Progressive Revenue Taskforce on Housing and Homelessness

of the Progressive Revenue Task Force meeting.

We have a full house today.

I want to thank you all for being here this morning and today we are going to discuss the draft report and we're going to attempt to resolve any outstanding issues remaining amongst the caucus groups.

before ultimately seeking some form of consensus on a final report and any associated documents that are attached to the report.

We will have, as we typically do, public comment as part of this meeting.

The public comment will be left to the end of the meeting.

We hope to be able to start public comment at 1045 a.m.

So please stick around.

And I'm going to ask my task force colleagues to please keep in mind that we do want to leave room for public comment and that we are hoping to get our substantive work done in time to hear public comment at 1045 and I'm going to run a pretty tight ship at this meeting today because we all have other commitments that we need to get to at 11 and I want to make sure that we are maximizing the time that we have here together to the fullest extent possible.

So earlier this week, You should have received what was close to a final version of a proposed report.

I think Cody from my office is the one who sent that out on Monday.

We had asked you all to, in advance of today's meeting, identify any outstanding issues that you have with the draft report and proposed recommendations as reflected in that draft.

We heard from a few people in terms of lingering issues.

And if you identified an issue, then we put it on this agenda for discussion.

So I want to...

Cody, is it actually printed on the agenda?

I think I have a slightly different agenda than most people.

What?

Oh, got it.

So you'll see in the 910 section, it says consideration and resolution of outstanding issues.

There are a bullet list of three items that We have four items, three items that are on the table for discussion and resolution this morning.

I'm asking task force members now, live, whether there is anything missing from the list.

And if so, you should speak up now.

And also, is the list accurate?

It's on your agenda.

Do you guys not have agendas?

Okay.

So they were not printed.

But it was emailed to you all last night.

The three items on the agenda are consideration of title VI businesses subject to IRS code 280E, possible application of skin in the game.

and aka alternative minimum tax, potential collaboration with the Small Business Advisory Council, discussion of the high rate or high end of proposed employee hour tax structure, and then we need to confirm approval of changes that Council Member Herbold emailed out in an email last night.

Does that accurately reflect the issues that are on the table?

Yes.

I just wanted to add that there's going to be one addition for review of the sample budget that the joint caucus reviewed last week that we just wanted to make sure everyone had a chance to see today.

That's the only other addition.

OK.

Does that still require consensus from the task force?

Kirsten, the chart, does it require consensus or is it simply illustrative?

It's illustrative.

OK.

Okay, speak now or forever hold your peace.

Okay, so it sounds like we have the identified list of issues that we have before us to discuss and it appears that I have accurately characterized them on the agenda verbally at least.

I apologize that you all don't have a hard copy of the agenda yet.

We are getting those printed and we will bring those down right away for you.

So let's go ahead and should we start with some of the edits that you suggested Councilmember Herbold and throw those out to the task force for discussion and action I'll hand it over to you.

All right, great.

So Apologize for the late suggested edits Appreciate your indulgence So there are some suggested changes And I think Shannon from my office summarized them within the text of the email sent last night.

The first is under the overview and includes, I think, a statement that is important to include because it, I think, is driving a lot of our conversations today.

And it's a quote from the last year's proposed budget from page two, but it just recognizes that there, and this is also an issue that I think came up within the context of the budget discussions around EHT last year is the nexus around economic growth and increased needs to address homelessness.

Second suggested edit is on page four.

Again, really trying to, page four, item one under the employee hours tax heading, trying to capture the concept that without progressive revenue, we're actually, and I think, that there might be some tweaking that needs to be made here.

I don't think this quite captures the intended words that were on the paper that I shared with staff.

But I don't think I want to say maintain continuation of policies that fail to capture extreme growth and wealth.

the intent is to clarify that without progressive revenue, we're actually protecting the regressive system and the failure to adequately capture growth.

So I think there might be some tweaking that would be useful there.

I'm sorry, Council Member Hurdle, can you go back and just, I understand that the words may not be aligned with what you were trying to here, but can you try to explain again what the intent is of this edit?

Really, I think the word that I might want to replace is the word policy.

So it's not maintain continuation of policies that failed to capture extreme growth and wealth, but maintain continuation of tax structures that fail to capture extreme growth and wealth.

Page five, I think it's important to note that sort of the converse of the first part of the sentence.

The first part of the sentence is there's not data establishing that an EHT-like tax adversely impacts employment opportunities.

I think it's important to note that there is a lot of data that shows that business-friendly climates are jurisdictions that adequately address a variety of needs that make a city livable.

and attractive to employers and employees, and are successful in moving goods and services and people.

The next, and I think this is the final suggested edit on page seven, is including reference not just shelter and housing but the unsheltered population.

And that by failing to address the bottleneck that we're talking about here, it ultimately has the greatest impact on our unsheltered population.

That's it.

Okay.

Any discussion?

Ms. Dugard.

can you please speak into the microphone.

Is there a rewrite that Councilmember Herbold that you have in mind for that sentence on page 4 that you said would need tweaks?

I was searching the room meaningfully for Shannon, but I don't know.

You didn't grab the ...

Yeah, maybe we could come back to it.

Is that all right?

No, I want to get it done now.

Okay.

Continuation of tax policies that fail to capture extreme growth in wealth.

I think the concept might not be capturing the growth in wealth, but capturing the fair share.

I don't know.

Folks have ideas.

Is that work?

OK.

Katie.

Sorry, I don't want to make this more complicated.

You've got to turn your mic on.

Katie, you've got to turn your mic on.

That's OK.

OK.

So I don't want to make this more complicated.

So it says, some potential revenue mechanisms are clearly prohibited.

And then whatever you say next, it sounds like it's those revenue mechanisms that are doing it, as opposed to the fact that they're prohibited.

So I'm just having a little trouble with figuring out how to make the syntax so that it says what you want it to say.

So this is an additional edit in addition to the suggestions.

that I've made, because the word mechanism, which is already in there, is problematic?

Well, no.

It's just how do you add that additional thought?

I see.

I mean, if people are happy with it, so it would read, some potential revenue mechanisms are clearly prohibited and maintain continuation of tax structures that fail to capture extreme growth and wealth.

That's good enough for me, if that's good enough for everyone else.

Ms. Dugard.

I find it confusing and to kind of take away from the weight of the existing language, but it seems like an important separate sentence or point.

And so I would just suggest pull it out, make it a separate sentence, then it's not confusing the point that right now it's in the middle of, which feels like it's almost the mirror image of the point that this sentence is trying to make, which I doubt anyone disagrees with.

What if it was phrased so that it said, so that some potential revenue mechanisms are clearly prohibited and current tax structures fail to capture extreme growth and wealth?

So it kind of like separates it, kind of, so it doesn't seem like it's one continuous point.

Yes.

So.

Do you want to reread it?

No.

So it's a separate bullet, correct?

No, I think it still fits in the sentence there.

So that some potential revenue mechanisms are clearly prohibited, comma, and oh, man.

Is it tax reduction?

And current tax structures fail to capture extreme growth and wealth.

Oh, perfect.

Thank you.

I feel like if we're going to do it that way, we should put it at the end of the sentence, because otherwise that last part about the while many carry legal.

So you could say, so that some potential revenue mechanisms are clearly prohibited, while many carry legal uncertainty to varying degrees, semicolon, and current tax structures fail to capture extreme growth and wealth, or something like that.

OK, that sounds like Yahtzee.

The city's options for generating progressive revenue are limited by Washington state law so that some potential revenue mechanisms are clearly prohibited while many carry legal uncertainty to varying degrees and current tax structures fail to capture extreme growth and wealth.

Support the semicolon.

You can't support the sentence without a semicolon in it.

And another item that I didn't send out, but I think it's a typo, is on the employer tax recommendations appendix.

Under option one, the fourth bullet, I believe, is supposed to be $8 million.

What are we looking at?

Firms with gross revenue between $500,000 and $8 million.

$10 million, actually.

Oh, $10 million, yes.

But you're right.

Typo.

So that was option one, because it's referencing a $10 million per year gross revenue exemption.

Thank you.

Anything else Councilmember Herbold?

So we spent a lot of time on the second to the last edit that Councilmember Herbold has submitted to the draft report.

Are there any comments or discussion or concerns about any of the other edits that Councilmember Herbold distributed to the task force last night?

Okay.

So I am going, seeing as though there is no further discussion on those edits, I'm going to call for whether anybody has an objection to including any one of these edits in the draft report that we are going to continue discussing.

There are no objections, so it appears that we have consensus around those edits.

And we're going to move on to the second issue now.

Okay, the second issue that was raised for us in email correspondence is one with regard to consideration of Title VI businesses subject to IRS Code II.

80E, and I'm going to stop there.

So I think we had a couple of concerns.

One was, one concern was expressed about whether or not to include them on the exemption list at all, and the other one was with regard to putting them in a different place, for example, under an umbrella of not being completely excluded or exempted from a potential employee hours tax, but to rather have those businesses, Title VI businesses, subject to this particular IRS code, be required to pay an alternative minimum tax, if you will, under the employee hours tax framework.

Discussion?

Does everybody know what kind of business this is?

Okay.

Yes, Ms.

Duggar.

So I strongly support the inclusion of the exemption as written and also strongly support the skin in the game concept that I believe Kirsten put forward.

So I would hope that we end up in that place where there is a general exemption and then there is a skin in the game explicit reference to these businesses.

So you see both of these issues as being complementary to each other.

In other words, they could be included in both areas for consideration.

We have elsewhere in this package referenced human services and homeless services organizations that should be grossed up to ensure that any impact on those.

on those organizations does not adversely impact their ability to deliver the very services that we're trying to fund in this package.

And this is a similar approach, I think, to call out a particular sector that has unique challenges and then not wholly exempt that sector from paying in under the skin-in-the-game principle that it feels like is widely accepted on the task force.

So the rationale for including these businesses is that they are uniquely unable to deduct business expenses from federal income tax.

So they are in a unique sector in the business community.

But the skin in the game principle is one that has been heavily or extensively discussed by task force members, especially in the revenue caucus.

And I think the rest of us, my sense is that everybody really has signed on to that approach.

Okay.

Any further discussion?

Yeah.

Sure.

Welcome to the meeting, Brie.

So we are currently discussing the second of outstanding issues that were placed on the agenda by task force members regarding the structure and some of the recommendations that are starting to formulate in the report.

So the second issue that we are discussing is the one with regard to consideration of title six businesses subject to IRS code 280e and possible application of skin in the game to that particular type of and category of business.

And so Lisa has just walked us through what she believes to be the consensus of the group around including The title VI business is subject to IRS code 280E both in the exemption category but also in the skin in the game category as well.

I just, I wasn't trying to say that that is the consensus of the group but rather I think there's a consensus of the group around the concept of skin in the game that no sector should be entirely exempt.

Got it.

Yeah.

Thank you.

So I'm opening this up for discussion amongst the task force members who either put this issue on the table or who are aligned with this particular concern and this is an opportunity for folks to really register what concerns they continue to have around these particular issues so that they can be reflected accurately in the report.

So if you want to speak to this issue either about a concern or support, this is an opportunity for you to do that.

Council Member Herbold.

Thank you.

I just want to put a little finer point on Lisa Dugard's earlier comment about general consensus around the concept.

I think it's actually the concept and the commitment to it is reflected in Principle D as well.

Which says what?

Says that everyone should contribute.

There we go.

And it identifies some specific concerns about the consequences of not having everybody contribute because of the creation of an arbitrary cliff.

A couple of things.

First, I think.

One thing, too, is we're trying to find a consistent revenue source.

And being that this entire industry is the future of it, given the federal laws and all that, is very ambiguous.

It does make sense to not necessarily count on this industry.

So I believe I'm in favor of the exemption.

However, I also agree.

We define progressive tax multiple times as ability to pay.

And I think if anyone's been following this industry as well, there's no doubt that there's ability to pay here.

And I think that at the very least, if we're requiring skin in the game from all other sectors, then it makes a lot of sense to continue that with this industry as well.

Can I hijack it real quick?

I need to talk over Ian here.

I want to support what Lisa was saying about the skin in the game.

I think that's a great concept on this, and I think that for two reasons.

One, I think the businesses over the certain threshold that are going to be subject to the greater amount of this tax need to know that everyone's in it, and it's not just that we're picking on them.

But the second thing is it's a considerable amount of revenue if you look at it, because I think that the City of Seattle folks said there's like 18,000 to 20,000 businesses who would be under the threshold.

We say put $500 on each of those businesses.

That's $10 million, and that's a big chunk of change.

And that's not a small amount for a small business, but it's not too much to pay.

So I totally support that.

And now Ian.

I support Lisa's idea of skin in the game, but I want to add that this isn't just pot retailers, it's also producer processors.

They're failing pretty rapidly in Seattle, the producer processors, and we're losing those jobs to other parts of the state, mainly eastern Washington.

You have to look at it that way.

It's not a healthy industry right now and it's barely hanging on actually in Seattle.

But also point out that if it changes on a federal level and 280E goes away, all these businesses will be paying the full amount of the head tax.

I just wanted to note that when I sent that skin in the game piece, that was really a reflection of the joint caucus meeting last Thursday, and there was a larger context in that conversation that was very well captured in the report that there are implications on the federal level around not only taxation but other intersecting policies that are putting a huge amount of strain on a whole host of businesses and sectors in our City, the detention and ICE raids are putting undue stress on immigrant and refugee-owned businesses, other marginalized community businesses.

This conversation also added a huge context that we put at the front of the report of what our lens of equity in consideration of this.

and what it is to support a whole spectrum of businesses with a lens of equity.

And so I just wanted to acknowledge that this body had a really deep consideration of that and added that to the report based on actually a seed conversation from this, a much larger context around that.

Michael.

I have a quick clarifying question.

So if somebody is exempt How does the exemption, in my mind, I see a conflict between the exemption and the skin in the game.

So the way that the skin in the game portion, oh, everybody should contribute section is written, it talks about those that are below a dollar amount.

Should we augment that language to include something about those businesses that are exempted, or does that muddy it?

Thoughts?

This was not my recommendation, so I am opening it up to the task force.

I'm shepherding this conversation.

When I look at everyone should contribute, it really talks about the dollar amount being concerned.

So it's on page 6. We're somewhat concerned about creating an arbitrary cliff, debt revenue threshold.

It doesn't talk about the businesses that are being exempted.

So if there's a whole bunch of businesses that are being exempted just outrightly, should they comply with the everyone should contribute clause?

And if they should, then you should probably note in here, even businesses that are exempted or something, to make that clear.

Because in my head, they're conflicting.

I would say just one easy way to do this would be to, in number 5 where we talk about specific exemptions in the part where we talk about businesses subject to 280e we could just add there we believe these businesses should be subject to skin in the game fee or whatever we're calling it.

So I think further on Katie's point, we could specifically say there, this is on page seven, that final bullet point toward the top of the page.

So any Title VI business subject to ADE of the Internal Revenue Code to be exempt from the ordinary application of the EHT semicolon but subject to the quote, skin in the game approach.

and reference the page number where that's laid out.

So exempt from ordinary application does not, that's really what we're saying is that it's not just going to go into the sort of formula and crank out a number, but there will be a contribution.

Yeah, I think a version of the edits that Kirsten sent out earlier, I think it, was yesterday.

Today's Thursday, right?

Yes.

Okay.

Yesterday, Wednesday, Kishon sent out an email where it included the language, any Title VI business subject to 280E of the Internal Revenue Code, such businesses are uniquely unable to deduct business costs from a federal income tax, to include that as a bullet point under number four on page six.

was another suggested revision.

But I think Michael's point is broader than just Title VI.

I think what you're lifting up is For those businesses that aren't Title VI in part of this industry but are going to be exempted, those people need to also be captured in the skin in the game concept.

And so right now, currently, the ones that are captured are those that I think maybe it's a little confusing because there's an example of what type of revenue we're talking about would be captured under skin of the game.

And so I think what we're hearing from ICO is a suggestion that we clean up the language to make sure that the intent is clear, that there is consensus amongst this group about the concept and principle of everybody paying into the solution.

We did talk about exempting single or businesses with no employees, right, like Uber drivers, correct?

Just single?

I think the assumption has been that they're totally exempted.

Yeah.

But basically everybody else is in.

Yeah.

So you have on page 6 under point 4, the skin in the game, very small businesses, for example, with revenue under $500,000 could be exempt from even this fee.

I'm personally fine with that.

I'm personally fine with Uber drivers.

But I don't know everybody that's currently listed as an exempt.

There's no clarity on who's exempted and whether that meets some of the other values and principles that we stated.

Ms. Dugard.

I'm glad we're having this discussion, because I think maybe there is a lack of clarity about the approach.

So as I read the current draft that nobody identified changes to before today, there is only one exemption.

And I think if we're adding single self-owned businesses with no employers, we should say that in the report as a second exemption.

The other bullet point in the report right now that we're about to be asked to vote on is not an exemption.

It is a BNO, it is a reduction in the application of the tax based on BNO analogous revenue stream exemptions.

So the tax would be reduced on those organizations to the extent that they would pay EHT only based on the same proportion of their What they would ordinarily be due or be obligated to pay for EHT would be, sorry, this formula, which maybe this is the best way of saying it, is that there would be an EHT reduction proportionate to the B&O reduction based on the nature of revenue that that organization receives.

And that is not an exemption.

It's a reduction.

So I think that we have to decide, is that enough to be skin in the game?

Some organizations will pay zero under that because of the nature of their revenue.

But it's not a per se.

I mean, next year, if they get different revenue, they're not exempt.

It's not a continuing exemption based on the nature of the organization.

And that is the proposal that we're preparing to vote on.

So to me, that we need to get clear whether we think that is sufficient to satisfy skin in the game for that very significant sector of the economy or not.

And I don't know the answer to that question.

My question is, I guess, kind of relevant in that I'm a little confused about the skin in the game fee, like whether it's the same for every business that is in that category of having to pay it or whether it's proportional to the revenue of the business.

I'm going to try to refocus us, because I think we're conflating two different concepts.

One is whether or not the first issue that was identified was what to do with this category of business.

And we're conflating that with the conversation around the broader concept of a skin in the game.

requirement reduction, whatever you want to call it.

And so I want to be, I want us to, I know that they're not completely mutually exclusive from each other, but I think there is a decision before us first and foremost around treatment of this particular category of business.

And it sounds to me that there is at least some interest in receiving clarification and having further discussion around the true intent of the task force as it relates to the skin in the game concept.

And I swear to God I've never said those three words more in my life than I have.

forward in my life than I have this morning.

So let's deal with the Title VI issue that was put on the table to begin with, and then we can move on to the broader conversation around this reduction in obligation to pay the employee hours tax, as Ms. Dugard has identified.

So I'm trying to get a gauge of It sounds to me like a moment ago we had reached some level of consensus around making sure that these Title VI businesses were both included in the specific exemptions category under number five, page seven, but that they also be included under number four of page six.

which is a skin in the game category.

Is that accurate?

Yes.

Okay.

So is there any further discussion on that?

Okay.

Is there any objection to those particular edits as we've discussed earlier?

Okay, there's no objection, so that will advance.

So let's have a conversation now about category number or variable number four on page six.

Okay, I have two people, so I'm going to let Kirsten go first and then Katie.

So my understanding of this, and folks correct me if I had a misreading, is that five was in somewhat relation to three and that three if we if we're putting forward a recommendation that the council consider a gross tax threshold We are then assuming that they're going to be looking at B&O tax because that's the only mechanism in which we have to look at any tax threshold.

And so my understanding with number five was that that was then a continuation of that assumption that if we're looking at B&O tax, We would also then have to consider that any currently, and to Lisa's fine point, which is very important, to any nature of revenue from any given business that is currently exempt under B&O, they would then also be exempt.

if we're using B&O as a certain standard for who is or is not part of this consideration of tax.

And so with that said, we also reemphasize that what that is is all the particulars of revenue.

So there's some very particular language.

And the reason we didn't then reference this, and if folks feel that we should add the link to the part of B&O code for the city that actually has the list of I think it's 30 some different revenue type exemptions.

I think we could definitely exactly reference that list.

But there are some very particular things, for instance, for particular types of revenue for non-profits if you have a faith delineation on top of the fact that you're a non-profit and also provide child care services, for instance.

So it's a nature of revenue, not a blanket statement that all non-profits would then be exempt.

So that was my understanding of this statement.

If I misunderstood what this is and what it's in reference to, or if folks feel like the language is not specific enough in that regard, I think that might be the nuance of the conversation we're having.

Katie.

I just wanted to address what was brought up before about sole proprietors or businesses that don't have employees.

So this is not reflected in the way the report is written and perhaps it should be, but in the information that central staff gave us about how one could do a skin in the game fee.

It wasn't just saying you pay a certain amount.

It was saying you're paying $300 per full-time employee for the first employee, and then subsequent employees are exempted.

So it would only kick in if there were, in fact, at least one employee.

So that would mean that businesses without any employees would not be paying anything.

And I think that was the intent.

Just by definition?

By definition, yeah.

And then also, the numbers that they gave us were, I believe, assuming that businesses with under $500,000 a year were also not subject to that either.

And I think that everyone agreed that it made sense to exempt, you know, very small businesses from even that.

So I just wanted to clarify that.

And then also just in terms of how the report is structured, I think it might make sense at this point to switch the order of number four and number five so that we're talking about, you know, exemptions based on gross revenue, exemptions based on other factors, and then finally skin in the game fee.

That makes a lot of sense.

OK.

Ms. Dugard.

If that is, in fact, everybody's understanding, and it feels like it is, about sole proprietors, I think it's important actually to state that.

Because it's not obvious to me that a sole proprietor business does not have an employee.

They do have an employee.

The proprietor is an employee of the business in a legal sense.

So I would suggest that we just be clear that that is not, this is not intended to apply to sole proprietor businesses.

That confuses me because you have a lot of small companies and sole proprietorships and it's a value for ten employees.

It's your clarification.

Maybe sole proprietor is not the right term, but one person works in the business.

I think if we're like Uber drivers, if we're saying that is to be exempt, I think we should be explicit about that.

Although if you're making over $500,000 a year as a sole proprietor, maybe you can afford $300,000.

Yes, Ms. Duke.

I think one can make arguments back and forth.

My point is we should be clear on what we are saying about this.

I'm not taking a position on what that should be.

I think to go back to the point that Katie originally made which is that the numbers that are before us in some of the sketches that are attached to the report are built on a mathematical assumption that there is at least one full-time employee working for the business.

Is that correct?

Okay.

And so I guess the difficulty we're having now is what is the definition of a full-time employee?

Is it the owner?

If the owner is the only full-time employee of an entity, is that enough or are we creating a distinction there?

And Mr. Sun has approached the table, which probably means that I have said something incorrectly.

No, no, I'm not here to correct.

I'm merely going to point out, and I understand there's two kinds of considerations, or my understanding of what you're discussing, that there's a kind of a fairness consideration as well as a mechanical revenue production kind of application.

But I do not believe that, especially given the scale of, or the level of accuracy that we have, given the data that are available, that you're going to If you land on either side of this that you're going to see, that's going to be the driver of your revenue level that you're going to go, oh my gosh, we lost 50% of our revenue because everyone was categorized as not being an employee.

So I want to point that out.

I do not feel sufficiently.

Let me say, I'm a little unclear myself.

My understanding, my expectation at a personal level, which I would not normally bring up here, is that if you are a sole proprietor, that you are not an employee of the business, but rather the owner.

And then you're looking at a different kind of a tax if you want to tax the owner of a business.

That's not an employee hours tax.

You can have other business taxes.

And in fact, you've discussed other business taxes.

I would maybe put this in the category of something that could be investigated further by the council and council central staff in consultation with the law department as the recommendation is passed along.

That doesn't mean that you can't indicate a preference of the task force as far as the treatment of firms where only one person is involved in, whether they are an employee or not, but involved in the work of the entity.

But maybe this is at the level where it'll kind of have to get sorted out.

There may be limitations here.

Okay.

So Mr. Sun is suggesting that the task force signal its preference for treatment.

of a sole proprietor, and perhaps that is the most we can do.

I believe the technical term here would be punt.

But perhaps a directed punt?

That is a term that one can use.

I am suggesting that we use one that is couched in the context of signal your preference to city council via this report as to your preferred treatment of a sole proprietor.

Definitely choose the end zone you're aiming for.

It seems like it's a semantic discussion.

It's a distinction without difference.

A limited partnership for an LLC can be the same size as sole proprietorship.

They just haven't formed a distinct separate legal entity.

Other than that, there's no difference.

But I think that's what Mr. Sun is signaling, is that it would be wise for the city council in its deliberative process to take a closer look with the guidance of our attorneys around what the nuanced legal definitions are of sole proprietor versus LLC versus LP, whatever it is the definition might be.

But I think it would be helpful for the city council to understand this group's intent in terms of is the focus on the type of owner of a business or is the focus really on whether or not you employ people.

And I will sort of show my bias towards I think that the real crux of the issue here is whether or not an entity, regardless of what type of business it is, has employees that are truly legally defined employees.

And so if that is consistent with the intent of this group, then I think that it would be appropriate to signal that within the content of the report.

And that allows the city council the opportunity during our deliberative process to really go back to this and make sure that we are staying consistent with the intent around making sure that it's about whether or not you hire employees and how many, right?

Let's do that.

All right.

Yes.

I'm just wondering where that signaling should be placed.

I don't think it should be under number 5 because we're not talking about an exemption.

We're talking about a definition, right?

And I don't even know if it fits necessarily under the variables category at all.

No, we're not taking any comments from the audience.

I'm sorry, you can wait for public comment.

Ms. Dukart.

So I would say, I think we should think of this as a definition rather than an exemption or anything like that.

We could put it on page four.

We're just defining an employer subject to this analysis, to be somebody who employs at least one other person besides the owner, right?

Looking over there at the experts on employing people.

So that can go on page four under employee hours tax.

It's just a footnote or a side note defining what employer means for the purposes of this report.

And it means an entity that employs at least one person apart from the owner.

How do people feel about that suggested edit?

I love it.

I'm just looking for the exact right place to put it so that it doesn't have to be a footnote, but I'm not finding one, so maybe a footnote is the best way to go.

I think we can work on placement.

in terms of maybe not burying it in a footnote, because it does seem too important to bury in a footnote.

So I think we can work with staff over the next couple of weeks in finalizing the report to find an appropriate place for this that is true to what we're hearing.

hearing here, which is that it is a definitional concept that the task force feels is important to communicate in the report.

And we'll find a place within either the principles or under the broad heading of employee hours tax right before principles on page 4 to place that language.

Is that acceptable?

OK.

That, Mr. Sund, was a punt.

Okay, so it sounds like we have agreement on that.

I'm hearing no objection around that particular issue.

Okay, we can move on.

Do we still feel like we need to have a conversation around skin in the game or have we resolved issues related to skin in the game?

I know, I need to say it 50 more times today.

I'd just like to restate my earlier question.

Yeah, please do, because I apologize, but I already forgot it.

Yeah, so my question is, or I guess my recommendation is that we kind of be a little more specific about what the skin in the game fee would be, like whether it would be proportional to the business's revenue, or if all the businesses who are exempt from paying the EHT would be paying the same fee every year.

Because I think that people will have questions, especially people who have to pay the EHT at whatever level will be like, OK, what is everybody else paying?

So I think we should be a little more specific in our language.

OK.

So currently the language reads employers, excuse me, employers under the gross revenue threshold could still be required to pay some relatively small amount.

Example, $200 per year, per ren, very small businesses, example, with revenue under $500,000 could be exempt from even this fee, closed per ren.

Ms. Wilson.

So could we just add the word fixed, so small fixed amount to clarify that we're just talking about a single amount that each one of those businesses would pay not proportional to revenue or employees or anything?

Does that clarify?

Yeah, I also understand that if we're using it based on the gross revenues threshold that we cannot actually graduate the rate.

So if you look at the employer tax recommendations that actually under each category, I think it actually has that minimum fee as the third item of the last item.

So you're referring to this document that says employer tax recommendations.

So would it be helpful, Brie, in responding to your question and call for clarity if we referenced this attachment in the skin in the game section on page six?

Would that be helpful?

Yes.

Could we also maybe remove the soft language on that?

It says we could do this.

I think we should say we recommend this because it seems more optional even though this is a template that we're putting forward.

So then that modification would read employers under the gross revenue threshold should be required to pay some relatively small amount.

Or shall.

Shall.

Okay.

Yeah.

Daniel, I'm sorry.

I couldn't hear you because you weren't on the mic.

I'm sorry, I was just noting that the section in parentheses following that sentence has the same problem.

He's just identified with the word could.

So we should be explicit about our intent on fully exempting businesses with under half a million dollars of revenue.

Okay, so we have a couple of, oh, I'm sorry, Samantha.

Just one other thing, maybe instead of saying small amount, because for some businesses that might not feel like a small amount, saying like the equivalent of one FTE tax, so whatever we set that EHT at, could be 200, could be something else, it's just they're paying one.

That is the fee that is going to be assigned to them, because I just, I feel like saying small might feel.

It's relative.

Yeah.

I think the difficulty.

Yeah.

Okay.

Okay There's a few things that have been put on the table and I'm going to try to dissect them so that we can have a conversation about each and I am expecting a trophy for my.

for my chair skills at the end of this meeting.

Okay, so the first suggestion that has been made is there are two wordsmithing suggestions to the skin in the game section.

Both of them include modifying the words could to shall.

So employers under the gross revenue threshold shall be required to pay some fixed amount per year, very small businesses with revenue under $500,000 shall be exempt from even this fee.

So I'm going to separate those two.

The first one is hardening up the language so that it isn't could still but shall, and also modifying the language to say required to pay a fixed amount per year?

Equivalent to?

Somebody help me.

Equivalent to?

Well, the problem with doing it that way is that we have some open questions about the structure of the tax and whether there is a flat per FTE charge.

versus payroll.

Yeah.

So it's going to be hard to just define it that way.

Well, I think the issue is, depending on which track they go, the equivalency of an FTE will be hard to determine.

Because if we do a percentage of payroll, it will no longer be able to have the moniker of a head tax.

That will no longer apply, because it won't be a flat fee per employee.

And I would also say, I mean, at this threshold, back to what Eric gave us a reminder of earlier, we're talking about, I think, a pretty small percentage of the overall total revenue that we're looking at annually.

And administratively, there is some huge advantage, I would say, to a flat fee once we set this particular threshold.

So I would recommend we just have maybe a substantive discussion about whether we want Instead of giving $200 per year as an example, actually decide on a specific flat fee dollar amount.

I don't think we can do that.

I think that there's enough question about what the precise structure of the tax will be.

I don't feel like I could say it should be $200 or it should be $500.

For the skin in the game fee?

is separate from the other question completely.

So that's why I'm recommending it because it feels completely separate from the other consideration which has a whole layer of questions that have to be explored by the council.

Price is right style.

Let's do this.

I'm just a little concerned if everyone who pays the skin in the game fee has to pay the same thing, because that kind of ruins the concept of equity.

Because if a business makes $10 million plus a year but is subject to the Title VI or whatever, yes, they pay.

federal taxes or whatever, but if you still make $10 million plus a year, that is not the same as a business that makes like under $5 million a year or whatever who also has to pay the skin in the game fee.

And I also think it is important that we give an example of what the skin in the game fee would be, because that would kind of get some clarity in my mind.

At least if we aren't going to make things equitable, we can say, all right, a small business isn't paying a severely disproportionate amount compared to a bigger or more profitable business.

So I think we should address one of those things for me to be comfortable.

I just want to say that's not necessarily true.

There's businesses that generate $100,000 in revenue that make $50,000 in profit and businesses that generate $9 million in revenue that make $10,000 in profit.

So it's hard to, we can't just point to gross revenue and assume that there's a certain amount of profitability.

It's going to trend one way or another for sure.

But I don't think we can, I think Katie said that we can't really graduate this based on the gross amount of revenue.

I hear what you're saying, because it makes sense in my mind that, OK, well, if they're making this much, then they're probably, if they're grossing this much, they're probably having a larger net revenue than somebody who's grossing half that much.

But it doesn't work that way a lot of the time.

Well, then I guess the second part of it is, can we agree on a suggested skin in the game fee?

I would like to do that as well.

I guess the thinking behind it is we're trying to generate $150 million.

This is hard to do, because we have some really rough numbers, and we have a lot of numbers we don't have.

We don't have a lot of numbers to really try and figure this out.

But if you do say, OK, we have somewhere around 18,000 to 20,000 businesses that are going to fall under this threshold.

And if we throw $400 as the sort of nice round number, 395 for the psychological pricing, you're going to get somewhere close to $8 or $10 million.

That's a significant chunk of your $150 million.

So I think $200 is too little.

I think $500,000 is too high of a threshold.

I think $100,000 is a good threshold.

I think $400 is a good threshold.

starting point.

You could throw in an 8% increase per year.

I don't know if there's a mechanism to do that.

But I think that seems like a good basis psychologically.

If I'm a business, I'm like, OK, well, I'm barely making it.

OK, but these big tech companies are paying $10,000.

I only have to pay $400.

I feel pretty good about being a part of the solution.

So I think $395 or $400 is a good starting point.

$500 seems a little large.

$200 seems a little small.

Second.

Yeah, third.

So that's for $3.95 with a $100,000.

And we're talking about $300.95, not $3.95, to be clear, for the math challenge.

With a $100,000 floor.

I think so.

I think it's one of these issues where if you're not paying, you just don't pay attention to the world around you.

But if you're paying $395, you're going to pay attention to what's happening.

I think that's important.

OK.

I'm appreciating the enthusiasm around $395.

So now I'm going to start over on what we are deciding here.

So we are deciding that there would be a Language in the report that would signal the task force preference and recommendation for the following.

Employers under the gross revenue threshold shall be required to pay a fixed amount of $395 per year, period.

And we want to then specify the $100,000 floor as well.

OK.

That seems like it's a second bullet point at this point.

I'm having a hard time combining the two concepts in one sentence.

So can I just, is there any objection to the first concept as I've articulated it?

Okay, no objection.

So we have consensus around a recommendation that will include employers under the gross revenue threshold shall be required to pay a fixed amount of $395 per year, period.

Okay.

And then, okay, you're fine with that?

Okay, so a second issue, so there's no objection on that, we have consensus around that point.

A second issue that has been lifted up is what is the gross revenue threshold for those flat rate category of business.

So I have heard that the original recommendation includes a reference saying for those businesses with revenue under $500,000 would be exempt from even that fee.

So now it sounds like the group is evolving into wanting to lower that threshold.

more.

I'm not necessarily opposed to that.

I also represent the Martin Luther King Business Association.

It's 90% minority-owned businesses along Rainier Valley.

They're almost entirely immigrant-owned businesses that, as you've mentioned and as was discussed last week at the joint caucus meeting, are under a lot of very unique pressures right now.

And as such, I do know for a fact that many of them are probably making more than $100,000, but would definitely be falling under the $500,000.

And I think given their situations as well, I do think that that may put a lot of pressure on businesses like those.

that, again, their future is very ambiguous right now.

And little things like this may have a significant impact.

Now, I mean, at the same time, it does make a lot of sense at what Ian just said, where it's like, well, if you're paying this, then you're paying attention to the fact that we all need to be a part of this solution.

And I think that's important.

So I just kind of wanted to just raise that as a topic of discussion.

Mr. Toew.

Yeah, I actually want to thank Josiah for raising that.

I think, but I also want to be specific because we talked about this in the revenues task force.

The two specific things, one is that the rent, the commercial rents are going up disproportionately in southeast Seattle right now relative to other areas because they were low before and now we're catching up.

So that's a huge burden on a lot of the small businesses.

The second thing is the property taxes.

We had a meeting yesterday, I think, the Economic Development Council, which is all the merchants associations in Southeast Seattle and Georgetown, and the triple net on the property taxes are going up for everybody.

So those are the things that historically were relatively low that are now really catching up with the rest of the city.

So that specifically is a couple of the burdens that we were talking about.

So I kind of agree.

It very much disproportionately affects those businesses.

Mr. Malone.

Well, I was fine with the $500,000 threshold before this conversation, and definitely am back to that now after hearing these last two comments in particular.

I think if somebody was right at $100,000 and they had to pay a $395 fee, that's four-tenths of a percent of their entire revenue for their business.

That feels regressive, frankly, and that threshold just seems too low to me.

Okay.

Any other discussion or comments on this?

Okay.

So it sounds like we have folks who are concerned about lowering this threshold from $500,000 to $100,000 in revenue, largely focused on race and social justice.

realities and issues.

One of the things that I will share with you all is that over the weekend I had an opportunity to have a conversation with both Katie and Lisa Dugard around similar concerns.

My concern focuses on the fact that we haven't run this tax policy, for example, through a racial equity toolkit to really identify what kind of impact we will be creating on those businesses that are owned by communities of color, people of color, and immigrants, refugees, and or women.

And so I want to be sensitive to those issues.

I do also acknowledge that in the draft report on page six, It specifically calls out as one of the principles racial equity and social justice.

And it's important for us to be true to that stated principle and to allow the city council an opportunity to undergo its evaluation and analysis through that lens to make sure that we are not having an unintended disproportionate impact on smaller businesses that are both owned by people of color, but also who primarily in all likelihood also hire many, many people of color as their employees.

And so we want to be sensitive to balancing the needs there.

So my suggestion is that the task force keep the language as is in terms of setting the gross revenue threshold at $500,000 and saying that Those who are under $500,000 would be exempt and all others above, up to wherever the employee hours tax begins to kick in, would be subject to the flat fee, flat rate.

Is there any objection to that?

I think, yeah.

And I think what we're hearing from folks in the room is that there isn't a level of confidence at this point to provide recommendations with regard to those businesses between the $100,000 and $500,000.

And so there is a higher level of comfort with drawing the line at $500,000 at this point with the understanding that In the council's deliberative process, when we undergo, if there is support to undergo a racial equity toolkit analysis of a policy, then that threshold may change.

And frankly, it may go higher or it may go lower to make sure that the policy is consistent with the stated principles in the report around racial equity and social justice in particular.

Okay?

All right.

So we have agreement on that as well.

Okay.

Michael.

There was a lot of discussion here about why we couldn't graduate the tax or that flat level.

Do we want to capture some of that saying that we had discussed it, but understanding our current tax system, that is not considered, we can't do it.

I, yes, Cody, you were going to point something out to me.

The employer tax recommendations?

Yeah.

Okay.

And also does, you know, graduate based on employee size or workforce size?

I'm talking really about how business that's at $500,000 and $10 million pay the same amount of tax.

And I think capturing Marie's comment, which I think many of us would like to see a little step up along the way, but we can't.

And Cody, if you could help me see where that says that, that'd be great.

Cody, talking to the mic.

The employer tax recommendation that's drafted kind of outlines kind of a ranked preference order of how to administer the tax based on kind of what is deemed to be the progressiveness of the tax.

And at the bottom it says that Without finding the specific language, the task force understands that the council has to take into consideration the legal authority.

And that is also determining a factor in selecting which option to utilize.

I see that.

I don't think that necessarily addresses the concern around, you have to understand what the legal structure is.

So most people reading this don't necessarily understand that you are not allowed to do this graduated tax thing.

I'd feel better if we just stuck that somewhere, not in an attachment, but in this as we start discussing what that tax is.

I'm going to look to central staff.

Mr. Sun, do you have any recommendations for the task force in terms of how to address that particular concern?

Is there a way to?

to address that in a final version of the report and still protect the council's ability to seek future legal counsel as appropriate.

I believe the council will retain that authority, fortunately, in any case.

This is a somewhat uncomfortable area where We had a meeting, gosh, I don't know, four or five weeks ago.

It was one of the meetings in SMT and I had, maybe it wasn't quite that long ago, but I had brought a sheet that sort of listed a lot of different progressive revenue ideas, most of which came from a report that was specifically kind of sent to us for some feedback.

I didn't go into a great deal of detail where I thought that there was some uncertainty of a legal nature surrounding the city's authority to impose any of the various changes that were listed in there.

I wonder if there might be some way to identify examples of the kinds of things that the task force would find favorable from a policy perspective as far as the structuring of this particular element of the tax and then noting that the task force identifies that there are some constraints that the council may have to investigate rather than specifically pointing out what the task force is perceiving as specific obstacles because, again, I wouldn't try to characterize the presentation that I've attempted to do as legal advice.

It's merely sketching sort of the outline of what a lawyer might have looked like if one had walked in and begun to provide legal advice.

Maybe charcoal or watercolors.

And, well, anyways, I don't want to paint myself too far in the corner with those same watercolors, so.

Okay.

Kirsten.

I wonder, though, if it's as simple as some sort of statement.

And we have so much up front in the report that's just a clarification of our understanding of a context of the environment in which we are making some of these recommendations.

And it could be something as simple as a statement that says we did have a lens that in no way do we want to put ourselves in any sort of legal jeopardy where any of these recommendations and the accumulation of them would be seen as a replication of the B&O tax because we know that is not viable nor legal.

It might just be that simple of a statement that would maybe, I don't know if that gets to your consideration specifically, but that sort of clarification of the context in which, because it was a consideration in lens when we're using B&O tax as part of a standard of looking at some of the data, but we don't want to make, but we have been towing the line of making sure we don't replicate a B&O tax structure and that can just be explained that was explicitly said.

Does that get to what you had hoped?

Okay.

Perhaps my comment is unnecessary if that does address the desired concern.

What I heard was a request to include language that reflected in pursuing something that we have some limitations on.

And so my suggestion was basically to include under number four, again, going back to the skin in the game fee, a sentence that says, though the task force was interested in pursuing a graduated fee, We understand the council must weigh other factors including legal authority in deciding how to structure that fee.

Ms.

Duggar.

I like the approach that Kirsten suggested because I think that We're trying to do something here, and I feel like the, you know, there's a million options, some of which might or might not be legal, does not hit on what we're doing here.

This approach is not the approach to revenue generation that anyone at this table would have picked first.

In fact, the council took a different approach last year, right?

And so I don't think we need to What we're doing is actually recommending that the council do something in specific in light of the context scan and analysis.

And I don't think we should weaken our recommendations one bit by the fact that it is not the optimal.

We are not working in an optimal context.

There is no question about that.

And yet we are making a strong positive recommendation.

So I think that the general observation that though they're in an ideal world, there would be more progressive options than the approach that we are recommending here today.

We are working within an actual context and the urgency of the situation calls for using revenue sources and approaches that are unquestionably available to the city and that is really the point.

It would be interesting to experiment with other things.

We are not recommending something that is going to be legally challenged and is going to take several years to actually come into play even if it prevails.

That's the point and I think we should make it really clearly and not water it down.

I don't think we should undercut our own message, I guess is my point.

In other words, an employee hours tax is the viable and most progressive tool we have available to us and it's one that we have not are not currently utilizing and we should be careful about structuring it in a manner that will continue to be legally viable and immediately available to meet the need of affordability and homelessness.

Okay.

Yes.

Okay.

So I want to make sure that your concerns have been addressed.

Okay.

We're going to move on now.

Because it is 1026. So we have just a few minutes to wrap up substantive decisions here before we move on to public comment.

And we have a couple of additional items that we need to discuss that are outstanding before we move along.

So the next item on the outstanding issues list is potential collaboration with a small business advisory council.

And I think Ian put this on the table.

And so we'd be happy to hear more from you about what you were thinking and how that would be distilled in a report here.

I was talking to Tony.

I might have the name wrong.

Is it the Small Business Advisory Task Force or Economic Council?

I thought it would make sense that if this group somehow collaborated with that group to understand kind of what we were talking about before, how these policies might actually affect real world businesses in ways that we haven't talked about here.

Sir, I'm not sure what your takeaway suggestion is.

Is it just wanting to have reference in the front of the report about this being yet another entity that it's important for us to collaborate with, or?

It issues a time, and I brought this up very late.

Just take it off the table.

OK.

Ms. Dewhart.

No, I actually, it's not, it doesn't pertain to the documents and maybe we can address it after we approve the documents, but I think that we, this task force should officially send a delegation to that body and open a channel of communication.

I think it's super important that we do that.

And I nominate Ian and Tony involuntary to participate.

Yeah, and Council Member Herbold is a member of that particular entity, so there is, and I think Council Member Mosqueda is as well, so we have council representation on that entity and are following the work of that body very closely and do agree that it has a nexus with the work that we're trying to do here.

But just to, I feel like what Ian is, if I can try to capture this, what Ian's saying is that that kind of at a community level that it is a peer-to-peer overture that could have value and that there are some of us who are interested in pursuing that, connecting those, yeah, those conversations and explaining where we were coming from and kind of translating this work, so.

Yeah.

I agree that there are better message carriers than me to have that conversation.

And I think the peer-to-peer conversation is super important.

But in my role as a member of that group, I can work with executive staff to get some time on a future agenda.

Yeah, I think there's a lot of technicalities here that people don't know.

And there's a growing sense in the small business community that they're not being heard.

And so I think it's important that we don't ignore that.

So I would think any kind of assistance that we can help to have more channels of communication I think would be helpful.

In that same regard, I know we didn't have any direct reply to our letter that we sent to the one table, but I know that we also have channels open there and just wanted to remind ourselves that we extended a branch there to stay in connection with that space as well.

It's relevant to the work.

Any further discussion on this?

It sounds like there doesn't need to be specific action on this item, but I do appreciate the lifting up of the need to make sure that we are maintaining open channels of communication with other entities that are doing bodies of work that will either be impacted by decisions made by council in this area and that are part of the overall solution to addressing the issues that are at the core of the work of this task force.

Yes, Mr. Wirtz.

Yeah, I agree with everything that has just been said.

I just want to add, I do think it's really important that in especially communicating with other small business owners, as a small business owner myself, I know when people come in starting to talk about taxes with me, I'm going to try to shut them down as fast as possible.

So I also think they should have as much context and know very clearly where our conversations have gone and what considerations we've taken as well.

So it also doesn't feel to them like we're just here, we're trying to convince you to be taxed, you know, but they really understand our goals and what we've taken into consideration in our conversations.

Appreciate that.

Great.

OK, we're going to move on to our last pending issue, which is a discussion of the of the proposal to structure the recommendations around an employee hours tax that would garner $75 million.

So if you all recall, the resolution that was passed by City Council set a sliding scale, if you will, between raising something that would raise between 25 to 75 million dollars.

The draft report includes the recommendation on the highest end of that spectrum of 75 million dollars.

We heard from a couple of people that are part of the task force expressing concerns about the about the fact that they feel that that may be too high.

Setting recommendations at $75 million would be too high given the per FTE tax rate that would have to be imposed in order to garner $75 million.

So I wanted to I would like to see if we could find resolution to this particular issue and open that up for discussion, particularly for those of you who raised the issue.

I know that at least one person who raised that issue is not here, and that's Mr. Walsh, who couldn't be with us today.

Nonetheless, he supports the direction of the task force, but does want to raise the concern about his level of discomfort what would ostensibly be about a $400 per hour FTE to garner $75 million on certain businesses.

And so I wanted to open that up for discussion.

Sorry, for a year.

Sorry.

I am still recovering from a sinus infection, so I apologize for my cloudiness.

That would solve the problem.

Is there any discussion?

OK.

So it sounds like there is no discussion on this issue, and the discussion was limited to simply wanting to express some concern about it over email.

And so I want to acknowledge that there was some initial concern, but it sounds like there is no further discussion of this issue.

So we...

Council Member.

Yes.

I wanted to comment.

I've had so have numerous other people had extensive conversations with Tom on this topic, and I think You know by not discussing the point I doubt any of us me and that's it's a real issue and also if We're working backwards from an endpoint that we all have agreed We need to get or I think we're about to agree that we need to get to which is to make a meaningful investment that actually transforms the landscape that exists in our city and And there is no way to do that.

This is like, to me, the most important thing that has happened in this task force is the emerging clarity that the amount of new revenue needed to make that desired impact that everyone in the city wants to see is so great that the $75 million recommendation is understood to be only a down payment.

So we cannot step further back from that.

After that, it's math.

How do we get to $75 million is the question.

And although we would all like to vote against math, we can't.

So that's where we are.

And I even think that's, without speaking for him, I don't hear Tom thinking that there's an alternative way of going forward.

It's just sort of a regret that we are in this situation, which I think is widely shared.

Yeah, in the absence of an alternative, you know, mathematical universe, we are moving in this direction.

Yeah.

I do think—I appreciate that.

And I do think that it's important for folks in the audience and those who might be watching at home or just following this issue to understand that part of the robust conversation of the respective caucus groups, particularly the Revenue Generation Caucus Group, have centered around where where to end up on this spectrum.

And that has been largely informed by the task force view on the depth of the need and what it takes to, what type of revenue it will take to meet that need.

And so I don't want people to think that because we are not debating this more actively in this venue that that should signal in any way that we have not had serious conversations about where the number should be set and why.

And there's a lot of content in the report that talks about the why and the rationale and the realities of what we still think are going to be needs moving forward in this particular area around affordable housing and addressing the basic survival needs of our most vulnerable neighbors.

And so I appreciate the thoughtfulness that has been applied to the debate amongst the caucus groups that have really been occurring diligently and regularly over the last several weeks and I think that the initial decision we made as a task force to divide our work and do working sessions in those caucus groups is now being, the success of that approach is now being reflected in the ability of this group to get to a place where they feel that they are comfortable with where the number has been set and why.

Council Member Hurdle.

Thank you.

I do want to signal that whereas I don't believe this is voting against math, I embrace and support the $75 million target, recognize that the needs are greater, but support the $75 million target.

am again, whereas I'm comfortable supporting these recommendations, I am going to again look at whether or not through using our bonding capacity can get to 75. And so that's going to be a conversation that I think is going to be important to have while, again, like I said, continuing to embrace that $75 million a year goal.

I really appreciate that Councilmember Herbold and appreciate that the context of all of the tools in the toolbox for the city has been also part of the conversation throughout this process.

I do want to clarify that the recommendation in the report is a goal of 150. million dollars of a combination in response to the resolution of what will be an employee hours tax and we do also have along with bonds and other recommendations what will fill what is really the other half of our recommendation and so I I would hope as the council moves forward with these recommendations, we are not in these recommendations saying that we want some skirting of the employee hours tax under our 150 recommendation to be skirted in application of the other tools.

I think it's pretty clear in the tone of the recommendation of the report that those tools we hope will be utilized to fill the gap between the 75 million to the 150 full recommendation.

questions.

Ms. Dugard.

Just on the bonding point that is discussed a little bit in the report and I think the intent of looking at how the city could use bonding is how can we stretch that $75 million further or build more of that housing up front so we can get a little bit closer to what is the immensely greater need that

I concur strongly with what Kirsten and Katie just said, and I think it's super important to acknowledge there are people in this task force who are doing some really hard and heavy lifts in their own communities.

And I don't believe that they're doing it to achieve actually less than $75 million through NEHT.

I believe that they are doing it to get to the mark, to have a real impact.

And I don't think that it's, I don't think we should send them back to their communities as ambassadors for this work and then have it turn out that there's only political support for sort of something far less than $75 million.

So I really, for those of us who have had the hard conversations peer-to-peer and come together around this, really, really ask you to make it a real $75 million through EHT and then use those strategies to go beyond that.

That is what we are saying.

Mr. Hortz.

I just want to express my support for all of that.

I think we're here for that $75 million, and I would love to see what we can do beyond that to actually address the needs that exist.

Yeah, I also want to say that it's not like we just woke up and realized that we have a problem that we need $75 million to solve.

There are some serious structural issues with the federal budget.

which has been exacerbated with the tax cuts.

The cost of building is going to go way up because of the structural deficit.

There's also market conditions locally.

So there's a lot of factors that have occurred in the last five to ten years that has created this problem.

and we're trying to solve this problem.

Hopefully some of the structural issues will change and there will be a broader base of resources to deal with this problem and also people can affordability thing gets better.

But I think it's important to understand that there are some serious market and and and federal structural issues that that's created this problem, and we're trying to address it Without it getting worse

Do you want to make a comment?

Yeah, I want to make one other comment.

So the part of the report that talks about going beyond $75 million is the section that refers to other progressive revenue options on page 7, and then directs folks to Appendix C. To I think underscore what I hear folks saying in response to my earlier comment, I think there could be some clarity that could be added to Appendix C. There is reference to the creation of a growth fund to pay back a potential housing bond, but it doesn't clearly say that a housing bond is not another type of revenue.

It's a way of using revenue.

So I don't have any great suggestions about how to do that within Appendix C, but I think that's a place to do that and to be more clear about your intentions for the 75 and the getting to 150. So perhaps it might be saying progressive revenue options and use of other financing tools or something like that.

So I'm gonna look to the primary drafters of this document to give us a little bit of feedback on the issue that is being highlighted by Council Member Herbold.

And I'm just trying to help you push back on my earlier statement and memorialize it in your document.

So bonding is discussed in the paper in the housing options with the caveat that it's subject to further analysis about how much absorption and at what rate is possible and given the desire to achieve rapid and great impacts, where that exactly fits in the strategy is TBD.

So I think you're right that it isn't actually an alternative revenue strategy.

It's an elastic factor about how far can the $75 million take us in impact.

But we are genuinely recommending $75 million in actual revenue through EHT and $75 million, hopefully one table will solve this problem for us and figure out how to do that.

But if they don't, then we're going to be asking the council to solve that problem as well.

Understood.

My point, though, is that the place in which you talk about the difference between the 75 and the 150, I believe, is on page 7. And I appreciate that under the housing section, you talk about bonding.

But I think that's a separate issue than being very clear to the readers of this report that bonding authority Your interest in using bonding authority as a financing tool is to get to the $150,000, not to make up for any of the $75,000?

So looking at Appendix C, so you're correct.

The Housing Growth Fund is neither a new revenue option nor is it inherently progressive since we're basically using future property tax revenue to bond against.

And the final sort of sentence there is at least acknowledging that part of it, but that this is a way of I suppose that could be reworded to sort of acknowledge that this is not really a new revenue source, but simply a way of using current revenue to generate some upfront money for housing.

I don't have an idea of specific wording in my head, but this could certainly be.

I'm just suggesting that we retitle Appendix C as Progressive Revenue and Financing Options.

And Financing Options.

Sounds fine to me.

Okay.

So the suggested edit is progressive revenue and financing options to Appendix C. Is there any further discussion of that?

Is there any objection?

discussion?

Yes.

If we're going to do that, I think there are actually two bonding ideas.

One is bond against future property taxes.

One is bond against the EHT revenue.

And I understand Councilmember Herbold's been putting that on the table.

And so if we're really retitling that, that could go there.

I would keep it.

So maybe we could title this appendix additional progressive revenue and financing options to make it clear that this is other ideas beyond the EHT because I think that the idea of bonding against the EHT is already sufficiently covered in the report.

Yeah.

Okay.

So the suggestion is additional.

Yeah.

Progressive revenue and financing options.

Okay.

Any further discussion of that?

Any objections?

OK.

We're moving along.

So I think that puts us, with that conversation, I think it puts us in a good place to have final consideration of the draft report as discussed in today's meeting with the understanding that, and I'll walk through this after we vote on this, there will be one last opportunity for task force members to review any revisions made to the report that capture the conversations that we've had today.

So is there any other discussion of the content of the report?

Ms. Wilson.

I just wanted to acknowledge that the one pager, the employer tax recommendations, it doesn't have a particular place in the report in the sense that it's just sort of there.

So I don't, you know, perhaps it would make sense to make that the first page of appendix B or something.

I don't know.

I'll leave that to the final compilers of the report, but I just wanted to point that out.

So what we have is a revised Progressive Revenue Task Force proposals document.

We also have several attachments to that report.

One is called Appendix A, Closing the Low-Income Housing Gap.

There's another titled Appendix B, Employer Tax Variations.

There's Appendix C, which we have now called Additional Progressive Revenue and Financing Options.

We have Appendix D, SCOF Law Mitigation Toolkit.

And then I have one, two, three, I have four pieces of paper.

There are a couple of items left over that do not have an appendix referral.

The first one is just simply titled number 3 hybrid FTE slash payroll employer tax model.

The second one is as Ms. Wilson just referred to employer tax recommendations document with several options.

Okay, so we have Okay, so then we have four four additional charts.

Do people have these four additional charts?

All right, so we need to get more going down that way.

Can you say the two that you do have?

The big one and then safety in place.

All right, great.

So you need intersecting needs and shelter.

Perfect.

It just stopped here.

My apologies.

take one take one pass it along.

So while those are being passed around Councilmember Gonzalez I just want to point out that the one of the sheets that you referred to number three hybrid FTE payroll employer tax model that's actually the third page of appendix B.

Third page of appendix B.

B as in boy?

B as in boy.

Okay.

Okay got it.

Okay thank you.

Oh that makes sense got it okay.

I just somehow in my paper shuffle had separated the two.

Okay, so we have heard, while those are going around, those additional charts, which I'm gonna allow Ms. Harris-Haley to describe what they are in a moment, I just wanted to get clarity on the document titled Employer Tax Recommendations that Ms. Wilson referred to earlier.

So if I understand correctly, you want that placed where?

I don't know.

I haven't thought about this deeply, but I was suggesting that perhaps it could be the first page of Appendix B. Got it.

Okay.

So setting aside placement of the documents, are we at a place where we can have a conversation about support for inclusion of the documents as appendices to the main document?

And just to be clear for the viewing public, These are documents that we've discussed.

I think this is our third public task force meeting where we've discussed these and they've been discussed quite a bit and worked upon quite a bit as part of the caucus groups.

So I just want to make sure that you all have had an opportunity to review them since Monday and that they accurately reflect the conversations that you all have had in your work sessions.

Okay so there's no objection to including any of the appendices to the main body of the I hear no objections.

So we do have one, two, three, four of these chart documents that are at least new to me.

So I'm going to hand it over to Ms. Harris-Talley to walk us through what these are and then I will call for discussion and see if there is any objection to including these as part of the documentation.

Thank you Councilmember Gonzalez.

So this is illustrative example only of to give a context really to a few things.

One, all of the information given to us by central staff around what the individual costs look like for all of the different recommendations that we have put forward in the report.

The blue column notes the $150 million per year recommendation that's a combination of the employee hours tax and other progressive tax sources.

And the green column is a reflection just of the $75 million a year employee hours tax piece.

It does the breakdown based on the recommendation again of affordable housing inventory and access at 80% of that revenue spend and shelter and services at 20%.

And again, it's only illustrative.

So we've taken this and plugged it into an overlap of what central staff has told us up to this point are the costs associated with these different categories and then also added a column to give a context to what need would be met with this given example.

It is illustrative and then there's a further narrative and thank you to Ian and others who recommended again for a context of reading a budget we need a narrative that gives us a context of what we're talking about.

So the narrative attached to this illustration simply gives a context to the categories and what recommendations out of the report are plugged into the categories.

None of this information is new except that it's a demonstration of what a combination could potentially look like and the level of need that would be met.

The accompanying tables were generated by central staff that give you the breakdown of the individualized numbers, services, programs that they were able to use illustratively to come up with the need that would be met under each of the subcategories.

And I would recommend us including this as an attachment with the clarity that it's illustrative only and an example just so that there is a context.

I just thought it was extraordinarily helpful for an overlay of what we're talking about on the revenue and use side for an annual sort of picture of the potential of what need could be met.

And also noting that some of this need, of course, builds upon itself.

So any of the new inventory, for instance, would build over time for as long as this revenue source was available.

Thank you.

Are there any questions about these documents and its content?

Okay.

So I'm looking at the big chart, and I'm just not understanding some of the things.

So 0 to 15 percent, is that under new housing construction?

Is the 0 to 15 percent an AMI target, or is it the percentage of revenue?

It's an AMI threshold.

And the reason that we did two grades of that threshold is because as we learned there's quite a different cost assessment depending on whether or not services needed to be extended with that.

And you'll note that for permanent and supportive housing there's a breakdown of capital cost and then operating and service costs.

And that central staff has also put in consideration there the threshold of what percentile increases would look like annually for that illustration, which is separate from the mixed income cost because at that AMI threshold you would not need accompanying operation and services annually to sustain the housing.

And then under the rental subsidy, which is number 2A and 2B, you have rental subsidy parenthesis 100% AMI to 15% AMI affordability.

Are you saying that you would provide rental subsidy to people between 15% of AMI and 100% of AMI?

No.

What we're saying is for current inventory that's at 100% AMI, so market rate, it would be subsidy that would allow those in the 0 to 15 threshold affordability access to market rate units.

And this would be something that would need to be set up as a program above and beyond any federal programs or other voucher programs that are in place, again, in response to what central staff showed us about the gaps in need there and what we're dealing with as far as market rate increases over time.

I would suggest some wording changes.

I just can't think of them right now because I'm tired, but let me think.

Okay.

Just to clarify that.

And I just want to clarify what the intent of these documents are is my understanding based on the introductory remarks that these are not recommendations of the task force for how any revenue should be spent.

It is simply a demonstrative set of sheets of what in one column $150 million a year could buy the city and what $75 million a year could buy the city.

Really, what I'm going to call for at the end of this discussion is whether there's any objection to forwarding these as demonstrative exhibits, but I'm not going to call for a vote on whether or not the task force is endorsing this slate of expenditures as the recommendations from the task force.

And I think if we do decide to move forward with it, there just needs to be a little bit of clarity in language.

Yeah.

And I will, because these are just being digested now, there is an opportunity for us to just hit pause on these documents to allow people an opportunity to absorb them and to propose changes or clarifications as needed.

Because these are not part of the formal set of recommendations of the task force, I don't want to hold up the task force actual recommendations because of the demonstrative slides.

Ms. Wilson.

I just had a question on the numbers.

So on the rental subsidy section, when I divide 15 million by 9,100, I get about 1,600.

So I'm wondering whether that sounds more like the subsidy per month rather than the subsidy per year.

And so I'm wondering whether the number of households served should be 12 times smaller than 9,100.

I would defer to central staff for that because they helped

I think that's a yes.

Yes.

Answer is yes.

Ms. Little.

My suggestion is that we title these documents as like, yeah, examples of how the money could be spent, obviously in a more eloquent way.

But yeah, just so no one is confused about what these numbers are and their purpose.

Good suggestion.

Mr. To.

I think just at a high level in terms of presentation, the three smallest sheets are actually the 20% and one sheet is the 80%, so it might be helpful to do that for the three smallest sheets that that's the 20% just so it's easier to categorize.

Any other feedback for the Revenue Use Caucus on these documents presentation content-wise that needs to be offered now?

Okay, I don't hear any.

So it sounds like we need a little bit more work on these documents to make sure that it's clear what their purpose and intent is.

So we'll take the next couple of weeks to solidify that intent and make sure that the clarity is there and that it's presented in a way that is consistent with the work that we're doing here.

But it sounds like there's no objection at this juncture to do that work in the hope of being able to advance the information as demonstrative.

Okay.

All right, so now we now have a complete set of appendices to the body of the report that include everything except for the charts that we were just talking about.

And we have a body of the report that will have modifications made to it consistent with the conversations that we had here that you all will have an opportunity to look at over the next couple of weeks.

to make sure stayed consistent with the conversation that we had here.

So at this point I'm going to ask if there is any further discussion about any other aspects of the contents of the report and the recommendations and whether anybody in the course of having those discussions wants to express an objection to finalizing the report.

Okay, Council Member Herbold has a question.

And I apologize.

Because of the nature of the appendix section and that it's my understanding that they need to relate to the content of the report, I want to double check.

The appendix three, the hybrid payroll employer tax model, that goes to appendix B.

It relates to appendix B but does it relate to a document within the report itself?

it' s part of appendix b and appendix b is referred to in the revenue generation employee hours tax section of the main report and it says see appendix b for some explorations of how the variables below may be used to make the eht as progressive and equitable as possible.

It' s part of those demonstrations of possibility.

actually have a sentence in there referring to this concept of the hybrid in the report itself?

I mean, personally, I don't feel that that's necessary.

Yeah.

It would take some thought, I think, to figure out what exactly to say about why one might choose that way of doing it.

Someone else might have some other thoughts.

Let's draw the question.

Okay, that's wrong any other discussion about the report Mr. Sun

Sorry, I try not to speak until spoken to, but in this particular case, I'd just like to be clear or to clarify from my own understanding the relationship between the, and this may be something we're getting to anyways, the employer tax recommendations attachment and the employer tax variations attachment, either in the way that it's referred to in the body of the main report, or in the numbering or lettering, as it were, of the documents.

And I'm understanding that the employer tax recommendations are actually like, please do one of these things.

And the other one is sort of examples of the kind of to show the principles you're working with and other ways that things might be done.

And I wonder how you might wish to organize those two lines of thinking.

I mean, I think we haven't really discussed that.

I would be happy to help make that happen.

I don't know that we can like come to that now.

I think just like some small wording changes in the report and some small wording changes in both that recommendations document and the appendix would serve to sort of integrate them in a way that would make sense and that would be consistent with everything that we've talked about today.

And I can help with that.

It's herself.

I would just if I could make a wording recommendation I would just where we have the first reference of appendix B just make clear that those are the two things.

Please refer to appendix B which includes the task force employer tax recommendation and also employee tax variation possibilities that the council and all other entities who advise

is that enough direction Mr. Sun?

Absolutely.

I just wanted to make sure everybody was going to be satisfied with whatever it is that we might end up doing.

Okay.

Sounds great.

Okay.

Anything else?

All right.

So are there any objections to advancing the will be revised version of this document and its appendices.

I'm not objecting.

Oh my gosh.

Is this the final vote?

Yes.

Because I actually think this, we should, if you are amenable to this, be better to vote in favor of it rather than on an objection basis because we're sort of, you've now assembled a final package.

Well, no, because we agreed to do things by consensus and that means I'm going to call for any objections.

I thought that's how we were going to get to the final package, but then people were actually going to vote up or down on the final package.

That wasn't what I was planning on doing.

But if you want to have people vote in support of it, is that what is?

I think it would be more powerful and compelling to do that.

So I don't know if others feel differently, but.

I like voting.

Does anybody else feel differently?

No?

OK.

Let's do this, because we've got to move on the public comments.

So OK, all those in favor of advancing the recommendations as modified pursuant to our conversation today, including the appendices, please signify by raising your hand and saying aye.

Aye.

Aye.

Any opposed?

Any abstentions?

Okay.

So that passes unanimously.

And it will go on to central staff to figure out how to reconcile all of these things and make it presentable.

So, okay.

So we're going to do public comment.

I think we have a public comment sheet somewhere.

I apologize for those of you who are signed up for public comment that have waited much longer than I'd would have wanted to make you wait.

We're starting about 30 minutes late on public comment.

Each person who I'm going to call is going to have two minutes to address the committee.

And from up here?

OK.

Is that a roving mic?

OK.

Whatever's easiest.

OK.

So the first person on the list is is David Haynes, followed by Sean Smith.

And again, each person will have two minutes to provide us with their public testimony.

Whatever the dollar amount, we need a great American house and build out also the supply demand squeeze oppressively perpetuated by the liberal Democrats bailing out Wall Street financial to advocate for their establishment donors throwing monkey wrench into financial costs who came in favor of sellouts.

We need noble civil engineering firms, advanced architects, honest to goodness general contractors, and carpenters union qualified carpenters with an investment in more carpenters to begin building for ourselves in partnership with qualified developers to build normal homes.

We need to investigate and consolidate the non-profits and government agency budgets and hire honest and trustworthy developers to stop giving money to shady, unqualified co-chairs and non-profits, self-appointed, politically connected by donations that exempt them from scrutiny.

As it turns out, all housing built by low-income housing, HomeSite, Seattle Housing, Plymouth housing, King County housing, solid ground and other smothers of suspect nonprofits skimming costs in partnership with low quality developers are creating warehouse echo government institutionalized housing designed to keep you irritated, uncomfortable, wanting to move away from abusive, intimidating housing authorities using data to manipulate statistics to sugarcoat the lies of the why they reasons why they've already failed the community and need to be denied this budget.

Okay, Sean Smith will be followed by Tiffany McCoy.

Good afternoon, members of the task force.

My name is Sean Smith.

I'm a member of SHARE and Nicholsville.

For nearly 30 years, we have come before city leadership and county leadership trying to articulate two things.

One, shelters save lives.

Two, housing sustains lives.

Many times we have told that there is no funding available for either.

We want to thank you for the work here that you have done over the last two months.

We look forward to working with you to make sure that it passes through the City Council.

And thank you for your time.

Thank you, Sean.

Tiffany McCoy followed by Sai Simaneni.

My name is Tiffany McCoy.

I'm the lead organizer for Real Change.

I want the task force and members of the audience to know that Real Change will be fighting for a $150 million employee head tax to be generated.

I realize that the resolution 31782 states that $25 to $75 million is what was proposed.

But as we learned from the most recent full Council meeting, resolutions are not law.

They're not binding.

And the language on page 4 of these proposals states that this is not enough or even close enough to adequately address the crisis.

And that this also says in this document that people are tired of half measures.

So there's a bit of a contradiction there.

Folks, Amazon paid $0 in federal taxes in 2017 after $5.6 billion in profits.

There was a discussion here at the end about bonding or other measures of financing to get to $150 million.

So there's a recognition that we need $150 million.

The employee hours tax would be an annual replenished revenue source that is paid for by the wealthiest businesses in this area.

I'm asking folks to come out to this meeting that's hosted by Council Member Sawant Monday, March 12th at 6 PM in this room to discuss how to build a strong movement to secure $150 million employees hour tax.

Thank you.

And our last speaker signed up is Sai Sumaneni.

I didn't bring any spoken word today.

I just had three asks of the council.

I'm concerned that this tax is headed towards a paradox and that it needs to be progressive, but also pro-growth.

In employee hours tax, the key word is employee, not tax.

And I think small businesses in the first 18 to 24 months of their operating need to be exempt from this.

I'm specifically thinking of my trainer who just opened her business a month ago in Southeast King County.

And she's a 30-year-old African-American woman.

And when she told me about all the licenses that she had to pay for, it was eyebrow-raising.

And so the paradox is that if we aren't communicating with real business owners and thinking about the impact on market economics and real systems because we're seeing this as a single agenda, homelessness and housing crisis view.

When businesses are hurt and they can't hire employees or remain stable, that's not going to lead to healthier communities.

And then finally, my second ask is, I know this is difficult, but I think part of the problem that this money is not stretching very far is because the council is being asked to both generate the housing, but also vertically integrate supportive services.

And I think other leadership in this area needs to be taking more accountability and not creating a phone service that puts you on an eight-month to five-year housing list.

That's not a program.

And so I think if other leadership, whether that's private equity, big health influencers like Kaiser or one table took ownership of vertical integration of services that's going to allow the money, which I'm fully confident that at a minimum you can get $75 million, and if 13 days from now I blink it's not going to become a zero, that that money will go further in terms of getting housing.

Stop.

All right.

That was our last person signed up for public comment.

So I'm going to close out the public comment period.

This report, as I mentioned earlier, is going to be revised to add any of the changes that we discussed here today.

In the next few days, task force members will receive a final copy of the report by email to confirm the edits correctly reflect your changes.

And barring any objections within 24 hours of that email, the report will be considered final.

The report will then be presented to the Finance and Neighborhoods Committee, of which I'm the vice chair of, in a briefing on March 14th.

That meeting is at 2 p.m.

on March 14th in council chambers.

And that briefing will be followed by the drafting and deliberation of legislation relating to the recommendations included in this report.

And so before we come to a close of this meeting, which is now officially, I can say confidently, our last meeting of the task force, is I just want to really say thank you Really sincerely thank you for all of your hard work and the time that you have put into being with us in these really long meetings here and in the long meetings that I know that you all have had in your work groups with respective caucusing.

So really thank you so much for being engaged and for continuing to be with us.

And then, of course, I want you all to help me thank some of the staff that has been working really hard on this.

So that includes Dan Eder, Eric Sun, Tracy Ratzlaff, Alan Lee, Shannon Perez-Darby, Cody Ryder, and Ashley Harrison.

So let's hear it for them.

Thank you, thank you all so much, really appreciate it.