Yes.

Council Member Morales.

Abstain.

Council Member Nelson.

Aye.

Council Member Peterson.

Yes.

Council Member Sawant.

No.

Council Member Strauss.

Abstain.

Chair Mosqueda.

No.

That would be five in favor, two opposed, and two abstentions.

Okay, thank you so much.

Amendment 1, version 1, passes.

Excuse me, let me get my correct script here.

Having received the majority votes, Amendment 1 carries and will be added to Council Bill 120706. Council Member...

Excuse me, I don't have the grid there.

Council Member Peterson, would you like to move amendment number two?

Yes, thank you, Chair.

Colleagues, I move to amend Council 120706 as presented on amendment two.

Second.

It's been moved and seconded.

Council Member Peterson, would you like to speak to amendment two, version one?

Thank you, Chair Mosqueda.

This amendment has a similar underpinning as the First Amendment.

And this is, though it goes further, would exempt Marketplace Network companies from the ordinance because they're not covered.

We're not regulating them for all the previous ordinances.

But if we could have Carina Bohl go through it, Would that be helpful?

MS. You know what?

I apologize for that.

Yeah, I probably should have done that before having you move the amendment.

Sorry about that, colleagues.

Karina, I will do that next time.

I'll have you describe the amendment, and then I'll have the sponsor move it, okay?

Sorry about that.

We'll rest you this morning.

Yes.

So Amendment 2, sponsored by Councilmember Peterson, would exempt Marketplace Network companies entirely from coverage under this bill, which reflects the fact that they are only covered by one of the two app-based worker labor standards that would incur regulatory cost and that fee revenue could be used to support.

If this amendment were to pass, marketplace companies would be covered by no aspect of the bill and they would not have to comply with any of the license and fee requirements, which means that their payment of the 10 cent fee would not exist and that fee revenue would be reduced by some amount.

It is not clear yet whether that would make a significant impact on the amount of fee revenue that would be coming into the city.

There's five to about five to seven marketplace network companies that I've been able to tentatively identify if the revenue were not sufficient enough to cover all costs, then the FAS director could adjust the fee by rule after determining what would be necessary to fully recover those costs and no more.

I did want to point out that since the committee just did pass Amendment 1, which would require the FAS director to recommend a reduced fee for marketplace companies, that provision could still coexist and not conflict with this amendment, if this amendment were passed, because even if marketplace network companies are exempted from coverage, the FAS director could still recommend establishing reduced fee for those companies, and then any legislation that would propose the reduced fee could also require coverage of marketplace network companies.

So I thought it'd be helpful to point that out.

Okay, Council Members, comments on this item?

Excuse me, Council Member Peterson, as it's been moved and seconded, would you like to speak to this item as the sponsor?

Thank you, Chair Mosqueda.

I believe central staff explained it very well.

I believe we should be exempting the marketplace network companies from this because the whole purpose is to raise money from their transactions to enforce these laws, but they're not covered by all of these laws.

So why are we penalizing them?

companies like Rover based in Seattle who have a totally different business model.

So I would encourage colleagues to exempt MNCs if there's something that, if we feel like we need to ensnare them later by this, it could be something that could be looked at later, but let's do an incremental approach here and not cast too wide of a net by unfairly charging fees to companies to enforce laws that do not apply to them.

Thank you.

Thank you.

Council Member Harville, please go ahead.

Thank you.

I appreciate the intent of the amendment and the sponsor of the amendment, but I think the amendment that just passed adequately covers this issue because it recognizes that there should be a consideration of a reduced fee in the future.

by eliminating the fee from marketplace companies altogether without any policy base to do so that would mean certain apps wouldn't pay this fee that would reduce the revenue for office of labor standards and community-based organizations helping to enforce in order to enforce the rights of workers and educate workers regarding the ordinance that marketplace companies do have to adhere to.

The intent is to make sure that there is there are funds to enforce the ordinances and marketplace companies are covered by the deactivation ordinance.

And so there needs to be funds in order to cover that enforcement.

Thank you.

Thank you.

I'll just add my support to what Councilmember Herbal does noted and also underscored the fact that the amendment prior just passed.

So if there is concerns that amendment prior will potentially help address and alleviate some of those.

And I think that this is an important component to keep in there.

We heard repeated testimony from workers that are working on these platforms.

They too have issues that they would like to see addressed.

So very strongly support the preservation of this and I will be voting no on amendment two.

Any additional comments?

Council Member Nelson.

I'm struggling with this because, first of all, if my amendment passes to limit the application of this fee to the enforcement of just the deactivation ordinance, then that kind of settles it because marketplace companies, unfortunately, are covered by that legislation.

And then I start thinking about, okay, well, how will eliminating the marketplace companies from putting into this pot of money, how will that impact the potential raising of the fee in future years to cover the costs?

How will that impact all the other companies?

And then I start thinking about Well, if there are only three or four, as Karina said, network companies, but there are more marketplace companies, then what is fair?

Who shoulders the burden?

Well, the network companies do more transactions, and so therefore they're charged more.

So the point is that it's hard for me to game out all the different implications of this, so I will be abstaining simply because...

i just need to be thinking about uh the impact of the amendments that will be coming later on this agenda thanks excellent thank you council member nelson any additional comments any closing comments council member peterson you're seeing none okay i think that's an old hand up there so i'm gonna perfect we're gonna go ahead and ask the clerk madam clerk could you please call the role on the adoption of amendment to version one council member herbold

No.

Council Member Juarez.

Yes.

Council Member Lewis.

No.

Council Member Morales.

No.

Council Member Nelson.

Abstain.

Council Member Peterson.

Yes.

Council Member Sawant.

No.

Council Member Strauss.

No.

Chair Mosqueda.

No.

Two in favor, one opposed.

Excuse me, two in favor, six opposed, one abstention.

Thank you very much.

Having failed to receive the majority vote, the amendment does not carry.

We will move on to amendment number three, sponsored by Council Member Nelson.

Central staff, do you mind describing the amendment first, please?

Amendment number three, sponsored by Councilmember Nelson, would restrict the Office of Labor Standards use of fee revenue to implementing the app-based worker deactivation rights ordinance.

This means that OLS would be prohibited from using fee revenue to implement the app-based worker minimum payment ordinance, and any funding to implement that ordinance would need to come from other sources of revenue in the OLS fund, business license tax revenue, and any resources of the city's general fund.

Again, as I've stated before, the OLS director could always adjust the fee by rule if necessary.

Thank you very much.

Council Member Nelson, would you like to move your amendment?

I move adoption of Amendment 3. Is there a second?

Second.

It has been moved and seconded.

Council Member Nelson, do you recognize to speak to your amendment?

Thank you very much.

And I just would say from in the beginning that 3 and 4 are presented as sort of a a package or they both depend on each other.

But anyway, so getting back to the opening comments of Council Member Herbold, her comments about the importance of adequately resourcing OLS does confirm my belief that the impetus for this legislation is to establish a dedicated funding source for OLS and that charging.

And I also believe that charging businesses a fee for each transaction to fund its core functions is is not a great model for a general fund department like OLS.

So I just wanted to let folks know that this is the idea of just of charging businesses for doing business to fund a general fund department is I'm struggling with that issue.

This legislation was originally conceived as a tax that would generate $2 to $3 million a year to implement the deactivation ordinance and establish a reserve fund for OLS to use on different things.

And then when the legislation came before us, the deactivation ordinance itself we were informed that it would be a costly new regulation to enforce and the central staff memo estimated i believe it was 1.1 million dollars a year it could have been 1.3 million dollars a year but anyway it was it was going to come with some costs so that is that's how we um that's how we came to be discussing how we're going to pay for that regulation So this amendment that's before you now would limit use of that fee revenue collected to enforcement of the deactivation ordinance and not enforcement of the minimum payment ordinance.

It does not prevent OLS from implementing or enforcing the app-based worker minimum pay ordinance, but reflects the reality that existing resources should be sufficient to implement that ordinance and others for which OLS is responsible.

To our knowledge, OLS staffing has not decreased despite the agency no longer needing to implement and enforce two major ordinances, the Transportation Network Company, TNC ordinances, and those are the minimum compensation ordinance and the TNC deactivation rights ordinance, which were preempted by state law starting on January 1st, 2023. Surely some resources that were previously dedicated to enforcement of these similar ordinances can be redirected toward the enforcement of minimum pay ordinance without needing to include Charging a fee for deactivation and then using some of it for minimum pay.

Ensuring that the fee is narrowly tailored to meet the most pressing needs of OLS is good for Seattle families and small businesses.

Ensuring that city resources are being used efficiently means that fees on platforms can be lower, which in turn means of these services can be more affordable and accessible.

And we did hear in public comment at the public hearing that ultimately it's clear that these fees will be passed down onto the consumers that are using these platforms.

And many people have grown really dependent on those platforms.

And so we have to think about how it is impacting the end user or the customer.

The mayor's office does support limiting the use of the app-based worker deactivation ordinance thusly.

And again, we'll talk about the actual amount in the next amendment, but does support these two amendments going forward as a package.

Thank you.

Council Member Herbold, please go ahead.

Thank you so much.

Again, appreciation for the sponsor's description of the amendment.

are some significant unintended consequences associated with this amendment.

I have heard this suggestion that staff were previously associated with enforcement of the T&C ordinances could just simply do this work.

um just want to give a little bit of background um about what has happened since um the state was preempted uh from enforcing uh the tnc ordinances in in favor of the state's ordinance and enforcement but um in 2022 the budget added um two ftes for ols to implement the tnc ordinance the 2023 budget eliminated one of the two positions.

And at the time, OLS stated that the single FTE remaining would be responsible for the preexisting work of other labor standards and that they would have limited capacity for additional projects, and they specifically named the app based worker minimum payment ordinances.

One of the projects that they would that this that the single FTE probably would not be sufficient to cover in 2023. The budget added three FTEs to LS for implementation of the app based worker minimum payment ordinance.

But that wasn't we did what we could in the 2023 budget but we didn't meet the request of ols in their certification memo they actually for um for enforcement of the minimum payment ordinance they forecasted the need for five ftes though um ols now estimates needing additional funding to fully fund implementation of the minimum payment ordinance and so even if the one fte originally intended for the tnc ordinances was solely assigned to work on minimum payment um ols estimates needing additional funds and position authority um and you know just another sort of piece of information about um you know why the enforcement of the T&C ordinances is not immediately transferable to minimum payment is, you know, Part of the issue is the number of platforms that we're talking about.

There are more platforms and more workers covered by minimum payment than under the TNC ordinance.

So hopefully you can see that the scope of the need for FTEs to enforce is also larger you can't just transfer oh you needed this number for this ordinance let's just move them over to the new ordinance there's a different scope of work the work the scope of work for minimum payment is larger because there are more uh more platforms and more employees councilmember nelson

just seems like every time we pass a regulation does it necessarily require more staff and and then the resources flow and the bottom line for me is that if if why was you know if why wasn't more um why weren't more resources requested in the mayor's proposed budget to to address um potential staffing needs for or for ordinances that we passed in the past.

So this whole thing about the fee came up in the topic of deactivation.

And so it should be applied to enforcing, implementing, administering deactivation.

That is my point.

All these other laws, I mean, they can be adequately staffed in different ways, but we're trying to, we're charging a fee.

in the context the policy context of having passed one ordinance now we're just saying okay well it's needed to pay for staffing for these other to enforce other ordinances and without understanding, I don't feel like I understand exactly what you just said about, you know, they can't just be transferred to doing a different body of work.

I need to dig into that a little bit more.

And so I think that it's just a lot clearer to talk about what this view will be used for, and it will be used for the law under which the whole idea of charging a fee came up.

Any additional comments?

Yes, Council Member Harbaugh.

Thank you.

So just to be clear, OLS did identify a resource need, not only when we were deliberating on deactivation, they also identified a resource need associated with the passage of minimum payment.

So this isn't new to deactivation.

Also just want to flag that Again, in 2023, Council added funds to OLS for the app-based worker minimum payment.

The mayor did not propose additional funding for the OLS implementation of minimum payment.

And that's so that was that was the council's add to the mayor's proposed budget.

And, you know, I agree it would be helpful if if there was adequate funding in the mayor's proposed budget.

That doesn't always happen.

And so that's precisely why all has this independent ability um unlike most executive departments there are a couple of um of exceptions the seattle arts commission is a is another entity that has this independent ability um the office of police accountability they all can make recommendations directly to us for addressing their resource needs.

And that's precisely because of the fact that they are independent and because we want to hear from them of what their needs are in those cases that there isn't sufficient funding in the mayor's proposed budget.

That is part of the built-in independence of the agency of OLS.

So when you hear me talk about the certification memo, that certification memo is OLS's independent communication to the city council that they are authorized under ordinance to provide to us on what their recommendations are for their resource needs.

And so that's a really, really helpful mechanism for us during our budgeting time in those cases where there isn't sufficient funding in the mayor's proposed budget.

How much did we allocate?

I forgot that in 2023 we gave money for the enforcement of the minimum pay standard.

So why didn't they use that money just to hire the staff that they need?

That's what I was trying to explain earlier.

We only met them halfway.

We funded three FTEs.

There was one left over from the TNC.

We funded three FTEs, so that's four.

The funding included in this fee will make up the difference.

I'm also going to ask central staff to weigh in.

The budget that we received specific to Office of Labor Standards also imposed a requirement for a 4.5 percent vacancy rate within Office of Labor Standards, meaning they had funding but were asked to hold back on hiring positions to keep those dollars in pocket, potentially for use in later years.

Could you speak to that a little bit, just as a reminder for the council members?

Yeah, so the proposed 2024 budget adjustments had a 4.5% vacancy rate that would require OLS to hold at least one vacant investigator position open so that the office could use the funding allocated towards that position for paying salaries that are above the typical midpoint that is used for budgeting.

OLS has many staff members that have been there for quite some time and are at the top of their step Top of their step or otherwise have salaries above the midpoint so there is a proposed there was a Amendment two amendments passed or let's see.

There was an amendment passed in the chairs balancing package that would Appropriate funding to OLS so that they would be able to fill that vacant Baker vacant investigator position and so that is in the chairs balancing package and And that is what is in the proposed budget.

There also is the about $500,000 for implementing the app-based worker minimum payment ordinance.

And as Councilmember Herbold has indicated, OLS has estimated that they need additional funding to hire two more FTEs to implement that ordinance and also have funds available for outreach and education contracts with community organizations.

Okay, and I think that that's significant because while we tried to build back one investigator, there is clearly funding that has been appropriated, but the department has been asked to hold back on hiring positions.

We need bodies.

So I think that's an important aspect here.

I want to go ahead and close debate on this, council members.

Is there additional comment that you'd like to make as a closing sponsor, Council Member Nelson?

Simply just let's keep it simple.

And I would just ask that we just focus on one ordinance.

It's so much more clear what the needs are for.

And then I ask for your support of this amendment.

Okay.

Thank you very much.

I believe I will be joining the prime sponsor of the base bill and encouraging a no bill.

Any additional comments?

Please go ahead.

Yeah, I just wanted to say something about the importance of enforcing the minimum payment ordinance.

We heard from stakeholder last night or this morning, specifically the Washington Budget and Policy Center, who wrote to us to remind us that Washington state is consistently ranked in the number one most upside-down tax code in the country, meaning that low-income people pay an effective tax rate six times more than the wealthiest Washingtonians.

And so their advocacy is to recognize that any action at any level of government needs to be viewed through the lens of what it will mean for the lowest income Washingtonians and those who have been excluded from economic opportunity based on race, immigration status, or identity.

And so that speaks directly to the importance of enforcing the minimum payment ordinance.

Thank you.

Any additional comments?

Hearing none, Madam Clerk, could you please call the roll on the adoption of amendment three?

Council Member Herbold?

No.

Council Member Juarez?

No.

Council Member Lewis?

No.

Council Member Morales?

No.

Council Member Nelson?

Aye.

Council Member Peterson?

Yes.

Council Member Sawant?

No.

Council Member Strauss.

Yes.

Chair Moschetta.

No.

Three in favor, six opposed.

Thank you so much.

The motion fails and the amendment is not adopted.

Moving on to the next amendment, Council Member Nelson, this is you again.

Shall we have central staff summarize this item?

I know you mentioned that it's paired with the one we just voted on, but central staff, if you'd like to provide a brief overview, that'd be great.

Amendment 4, sponsored by Councilmember Nelson, would reduce the fee for network companies from 10 cents per online order to 5 cents per online order.

Just a reminder, the fee becomes effective on January 1st of 2025. Changing the fee to 5 cents per online order would reduce estimated fee revenue to $1 to $1.5 million for that year.

Thank you.

Councilmember Nelson, would you like to move your amendments?

I move Amendment 4. Is there a second?

Second.

Thank you.

It's been moved and seconded.

Councilmember Nelson, would you like to describe your motion?

One moment, please.

I'm going to...

Just a moment, please.

I will note while we wait here that we are halfway through the amendments and our intent is to vote on the base bill prior to noon.

So we have about 40 minutes left.

And thank you, Karina, for walking us through all these amendments.

Council Member Nelson, do you need additional time?

Thank you very much.

I really appreciate your patience.

I got the move down right, though.

Okay.

So this amendment has to do with the actual amount of the fee.

By reducing the fee to $0.05 per service, Amendment 4 reduces the risk that the initial fee results in substantial overcollection.

As a fee, the City should not be collecting more money than is necessary to carry out the specific regulatory activities.

Given that the estimates of app-based services are being provided by the City are mere guesses, the Council should err on the side of the fee starting low, given that it can be increased if deemed inadequate.

And I do want to mention that nothing is a done deal here because the directors will have the ability to increase or decrease as necessary.

But I think that starting out at an amount that is more perhaps cautious because it will impact the end users of these services is a good idea.

Additionally, if amendments well, Amendment 3 did not pass, so never mind, I'll skip that in my talking points.

The point is that we need to be mindful of the fact that we can't just create a what would end up being even though it's called a fee a reserve fund to be used for things that we are not approving right now um is important we need to keep the good faith of uh of our consumers or the people that are using these fees and also the companies that that deliver goods and services to people that need it and so a five cent fee is more in line with the scope of work that needs to be done and so therefore and we don't know how much it will generate in the long run let's start at five and there will be as the amendment one noted there will be some analysis not just on who gets to pay this but also How much should be collected?

Is it enough?

Is it too much?

And so therefore we should start at five.

That is the rationale behind this amendment.

Council President Morris.

Oh, thank you.

My hand again isn't working.

Don't ask me what's going on.

Just a quick question and maybe Karina can respond because if we reduce it to five cents, And then we look at Council Member Peterson's amendment coming up where he would like it to only Seattle City Council could do an increase.

What would be the discussion about that?

Is that a problem?

I mean, they interplay.

They kind of go together in a way.

So I think the issue to consider in analysis of these amendments is that the city does not yet know the amount of revenue that the fee will generate.

And so if the fee is reduced to $0.05, and if that brings in less revenue than anticipated and perhaps not enough revenue to cover the regulatory needs of both deactivations and minimum payment, and if the amendment were passed that the only council could increase the fee every two years, then it would delay an increase to the fee for two years, which would result in the city not receiving the revenue that a $0.10 fee would bring in for two years.

Follow-up question, Council President?

Okay, Council Member Herbold.

Thank you.

Karina, I'm wondering if you could also speak to the issue that Council Member Nelson's amendment seeks to address.

I understand that in a meeting with the network platforms explained what I understood FAS's position to be, which is if they will be monitoring very carefully the costs to enforce the ordinances.

And if 10 cents turns out to exceed the cost for one year, those dollars will carry over into the future year and they can dial down the fee.

I'm just wondering if you can confirm my understanding of how FAS would react to a scenario where, I would say probably an unlikely scenario, but a scenario where $0.10 was generating more than sufficient revenue to enforce the ordinances.

The scenario that you just presented is true.

The FAS director, through rule, could very quickly reduce the fee to If there's more revenue than anticipated, could reduce the fee and then raise it again once there was an opportunity to use that revenue.

It could carry it forward to a future year.

Also, something that's unknown about the Deactivations Rights Ordinance is exactly what the volume of work for Office of Labor Standards would be.

So right now, Office of Labor Standards is estimating 1.13 million or so for implementation.

As a reminder, there was $3.5 million for the driver's resource center to implement the TNC deactivation rights ordinance.

So it could be that the volume of inquiries for the app based worker deactivation rights ordinance far exceed what OLS is estimating.

If there is more fee revenue than anticipated, council would be able to decide if that revenue could be appropriated to Office of Labor Standards to cover unanticipated work.

If that turns out not to be the case, then again, the director could reduce the fee by rule.

And that can happen quite quickly because rules require a two-week notice and comment period.

Other comments, Council Member Harbaugh?

Your hand is still up.

Additional .

Council Member Nelson, please go ahead.

vote on um i think it was nine hundred thousand dollars or maybe it was nine hundred thousand dollars plus five hundred thousand dollars uh for uh to to get going on the enforcement of uh the deactivation in 2024 so can you please remind us how this um how that body how the uh that amendment yesterday that we passed in group a relates to this because my understanding is that All of what we're talking about right now will not start until 2025. But we just allocated a whole bunch of money for actions and work in preparation for 2025. Annette Dubreuil, Ph.D.: : Yesterday, and so it seems as though that some of the analysis about all right digging down into how many trips, are we talking about what is what are the assumptions that we are.

Annette Dubreuil, Ph.D.: : Actually, going forward as we set up the whole thing we don't have software yet FAS hasn't established any kind of licensing program and so.

I am just saying that it's it's highly unlikely that you'll set a fee and then reduce it.

And then what happens to that money?

It's not refunded or anything.

It just goes someplace.

So we aren't talking about a collection that will that will happen until 2025, if I am not mistaken.

Let's go ahead central staff.

Yeah.

Okay.

So the amendment that was passed in the chairs balancing package appropriated $900,000 to FAS.

And that money was the upfront full cost of developing software that will be completed sometime in 2025. And also for a temporary staff member to manage that project.

Uh, then 500,000 was appropriated to OLS to begin implementation of the Deactivation Rights Ordinance before it goes into effect in January of 2025. So OLS usually, if they have the resources, does a fair amount of work prior to the ordinance going into effect to hire and prep staff members and also to do some amount of outreach to the community, both workers and hiring entities about the, rights and obligations of the new labor standard.

So in this instance, OLS will receive $500,000 as part of that budget amendment.

They have forecasted the need for more money than that to implement the deactivation rights ordinance.

So when the fee revenue brings in money for the city to use for deactivation rights, if it brings in enough revenue, then OLS could get the full amount of what they estimate is needed, which is closer to, well, this year.

For 2024, they wanted 1.35.

And outgoing years, they anticipated about 1.13 million.

And then in 2027, up to $1.56 million per year.

Hold the question.

No, it isn't known how much revenue that is generated from settlements that is also used for some of the core functions of OLS that it does not get reimbursed to workers in the course of, you know, enforcing or enforcing compliance of our previous laws.

So I don't know the amount of money off at the top of my head that OLS brings in through civil penalties that go to the city.

What I can say is all of the penalty amounts flow to the general fund.

And so that is for use in the general fund, it's not designated to be used by OLS and the vast majority of civil penalties that the OLS assigns are actually turned over to workers.

So OLS closes or resolves most of its investigations through settlements.

OLS figures out the amount of money that would be owed for a civil penalty.

And then as part of the settlement agreement, almost all of that money usually goes to the workers and the director has the discretion in the settlement terms.

So it's not raising money through a settlement.

It is an agreement between OLS and the company and the business, and then OLS usually awards most of the civil penalties to the worker.

Thank you.

Thank you so much.

Okay, I think we are, we don't see any more hands.

Any additional comments on this item?

Seeing none, just double checking.

Okay, we're on agenda, excuse me, amendment item number four.

I will also be joining the prime sponsor of the legislation, Council Member Herbold, and I will be voting no on this and encourage others to be voting no as well.

Madam Clerk, could you please call the roll on the adoption of amendment number four?

Council Member Herbold?

No.

Council Member Juarez?

Yes.

Council Member Lewis?

No.

Council Member Morales?

No.

Council Member Nelson?

Aye.

Council Member Peterson?

Yes.

Council Member Sawant?

No.

Council Member Strauss?

Yes.

Chair Mosqueda?

No.

That would be four in favor, five opposed.

Thank you, Madam Clerk.

The motion fails and the amendment does not carry.

we will go ahead and move on to amendment number five.

This is sponsored by Council Member Peterson.

Central Safety Minds summarizing amendment number five first, please.

amendment number five sponsored by council member peterson would change the procedure for adjusting the network company license fee by allowing or requiring the fas director to make a recommendation to the city council to increase the fee every two years and then council would action would be required to increase the fee by ordinance and then the FAS director would retain the ability to make any necessary reduction to the fee by rule.

Thank you.

Council Member Peterson, would you like to move your amendment?

Thank you, Chair Muscata.

I move to approve Council Bill 1207, wait.

I move to amend Council Bill 120706 as presented on Amendment 5.

Second.

It has been moved and seconded.

Council Member Peterson, would you like to speak to your amendment?

Thank you, Chair Muscata.

Colleagues, this amendment basically retains the authority of the fee with the city council.

So it should be done by ordinance by us like we do for a slew of other fees throughout the city.

We routinely have them transparently put out on the agenda, discussed, and then approved by us after debate.

So this would require the same fee to go through an ordinance process.

Secondarily, rather than it being at least annually, it would just be aligned with our biennium budget process.

So it'd be every two years.

But the main point here is to retain that authority as the elected officials to decide what the fee is every couple of years.

Thank you.

Thank you so much.

Comments on this item?

Any other, oh, excuse me, Council Member Nelson, please go ahead.

I just wanted to reinforce the point that Council Member Peterson made that Council does approve fees.

In fact, one of the items in the consent agenda that we voted on at the beginning of this whole process was a whole bunch of fees from SDCI.

So I do, I wanted to second the comment that Council does this regularly for other departments.

Thank you.

Thank you so much.

Additional comments on this Council Member Herbold?

Thank you.

There's a question for Karina.

I understand that there are fees that the council is authorized to adjust.

I believe the practice of FAS, though, is to, for the fees that FAS administers, my recollection is that the the authority for adjusting the fees is generally with FAS.

Just wondering if you could speak to that now.

So I think my recollection is that there was some concern about limiting the FAS director's authority in this area because of the standard practice of allowing the director to have that authority.

MS.

Councilmember Herbold, my understanding without having fully researched all of the fees that fas implements is that the fa fas director does have the authority to adjust those fees by rule so council member herbal if i might ask um as the sponsor of the underlying bill does that inform your vote on this item

I am not supportive of taking away the authority that FAS Director currently has to adjust fees.

Voting no.

Council Member Peterson, please go ahead.

Thank you.

I think this really reveals a bigger problem, which is that the city council, as the elected officials, should retain the authority for these fees that are charged externally, like we do for other departments.

I'm not sure why the FAS director would have special powers over the city council's ability to decide these fees.

And as of today, the FAS director does not have this power, so we're not overriding anything um maybe it would be inconsistent until we were to uh look into this further about why the fas director is able to unilaterally do fee adjustments without checking with the city council uh council member herbal yeah i just um i think i don't you i don't think you misspoke council member peterson but i just want to be super clear um

the council can adjust fees.

So it's not like the FAS director takes away the ability of the council to adjust fees.

It's just that the director as well has the ability to adjust fees.

And I wouldn't want to limit that authority.

And I can tell you that we have, the council has in the past identified fees that the council was concerned were not aligned with the cost of the regulation i recall a couple years ago working with then council member burgess on a statement of legislative intent asking fas to look at the fees associated with cannabis regulation enforcement and they you know did an analysis of the cost of the enforcement and whether or not there was some duplication with state state law enforcement and the fees that these businesses were paying to the state and as a result they they um of of the council flagging the the need to take a look at the fees they then reduce the fees on some of the smallest businesses so it's i think a system that um the elected authority can certainly state its preference or direct FAS to look at an issue more carefully to look at adjusting the fees.

But I would want to take away the ability of FAS to do that work.

Council Member Peterson.

Thank you, Council Member Herbold, for clarifying that we would both have the authority to change the fee.

The good part about this amendment is it does still give the FAS director the ability to lower the fee.

So one of the examples you mentioned where they're lowering the fee FAS director would still be able to do that under this amendment.

It's just that only council would be the one to raise the fee, and that way we could have a transparent process.

I know there was a lot of effort with stakeholders in sort of coming up with these amounts, the 10 cents.

So that should then come back to the council, I believe, if it were going to go higher in the future.

Thank you.

Okay, I think we will use that as closing comments on this amendment item.

We are on amendment number five, and as the prime sponsor of the base legislation noted, she's going to be voting no.

I will be joining her in encouraging a no vote on amendment number five.

Madam Clerk, could you please call the roll on the adoption of amendment number four?

Council Member Herbold?

No.

Council Member Juarez?

Yes.

Council Member Lewis?

No.

Council Member Morales?

No.

Council Member Nelson?

Aye.

Council Member Peterson?

Yes.

Council Member Sawant?

No.

Council Member Strauss?

No.

Chair Mosqueda?

No.

Three in favor, six opposed.

Thank you very much.

The motion fails and the amendment does not carry.

We will go on to amendment number six, sponsored by council member Herbal.

Central staff, could you please summarize amendment six for us?

Amendment six would make six revisions.

to increase transparency and streamline provisions in the ordinance.

It would clarify regulatory cost in the scope and purpose section.

It would remove the FAS director's authority to sign network companies to a monthly or annual payment schedule, meaning that payments would only be received on a quarterly basis.

It would require OLS to publicly announce which contracts with community organizations are funded by fee revenue.

It would also require OLS to create policies and procedures for awarding and monitoring contracts that are funded by fee revenue to ensure that those contracts are solely for the purposes prescribed in the ordinance.

It would require the FAS director to include fee revenues in the quarterly reporting to council.

And last, it would clarify that penalties do not accrue if the network company achieves compliance before the date that is required on the FAS director's notice of violation.

Thank you.

Council Member Herbal, would you like to move your amendment?

I'd like to move Amendment 6, Version 1 to Council Bill 120706. Second.

It has been moved and seconded.

Council Member Herbal, would you like to speak to your amendment?

Thank you, Karina.

I think you did a great job of clarifying.

All six of these items in this sort of combined amendment addresses the concerns that I've heard from the network platform companies.

And I think it does a really great job of clarifying the expectations of the council as it relates to the ability of the funds to be used solely for the enforcement of these two ordinances.

as well as limiting the payment schedule.

Again, that was a request of the platform companies is to just make sure that the payment schedule was quarterly and not a possible monthly or annual payment schedule.

Thank you.

Any additional comments on this?

Anything else to add?

No?

Okay.

I will be joining the prime sponsor of the base legislation in supporting this amendment, and I'll be voting yes and encouraging a yes vote.

Madam Clerk, could you please call the roll on the adoption of amendment number six?

Councilmember Herbold?

Yes.

Councilmember Juarez?

Yes.

Councilmember Lewis?

Yes.

Councilmember Morales?

Yes.

Council Member Nelson.

Aye.

Council Member Peterson.

Yes.

Council Member Sawant.

Yes.

Council Member Strauss.

Yes.

Chair Mosqueda.

Aye.

Nine in favor, none opposed.

Look at that.

Unanimous.

Thank you, colleagues.

The motion passes and the amendment does carry.

and will be included in the base legislation.

Council Member Peterson, you have amendment number seven.

Central staff, would you like to please describe this for us?

Yes.

Amendment number seven would clarify the FAS director's authority to establish additional requirements in two ways.

It would clarify that the director may only require administrative information for the license application, and it would also clarify that the director may adjust fees by rules, but otherwise would be prohibited from adjusting network company obligations.

Thank you.

Councilmember Peterson, would you like to move your amendment?

Thank you, Chair.

Colleagues, I move to amend Council Bill 120706 as presented on Amendment 7.

Second.

It has been moved and seconded.

Council Member Peterson, would you like to speak to your amendment?

Thank you for the sympathy seconds.

I'm abstaining from my second, so.

Thank you, Chair and colleagues.

This amendment clarifies and specifies this new authority we'd be granting to the Director of our Financial and Administrative Services Department.

The amendment tightens up the language to prevent misunderstandings about the FAS Director's authority so that they're not creating different and new rules beyond those specified by the intent of the ordinance that we as a legislative branch would be enacting.

And this is especially important considering the extensive stakeholder process.

Thank you.

Council Member Herbold.

Not a sympathy second.

I intend to vote in favor of this amendment.

Thank you.

Thank you, Council Member Herbold.

I then do have some questions about this.

Council Members and Council Member Peterson, could you help address the concerns here, and I'll just state them, and if you have any thoughts about it, it's great.

Maybe we have a difference of opinion.

I think that community enforcement partnership work is fundamental to labor standard infrastructure at the Office of Labor Standards.

It has helped to inform people not only of their rights, but also continues to provide education and outreach.

We know that it's an industry that is really hard to do outreach, since many labor standards for this specific sector have not been traditional.

And there's been a lot of work needed to ensure that workers get information they need, just like there's a need to make sure that employers get the information they need.

So I see this as a way to ensure that there's just information out there about rights and responsibilities and ensure that there's effective information oops council members am i speaking to the wrong one yes i think all right i'll stop there's two council member peterson amendments so i will pause there and um just double check that we are good on this one okay no no other comments on amendment number seven then okay karina did you still have additional

I do not.

All right.

Looks like we could potentially move forward.

The chair is supporting the base, excuse me, the prime sponsor of the base legislation here is supporting this item as well as you've already heard from the sponsor, Council Member Peterson.

Council Member Peterson, did you have anything else you wanted to add?

Sorry for the confusion there.

Thank you.

Nothing to add.

Okay.

Council Member Herbal, anything to add?

Okay, all right, then let's do this.

Looks like another opportunity to find that common ground.

Madam Clerk, could you please call the roll on the adoption of amendment number seven?

Council Member Herbold?

Yes.

Council Member Juarez?

Yes.

Council Member Lewis?

No.

Council Member Morales?

No.

Council Member Nelson.

Aye.

Council Member Peterson.

Yes.

Council Member Sawant.

Council Member Sawant.

Council Member Strauss.

No.

Chair Mosqueda.

No.

Council Member, excuse me, Council Member Sawant.

Okay, four in favor, three opposed, one abstention.

Sorry, I got disconnected.

I'm an abstain.

Four in favor, two opposed.

Excuse me, four in favor, three opposed, two abstentions.

Thank you very much.

The motion carries, and Amendment Number 7 will be adopted.

Moving on to Amendment Number 8. I'm sorry, colleagues, for jumping ahead here.

Madam Central Staff, could you please describe Amendment Number 8?

Amendment number eight is sponsored by Councilmember Peterson, and it would establish requirements for the Office of Labor Standards administration of contracts that would be funded by fee revenue by prohibiting the office from using fee revenue to contract with community organizations for community-based enforcement, and also requiring the office to conduct a competitive solicitation and selection process for all contracts funded by fee revenue regardless of the value of such contracts, which would mean that the contracts would require a competitive invitation to bid or request for proposal.

Thank you, Council Member Peterson.

Let's now have you describe Amendment 8, please.

Thank you.

Colleagues, I move to amend Council Bill 120706 as presented on Amendment 8.

Second.

It has been moved and seconded.

Council Member Peterson, please go ahead.

Thank you.

And for me, the most important element of this amendment is the second one that you're seeing.

I just think it's a good practice for us to have an open process in awarding funds so that that organizations have an opportunity to, you know, that they get a chance to receive the funding and that it's not just a direct award behind closed doors by the department director to just sole source or direct a grant or contract.

So because I do hear the concerns from the chair about the first item and would be willing to do an oral amendment to strike that first part so that we can at least have the best practice of open, transparent process for who gets such contracts.

Thank you.

I'm going to take additional comments before we get into that potential motion.

Council Member, Council President Juarez, please go ahead.

Thank you.

I'm so glad Council Member Peterson brought that up because my notes say verbal amendment, maybe perhaps I could ask because I wanted to support this, but I had a problem with the first part because we do rely so much on community organizations that are, as we all say, in community and in these particular groups that inform us, besides city departments, what's actually going on in the community, on the ground, in labor practices.

That's how most of these violations are found is from these community groups that come to OLS and say, look, there's been wage theft, there's been worker theft, there's been overtime, there's been all these things that we've passed for labor protections.

So we kind of have to rely on them, but I didn't want to, I was just hoping that Council Member Peterson, and he did, So I don't know, Council Member Peterson is moving for the verbal amendment or I would support it if indeed we all honored a verbal amendment to remove number one and just voted on the second part of this.

And I'm not sure the parliamentary thing on how we do that, but that's where I'm at.

Thank you.

I'm assuming there's some heart palpitations here from our team.

I did not know that there was a possibility of a verbal amendment today.

And I don't know if central staff has any texts as well Um, I, uh, can I, can I ask, um, central staff capacity here?

We only have nine more minutes until we lose council members.

So, um, so I could, um, Allie who was on the line can help us through the procedural aspects of an oral amendment.

I do have the amendment in front of me.

Uh, it would require changing two sections that could be done quickly if there's an interest in amending it.

in this committee meeting.

MS.

And I'm going to ask the prime sponsor of the original bill just to speak to that real quick, since we've heard from Council Member Peterson of his interest.

Council Member Herbold, is there a comment?

MS. Thank you.

Yeah, I'm open to the idea of moving forward with element two in this amendment, as long as we're striking the section number one.

And just want to clarify that there's no onerous technical requirements associated with competitive bid process separate from the standard RFP process that's already in place.

And if Council Central staff can confirm that there is no sort of onerous additional requirements under number two beyond the standard process, then I would be prepared to support a verbal amendment to Amendment 8, striking one and voting in favor of number two.

Okay.

Sorry about that.

I was trying to amend the ordinance and listening at the same time.

So as far as the competitive selection or solicitation process, what that would mean is that OLS would have to do the request for proposals for any value of contract.

So if OLS wanted to a contract with an organization for a smaller amount such as say fifty thousand dollars or twenty five thousand dollars which might be in the range of what they contract with small smaller organizations for they would need to wait to do that until they were prepared to do a request for a proposal because that is quite an extensive process the way that ols does it they they follow all of the guidelines that are required by the city to do so.

I believe they also have interview panels.

They have a whole system in place for the way that they do the request for proposals for their community outreach and education fund.

So I can't say how they would conduct the RFP process for all of the fee revenue funded contracts, but it does add another layer of administration to the way that they would contract with organizations.

I can't say to the the amount of delay for that, but it would take more time, definitely.

Council Member, excuse me, Council President, is that an old hand?

That's okay.

Council Member Peterson, please go ahead.

Thank you, and Chair, it was because of your compelling remarks on the previous item that I want to make this motion, and I can I can't do the motion correctly for committee guidelines and our council rules.

But as Karina scrolls down, you can just see how minimal the amendment is to begin with.

So it's really just a couple of things being fixed.

In terms of the competitive process, FAS is doing this all the time.

They've been aware of this ordinance for a long time.

So I really, you know, this is part of their process, part of their machinery to do this.

And, you know, in terms of the timing of when these fees go into effect, central staff could remind me if this ordinance passes, when do these fees go into effect?

The fee would be in effect on January 1, and then the network companies would be required to start paying it in the fourth quarter of, did I say January 1 of 2025, and companies would be required to start paying it in the fourth quarter of 2025.

And that's my point is that there's plenty of, this is what FAS does a lot of and this is, which is one of the reasons we want to ensure it's competitive and then to give organizations an opportunity to have the funding and because the implementation date is later, it provides that time.

Okay, we got a, does make a decision here.

Council Member Herbold, I see your hand up.

yeah i'm sorry i'm i am uh hearing from the executive that the language in number two uh referencing any size um is problematic so that means no matter what the funds are for that's going out the door.

Even small, you know, $5,000 grants, for instance, for translation services, that's going to be problematic to administer.

So I'm sorry.

I was hopeful I was going to be able to support this.

I cannot.

And I would just say I appreciate the creative thinking Council Member Peterson.

Since we have been really discouraging walk-on amendments, I want to just underscore my appreciation for your willingness to try to find that common ground.

But given that we don't have the text, we've now received this information from the exec, I would prefer to just move forward with voting on your amendment as written for amendment number eight.

Okay.

Okay.

Colleagues, the motion is still in front of us to consider amendment number eight.

Seeing no additional comments, I will be voting no on this given what we have just discussed.

and encourage others to vote no.

And apologies, Councilmember Peterson, you are the prime sponsor of the amendment.

Please close this out.

MR. Thank you for the discussion, colleagues.

I just, I do want to caution us to, you know, if we get texts from the executive in the middle of our deliberations and we're basically ceding our authority to another branch of government, not allowing for the best practice of a process to enable organizations.

A direct award of $5,000 to an organization for translation services is excluding other organizations from providing those same services.

There's not an open process.

It's opaque to the public.

So I'm very concerned about

know if we're getting texts from the executive trying to sway our votes in the middle of our deliberations i just don't think that's good practice of the city council thank you i generally agree with you and having been speaking well others have received texts i appreciate that as well um and uh apologies uh for um uh making it seem like there's a division on that principle i do agree with you the importance of the separation of the legislative and executive branch is critical, and we're trying to put more of that into statute, as we will be discussing later.

So your point is very well taken on the policy.

I still have concerns.

So thank you for undersupporting the importance of that for this and future council.

Madam Clerk, could you please call the roll on the adoption of Amendment 8?

Council Member Herbold.

Yes.

I'm sorry.

No.

Council member Juarez.

Yes.

Council member Lewis.

No.

Council member Morales.

No.

Council member Nelson.

Aye.

Council member Peterson.

Yes.

Council member Sawant.

No.

Council member Strauss.

No.

Chair Moschetta?

No.

Three in favor, six opposed.

Thank you very much.

The motion fails and the amendment does not carry.

Okay, we're going to go on to the base legislation.

Some of these amendments did get passed, so I think there is some harmony there, some good common ground amongst colleagues.

and appreciate the diversity of the ideas brought forward i will turn it over to um councilmember herbal i see your hand up please close this out if there's any additional comments we'll come to that before a final vote on the amended ordinance in front of us

Because it is noon, I am going to forego the normal practice of speechifying about significant legislation that one sponsors in advance of the vote.

I really want Council Member Sawant to have the opportunity to vote on this legislation.

So with that, I appreciate your calling for a vote.

Okay, thanks.

Is there any additional comments?

Looks like that pep talk worked.

Okay, colleagues, we now have the amended ordinance in front of us.

Agenda item number 22, Council Bill 120706 as amended.

Hearing no additional comments, Madam Clerk, could you please call the roll on the adoption of Council Bill 120706 as amended?

Council Member Herbold?

Yes.

Council Member Juarez?

Yes.

Council Member Lewis?

Yes.

Councilmember Morales.

Yes.

Councilmember Nelson.

No.

Councilmember Peterson.

No.

Councilmember Sawant.

Yes.

Councilmember Strauss.

Yes.

Chair Mosqueda.

Aye.

Seven in favor two opposed.

Thank you very much.

The motion passes and the bill as amended will be sent to the Seattle City Council for final vote.

Okay.

Thank you so much, everyone.

Appreciate the discussion and dialogue and points well taken all around.

Karina, you've done a tremendous amount of work on this and we appreciate all of your work.

Council Member Herbold is signaling the thank you emoji so thank you so much for that and anything on your end karina no thank you very much okay excellent um councilmember swan will be excused for the rest of the afternoon i hear no objection councilmember swan is excused for the rest of the afternoon okay um so it's my preference i think that we continue on with agenda item number 28 we do have another hour here I just want to take the temperature of the room to make sure that nobody is desiring a two-hour break.

We could reconvene at 2 p.m.

We could not reconvene earlier, as the rules require us to come back at the stated time on our agenda.

So would folks like to continue through on agenda item number 22, or would you like to have an extended break at this juncture?

Council President, what do you think?

i'm thinking we should have a break because we have eight amendments isn't it or not i'm sorry we have other items yeah the other yeah yeah would that be okay that would be fine with me i just want to make sure that we can keep folks until you know five o'clock if um if necessary I think we planned for that, but just want to double check.

Okay, I'm seeing some nods.

Look at this .

Is anybody playing bingo?

I keep saying it.

We will do that then if that's okay with central staff.

Okay, I'm seeing some nods.

Yeah, I'm just checking with my team.

I do think that means we will run the full afternoon, and that'll just keep staff here until 5 or 5.30 as we finish the work, but we can be available to do that.

Well, we're not taking any votes, though.

That's correct.

That's correct.

This afternoon is a briefing, and we've already summarized the Revenue Stabilization Workgroup Report.

So that's helpful.

And then I think as Council Central Staff Director Esther Haney noted, I do anticipate a robust discussion this afternoon, even though there's not votes.

But I look forward to that briefing and want to give the chance for all of the sponsors to have the opportunity to dive into their potential proposals, because we won't be revisiting this until after the Thanksgiving break.

And we will come back on the 30th for votes then.

So again, it would be Great.

If you all are interested in taking a two-hour break, we will reconvene at 2 p.m.

and we'll dive into all things revenue and budget transparency at that time.

Hearing no objections.

One, two, three.

So be it.

The Seattle City Council Select Budget Committee meeting will be in recess until 2 p.m.

Have a good extended break and thank you for all of your work this morning.

Take care, colleagues.