Select Budget Committee November 30, 2023

Thank you very much for joining the Select Budget Committee meeting.

Today is November 30th, 2023. I'm Theresa Mosqueda, Chair of the Select Budget Committee.

Madam Clerk, will you please call the roll?

Council Member Herbold.

Council Member Herbold.

Here.

Thank you.

Council President Juarez.

Here.

Council Member Lewis.

Present.

Council Member Morales.

Here.

Council Member Nelson.

Council Member Peterson.

Here.

Council Member Sawant.

Council Member Strauss.

Present.

Chair Mosqueda.

Present.

Seven present.

Okay, wonderful.

Thank you, colleagues.

Today is the last day of the Select Budget Committee meeting.

I think we've done our thank yous and all of the work that we've already accomplished this year as we took on track one.

So, Madam President, I will...

suspend my thank yous for this last committee meeting, but just really emphasize my appreciation for all of you.

We did take on a lot this year related to the Select Budget Committee.

We have on today's agenda the final meeting.

We will discuss and possibly vote on Resolution 32116. Council Bill 120716 and Council Bill 120717 also listed on today's agenda is discussion only on briefing and discussion on Council Bill 120602 and Council Bill 120601. These are the water tax repeal bill and the capital gains tax, which I'll make some comments on in about a second.

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

Hearing no objection, today's agenda is adopted.

I don't see anybody signed up for public comment remotely.

We have one person in the room.

Would you like to provide public comment today?

Okay, there's nobody else signed up in the room either, if I'm correct, Linda.

Okay, thank you.

And with that, we're gonna jump right into it.

Colleagues, we have a number of items here that we will be discussing on track two for today's agenda.

Madam Clerk, could you please read item one into the record?

Agenda item one, resolution 32116, a resolution relating to the city's annual budget process, updating modified biennial budgeting processes, establishing guidelines for mid-year budget changes, establishing data sharing and reporting requirements, and superseding resolutions 2885 and 31954 for briefing, discussion, and possible vote.

Thank you.

Do you also mind reading in item number two on the agenda as well?

Agenda item two, Council Bill 120716, an ordinance relating to the establishment of a fiscal transparency program requiring periodic and consistent reporting and monitoring of city budgetary, financial, and fiscal policy information to the city council and the public, adding a new chapter 3.1402 and amending sections 3.14.100 and 5.08.020 of the Seattle Municipal Code and requesting that the code revisor recodify chapter 5.08 of the Seattle Municipal Code and sub chapter one of chapter 3.14 for briefing discussion and possible vote.

Thank you so very much.

And today with us we will have central staff who will help provide additional information or background as a reminder on these two pieces of legislation.

Colleagues, these are two policies that we had teed up in our committee earlier this year.

Thanks to central staff for their work on this legislation.

These go hand in glove.

related to fiscal transparency and additional accessibility and accountability for our city's budgeting process.

Thanks to the city budget office for their collaboration.

As you just heard, there is one, a resolution in front of us to update and reflect current practices for the city's annual budget process.

and mid-year budget changes, and two, an opportunity through legislation to create a fiscal transparency program within the Seattle Municipal Code to codify certain fiscal transparency reporting requirements.

The intent of these two items together is a package to memorialize the policy the processes and the practices that were discussed at that work group that the city budget office and central staff participated in as a result of a statement of legislative intent that I sponsored in 2022. The work was completed in 2023. And we have in front of us part of those recommendations that we're seeking to advance today.

I'm going to turn it over to central staff for additional information.

Good morning, Budget Committee members.

Esther Handy, Director of your Council Central Staff.

The Budget Process Resolution, Resolution 32116, is the first bill in front of you.

It does four things, and there is one amendment for consideration today.

I'll do a brief summary of those four items in the bill and then move to the amendment.

The Budget Process Resolution replaces and supersedes Resolution 288, It was adopted in 1994 and defines the City's modified biennial budget process.

This resolution continues the City's practice of considering two budget years together, having the Council adopt a first-year budget ordinance and endorse a second-year budget by resolution.

Second, the resolution defines the types of allowable mid-year budget changes.

through an annual carry forward, mid-year and year-end supplemental bills, and supplemental grant appropriation bills, and it defines the cadence of those throughout the year.

Third, it charts a path to explore new practices for the city's planning reserves, And finally, the resolution defines a current year financial reporting program for the city that will build on the current financial monitoring pilot that the City Budget Office and Office of City Finance have rolled out this year with city departments and expects to be fully operational by 2025. That's a brief summary of the resolution that we walked through in more detail on November 15th.

Madam Chair, happy to take questions on the base or describe the amendment.

Are there any questions?

Linda, can you ask them if there's any questions?

I'll go ahead, and Deputy Director Panucci, if you wouldn't mind putting Amendment 1 up.

Oh, I see a council member hand.

Happy to take a council member hand, and then we can describe the resolution and return to moving it.

Council Member Nelson?

I just wanted to note that I have now arrived from the Urban League Breakfast, so sorry for being late.

Thank you.

Happy to have you with us.

Thank you, Ali.

I'll describe Amendment 1. This is sponsored by Councilmember Peterson.

and would add a new section to the resolution requesting a briefing from executive departments on central rates and indirect cost changes for the next biennium.

Central rates typically cover internal services like IT, HR, and facilities, and the costs for those are charged internally to other city departments that receive services from those others.

THE COUNCIL HAS A STRONG UNDERSTANDING OF SOME OF THE CENTRAL COSTS LIKE RETIREMENT AND HEALTH CARE, SORT OF THEIR BASIS AND HOW THEY'RE FUNDED IN THE BUDGET.

OTHERS ARE MORE COMPLEX AND THE OPPORTUNITY HERE IS TO IMPROVE BOTH THE COUNCIL AND THE PUBLIC'S UNDERSTANDING OF THE COST OF INTERNAL SERVICES, HOW THOSE TRANSLATE INTO INTERNAL RATES CHARGED TO CITY DEPARTMENTS AND FUNDS WITH ULTIMATELY THE GOAL OF IT BEING ABLE TO BETTER ASSESS THE APPROPRIATE FUNDING LEVELS TO SUPPORT THESE SERVICES.

The amendment would request a report to the Council Finance Committee by April 30th on those details.

Madam Chair, I'll turn it back to you whether you want to turn to the sponsor to move this amendment or speak to it.

Thank you so much.

Before we do that, I do see one person signed up for public comment that we may have missed in going too fast.

It says that they're not present, though.

I just want to confirm that they're not waiting in the wings.

I would be happy to go back and have them provide public comment.

Looks like they're online, hang on.

I'm sorry, what was that?

It would appear they are actually calling in.

So hold on, please.

Okay.

Colleagues, I'm going to suspend the portion of the discussion that we're in right now, taking on item number one, to hear from the one person who's signed up for public comment today, given that we moved through that relatively quick.

As soon as they're available, IT, you're able to admit Peter Schrappen.

You are welcome, Peter, to provide public comment.

We'll do two minutes, Peter.

Good morning.

Thanks so much.

Hi, this is Peter Schrappen, Vice President for the American Waterways Operators.

We are the Tugboat, Towboat and Barge Trade Association, and we've been around for 80 years.

Our members include Saltchuk, Crowley, Centerline, Majestic, Alaska Marine Lines, Sunim, a few, Western Towboat, I could go on.

But yes, we are a linchpin of the working waterfront, and I'm speaking out in opposition to the increase of the capital gains tax.

The city has enough money and its tax is unnecessary.

As you probably know better than anyone, the city's budget has increased $1.3 billion since 2010, which is twice the rate of inflation.

And the city's population has only increased by 10%.

On top of the head tax, this will be more money to spend on inefficient, what we feel are inefficient and unpopular projects.

So we'd ask you to shelve this idea and not focus a new tax on 163 people who, some of them are marine maritime entrepreneurs and look for other sources to of our city's problems.

Thank you.

Okay.

Thank you so much.

And we will come back to that item at the end of the agenda.

Again, it's listed for briefing and discussion.

And thank you so much.

I don't see anybody else who signed up for public comment.

So we will go ahead and close public comment at this point again.

Thanks so much.

If anybody's listening and would like to provide public comment, you can do so by going to your...

and sending an email to council at seattle.gov or any of our individual emails or phone numbers listed on our website.

With that, the item number one has been described by central staff.

We do have an amendment in front of us.

This is an amendment that council member Peterson teed up in our initial discussion and I'm supportive of this amendment and I will be voting yes on this.

Council member Peterson, would you like to describe your amendment and vote, excuse me, would you like to move your amendment and then add any additional description?

Thank you, Chair Mosqueda.

Colleagues, I move that 32116 is shown on the agenda.

Second.

Second.

Thank you.

Thank you.

It's been moved and seconded.

Council Member Peterson, would you like to describe your amendment in more detail?

Thank you, and I really appreciate working with central staff on this.

I really appreciate the work that they did during the budget process to try to get as much information as possible from the executive on how these central services administrative costs are calculated and allocated.

We know it's about a baseline of about $500 million, and then we endorse the budget for 2024 Just 12 months ago, and then there was then came a 17Million dollar increase above that 500Million dollar baseline.

And as we were trying to get more money out the door to community for different priorities, we wanted to see if there was any efficiency that we could from which we get more money and what we learned is that we need more information what we what we learned is that there needs to be more transparency about this and understanding and so this amendment crafted in collaboration with central staff will help them to get that information and the future future city council as well so hope you all support it thank you

I will also be supporting this amendment here today.

For my colleagues' engagement on this legislation in front of us, I think that this is one additional way that we can continue to try to get information from the City Budgets Office in real time.

Many of the things that I went hoping to accomplish in our budget related to true biennial budgeting, real-time data on whether or not there is vacancies within departments, and information like this that Councilmember Peterson is bringing forward will only help for future councils to be able to have Accurate and up-to-date information as the final budgets are constructed year over year and I appreciate your Your work on this council member Peterson.

Are there any additional comments on this?

Hearing none madam clerk.

Do you mind please?

We're calling the roll on the member.

Oh, excuse me I just want to make sure that you all have moved the underlying resolution that you are amending in front of you

Okay, then.

Let me just do that, Councilmember Peterson, and then we're going to have to go back and have you make your motion again.

Okay.

Okay.

I thought he did, and I seconded.

He did.

I didn't move the underlying legislation.

Oh, I see the amendment.

Got it.

Let's do that again.

I move the committee recommend adoption of Resolution 32116. Is there a second?

Second.

Thank you.

It's been moved and seconded.

Councilmember Peterson, would you like to move to amend the resolution?

Yes, I move the amendment to resolution 32116 as shown on the agenda.

Second.

And Council President second it.

Thank you.

Amendment number one has been moved and described.

Any additional comments on that?

Hearing no comments, Madam Clerk, could you please call the roll on the adoption of amendment number one?

Council Member Herbold?

Yes.

Thank you.

Council President Juarez?

Yes.

Council Member Lewis.

Yes.

Council Member Morales.

Council Member Morales.

Council Member Nelson.

Aye.

Council Member Peterson.

Aye.

Council Member Swant.

Council Member Strauss?

Yes.

Chair Mosqueda?

Aye.

Seven in favor, none opposed.

Thank you so much.

Sorry.

That's okay.

Are you under the weather, Council Member Morales?

Yes.

Apologies.

I vote aye.

Excellent.

Thank you.

Eight in favor, none opposed.

Thank you so much, colleagues.

It is unanimous.

I'm sorry, Council Member Morales, you're feeling under the weather.

Thank you for dialing in.

If you need to log off, we understand.

And I will also note that Council Member Soan's office let us know that she would not be here today.

So she is excused.

So the motion carries and the committee recommendation that the resolution be amended has been passed.

Madam Clerk, I don't see any additional hands.

Could you please call the roll on the adoption of the resolution as amended?

Council Member Herbold?

Yes.

Council President Moroz?

Aye.

Council Member Lewis?

Yes.

Council Member Morales?

Yes.

Council Member Nelson?

Aye.

Council Member Peterson?

Yes.

Council Member Strauss?

Yes.

Chair Mosqueda?

Aye.

Eight in favor, none opposed.

Thank you so much.

The motion carries and the resolution as amended will be sent to the Seattle City Council for a final vote.

And we have already read item number two into the record.

This goes together with the item we just adopted.

I want to again thank Director Esther Handy and Allie Panucci, who've been working on this in partnership with Central Staff's Tom Mikesell and Eden Sesec.

In addition to the folks from the city budgets office, Julie Dingley and her team, as we have asked for the work group to identify ways to enhance our fiscal transparency and budget process, the central staff has been working diligently to move those recommendations into legislative action and include those in our track two recommendations.

APPROACH HERE FOR THE 2024 BUDGET PROCESS.

THIS WILL ALLOW FOR US TO HAVE ONGOING POLICIES THAT DON'T JUST AFFECT 2024, BUT ARE REALLY ABOUT OVERALL BUDGETING AND TRANSPARENCY FOR PERPETUITY.

AND I WANT TO THANK YOU ALL FOR YOUR WORK ON RESOLUTION 2885 AND 318. What we have in front of us with the next item is an opportunity for us to really move forward on finalizing the recommendations from that work group, recommendations number one, two, and three, and eight in that report, if you have not had a chance to read it.

Again, this is a report that came to the Finance and Housing Committee meeting mid-year this year, and moving forward with this package of legislation will help us move in a biennial budget direction, including the new approach to mid-biennial review, as Director Handy noted.

It sets the cadence for the mid-year changes, first quarter, mid-year, and end of year supplemental and grant acceptance process.

And it defines the next steps for planning reserves, including exploring the creation of an appropriated risk reserve that is operationalized in the 2025-2026 biennial budget.

That was recommendation number eight.

So continuing the theme of fiscal transparency and the discussions that we've had with City Budget Office and central staff over the last few years, This is the final approach that helps us as decision makers have more access to information in a quicker way and in a transparent way that will allow for us to have access to details earlier in the budget process so we're not finding where there might be additional pockets later in the process as many have experienced.

I'm excited that this is an opportunity as well, this in partnership with the revenue stabilization work group that is going to have future work to come on how we can free up additional revenue and the revenue forecast council that we created two years ago.

I think all of these components are really important as we think about how we create greater stability for the city's fiscal plan over the next six years and how we create a more accessible and transparent budgeting process.

So with that, Esther Handy, did you have anything else you'd like to add to item number two that's already been read into the record?

I'll just add that for item number two, the fiscal transparency ordinance, some of it repeats what is in different parts of the code, but it establishes the fiscal transparency program into a single section of the code, that's section 3.140.

consolidating existing reporting information on past and current and future activities, and is a section of the code that could be added to and grown over time as the council and the executive continue discussions about budgeting and financial practices.

It sets the requirements for summary and fiscal notes into code and updates the CBO's director, the CBO director's authority to transfer funds mid year.

Excellent.

Thank you for me.

Are there any other questions, colleagues?

Okay, I'm going to move this legislation in front of us.

I move the recommended passage of Council Bill 120716. Is there a second?

Second.

Thank you.

It's been moved and seconded.

Are there any additional comments on the legislation in front of us?

Hearing none, Madam Clerk, will you please call the roll on the committee recommendation to pass Council Bill 120716?

Council Member Herbold.

Yes.

Council President Juarez.

Aye.

Council Member Lewis.

Yes.

Council Member Morales.

Yes.

Council Member Nelson.

Aye.

Council Member Peterson.

Aye.

Council Member Strauss.

Yes.

Chair Mosqueda.

Aye.

Eight in favor, none opposed.

Thank you so much.

The motion carries and the recommendation to pass.

The bill will be sent to the Seattle City Council for a final vote.

That's a big deal.

That's been four years in the works.

And so we're really excited about this.

We want to make sure to share this information out with the public.

I know it gets a little wonky at this time of year and we're all tired.

You were tired and done with the budget process, but this is a really big deal.

Look, Council President, I know you're excited about it too.

And I just want to say thanks to everybody who put this in motion, multiple year process, and we will hopefully be able to build on this year over year.

So thank you for helping to increase transparency and accessibility to the budget process for members of the public and especially for future council legislators who are sitting in these seats.

No matter who is here, we want to continue to improve these processes.

and concretize the approach that we've put into place so that there's greater accessibility to information and additional detail.

And one year, colleagues, I'll say it last time, we will one year have a budget bill that allows for you to see line items striking out changes.

And you can see the dollar amounts increasing or decreasing, so the base budget is always known.

But I really appreciate the work that we've been able to accomplish through these two pieces here and look forward to hearing how these evolve in the future.

With that, Madam Clerk, could you please read item number three into the record?

Agenda item 312717 an ordinance relating to human services contracts that include appropriated money expressly reserved for the purpose of human services provider pay requiring that such appropriated money be used only for wage increases for human services workers that are in addition to inflationary adjustments establishing contracting and reporting requirements regarding use of such appropriated money and adding a new chapter 20.61 and section 20.61.010 to the Seattle municipal code for briefing discussion and possible vote.

Thank you so much.

And council member Herbold as chair, excuse me, as vice chair of this committee, but sponsor of this legislation, would you like to move the legislation so it's in front of us?

Absolutely.

I would like to move the, Let me find the number.

Council Bill 120717. Yeah, yeah, yeah.

I'm sorry.

I'd like to move Council Bill 120717. Second.

It's been moved and seconded.

Thank you, Council Member Herba.

I'll turn it to you in just a second.

I just want to welcome Jen Labreck, who is here with us from Central Staff as well, who can provide an overview.

I'll first turn it to the sponsor of the legislation to see if you'd like to add any context, and then we'll have Central Staff walk us through it.

It has been moved so that it is in front of us and ready for action.

Council Member Herbold, would you like to go first?

Sure.

Thank you.

I would like to note that it's probably a function of you being the budget chair, Madam Chair, but I am not in the legislature listed as a sponsor, at least as far as I can see.

So I just want to say publicly I would like to be listed as a sponsor if I'm not currently, and if I'm misreading the indication in legislature, my apologies.

But the background on this legislation relates to the University of Washington wage equity study that council funded back in a couple of years ago.

The study itself became available in February of this year.

That wage equity study found that even when you hold constant worker characteristics such as educational level or age, that the median annual pay for human services workers in the nonprofit sector is 37% lower than in non-care industries.

And also, the study also found that workers who leave the human services industry for a job in a different industry, those workers see a net pay increase of 7% just a year later relative to the workers who stay in human services.

And that's something that we call a pay penalty, a pay penalty for working in the care industry that should definitely not exist.

The wage equity study recommended that by 2025, nonprofit human services organizations and governmental and nongovernmental funders could increase human services worker wages by at least 7% to close that pay penalty gap.

And the council passed a resolution, resolution 32094, earlier this year, stating council's intent to consider increasing human services department administered contracts by 7%.

Instead of 7%, the mayor's office in his proposed agenda included a 2% increase for human services provider pay to all HSD-administered contracts receiving a, this is in addition to the required by statute inflationary adjustment.

And so the purpose of this legislation is to simply require that human services contracts that include money provided for the purposes of wage equity, that those funds be used for that purpose.

And that be, again, in addition to the inflationary adjustments.

The legislation establishes some contracting and reporting requirements regarding the use of such money in order to make sure that the intent of the council as it relates to wage equity increases is adhered to.

Thank you.

Thank you so much.

I will make sure to note as well for a legislator that it would be great to have Council Member Herbold listed as the sponsor, seeing nods from the clerk.

Thank you.

Council Member Lewis, I know you were a sponsor of previous legislation as well.

Is there anything that you would like to add or comment on on this?

Thank you so much, Chair Muscata.

I appreciate the opportunity to weigh in.

I think that previous speakers have said everything I would say.

So just to say that this is really critical for our future planning as a council and really support the opportunity to have worked on this and encourage colleagues to pass this this morning.

Great.

Thank you, Council Member Lewis.

Jen Lebrecht from Central Staff, would you like to provide a quick summary?

Hi, good morning.

Yes, I will briefly review the legislation.

So this legislation does four main things.

Just as Councilmember Herbal mentioned, it requires that any human services contract that includes appropriated money expressly reserved for the purpose of human service provider pay must be used only for wage increases for human service workers.

It requires that such wage increases be in addition to any inflationary adjustments.

It establishes contracting and reporting requirements regarding the funding, including reporting on which organizations use the funding, which positions received pay increases because of it, and what other funders also contributed to pay increases during the same time period.

And finally, it adds a new chapter to Title 20 of the section of the Seattle Municipal Code.

As a reminder, the 2024 budget approved by Council earlier this month provides a total of $5.1 million for provider pay funding with $5.1 million also provisoed for that purpose in the budget.

This legislation will always need to be activated by a proviso.

The proviso is a necessary step to expressly reserve the budget funds for the purposes of provider pay, which then triggers the requirements found in this legislation.

Thank you.

Thank you very much.

I think I saw a hand.

Councilmember Nelson, did you have a hand?

Any comments or questions from you?

Yes, thank you very much.

So I still have some concerns about this legislation, not because I don't value human services, service workers or the work that they do, but because I believe the legislation is based on a methodologically flawed study that we received last year, the wage equity study.

But I'm going to vote for this because as we saw from a report that the state auditor's office issued last November, jurisdictions need to do a better job of directing and monitoring how our investments are being used.

And so I appreciate the chair of the Public Safety and Human Services Committee, Council Member Herbold, bringing forward this resolution to make sure that the investments are going to precisely for the intent, which is to increase pay.

Thanks.

Excellent news.

Thank you very much, Council Member Nelson.

Any additional comments?

Okay, I'll just add some comments and see if there's any closing comments from our now official sponsor, Council Member Herpel.

I want to, again, thank Central staff for your work on this, Jen Lebrecht, during the budget process.

Thank you for helping to ensure that all of the layers were peeled back so that we weren't missing.

any workers.

It was our intent to ensure that all of the contracts that the city originally held had an inflationary adjustment.

And as Council Member Herbal noted, all of us want to work towards that 7% pay disparity that we should be closing and very much appreciate that Mayor Harrell did everything that he could in the proposed budget that he sent down.

Increasing the base pay by 2% is something that we maintained in the budget.

I think had we all had better outlook for future fiscal stability of our council.

We would have tried to get that to the 3.5%.

That was our goal for this year.

But do appreciate that this 2% is an important down payment on the commitment to close the wage gap.

And even then, when we were all in unison, the executive and the legislative branch on wage, the base wage increase necessary and the inflationary adjustment necessary to maintain our commitment to the human service providers, we still had to put the pieces together to ensure that no workers were left out.

So Jen Labreck did a tremendous amount of research in partnership with community organizations to help really understand who potentially would have been left out if we did not close some of the gaps that were unintentionally left.

Again, unintentionally, because the legislation that the council passed a few years ago was very clear that we wanted to close that gap.

And here we are saying much more future work needs to be done so that we can fully close that gap and not experience a pay penalty and ensure that year over year, these very workers who were already on the edge of potentially losing their home or living in their cars and providing care to our most vulnerable community members, that they themselves are not having to then do that work in addition to the advocacy necessary for pay gap and inflationary adjustments.

So thanks, Jen, for all of the work that you did during the budget.

Thanks for the work that you're doing on this legislation.

Thank you, Council Member Herbold, for being a fearless champion on this issue over the last few years.

And I also want to thank the organizations who have been working with this council to increase provider pay and make sure that we're not leaving workers behind in this or any future budget process in entities such as a Downtown Emergency Services Center, DESC, SEIU Healthcare 1199 Northwest, organizations like Youth Care, our various affordable housing providers who provide services within those buildings and have reminded us that the buildings might look the same on the outside, but the needs of the people with inside the resident needs have dramatically increased and changed.

Thanks to the Seattle King County Homelessness Coalition, Hallie and Allison Isinger have been incredibly helpful and informative throughout the years and to the Human Services Coalition as well.

And to all of our frontline human services workers who have come to council to share their stories about just the sheer desire to continue to provide care to the most vulnerable community members and are coming to help us understand how these wage gaps and pay penalty have affected their ability to stay in this industry.

And thus, when they do not have pay stability and are forced to make decisions about whether or not they themselves are able to put food on the table or keep a roof over their head.

They often end up leaving this sector when we need people in this community providing human service work so desperately to be able to actually solve our homelessness crisis and the shadow pandemic.

that is creating greater instability for many community members still for our Seattle residents.

So thank you to them, the human service workers who came and provided testimony after testimony, sharing their experience about how stability and sustainability for wages and the human services sector could actually improve care and improve the coordination of services for our community.

I appreciate it.

Council Member Herbal, do you have any closing comments?

Thank you, Madam Chair.

I think you covered a lot of the thanks that I would offer and covered a lot of the issues of why this legislation is important.

I did want to, again, reinforce the fact that this is a multi-year campaign to close that 7% pay penalty gap.

And for any of the remaining council members who will be here next year, if any of you have questions about the methodology, I would be happy to facilitate an introduction to the researchers to get those questions answered.

This is an issue that the Human Services Coalition will be bringing up again next year.

And so I really hope that we, again, address any questions that we have about the study.

between now and next budget cycle, as well as appreciate that central staff will still be around to ensure that the triggering proviso is included moving forward, and just hope that we collectively can have the institutional knowledge to continue to support this campaign moving forward in years when the sponsors of this legislation and of these investments won't be here any longer.

So thank you.

Thank you, Council Member Herbold.

Let's do this final act on human service provider wages with the call of the roll.

Madam Clerk, could you please call the roll on the adoption of Council Bill 120717?

Council Member Herbold.

Yes.

Council President Juarez?

Aye.

Council Member Lewis?

I can't vote.

Yes.

Council Member Morales?

Yes.

Council Member Nelson?

Aye.

Council Member Peterson?

Aye.

Council Member Strauss?

Yes.

Chair Mosqueda?

Aye.

Eight in favor, none opposed.

Wonderful.

The motion carries and the recommendation that the bill, Council Bill 120717, will be sent to the Seattle City Council for a final vote.

Congratulations all.

Okay, Madam Clerk, could you please read items number four and five into the record together?

Agenda Item 4, Council Bill 120602, an ordinance repealing the tax on gross income derived from the business of selling or furnishing water for hire to customers, amending Section 5.48.050 and 5.48.060 of the Seattle Municipal Code for briefing and discussion.

Agenda Item 5, Council Bill 120601, an ordinance imposing an excise tax on the sale or exchange of certain capital assets in Seattle, adding a new chapter 5.66 to the Seattle Municipal Code and adding a new section 5.45.050 to the Seattle Municipal Code for briefing and discussion.

Thank you very much.

Thank you, colleagues, for your work throughout the year and all of the conversations we've had on these items.

Actually, the concept here that is in front of us has been introduced earlier this year prior to the budget.

I want to thank Councilmember Peterson for his work on the two items listed here today.

At the top of the meeting, I noted that we had the last two items listed for briefing and discussion.

We will not be voting on these items here today, but I want to provide additional context on the legislation in front of us, and we also have central staff with us who can walk us through an orientation to the legislation, as well as our prime sponsor.

The water tax repeal legislation and the capital GAINS tax legislation, both sponsored by Councilmember Peterson.

Again, I want to thank him for the work that he's done to bring the legislation in front of us here today and to initiate the conversation, both about how to look at more progressive revenue streams and specifically how we advance a known progressive resource or revenue source being capital gains.

There's been a lot of conversation about how Our city can advance progressive revenue strategies and help to create greater sustainability, and I very much see the capital gains legislation as part of the trio of legislation that we knew were potentially possible options for the council to consider as a result of receiving the revenue stabilization workgroup report.

While we appreciate that the workgroup report identified capital gains as a possible item for advancement, Councilmember Peterson had already begun teeing that up with the foresight that that was a possible item for Council, and had the initial intention of replacing the water tax source with capital gains.

I think it's really important that you, Councilmember Peterson, had teed that up for our discussion and really appreciate that the capital gains tax was one of the three items that this Council could potentially consider.

Again, if you'll remember, the Revenue Stabilization Workgroup had three items out of nine that were potentially actionable.

Meaning that we had solid advice that we could potentially amend existing statute to do something like increase the jumpstart progressive payroll tax.

Well, we did that in the budget.

We increased the jumpstart progressive payroll tax to the tune of about $20 million to go specifically to mental health resources.

That legislation, the base legislation, was then not advanced to track two because it was used to fund the mental health services for youth around Seattle and a very important immediate investment.

So I want to again thank you colleagues for advancing that and Council Member Sawant who had year over year brought that legislation forward.

But because it was part of our 2024 action, it was then not part of our track two action here.

The other item that was potentially for consideration was our CEO pay ratio legislation.

And we spent some time in our previous meeting on November 15th talking about how I had high hopes that the CEO pay ratio was going to be a vehicle to help close the revenue gap.

Given the timing of when we received the revenue stabilization workgroup report and the then budget that we had to take on the fastest way that we thought it might be possible to advance revenue a CEO pay ratio policy similar to what San Francisco already has in place, similar to what Portland already has in place.

We thought it would be a simple vehicle to amend the Jumpstart progressive payroll tax and, if you will, basically consider an excise tax on top of that for the existing payers and look at the ratio between the CEOs that are already paying in and the companies that are already paying into Jumpstart.

and add an additional assessment based on who had the most, you know, the widest gap between the CEO pay and the workers, meaning at least 100 to 1 ratio that the CEO made 100 times more than the median worker within those companies.

However, even just using that vehicle as an avenue to advance CEO pay ratio was only bringing in single-digit dollars, $7.5 million, And that did not seem like the best avenue to advance that very important and hopefully actionable policy in the near future.

So to me, as I mentioned on November 13th, this signals that additional work is necessary to work on a CEO pay ratio tax, not using Jumpstart as the base vehicle, but really going back and evaluating how to craft from scratch.

a CEO pay ratio more akin to what San Francisco and Portland have done.

So that is not in front of us either because of the need to do additional work on that so that there's more resources that could potentially be brought to the city.

And per the conversation we just had led by council member Herbal, very timely given the wage disparities that we see in the city.

the income inequality that we've seen grow in Seattle.

I think it's very important for us to still have a council that takes on evaluating how to advance CEO pay ratio in the future.

That leaves us with the last item, which was capital gains.

And I want to thank Councilmember Peterson again for teeing up the discussion around capital gains tax and really think the state legislative members as well, who for over maybe a decade had been trying to advance capital gains in the state legislature and were ultimately successful.

have won in the courts and continue to win, I believe, in the court of public opinion about how a capital gains tax is a way to help level the playing field and at least identify additional resources to invest in the very community and workers and small businesses that help make our region and our local economy successful for many entities that would be assessed by a capital gains tax.

So thanks again to our state legislative partners for advancing the capital gains revenue option at the state level.

That has been relatively successful, actually extremely successful, bringing in over three times as much as the anticipated revenue originally projected.

So an incredibly important revenue source for our state as well.

And as we look to create greater stability and predictability for revenue sources in Seattle, I'm still very optimistic that we could, in Seattle, at some point in the future, advance a capital gains tax.

But I want to defer to Councilmember Peterson after I make this following point.

As we look at the current landscape that is occurring in our state relative to state capital gains, I want to make sure that we in the City of Seattle continue to offer firm support for the state to be able to maintain and protect the capital gains revenue source.

Given the circumstances surrounding capital gains, the efforts that are currently underway to overturn that progressive revenue source, and the threats that that potentially would impose, not just on residents in Seattle, but across the state, my hope is that if we give the state legislators additional time to make sure that that revenue source is protected and not fold into any additional attempt to overturn that progressive revenue source, then we as a state, including residents of Seattle, will be better positioned in the future to potentially act upon this progressive revenue source when it's the right time.

Recognizing the circumstances that are currently out there that are trying to overturn and undo capital gains, I would like to colleagues leave this in the budget committee for a future action and consideration, perhaps next year or the year after that, that the council could potentially be taking on a discussion about these two pieces of revenue at the right time when we see how the current efforts to overturn this important critical revenue source that is capital gains ultimately play out.

I remain very committed to supporting our state legislative members who have advanced the capital gains tax and in doing so would offer to this body to keep this piece of legislation in the budget committee for future action, but not prior to the outcome of the attempt to change capital gains at the state level and show our strong support for our state legislative partners who will be defending capital gains as well.

And in doing so, that is why I have listed the water tax repeal and capital gains today as briefing and discussion and not action for this council to potentially take on.

Council Member Peterson, before I turn it over to central staff for any additional comments on this item, these two items, would you like to comment on these?

And again, thank you for your work to tee this up.

Thank you, Chair Mosqueda.

And yes, I agree with everything you've said and support how we're handling this today.

Colleagues, these two council bills, 120602 and 120601, were crafted and announced together back on June 7th with the goal of making more progress on tax reform here in Seattle.

I do want to thank City Council Central staff Tom Mikesell and Brian Goodnight and others, as well as Hannah Thorson on my team, our council communications team, and our city attorney's office for their work on both pieces of legislation to attempt to address one of the most regressive and unfair tax systems in the nation.

in our state, but I agree it's not prudent to vote on these bills today due to feedback we received recently from progressive state leaders who want to make sure that our eagerness for additional tax reform here at the local level doesn't inadvertently jeopardize the original progress made on the newly affirmed statewide capital gains tax.

So while we're not voting on these two bills this year, the bills are well crafted and ready for action by the next year's city council to consider so they can make our tax system more fair and progressive once our statewide leaders ensure that their progress on tax reform has safely solidified I want to thank Council Member Herbold for her support around creative tax reform.

I want to thank our budget chair, Council Member Mosqueda, for her wisdom and collaboration on thinking through the timing of this tax reform package.

And I agree that the next City Council should consider this due to our mutual desire to make sure we preserve what's been gained throughout our state already.

The good news is the tax reform legislation package was endorsed by several nonprofit leaders in our city.

Derek Belgrade of Chief Seattle Club said Seattle's water utilities tax places a disproportionate burden on low-income communities and our members.

Repealing this regressive tax will allow more of our members' income to be focused on their healing and recovery as they move forward on a journey to being healthy and housed in supportive environments.

We must break down all barriers that create homelessness or housing instability without limiting our resources to address these crises in our urban native communities.

Other nonprofit housing providers were supportive of this because it would save them money to repeal the water tax.

John Burbank, founder of the Economic Opportunity Institute think tank, said that introducing a progressive tax to sunset a regressive tax on everyone is a welcome and elegant step forward in addressing economic inequalities in Seattle.

Lower income households that pay a greater proportion of their income for their utility bills including many seniors on fixed incomes, will benefit from eliminating the water tax.

So that proposal is also endorsed by the Customer Review Panel of Seattle Public Utilities.

The Institute for Taxation and Economic Policy, as we know, consistently ranks Washington State as the most unfair regressive taxation system in the country.

where low-income residents pay a higher percentage of their household earnings for taxes and fees than do wealthier residents, including City Hall's tax on everyone's drinking water.

So I realize that also locally we don't want to create a $38 million annual revenue gap in our city's general funds, so this was combined with the proposal to create a 2% add on to the state's capital gains tax.

Just to clarify, that tax policy, which we would have mirrored here, exempts real estate transactions and exempts retirement accounts.

I believe this is an approach that's fiscally responsible and reasonable rebalancing of the system to make it more fair and progressive.

And so I'm sort of speaking to the future city council as well.

While we can't do this today, I hope you strongly consider it next year and to consider these two pieces together.

Thank you.

Excellent.

Thank you so much.

Well, maybe just for the purposes of the record, we could have...

Central staff, just briefly describe anything else that Councilmember Peterson and I have not described.

I think with that, though, recognizing that we are going to be hopefully seeing future action on this, that it could be very brief.

And welcome again, Allie Panucci.

Thank you.

Thank you, Chair Muscata.

Good morning, Council Members.

I'm Allie Panucci of your central staff.

I do have Tom Mikesell and Brian Goodnight on the line who staffed this legislation, and they're happy to answer questions or provide details.

But between you, Chair Muscata, and the sponsor, Council Member Peterson, I think you have adequately summarized the bills, and we don't have anything new to add from our previous briefing.

So we're happy to answer questions.

I will just note for the record that there were amendments proposed to this bill and they'll be available for a future council's consideration and we will be available to stop that future council on these bills.

Excellent.

Thank you very much.

Thank you again, Council Member Peterson.

I'm not seeing any additional questions on this and Council Member Nelson, I spoke too soon.

Please go ahead.

Thanks, because I appreciate this because it might come back to the future council and I appreciate that.

We're not voting on this today.

There it is.

There has not been a lot of clarity to me, at least whether or not this was intended as this.

The water tax repeal was intended as a standalone getting rid of a regressive tax, or if it was always intended as a, as a package deal to generate ultimately.

new revenue.

However, right now it sort of balances out, so that would require increasing the capital gains tax locally.

So, in any case, I hope that if it does come forward, we make sure that we are really clear in communicating what our end goal is.

As appealing, I'll just speak to the tax and this tax itself.

As appealing as getting rid of a regressive tax may be, that's not a good enough reason to blow a $37 million hole in our general fund, especially considering that we've got a $224 million deficit in 2025. um if the goal is really to help low-income people instead of eliminating this very stable predictable revenue source uh we should be working harder to enroll them into our uh utility discount program in um which provides a 50 percent discount on the combined water bill and water utility including uh wastewater so um that and that's much more than getting rid of what is 15 of the only the water portion of this bill so but basically when i when when i met this idea uh i thought twice about it because people aren't filling up my inbox complaining to me about the water tax they're complaining primarily about crime and homelessness and other issues that seattle is facing and wondering why aren't we doing more about those issues.

And so it just doesn't seem that it's well advised to eliminate a source of stable revenue and trade it out for another revenue source that is less stable.

And we're waiting to see what the courts do on it in the future.

So that is why I was prepared to vote against this today.

And I just wanted to make sure that I got this on the record.

If it does come back, either as a standalone or as part of the pair.

So thank you very much for hearing me.

Appreciate it.

Thank you so much.

Council Member Herbold.

Thank you.

I wasn't going to say anything, but just for clarity's sake, because it seems like there is some uncertainty about the intent of the prime sponsor's bill.

As it relates to capital gains, I just wanted to take this opportunity to mention that the prime sponsor's bill was intended to use capital gains to offset the costs associated the revenue associated with the water tax i had an amendment um to the capital gains tax that would increase um the revenue available to address the ca um the uh uh the general fund uh gap that we're seeing moving in forward in in years so it's pretty clear that what the intent is of council member peterson's proposal whereas um what may have been confusing is that i had a a a separate amendment that would generate additional money with an additional one percent uh capital gains tax for purposes of the second purpose um that was suggested that this legislation might serve which is to generate additional revenue thank you

Thank you so much.

Council Member Peterson, did you have anything you'd like to offer?

Oh, excuse me.

Council Member Nelson, did you want to offer a follow-up?

Just for the record, the sponsor has always proposed it as either a stand, you know, as take it out as it is.

He's been very clear at least to me that this is, um.

An initiative that that may or may not be tied directly to the, the following 1. so I'm not trying to cast aspersions on his on on how he is communicated his intent.

Thanks.

Okay.

All right.

So again, thank you, Council Member Peterson, for teeing these up earlier in the year.

And did you have something else you'd like to add?

Please go ahead.

thank you yeah i appreciate the the discussion uh and you know for me first and foremost i think the uh the water tax is is an unfair regressive tax that should be repealed and became familiar with it as the chair of the committee overseeing seattle public utilities and but i also understood you know to be balanced and fiscally responsible and try to get sufficient support on this body i was also very open to the capital gains tax as well and and i really do hope um you know as as a centrist who cares about business in the city and worked really hard on public safety issues here in the city i support a capital gains tax i think it's fair And we should do it.

And we have the most regressive system in the nation.

It's embarrassing.

We need to do something.

And so I'm willing to put my neck out there and say we should do this.

And I think we could also repeal the water tax.

We could do both.

And so I just wanted to be clear that, yes, I want to repeal the water tax, number one.

to be realistic, to be pragmatic, to be balanced.

Capital gains tax makes a lot of sense to me.

Thanks.

Excellent.

Thank you.

I think those are good closing comments for a future council's consideration about the legislative intent here on both of these items.

And again, want to underscore our strong support and appreciation for the state legislators who helped to advance capital gains to begin with.

As we can see, this is not only a sustainable revenue source, but it is yielding more than was originally anticipated, signaling that progressive revenue options in the state are so desperately needed to ensure that there's funding going into our growing population and growing population needs.

Notably, capital gains currently directly provides support services to educational services, which have been largely underfunded for many years.

So very much appreciate that it often takes a lot of time to move something like this through the state legislature.

And at this junction, I think today, as you heard from the prime sponsor and myself as chair, we just want to ensure that the stability of the capital gains remains intact and as the state legislature takes on the potential next hurdles, given the circumstances surrounding capital gains, and look forward to future conversations around how to ensure more progressive sources in our city align with our values of helping those who are the lowest income and our smallest nonprofits, which I think was the intent behind the water tax piece that was teed up as well.

Anything else on this?

Okay, colleagues, I want to thank you for this discussion.

That does conclude our briefing and discussion on these last two items.

And we are at the end of our agenda.

Linda Barron, our clerk here today, is retiring at the end of the year.

So since it's my last time clerking, if you could all please join me in thanking Linda for her years of clerking.

Thank you, Madam Clerk.

And, um, very much appreciate, uh, your help in getting us through this last meeting.

Uh, in addition to all of the clerks and the community of city employees that help make these meetings possible again, thanks to everybody from it, Seattle channel security, um, our folks from the clerk's office, uh, comms and, um, and, uh, everybody in the central staff body who helps to ensure that we're able to get the information and have it all available.

We really appreciate you.

So congratulations on your retirement, Linda.

And thank you all for helping to get us through our 2023 fall budget process.

We have now completed track one and track two of our budget.

If there's no objection, then our committee will be adjourned.

Hearing no objection, the committee is adjourned.

And that concludes the Select Budget Committee for 2023. See you at full council, everybody.

Thank you.

Thank you.