Seattle City Council Select Budget Committee 4/29/2020

2 a.m.

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

Will the clerk please call the roll?

Councilmember Herbold?

Councilmember Gonzalez?

Councilmember Juarez?

Councilmember Gonzalez?

Councilmember Herbold?

Council Member Juarez.

Council Member Lewis.

Present.

Council Member Morales.

Here.

Council Member Peterson.

Here.

Council Member Sawant.

Council Member Strauss.

Present.

Chair Mosqueda.

Present.

Five present.

Thank you, colleagues, and thank you, Madam Clerk, folks from IT, the communications staff as well for making today's committee meeting possible.

As we hear from additional colleagues who are joining us throughout the morning, we'll make sure to announce them.

As a reminder, the city of Seattle issued a civil emergency proclamation due to the coronavirus on March 3rd, 2020. Since then, the governor has issued a stay-at-home and healthy order through May 4th.

To comply with the recommendations and in the interest of safety and welfare of the public and our employees, the City of Seattle and the Select Budget Committee is meeting remotely and participating electronically.

The purpose of the conversation today and the purpose of the conversation in our committee is to have a discussion about legislation related to emergency assistance in 2020 as folks are responding to the 2020 COVID crisis, both the public health crisis and the economic crisis that has ensued.

We will have a discussion today that is largely a continuation of last week's hearing.

Today's conversation will focus on the ability for us to raise revenue to pay for the 2020 emergency funds that have been proposed in the legislation that's being discussed.

and introduced by Council Member Sawant and Council Member Morales.

Today's conversation is largely a continuation, but we have added a community panel after public comment to provide context on the immediate impact and the reality of the budget crisis that has been exacerbated by COVID and the public health issues that are arising for community members, small businesses, and healthcare providers.

Again, we want to thank all of the folks who have participated in our community conversations and engaged both via email, phone, and by public comment in last week's meeting.

We heard from workers, small businesses, nonprofits, and the community at large as we talked about how we can provide some immediate assistance and try to replenish the funds from providing that immediate assistance.

This is a conversation for us to put into context the reality that we heard from Director Ben Noble last week, which articulated a situation in which we may very quickly face up to a $299 million budget shortfall.

I encourage folks to review the slides provided by Director Ben Noble last week and want to ensure that folks know that we are following up to get additional details on the projected revenue shortfall.

You also heard this morning or Monday morning at morning briefing about the potential ability for us to use federal dollars and state dollars, which we know will not be enough and it couldn't come quicker, but we want to make sure that we are following up and complementing those federal and state resources with additional support in 2020 for small businesses, for community members, for families who are in need of food and housing security.

I want to thank everybody who's logged in today for public comment, and I will have a few comments about the public comment process.

But first, I would like to move the agenda be adopted.

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

Hearing no objection, the agenda is adopted.

Council colleagues, it is 10.05 and we are about to move into public comment right on time.

At this time, we are gonna open remote public comment.

I ask that everyone please be patient as we learn to operate this new system in real time and navigate through the inevitable growing pains.

As we move forward, we will continuously look for ways to fine tune this process and hopefully add new features that will allow for additional means of public participation and council meetings and council discussions.

Councilmember Musqueda?

Councilmember Sawant?

I just wanted to register my attendance because I think my voice was not heard during roll call.

Thank you, Councilmember Sawant.

We do hear you and we will acknowledge for the record that you are here.

I'll take a pause real quick.

Are there any additional council members that have joined us?

Okay, thank you, Council Member Suman.

This is Council President Gonzalez.

I've been able to finally log on after some technological difficulties.

Underscoring our ongoing commitment to making sure that people can continue to participate in the process.

Thank you, Council President Gonzalez, for being here as well.

Council colleagues, I want to also issue an apology for the viewing public, anybody who called and tried to log in this morning to sign up for public comment.

There was an issue.

We want to acknowledge that this morning at 8 a.m.

there was a typo in the field listing the meeting date and time, and individuals saw a sign that said council meeting April 27th at 2 p.m.

instead of this morning's budget meeting.

We apologize for that error.

The clerk's office immediately was notified and fixed the error as soon as they could and sent correction to everyone already registered, letting them know they had successfully signed up.

However, the error did cause some confusion, so I want to apologize for that.

And this typo has been corrected.

We will make sure that folks who did not get a chance to sign up to continue to email us at Council at Seattle.gov.

I hear a little bit of background.

Yeah, Chairman, can we ask that Council Member Juarez put herself on mute?

Wonderful.

Thank you, Council Member Juarez.

And if the IT team could, thank you.

And Council Member Juarez, we appreciate you joining us.

Thank you so much for being here.

So with that, we are going to moderate the upcoming public comment period.

We're going to go for at least 20 minutes, and then we'll consider extending it.

Council members, last week we tried to do a chime at 50 seconds.

We did hear that that was a little bit of an interruption for our colleagues and the community who was trying to provide public testimony.

So you're going to see this chart or this timer on the screen.

It will give you one minute to speak, and we ask that you wrap up your comments within one minute.

Your line will be muted after a minute and five seconds, so we do ask that you summarize your comments so you don't get cut off.

We want to also acknowledge that the webpage provides a link to today's agenda.

All of the materials will be listed on the line.

Speakers, when you hear your name called, your mic will be unmuted.

Please go ahead and begin your public testimony beginning with your name after you hear the prompt you have been unmuted.

Please begin speaking and do try to wrap up at one minute.

Otherwise, unfortunately, we will have the line muted at one minute and five seconds.

Thanks again to Seattle Channel for providing the opportunity for folks to both see and hear all of the public testifiers today and our upcoming conversation.

If you do get the chance to speak, please disconnect from the line and continue watching us on Seattle Channel or on the website streaming so that you can continue with the conversation.

I do apologize for folks in advance.

We have a number of people who have signed up for public testimony.

We are going to get through as many people as we possibly can.

And again, if you are not able to stay on the line with us or if you have a number that does not allow for us to get to you today, please email us at council at Seattle.gov.

And each one of our offices is continuing to operate at full staff.

We have people answering the lines in our offices as well.

Council colleagues, at this time, we are going to open public comment with a 20-minute public comment period.

And the first three speakers on the list include Lawrence Lenner, Alicia Lewis, and Dawn Blankney.

Lawrence Lenner, your line should be unmuted.

Please go ahead.

Good morning.

Thank you so much, Councilmembers.

My name is Lawrence Lerner.

I'm a Seattle business owner, venture capitalist, and involved with multiple nonprofits here in the greater Washington area.

I'm speaking against CD 119-772.

It's going to impact, as stated in the comments, over 800 businesses, operating with around $7 million or more in income.

And interestingly, the cost to implement this system by my calculation based on what was provided is about $7 million as well.

And what that's going to do is make, have these businesses have to make some hard choices about whether or not they can open and remain open and how many employees that they can bring back in.

It's also creating one more barrier to entry for bringing businesses into Seattle.

Last year, I was involved with a 425 business startup with five neighboring cities, and they were looking at reasons that we can lower barriers to bring in, and I believe this will have a severe impact on...

Thank you very much, Lawrence.

Your comments have been registered, and please do follow up with us via email.

Alicia Lewis, your line should be unmuted.

Hi, my name's Alicia Lewis.

I'm a tax Amazon activist, and I want to speak to the shameful misinformation that Mayor Durkin has been spreading about this legislation.

Mayor Durkin received $350,000 in corporate PAC money from Amazon when she was elected.

She's not neutral on this issue, and her arguments against this tax should be taken with a grain of salt.

For example, she's saying that using Interfund loans to provide cash assistance to working families immediately is robbery.

As all council members are aware, Interfund loans are a standard practice and the 314 million in funds available are a year in balance that wouldn't impact any existing projects or delay future ones.

This accusation from Mayor Durkin is not only untrue, it's in bad faith and an attempt to capture movement off guard on a technicality.

Months ago, we prevented Amazon and other large corporations from buying the City Council elections.

At that time, Councilmembers Mosqueda and Gonzalez came out publicly condemning Amazon's blatant interference in our elections.

I want to thank both of you for taking a clear stand when it counted, but that fight was not for nothing, and that's why I hope you'll stand with the working people of Seattle and pass this strong.

Thank you very much.

Alicia, Don Blakeney.

Good evening, Councilmembers.

Good morning Council Members.

My name is Don Blakely and I'm with the Downtown Seattle Association and I'm calling today to express our strong opposition to a tax on jobs.

Downtown Seattle has been on the front lines of this economic crisis with nearly 50,000 jobs in industries that are at most at most at risk, including retail, restaurants, entertainment, the arts, and hotels.

For example, we have 29 shuttered hotels in downtown, which is unbelievable at this time.

We are on the eve of a major economic downturn, and instead of negotiating over new streams of revenue for city programs, we need our city leaders' help in focusing on getting our local jobs and economy back online, working with the federal government to connect local businesses to much-needed aid.

We urge you to help us focus on recovery and not a new tax on jobs.

Thank you very much for your time this morning.

Thank you, Don.

The next three speakers will be Emily MacArthur, Taylor Hong, and Eva Metz.

Emily, please go ahead.

My name is Emily MacArthur.

I'm a renter in District 2, and I'm excited to see my council member, Council Member Morales, playing a leading role in this fight.

I support the Amazon tax, and I'm active in the tax-Amazon movement, along with thousands of other Seattleites.

I'm here to speak on the attacks on our movement from Mayor Durkin.

Durkin has said she's opposed to the emergency clause in this bill, yet I would challenge anyone here to identify a more acute emergency.

The virus is killing our neighbors, the recession is putting working families in dire straits, and the pre-existing housing emergency is even more urgent than ever.

I hope all council members will confidently stand by the emergency clause.

Durkin has also been very vocal with a cannot-do attitude.

She's blatantly lied about how long it would take to collect this tax.

How do I know she's lying?

In March, she said the payroll tax could be implemented within six months.

Of course, that bill contained a poison pill statewide ban that big business was salivating for.

Now, the exact same tax mechanism with no poison pill and on a scale that would actually meaningfully impact the problem, somehow that tax will take three times as long.

It's shocking to see even a corporate politician be so duplicitous.

Thank you, Taylor Hong.

You should go ahead, please.

and my name is Taylor Hwang, and I'm the owner of Fossil Glow Cafe, and I'm also with the Ethnic Business Coalition.

In the midst of the worst global economic downturn in nearly a century, Councilmember Sawant has introduced her latest tax on jobs in Seattle at a time when the local economy is reeling from the impact of the coronavirus outbreak.

Our city council should be focused on doing everything they can to help our local businesses recover, reopen, and rehire.

Large and small businesses coexist as part of the same economic ecosystem.

A jobs tax will have a ripple effect throughout the business economy.

Placing a tax burden on large businesses will only increase the economic recovery challenges for small businesses, straining the ecosystem even further.

I urge city council to please oppose this bill.

Thank you.

Thank you, Taylor.

Eva Metz.

Hi my name is.

Hi my name is Eva Metz and I'm a renter in District 2 a member of Socialist Alternatives.

Thousands of people have gotten active in the fight to attack Damathon this year.

Rallies marches town halls and a series of Democratic grassroots action conferences.

And in this crisis city council has a duty to act more than ever.

I want to thank my council member Tammy Morales and council member Sawant for standing with working people and our movement.

We saw in 2018 how a majority of City Council bent to big business pressure and shamefully repealed the Amazon tax.

Council Member Mosqueda, I hope you'll stand with working people again, as you did in 2018, and Council Members Juarez, Herbold, and Gonzalez.

We'll take this second chance to be on the right side of history.

But if City Council fails to act, we're prepared to take our Amazon tax directly to voters.

We've collected thousands of signatures on our ballot initiative in just a few weeks with a growing coalition, including TransitRidersUnion350.org UAW4128.

We'll see 14 to be small businesses like Skrill Tops and the Beacon Cinema, Tenants Union, Nickelsville Share, CSA, Socialist Alternative, King County Working Families.

Thank you very much.

The next three people are Ryan Smith, Sue Hotz, and Carrie Lafferty.

Ryan Smith you should be unmuted.

Thank you for the opportunity to comment today.

My name is Ryan Smith.

My local family-owned company, Martin Smith Inc., owns several buildings in Pioneer Square and the Waterfront and 9th Place Market.

We have over 250 tenants who are all suffering significant economic challenges right now.

The majority of our tenants are small businesses who employ thousands of people with living wage jobs, from architects to attorneys, software engineers, as well as many restaurants and other retailers.

As I regularly talk with our tenants these days about rent relief solutions during this economic and health crisis, I continue to hear unanimous disappointment in our city council for opposing this tax on our businesses.

I have yet to hear from a single business, large or small, who supports this tax.

Although this is framed as a tax on big business, this tax will negatively impact all of the businesses in our local economy.

The best analogy I can think of is to describe the situation As akin to proposing, we build a wall around our city and hang a giant sign outside stating, no jobs, welcome here.

Grow your economy elsewhere.

Thank you for your time today.

Thank you, Ryan.

Sue Hodes?

My name is Sue Hodes, and I am with the Housing for All Coalition and part of Dike Community Activists.

I am organizing with my neighbors to support the bunkhouse and nearby shelter in our District 2 and the Wheel Women and Black Shelter with some food and supplies.

support this very, very little big business tax.

To a majority of us, COVID-19 has made so apparent the suffering and injustices of our system of a very small minority with an obscene amount of wealth, Amazon, a trillion-dollar company, and Bezos personally having $140 billion, and the majority of the rest of us.

And that includes those dying in the streets homeless, and working single moms barely making rent, and so many other people living on the edge.

Immigrants dying in our detention centers, inmates dying in prison.

We need the gargantuan businesses, and that's who we're referring to here, to start returning resources to our community that they have taken so much from.

This tax is so very minimal and will make life and death different to those who benefit.

Support this little big business tax.

Thank you, Sue.

The next speaker is Keri Lafferty.

I live in North...

Go ahead, Carrie.

Thank you.

My name is Carrie Lafferty.

Yes, my name is Carrie Lafferty.

I live in North Seattle.

I am a small business owner in the Fremont neighborhood.

I'm a healthcare provider and a Chinese medicine practitioner.

And, you know, I just wanna like look at this from the energy in the world of yin and yang, right?

It's just like yang is out of control.

The obscenity of wealth is just out of control.

We need some heart-centered yin energy that lives in every one of us.

Like, let's just look at who's surviving in this.

It's Amazon.

It's these big companies.

And my business is going to be ready to go out of business soon because I can't afford to pay rent.

And it is time to have this be more equitable, to bring this balance.

back.

It's only gargantuan huge businesses that are being taxed.

The rest of this is misinformation, and I am extremely disappointed in Jenny Durkin's comments.

And so City Council, it's like make...

Thank you very much.

The next three people are Logan Swan, Steve Claggett, and Stephanie Stravok.

Logan Swan, you should be unmuted.

Hi, my name is Logan Swan.

I'm a Seattle rank-and-file union iron worker currently on unemployment during the pandemic, and I support the tax on big business.

Two years ago, Council Member Mosqueda voted with working families and against their appeal.

A week ago, in your opening remarks, you spoke in no uncertain terms on how an austerity budget will not work and will not meet the needs of working families.

Having run as a labor candidate and a union representative yourself, I hope you'll not only vote for this tax in full without watering it down, but that you'll join Council Member Sawant Morales in pushing for it to pass.

The Amazon tax will create 10,000 union wage construction jobs over the next decade and 30,000 jobs overall over the next decade.

The last recession had building trades unemployment rates at nearly a third of the workforce.

During this boom, the private market failed to provide affordable housing for us.

And much like the last recession, the private market will fail to provide us with work during the booming bust.

The crisis will have to be paid for in a world divided between landlords and tenants, workers and bosses, those with billions at their fingertips while the rest of us have been working our fingers to the bone.

It is clear that the choice of who will pay is reduced to either union families or the extremely wealthy who will profit off our labor.

Thank you, Logan.

Steve Claggett, you should be unmuted.

I am Steve Claggett.

I am Steve Claggett.

I'm testifying from Debra Wars' district in favor of a payroll expense tax.

I'm a member of the Working Families Party.

I founded the nonprofit Common Ground that produced 8,300 units of low-income housing over its 33 years.

Since retiring, I've worked with the faith community for justice, especially economic justice.

Washington pays relatively few taxes.

Since the 90s, we have fallen from 11th place nationwide in percent of personal income paid in taxes to 35th place.

We so easily have the means to contribute more through taxation.

Washington leads the nation in economic growth.

We're number one.

But instead, Washington is unduly burdening our poor with the most regressive tax system in the nation.

We do not have an income tax, and we're one of a handful of states not taxing capital gains.

Until Washington adopts an income tax, I support payroll expense taxes for major employers.

Companies can easily pay it.

Amazon stock just quintupled over the last five years.

Thank you.

And I have graphics of that in my written comments.

Thank you for sending those.

Appreciate it.

Stephanie Stovic.

Stephanie Stovic.

I'm a board.

My name is Stephanie Stovic.

I'm a board member of the Seattle Restaurant Alliance.

We oppose this tax proposal.

It's 10 times larger than the failed 2018 head tax.

It targets more than 800 of our city's employers which provide over 300,000 jobs.

Many of these businesses will not make it out of this COVID crisis.

They do not need this huge new jobs tax.

We call on more responsible city council members and the mayor to focus on key economic recovery needs once the stay at home order is lifted, create partnerships with businesses and workers in cooperation with King County and the state to get our city back on its feet as quickly as possible.

Thank you for your time today.

Thank you very much.

The next three people include Sean Case, Alan Nay, and Emily Hazleton.

Sean, you should be unmuted.

Hi there.

My name is Sean Case.

I'm a renter in District 3 and a member of the Seattle Democratic Socialists of America.

I lost my job as a cook due to COVID-19 on March 13th, and since then I've been scared not just of getting sick, but of not having a job to go back to after the stay-at-home order was lifted and not being able to pay rent once the eviction moratorium is over.

And if I'm scared, my neighbors and working people all over the city are scared, too.

Many of them are more vulnerable than I am.

This pandemic is exacerbating the housing crisis that already existed in our city, but it doesn't have to be this way.

We live in one of the wealthiest cities in the history of the world.

Big business in Seattle has enough money to bail us out.

I support the legislation proposed by Council Member Suwantna Morales because it can provide relief now to those most affected by the pandemic.

provide housing security in the future in the form of 10,000 publicly owned green homes in the first decade of legislation.

I believe this modest tax is a small and important step toward a more just city.

I hope the council has the courage to pass it.

Thank you.

Thank you.

The next person is Alan Nay.

Good morning.

I'm Alan Nay.

I live in Madrona.

I own a small business on Capitol Hill.

I have 19 employees.

They get paid really well, and we have generous benefits.

Our clients are big businesses in the region.

I strongly oppose the tax on jobs.

Jobs are good.

We need to be focused on creating jobs.

We need to be encouraging job creation.

Punishing for creating jobs is short-sighted.

You guys are in a tricky position without the income tax, and I recognize that, and thank you for your hard work.

Jobs are good.

Everybody say it.

Jobs are good.

We need to be encouraging job creation, not punishment.

I'm from Cleveland, a blue collar family in Cleveland.

If you think big businesses that create high paying jobs are bad, you should go spend some time in Cleveland.

They never backwards to have some companies come in to create high paying jobs.

Thanks, guys.

Stay safe.

Thank you very much.

Colleagues, we have gone 20 minutes.

I'm going to ask if there is not objection that we extend public comment for 10 more minutes.

Hearing no objection, public comment will be extended 10 more minutes.

The next three people are Naomi Gonzales, John Manella, and Sharon Appelt.

Naomi?

My name is Naomi Gonzales, and I'm one...

Hi, my name is Naomi Gonzales, and I'm one of the co-founders of TomboyX, based in Soto.

And I'm speaking against this bill.

As a business we are in uncharted territory.

It's a period of severe uncertainty and in which the future of our business is not guaranteed.

We have had to lay staff off and are working on preserving cash however possible so that the staff that we're able to keep on can continue to receive their full pay and generous benefits.

This tax would be based off of a business's 2019 payroll record.

In the COVID period, we're unable to have any level of confidence in forecasting.

We cannot reliably predict that we will continue to grow at any pace as we were before COVID.

That means we cannot make investments in the future, and we certainly can't guarantee jobs.

This proposed punitive tax would affect over 800 Seattle businesses, not just Amazon, businesses that employ over 300,000 people, punishing businesses now is counterproductive for the economy.

The dollars spent on taxes at this moment in time are dollars that will not be spent on goods and services that keep the economy alive.

The best focus the city council can have right now is getting people back to work, not taxing the businesses that help people get.

Thank you very much.

Colleagues, I apologize.

I called Emily Hazleton and then didn't ask her to speak.

Emily, if you're still on the line, we'd love to unmute you and then we will continue with John.

Emily, are you available?

Yes, thank you.

Hi, my name is Emily.

I'd like to speak in support of the business tax.

I work at neighbor care health, the community health care organization as a data analyst.

My hours on the hours of most people in the admin office have been reduced to 0.5 or 0.8 of our standard schedule.

Even with that, I feel lucky.

Our other admin staff, dentists and school based providers have been on furlough for over a month.

This is just one story of how the pandemic is impacting workers and critical services in our community.

I'm also a volunteer with 350 Seattle.

We are currently experiencing multiple crises a pandemic economic downturn and climate change.

I believe it's smart governance to introduce policies that solve multiple crises at once.

Building social housing and converting our home heating systems will create thousands of jobs over the coming five years.

The top 2 percent of businesses can afford to chip in 1 percent to help our community face these crises and build resilience.

And the overhead of operating the program is only 3% of total revenue collected.

Thank you for listening, and thanks for your work.

Thank you very much.

John Manella and Sharon Appleton will be our next speakers.

John, please go ahead.

Great.

Thank you, members of the council.

My name is John Manella, and I'm the board treasurer of the Tenants Union of Washington State.

Please focus on helping our communities and support this big business tax.

Our communities, especially renters, are getting absolutely crushed right now.

But this pandemic has only shown what we've already known, that Seattle is a deeply unfair, regressive city where a tiny fraction of billionaires and corporations benefit at the expense of our communities, even in this pandemic.

And to quote Council Member Mosqueda from a rally earlier this year, we have a moral duty to right-side up our upside-down tax system.

And this bill does exactly that.

Please support this big business tax so that our communities get immediate COVID relief, affordable green housing so that we can recover from the pandemic, climate mitigation for housing because our communities are the ones most impacted by both a pandemic and by climate change.

And most importantly, this bill provides thousands of jobs, and jobs are good, so our communities can recover from the pandemic.

Please focus on helping our communities and pass this big business tax.

We need recovery and relief now.

Thank you.

Thank you very much.

Sharon Appelt?

I'm a retired TTA.

My name is Sharon Appelt, and I'm a retired CPA and live in District 7. I'm opposed to this payroll tax on 800 businesses who call Seattle home.

I'm also opposed to the borrowing from voter-approved funds, including affordable housing, parks, education, preschool, transportation.

Every business in Seattle already pays a business and occupation tax on gross receipts, sales taxes, and property taxes.

I am concerned that this tax will overburden businesses who have been in Seattle for years, for decades, who have built this city and employ our working families.

Businesses like Dunlumber, Bartels, Dairygold, Cochrane Electric, the Polyclinic, Aegis Living.

This is a new jobs tax, which is 10 times larger than the one that failed in 2018. Our city council needs to be looking at other ways to address the budget shortfall and not hurt our existing businesses.

This is not only about Amazon.

It's about many, many other businesses who employ working families.

Thank you very much.

Thank you very much.

The next three people will be Megan Murphy, Brent McFarlane, and Wale Amjapai.

Sorry about the pronunciation.

Megan Murphy, please go ahead.

Hi, I support this tax.

We are currently funding clientelism of elite, of the top 1% of the 1% who is supposedly against socialism and using our tax money for socialist purposes.

However, they're living well beyond what it takes to survive in this world.

So what kind of businesses do we want to partner with anyway?

The payroll is very minimal.

and uh...

it i think a lot of people out there but they don't want to create dot they say let them create more jobs and build affordable housing instead of putting the money in manhattan and i'm creating a clientele among their top executive that important the culture of implying uh...

ecological um...

conscientiousness and uh...

and sexism and uh...

i don't think and uh...

and let the design of the society be around sharing wealth.

Thank you very much.

The next speaker is Brent McFarland.

Hello, my name is Brent McFarland.

I live in North Seattle District 5, and I'm a King County Labor Council delegate and member of PASARA, that's Puget Sound Advocates.

for retirement action.

I'm here to support a tax on the wealthiest 2% of businesses to build affordable green housing and for COVID-19 relief for those most in need in our city.

This is not a tax on jobs.

It's a tax that creates green jobs.

The mayor didn't speak for us when she said of this proposal, yeah, that's never going to happen.

We need you, the city council, to say, yeah, it's going to happen.

because it's what the city needs now.

We need you to step up with big progressive solutions, progressively funded solutions, and this is an opportunity to do just that.

Show real solidarity with people of this city as we work together to come back from the pandemic.

Be brave, stand in solidarity with the majority of the people you represent.

Thank you.

Thank you.

The next person is Whale Ongdupi.

Apologies for the mispronunciation.

Wale?

Hi, my name is Wale Gendipe.

I live in District 2. I'm a renter, and I am in support of this tax.

I'm also a member of the Democratic Socialists of America.

Amazon is doing so well.

It's doing so well during this time.

Its stock prices have gone through the roof during this epidemic time.

And so it just makes sense for us to tax the big businesses that are doing so well.

And really, it's our responsibility to the people of Seattle to actually not have all these regressive taxes, like sales taxes, put on the people and have the poor bear the brunt of it, but actually have everyday people not bear that brunt and have the big subsidized companies bear it.

So, thank you.

Thank you.

Folks, the last three speakers will be Bess Byers, Mark Cummings, and Sajutha Romney.

Bess Byers, you should be unmuted.

Hi, my name is Bess Byers.

I'm a small business owner in Seattle, and I am here to say no on a 1.3% tax on payroll of over $7 million a year or more.

That percentage breaks out to $91,000 stolen from companies who are voluntarily paying $7 million in income to the community, and instead gives it to government, the same city government that has a $6.24 billion annual budget.

Where is our money going?

$6 billion.

And I'm not worried about the $7 million that you guys have now.

I'm worried that it's going to soon become $5 million, then $3 million.

Then you guys are going to be taxing all businesses to give it to government for green jobs.

Why is it that the Seattle City Council, every single one of you who makes $122,000 a year, is going to come here and vilify businesses, people who are investing their own money?

And if people want to create green jobs, do it voluntarily.

Start a green job.

Don't let government tax you out of business.

Don't depend on government.

Make it happen for yourselves.

Thank you, Bess.

The next person is Mark Cummings.

Hello, my name is Mark Cummings, Life Science Washington testifying against the payroll tax.

We represent hundreds of life science organizations throughout Seattle.

These are exactly the companies and medical research institutes that are currently doing everything they can to fight COVID-19 pandemic.

So it's ironic that I'm here today asking the council to oppose a bill that would slow down our response efforts, because that's exactly what it would do.

Many life science companies have large payrolls, but they don't have any profits.

Let me repeat that.

They don't have any profits.

Instead, they're spending years funding research and clinical trials.

And right now, many of them have put that work on hold to focus exclusively on COVID-19.

Without profits, these companies have to take funds out of research and clinical trials to pay this tax.

And for health care providers that are doing heroic work and absorbing massive financial losses, it further reduces their ability to serve at-risk populations.

So while Seattle's been incredible at slowing the spread, we implore the council not to slow a response with a new tax on the exact people that are working to find a cure and a vaccine.

Thank you for your time.

Thank you, Mark.

And the last person is Sudhatta Romney.

Sudhatta, available?

You hear me?

Yes, go ahead.

Thank you for waiting.

Yeah.

Hi.

Thank you.

My name is Sujata.

I'm giving my comments supporting the big business tax.

And I am quoting from an article from The Guardian that came out 10 days ago.

It says, the online retailer Amazon has been described as a clear winner from the coronavirus crisis.

Its share price surging by more than a third inside just a month.

Its customers spending almost $11,000 a second on its products and services, and its owner Jeff Bezos reinforcing his position as the world's richest person with a fortune of $138 billion.

While most businesses have been hit by the impact of the pandemic and the looming recession, shares in Amazon have risen to a record high as hundreds of millions of people stuck in lockdown conditions turn to the delivery giant to keep them fed and entertained.

I urge the council to proceed with this big business tax and use the money to fund social housing and the Green New Deal and other jobs that the city so badly needs.

Thank you.

Thank you very much.

I want to thank everybody who called in and again extend my sincere apologies for the trouble that there may have been with signing up this morning.

This will not be the last time for public comment.

And in the meantime, between now and our next meeting, We do encourage folks to email us at council at Seattle.gov.

Again, all of our offices are open and functioning full time during the crisis that is COVID.

And we encourage you to reach out to our offices.

We've received a number of calls and emails and appreciate that.

Any public comment can also be sent to us and we will send it out immediately to the full council.

Thanks to the communications and IT team for the folks who did sign up and did not get a chance to speak today.

You should be receiving an email immediately with instructions about how to send in your written comments.

Our sincere apologies for folks who are waiting on the line.

We know many people have small businesses to run, work that they need to do as essential workers, and we appreciate your time.

So we will make sure to continue to extend public comment in future meetings.

At this time, council colleagues, I'd like to move on to items of business.

Item D, number one.

Will the clerk please read item one into the record?

Agenda item one, community panel on COVID-19 needs and responses.

First thing at discussion only.

Thank you so much.

Council colleagues, again, the conversation that we're having today is in the context of how we're able to get immediate assistance out the door in 2020 to support those who've been affected by the COVID crisis, both the public health crisis and the economic crisis that has ensued.

Today, to provide a little bit more context on the need for potential immediate relief and a little bit more of a reality of what's happening on the ground.

We have some esteemed colleagues with us from the community who are here to present.

We've asked each of these folks to share just about three minutes to give us a chance to ask any questions that we may have as well.

The panel includes our friends that we have seen in many aspects of both commerce and the social safety net, including Molly Moon, who is the CEO of Molly Moon's Homemade Ice Cream, Jeanette Randall, a worker in the grocery store and a member of UFCW Local 21, David Parsons, who is the president of United Auto Workers 4121, Katie Wilson, who is the general secretary of the Transit Riders Union, and Montserrat Padilla, co-director of Washington Immigrant Solidarity Network.

I know we have a number of folks who are also interested in providing feedback and testimony on future panels and we will continue working on that.

I want to thank the sponsors for suggesting a handful of these folks and for the individuals that we reached out to directly.

I really appreciate your time and your interest in participating in this.

Council colleagues, I ask you to hold your comments and questions until the end.

We will have a chance to ask the panel questions and with that, we'll go ahead and get started.

I'll call on folks and we're going to put about a three minute timer on the screen, hopefully with your face.

so that everybody can see your face as well.

Actually, staff, please don't put the timer up.

The folks who are presenting do know that we are going to try to keep it to three minutes, though, so we can get to public testimony.

On Seattle's channel, you should be able to see folks' face, and for the folks who are online, please make sure that you do have a chance to to unmute your line when we get to you and then mute again.

I'm going to start today with Katie Wilson from the Transit Writers Union.

I know that you are on a short timeline.

Katie, would you like to start us off, please, with a three-minute overview of what you're seeing on the ground as it relates to immediate need for relief due to COVID and the public health and economic crisis?

Thank you, Katie.

Sure thing.

Thank you Councilmember Mosqueda.

So hi everyone, my name is Katie Wilson.

I'm the General Secretary of the Transit Riders Union.

Our members are people who ride public transit, including many people who don't have any options.

People with disabilities, seniors, low-wage workers, and people experiencing homelessness.

And what we, so many people were already starting to afford the cost of housing in Seattle before the COVID-19 crisis made everything so much worse.

We started organizing with transit riders in 2011, a few years into the Great Recession.

And at that point, Metro bus service was in danger of deep cuts and fares had gone up multiple times.

Now we're again looking ahead to a future where our transit system is under threat because sales tax revenues are plunging.

And I just wanna say something quickly about our tax system because right seeing more than real time, the most breaking part of what happens when we rely so heavily on regressive sources of revenue like the sales tax.

As many people probably know, is the city in our state with the most regressive tax system in the state with the most regressive tax system in the country.

What that means is that lower income people, including our members, are paying state and local taxes at a much higher rate, like 18% of their income compared to the wealthiest households who are paying only 3%.

Not only does that place a huge burden on the people who can least afford it, it also creates a problem for governments for public budgets.

Since equitably taxing the people at the top is bulk of the wealth, even though our has been an economic powerhouse in recent years, public revenue hasn't risen to meet the growing needs of our city.

From infrastructural needs like maintaining our bridges and streets and expanding public transit, to human needs like addressing the homelessness crisis.

So now with the COVID-19 pandemic and a new deep recession, we're seeing a situation where new needs and crises are piled on top of the old ones.

And in particular, what we're seeing on the ground right now is that people experiencing homelessness are really being left behind.

We've been hearing from our bus drivers that many more people than usual are riding the bus without a destination, basically using our transit system as shelter.

That makes the bus drivers feel unsafe because they are trying to socially distance and limit their contact with riders.

It also creates a problem because Metro has limited passenger loads in the interest of safety.

Central workers can use the transit system.

But the truth is that homeless people really have nowhere to go right now.

Public spaces like libraries and community centers are closed and there's not enough shelter space.

Many programs that previously provided meals have been shut down, and people can't find places to charge their phones, laptops, wheelchairs, and medical devices.

So there's a humanitarian emergency that's unfolding on our streets right now, even though most of us aren't seeing it because we're sheltering at home.

I'll leave it there.

Thank you.

Thank you so much.

I'd love to turn it over to Molly Moon.

Molly, if you could introduce yourself and your organization, your small business.

We'd love to hear from you about the impact of COVID as it has been playing out for small businesses on Main Street across Seattle.

Yeah.

Thank you, Council Member Mosqueda, and thank you, City Council.

I know that your decisions are extremely difficult right now.

My decisions are extremely difficult right now.

I used to run, I am the CEO and founder of Molly Moon's Homemade Ice Cream.

I hope many of you know about our ice cream.

I have eight ice cream shops and I'm under construction on the ninth.

Last year, I did just under $8 million a year in revenue.

And to give you some context for the tax you all are talking about, I had about $3.5 million in payroll.

So well under the threshold that is being talked about in the proposed tax.

I now have no idea what I'll do in revenue this year.

It'll definitely be less than eight million.

My sales have dropped about 80% and I'm extremely lucky and thankful that I've been able to pivot to rush my ice cream pints to grocery stores.

Both our local PCCs and metropolitan markets have started carrying my pints, and those have done extremely well.

I've been able to make about 20% of what I would normally make.

But that also means I've laid off over 90 people.

And I brought four people back to work this week because pint production is going well, but I feel really unclear about how to reopen ice cream shops in a safe way.

That's one of the things I'd love for you all to hear from small businesses is that we need consistent guidance.

about how to reopen safely.

As for business taxes, I have always believed that businesses and folks who make a lot of money need to pay to help our community be a wonderful place to live and work.

I think that small businesses under five or seven or $10 million a year in revenues probably do need B&O tax relief this year in a pretty substantial way.

And I don't think that businesses under seven or $10 million a year in revenue should be paying any new taxes.

But as for the proposed tax, the way that it's written, I think We need to ask our big businesses to pay to help our community survive.

And I think one of the things that's really difficult about this tax, both for small businesses who depend on customers who may work at Amazon or Microsoft, or Google or wherever, is that we just don't want the divisive language.

I would say I agree with most of the policies that you, Council Member Sawant, put into the universe, and I appreciate your thoughts and your leadership.

I think that the way that we talk about it could be more unifying.

You know, I have friends that work at Amazon, and they also think that Amazon should pay more taxes.

Many of my customers work at Amazon.

But I think that we can invite large companies to help be a solution to the city where they want to be and operate.

I also think it's important to just write this legislation in a thoughtful way that thinks about carve-outs.

I do think we need to be so careful about taxing medical research right now.

I know a public commenter said that, was talking about that earlier.

And I think small businesses like mine and Taylor Wong's, who spoke earlier, who I very much respect in our community, We need help with retrofitting our businesses to open safely with PPE for our employees and tax relief help this year.

We also want our customers.

not to leave Seattle, but I think there's a way to do all of this.

And I think this tax as written is a pretty good way to do it.

I would love to see us start to talk in a more unifying way and a more inviting way to even the big business leaders about how they can participate in helping Seattle move forward.

Thank you very much.

Very much, Molly.

I really appreciate you being on the line and for all that you're doing.

The next person is Jeanette Randall, a grocery worker.

Welcome, Jeanette, and thanks for being here with us.

Thank you so much for this opportunity, Council.

I am a grocery worker and I work at Roxbury Safeway, which is in unincorporated King County, but I live in District 1. I, my husband works for Safeway too, so fortunately the both of us still have jobs because we're essential frontline workers right now.

What I sit here and think about after the wake of COVID is like, we have a really bad homeless problem in this city.

And it's not just people who are, you know, horribly poor, working people are homeless.

And I see that we are going to have an increase in working people becoming homeless.

And working people cannot afford to have more of the tax dumped onto them.

It's time for big business to pay their fair share and help the community out.

I have neighbors and people that I know in my community that are still waiting for unemployment and they applied like a month ago.

What are they supposed to do to pay the bills.

And you know until then it's just very disheartening.

You know and we have to look to our local government for relief and support for our community.

And you know so we don't have more people losing their homes losing their families.

It's it's just.

it makes sense to uplift from the bottom.

Thank you.

Thank you for all of your comments and for the work you're doing on a daily basis to feed so much of the city.

We really appreciate it and we know that you are also putting your life and your family's life at risk.

Thank you for being a frontline worker in this time of COVID and being with us here today.

The next person that we have is Montserrat Padilla, co-director of Washington Immigrant Solidarity Network.

Montserrat, can you hear us?

Yes, good morning, Council.

It is an honor to be here with you all today.

I'm hopeful that you're all keeping healthy and safe.

As mentioned earlier, my name is Montserrat Padilla.

My pronouns are she or hers.

I actually have been living in the city of Seattle for over 20 years.

I'm 27 now.

I am undocumented and unafraid, transgender and unashamed.

And in my day work, I work as the director of the Washington Immigrant Solidarity Network.

We're a statewide network that works to support immigrant communities Please let me know if you lose me.

I kind of saw someone freeze.

Immigrant communities who are living in fear of family separation and the detention and deportation machine.

Over 250,000 undocumented immigrants call Washington State their home.

But many of these communities are not benefiting from the $2 trillion CARES Act that has been approved by Congress.

Many of them don't have access to unemployment benefits and continue to face the barriers, many barriers to access health care and basic resources to survive this pandemic.

The YC Network, which has a community trust to hotline, has been receiving thousands of callers every single day from all across the state asking for four major things.

These are folks who are undocumented and the four major things come in this order.

The first one is for folks to be able to have a way to rental assistance as many of the immigrant and undocumented workers have been impacted by the dissemination of job losses that we've seen in this new pandemic.

The second thing that folks are calling to request is access to food because we know that public charge has been a fear factor for many of our communities to be able to access food for their for their families and so The second thing that folks are calling us asking for is access to food.

The third thing that folks are calling us is asking to how to get care because they've been exposed or feel symptomatic to COVID-19 and are afraid that they will not be treated with the care that they need in order to survive this pandemic.

And then finally, many undocumented workers are still deemed essential in this current time.

Many of them work in the food supply line, food supply pipelines, as well as the agricultural sector and are afraid that they're being allowed into work without the protective gear that they need in order to ensure that their families are safe and that themselves are safe.

However, As I mentioned earlier, many of the programs that currently exist are excluding undocumented communities.

The Washington Immigrant Solidarity, in partnership with other partners, including the Northwest Immigrant Rights Project, Washington Dream Coalition, have started a community fund that, as of yesterday, reached a new milestone of over $1 million.

in order to support communities.

However, over 14,000 applications have come in from across the state with the majority of them majority of the applicants residing in Seattle.

This really just shows of the work industries that we have in Seattle from across the rest of the state and that most of the the burden of unemployment benefits is really coming from the city of Seattle and so I really urge that the council continues to enact programs that are have unrestricted funds and that they are not tied to information that would then be used for public charge or for their immigration purposes that would potentially complicate the situation of families.

And so our communities are right now in a lot of fear, but also they feel genuinely left out.

They also feel that time and time again, the government depends on our labor, depends on our communities having to be the one that sacrifice the most to ensure that others are able to pull through.

But the reality is that there's no more that we can sacrifice.

Our families have given everything to the battlefield and continue to do so.

And so we urge the City Council to continue enacting programs that will include undocumented immigrant communities and to ensure that they're able to endure this pandemic and as well as removing the systemic barriers that they have to access health care and protection at their work employment.

Thank you.

Montserrat, thank you so much for your courage every day and for everything you're doing to provide relief to the community right now.

We really appreciate you sharing that perspective on how folks have been left out even at the federal and state assistance.

So I want to note we have two more people, David Parsons, president of UAW 4121. And then we also have a member from SEIU 1199 who works at DESC.

I want to make sure that they're also on the line.

David Parsons, let's turn it to you, and then we will go to the SEIU member.

Welcome, President Parsons.

Hi, can you hear me?

Yes, thank you.

Okay, great.

Thanks, Chair Mosqueda.

Hello, everyone.

My name is David Parsons.

I'm the president of UAW Local 4121, which is the union for more than 6,000 academic student employees and postdoctoral scholars at the University of Washington.

I want to thank Council Member Mosqueda and the committee for inviting me to speak today about how our membership will be impacted during and after the current pandemic and some proposals that we have about that.

First, with regard to the academic workers that we represent, I wanted to point out that it's important to understand that all of our members work in fixed-term appointments with end dates that are often established long before the governor's stay-at-home order.

Seventy percent of our members' jobs are scheduled to end in the next six weeks.

That's nearly 4,400 people.

98% of our members' jobs will end within the next year.

That's 6,100 people.

Approximately 40% of that group are not U.S. citizens.

That's nearly 2,500 people.

If even a fraction of this group find themselves without work, which will be likely without aggressive intervention from the employer and from all levels of government, then they will be in the following situation.

One...

I'm sorry?

So sorry, President Parsons.

I just want to note for folks, I believe, President Morales, if you are off mute, you might want to just hit mute real quick.

Go ahead, President Parsons.

OK, great.

So what would happen to our members?

They would be without income.

They would be without health insurance.

This means that in most cases, even a single paycheck away from an inability to pay rent because the vast majority are rent burdened.

If they are international students or scholars, they are at increased risk of deportation, particularly because travel abroad is heavily restricted right now.

Also, if they are international students and not U.S. citizens or scholars, they are ineligible to work for another employer due to visa restrictions.

And again, many of them will be ineligible for unemployment, totally ineligible, either because of their non-citizen status or because of their student status or because they have fixed-terms appointments.

Now, to place these facts in context, as you all know quite well, longstanding public health research shows that in pandemics like this, those who are most vulnerable face exacerbated harm.

UAW members are certainly not the only workers in this situation.

And it is critical that we identify sources of revenue, again, at all levels of government that will help academic workers, nurses, tech workers, grocery workers, and all other workers remain employed, and able to have access to the social safety net programs that are so critical.

Revenue sources that support job growth and housing must be fundamental to this.

Knowing the details of the risks faced by the members of UAW 4121 and many other workers illustrates how urgent it is to take action.

And let me hasten to add that such an urgent need is not inexpensive.

We need revenue, we need to root out the sources of inequalities that create the exacerbated need for revenue.

John Burbank at the Economic Opportunity Institute shared with me recently that the Amazon Corporation received between 2013 and 2017 $220 million in excused taxes from the state of Washington.

In 2018, it received a federal tax rebate of $129 million.

We've given a lot as a community to companies like Amazon, and now in this crisis, perhaps more of us are understanding But this form of generosity elevates the risk in ways that are unacceptable.

We ask that you please take immediate steps to fix this.

UAW 4121 is joining with tech workers and many others in coalition to ask that you help all vulnerable workers tax Amazon, tax other big businesses, and do it now.

Thanks so much.

David, thank you so much for being here on behalf of your members at the University of Washington and on behalf of the community as well.

We really appreciate your comments and directive there.

The last speaker will be David Held.

He is a member of SEIU 1199 Healthcare Northwest and works at DESC.

David, we see you on the line.

I believe you're on audio only.

Please go ahead and unmute yourself if you can.

Great.

And you can please give us a picture of what is happening at DESC and in community as response, as you've seen responses try to scale up to meet the crisis that is COVID and where the current needs are in a 2020 response package if possible.

First of all, thank you very much for having me.

Thank you very much for your efforts at addressing this situation, especially you, Councilman Seda.

Where to start?

DEC, I've been there for five years now, and it is just wildly different from

David, we lost you.

If you're still with us, it might be a signal.

Oh, there you are.

Yeah, wherever you're at, that's a good spot to stand.

She said, we lost you at wildly different.

Yes.

I mean, with the main shelter closed, with basically all of our shelters closed and using the exhibition hall, All of our case managers are operating part-time as case management at best, and primarily operating just as entry-level staff, just to make things work in our housing buildings, in the Red Lion, because we have such a high level of people that are calling off sick because, well, just because they're out, they can't get there.

Everything that's going on right now.

It's been very, very difficult for staff to just manage.

One way or another, we will get through this.

What I am looking for is some sort of plan for how the the homeless landscape is actually going to change after this.

There's going to be some long-term shifts, I believe, and getting ahead of that, I think, will be really important.

As of right now, we certainly just need more flexibility in our funding.

I know specifically for DESC, there is an awful lot of very program-specific funding, And those programs are already very tightly, it's very tight.

And I just don't see how that's going to work as this starts to lift and more people are hurt, and we're going to get a much, much broader demographic of homeless, is my prediction, when all of this ends.

I'm really, really worried about what things are going to look like a year from now.

And so I'm really hoping to get more funding, more housing, more clinical services, more everything because we're hurting right now.

Anyways, thank you very much for considering this and please, please provide just more for us.

A lot of people are in an awful lot of need right now.

Thank you.

David, thank you for sharing that perspective with us today and for all that you're doing to care for the most vulnerable in our city through DESC and the folks who are living unsheltered.

Really appreciate you providing your time today and more importantly, you putting yourself out there every day.

Folks, we do have about five to 10 minutes.

We know we have a handful of questions, but please, I hope you can all see us, the presenters.

We are thanking you for your time and your generous comments today.

The first person that would like to ask a question is Council Member Lewis.

Council Member Lewis, you have the floor.

Thank you so much, Madam Chair, and I want to thank all of our panelists this morning for joining us and providing a great variety of perspectives from small business, from labor, from service providers.

Thank you so much.

My question is for Molly, if Molly Moon is still on.

There she is.

So Molly, first off, I'm going to say, really appreciate the distribution of the scoopers pints to the grocery stores.

Strawberry is my favorite so far, and I am an avid, and just as a PSA to everybody, it's 18 ounces of ice cream per pint.

So a scooper's pint, I guess, is 18 ounces.

That's not my question, but I did just want to flag that that's great.

It's been good to see those there, and I will continue using them until the retail stores are open again.

I did just want to ask, because I've gotten a number of communications, obviously, on all sides of these proposals that have been advanced by Councilmember Swann and Councilmember Morales.

One of the common emails that I've been receiving as an argument against is from small business owners who, while they are not directly impacted by the tax, make sort of like a supply chain and ecosystem argument that this tax will somehow get passed on to them or that it will be factored into their cost of doing business.

As someone who runs a local small business with multiple chains, I just wanted to kind of ask you what your response is to that argument and those considerations and what some possible things could be considered to limit that kind of an effect or an impact of a city tax like this.

Thanks for the question.

I think this is exactly the kind of thing that just needs to be thoughtfully figured out.

I mostly buy from very small businesses that would not be taxed, but I can see how some of my peers are buying ingredients from much larger companies that would meet the, is it right now $7 million in payroll?

Is that the threshold that's being proposed?

Yes.

So I can see that that would be an issue.

I think, you know, distributors to grocery or food manufacturers or food distributors to grocery, that could be a part of what's thought about for the grocery carve out, that industry carve out.

I don't tend to love industry carve-outs in general for tax bills, but I think in this case, really thinking about continuing to make food as affordable as possible and continuing to make healthcare as affordable as possible is a good thing to think about in this legislation.

So I can see that argument, I think the other thing that many of my peers are worried about even more than our vendors being taxed and then passing costs on to us is just customers working for these large companies and how that might impact those customers, you know, remaining in Seattle.

And that's where I think, you know, the unifying message comes in.

I think if most people who work for these large companies that may need to pay this tax understand what it's going for.

I just, I don't know, I believe in people wanting to take care of their community, and I don't think Amazon wants to leave Seattle.

And I think there's a way to invite them to participate.

Molly, thank you so much.

Council Member Lewis, did you have additional comments?

Any follow-up?

No, just that was it.

Thank you so much, Madam Chair.

You're welcome.

And thank you again, Molly.

I'm looking at our other council colleagues.

Okay, Council Member Swat.

Thank you, Council Member Esqueda.

I had a question and a comment.

A question is to David Parsons.

And if he is not available, then I can direct the question to Katie Wilson.

David mentioned that as badly impacted as the graduate students are going to be, that our homeless neighbors are in a very difficult situation.

Katie mentioned that as well.

And I wondered if Katie wanted to quickly also talk about how a tax like this that is going to upfront, you know, load permanent supportive housing will have an impact on the people who are currently experiencing homelessness.

And there's just one clarification.

The tax, as it's written right now, the legislation, it It exempts all non-profits and grocery stores.

So just to clarify some of the comments, only the profiteering pharma companies are not exempt in this tax.

So Fred Hutchison, which is a non-profit, will be exempt.

And as far as job creation, I really agree with Molly Moon's comments.

We absolutely need to create that kind of virtuous cycle of jobs, but that is what this tax will create.

When it creates jobs, builds affordable housing, it will help For example, you know, the neighborhood taco truck, which can come back to business because the construction workers will be buying lunch from them, you know, and so on and so forth.

So in that sense, small businesses will be positively impacted.

Thank you.

We will turn it over to David Parsons or Katie, if she's still available.

Okay, not hearing them.

Are there any other panelists that did have a comment in response?

Councilmember Sawant, we'll follow up with the folks who are providing the direct responses you just requested and see if we can send around additional information for you and others who are in the viewing public and also for our council colleagues.

Council colleagues, please do join me in a huge A note of appreciation for all of the folks who joined us by phone today, Katie Wilson, Molly Moon, Jeanette Randall, Montserrat Padilla, David Parsons, and David Held.

We really appreciate your perspective and everything that you're doing to both serve the community and provide community.

in this time of COVID.

So thank you for being with us today and we look forward to continuing the conversation with you as we continue this dialogue about 2020 assistance and how we can be there for small businesses as well as workers and those who are in our community needing healthcare, food and housing.

With that, council colleagues, I'd like to move on to items two through four.

Will the clerk please read the short titles of these items, and then I'll give you a little bit of my perspective on how we can engage in the conversation with central staff and our council colleagues today.

Madam Clerk, turning it over to you.

Agenda items two, three, four, Council Bill 119772, an ordinance relating to taxation imposing a payroll expense tax on persons engaged in businesses in Seattle Council Bill 119773, relating to the financing of responses to the civil emergency authorizes a loan of funds from the low-income housing fund to the general fund.

Council Bill 119774, establishing a spending plan for the proceeds generated from the payroll expense tax authorized by the ordinance introduces Council Bill 119772 to fund immediate cash assistance for low-income households impacted by the COVID-19 crisis in 2020. All three items for briefing and discussion only.

Thank you very much, Madam Clerk.

Council colleagues, as I noted at the very beginning of this meeting, this is a chance for us to have a conversation about immediate relief for those who we've just heard about in the community who are suffering due to the public health crisis and economic crisis created by COVID.

As we think about assistance in 2020, whether it's food assistance, housing and shelter assistance, small business assistance.

We know that the funding needs to come from somewhere.

We appreciate the $131.5 million that we know is going to come to the city of Seattle from federal relief, and we appreciate that there's ongoing conversations about how we can get additional state revenue.

Even with that additional support, we know that there's going to be increased need in the community that we see currently and need that we haven't yet even seen crop up.

Our intent today is to have a conversation about how we can free up dollars to get out to the community and the conversation you will hear from central staff will focus on both an inter-fund loan agreement that could be a potential source for additional revenue out the door in 2020 for immediate relief, and also a tax source that could be used to backfill those dollars, any dollars that were used for that.

We appreciate Central Staff's presentation today and walking us through the bills that we did not get a chance to talk about last week.

Again, I'm going to turn it over to Director Erstad who is going to be with us to talk about the flow of the conversation.

At the end of the presentation on each bill, I will do what we did last time and walk through each of the council members by order that we did introductions today or roll call, and then also conclude with additional comments or summary from the sponsors.

We did have a chance to hear from Council Member Morales and Council Member Sawant last week, who articulated their intent of the legislation and really appreciate their perspective and for walking us through the legislation as the bill sponsors.

So today we're going to have the two bills that we didn't get to, and I understand we also have from central staff some answers to questions that were asked during last meeting.

If we do have the chance to get to those, I know a lot of folks are interested in that discussion as well.

So with that, I'm going to turn it over to Director Aristad, who will walk us through the presentation and then turn it over to our esteemed colleagues from Central Staff.

Director Aristad, are you with us today?

I am.

Thank you.

Thank you, Madam Chair.

You did a great job of summarizing the points that I was going to make, so I'll make my comments very brief.

I'm Kirsten Aristad, Director of Council Central Staff.

And today is the second presentation by the central staff team concerning the proposed payroll exceptions tax package.

Last Wednesday, as you mentioned, Tracy Ratzliff and Ali Panucci discussed the spending plan, which is one of the three bills in the proposed tax package.

Today, Tom Mikesell will describe the tax itself, and then Dan Eder the Interfund loan financing mechanism to allow for the emergency spending in 2020. If time allows, we will turn to Ali and Tracy, as well as Amy Gore and Yolanda Ho to highlight some of the questions that you posed last Wednesday and since last Wednesday concerning the spending plan.

As you mentioned, Madam Chair, we would like to ask that the council members hold questions until the conclusion of each presentation.

And if you have additional questions following today's discussions, to send those questions to Sejal Parikh with Council Member Mesquita's office and to me by noon this coming Friday to allow us sufficient time to develop the responses and get those responses to you.

before our next Select Budget Committee meeting.

So with that, I will share my screen.

And Tom will now begin with a six-point overview of the Payroll Exceptions Tax Bill before pausing for questions, then followed by Dan Eder, who will do the same for the Interfund Loan Bill.

So I'm going to share my screen.

Thank you.

Thank you very much, Director.

And thanks to your incredible team at Central Staff as well for their ongoing research and response to the various questions.

I again want to underscore, if folks do have questions that they'd like Central Staff to respond to, the deadline is noon on Friday, and thanks in advance for all your work.

So as we have you tee up your screen, I'll turn it back over to your team for walking us through the legislation.

I want to also note for folks, you did receive central staff memos two Fridays ago on all of the legislation.

So we also have that in our hip pocket.

Thank you for that reminder.

So with that, we will move on to Tom Mikesell's payroll expense tax overview.

Good morning.

It's unclear if I'm on.

Can you hear me?

We can hear you.

Thank you, Kirsten.

Good morning.

Thank you, Chair Mosqueda and members of the Select Budget Committee.

As Kirsten described, I'm going to give a fairly high-level overview of the Council Bill 119772, which imposes a payroll expense tax.

I'll discuss the provisions of the tax bill as introduced.

I'm going to cover elements including the annual amount of revenue that is generated, the structure that is designed to collect that level of revenue, what businesses would generally be and go a little bit into the emergency clause provision and how that plays into those adoption and then discuss the the elements of the imposition date and the due date and how it's going to go to the next slide, please.

Thank you.

So as noted in the summary fiscal note for the legislation, $500 million per year, the Uh, tax would go into effect on June 20 or June 1st of this year.

Can I interrupt?

Um, you are breaking up.

I'm not sure if you can put the mic in a different location.

Last point.

If I can do anything.

That sounds better.

Okay, let's try this.

So I think I've covered the revenue pieces.

Just please let me know if there are any questions.

Hi Mike, this is Eric from IT.

If you have the option to call into The meeting as well, along with your video, you can call into a meeting with a phone, and that might give you better audio as well, too.

Unless you want to also, I don't know if you have any other devices going on in your household right now.

So just if you want to do that.

OK.

I'm trying to make some technical changes here on the fly.

Am I going through any better now?

You are, Tom.

OK, great.

If there is a problem, again, perhaps what I will do is ask for the next bill to be teed up, and we can have Dan walk us through that one while you get your audio set up.

But for right now, Tom, you are coming through loud and clear.

Your image is a little blurry, but we can definitely hear you.

So why don't we go ahead and go with the presentation as is, and we will let you know if we can't hear you.

Great.

Thank you.

So slide four, please, Kirsten.

So this is generally the general structure of the tax.

So as has been described and discussed earlier in today's meeting, the tax is a 1.3% tax on payroll that is assigned to Seattle business.

It generally applies to businesses with $7 million annual payroll in the prior year.

There are exempt categories that I will discuss further.

And so one of the concepts is what do I mean when I say Seattle assigned payroll?

And so this is a similar construction that's used for our city's current business and occupations tax.

And it is a way of defining the tax base so that it relates to those activities that are occurring in Seattle.

and not in other jurisdictions.

So similar to our existing B&O tax, there is a three-part test that is applied in administering this bill as proposed.

One is just determining if the individual is primarily assigned.

So the place of business where that employee works is in Seattle.

That would be the first check.

If an employee is not primarily assigned to one specific location, but they perform 50% or more of their work in-sale, the entire amount of that person's payroll expense would be assigned.

And then finally, if the employee is primarily assigned to maybe one particular location of business, but they do not perform 50% or more of their activities in one place of business, but they do reside in-sale, that would be assigned to the state.

Next slide, please, Jason.

So we're having questions since the bill was introduced about how the annual expense can apply in bigger business situations.

And here are a few of the most frequent questions that are asked.

I would note that the independent contractor is typically in the bill as introduced as a category that is included.

So these are independent contractors.

One thinks about the gig economy, and that's what we're talking about here in large measure.

It's how the work is performed by those independent contractors factor into the calculation of a business's payroll against the $7 million threshold.

And the key here is if a business is employing an independent contractor and that independent contractor's payroll is not being included in some other business, then the payment to that independent contractor would be included in that business's payroll expense.

So again, that is specifically noted in the legislation.

The next two that I'll discuss briefly are rather interpretations of different ways of organizing business.

One of these is integrated enterprises.

And so this is a case where perhaps a business advertises and speaks about itself as one larger entity, but in fact could be a collection of smaller independently operated businesses that function under a single management consulting group.

And for the purposes of discerning whether or not those businesses were that business, how they calculate their seven million, their payroll against the $7 million threshold, each one of those independent businesses would be measured against a $7 million threshold a larger restaurant enterprise that operates a number of different restaurants that are independently licensed.

And then finally, this will be more familiar, but the concept of a franchise.

And so there are national Each one of those franchises will have its own discrete individual business license.

So rather than say all the McDonald's in the city, just to use a familiar example, the purpose of this bill, each individual McDonald's would determine whether or not their payroll expense is above or below the seven million dollar threshold.

So I understand that those are complex topics.

Hopefully that helps shed a little light of how this tax would apply in those cases.

Next slide, please.

Thank you, Tom.

I know you're a little blurry, but you can hear us well.

Is this a good point for us to jump in and ask questions?

Um, I'm not that far away.

Um, I think we can get through it pretty quickly.

Let's do it.

Turn it back over to you.

Okay.

Thank you.

Uh, so, um, the businesses that would generally be subject to the tax would be those above $7 million of payroll annually in the prior year.

Um, that does index with inflation starting in 2021. There are a number of exemptions.

non-profit organizations, educational employers, grocery stores, retail and wholesale groceries, local government employers, and other businesses that are generally not subject to taxation by state or local law.

The next slide, which will include federal and state government, it will include insurance businesses that sell fuel and businesses that sell energy.

Next slide, please.

Kirsten?

Yes.

Oh, thank you.

Okay, so this is the last slide, and then we can go into some questions.

I mentioned earlier the taxes affected June 1st of 2020. There will be some time allowed for the Department of Finance and Administrative Services to set up their audit, outreach, and collections capabilities.

So there's about a year and a half for that.

Businesses will be responsible for determining and maintaining records to calculate their tax liability.

However, tax payments will not be collected until the final tax payment of the 2021 fiscal year, which is the final quarterly payment, which will be due by February of 2022. Finally, the emergency clause.

The bill as proposed and as introduced includes emergency clause provision, which requires a three-quarter city council vote and the mayor's signature to go into effect, and it would have an And that's the conclusion of my presentation.

Thank you very much.

Director Nara said, is there anything else from your perspective before we do questions?

I think that I would just add that I know that some parts of Tom's presentation was difficult to hear, and we apologize for that.

But if you If any of the council members would like to have an offline individual briefing to discuss that part of the presentation, we'd be happy to do that.

Okay, thank you very much.

Council colleagues, as we did last time, we're gonna go through the roll call order to see if anybody has any questions, because I think it's the fairest way to make sure that we get through the full list to see if anyone does.

I would like to start with Council Member Peterson.

Council Member Peterson, any questions from you?

Hearing none.

Great.

Council Member Sawant and Council Member Morales, we're going to turn to you guys last as the sponsors of this, and we'll make sure to get to you though.

And that way the folks who are newer to the legislation get a chance to ask their questions first.

Council Member Strauss, you're next.

Any questions from you?

Hearing none.

Council President Gonzalez.

Hearing none.

Council Member Juarez.

Hearing none.

Council Member Lewis.

Thank you, Madam President.

I have a quick question, and this may have been covered, but similarly, I had trouble with Tom going in and out a little bit.

So I just wanted to maybe ask, given the COVID crisis, has there been any analysis of the impact that that would have going forward on the revenue estimates?

and how much would come in due to this tax.

It sounds like the universe for the initial 2020 payment would be kind of fixed because it would be based on last year's payroll.

I don't know if I followed that.

But going forward, I wonder if there's been revisions.

downward, upward, or wherever, based on the projected impact that COVID might have on the economy, the payroll of firms, or even the possible bankruptcy of some firms.

So just wanted to ask that question.

Oh, can you hear me?

Yes.

OK, great.

I apologize for the audio.

I'm trying to figure out workarounds here.

So Council Member Strauss, thank you for your question.

With regards to the, or Louis, apologies.

With regards to COVID-19 impacts.

So when the proposal was being originally drafted, we were early in the public health crisis and recognized that an adjustment would be in order though little information to guide what that adjustment would be.

So I apologize.

I'm going to ask Tom to call back in and we will put Council Member Lewis's question on hold really quickly.

What I'd love for us since we're running a little ahead of time, is actually have Tom call back in using audio only.

Kirsten, you can walk us through the slides at that point so that we can actually have the presentation done again.

We're a little ahead of time, so I think that there's time to do that.

But it is really hard to hear you, and I think if you just called in using your phone instead of trying to do video, we'd all be able to hear you.

I know that there's a number of people who are watching online who want to hear these details as well as folks in the press.

What we're going to do is we're going to turn it over to Dan, because I can see you well, Dan, and I'm assuming that you have excellent internet connection and audio.

So we're going to put Council Member Lewis's question on hold.

When we're done with Dan's presentation, we'll also ask for questions.

But then before we adjourn today, we're going to ask Tom to walk us through the presentation again and then immediately address Council Member Lewis's question at that point.

I hope that that works, Council colleagues.

Okay.

So with that, I'm going to turn it over to Dan.

Dan, you also have a PowerPoint presentation that you'll walk us through.

If for some reason we can't hear you, we're going to immediately ask you to call back in so that we don't miss a beat.

Council Member Lewis, I apologize for the delay in having your question answered.

I hope that's a satisfactory response for us to be able to do that.

It's fine with me, Madam Chair.

Thank you very much.

Dan Eater, thanks for waiting on the line here.

For the viewing public's knowledge, could you start with the council bill that we're talking about so that people can follow along at home and remind folks what an overview of the Interfund loan is and how this ties into 2020 funding for immediate relief?

And then we'll go back to Tom to talk about how that funding gets replenished with a possible revenue stream.

Happy to do that.

My name is Dan Eater, for the record.

I'm the Deputy Director of the City Council Central Staff.

My portion of the presentation is about Council Bill 119773. This bill would authorize several city funds to make loans to the city's general fund.

The purpose of the proposed loans is to support 2020 emergency spending That's covered in Council Bill 119774 that you heard about at your meeting on April 22nd.

The emergency spending would be supported by the Interfund loan until anticipated tax revenues become available through a proposed new business tax.

And that's what Tom Mikesell was just describing, Council Bill 119772. So I'm going to cover the topics on your screen now, and I'll do my best to address questions as they arise.

And if you could hold them until the end, that would make things, I think, easiest.

Specifically, I will cover the cumulative loan amount that would be authorized by 119773. I'll discuss the source of the funds for the loan.

The approach that the bill uses for minimizing impacts, I will describe what we know about the year-end fund balance projections and how those appear to support or allow the city to support this kind of fund loan arrangement.

And then I'll provide some additional context about inter-fund loans generally and these proposed ones in particular, including addressing the emergency clause.

We can go to the next slide, please.

So as shown on this slide, the cumulative loan amount that would be authorized by the bill is $200 million.

These loans would be repaid plus interest using tax revenues that would begin to flow if the tax bill is approved.

The flow of revenues would begin in early 2022, as Tom just described in his presentation.

The bill identifies six different source funds for making up in a variety of potential paths the $200 million in cumulative loans.

Specifically the Low Income Housing Fund.

The Housing Incentive Fund.

The Move Seattle Levy Fund.

The Families Education Preschool and Promise Fund.

The Metropolitan Parks District Fund which is sometimes referred to as the Parks Levy Fund.

And finally, the 2019 library levy fund.

The bill as introduced would authorize each of these funds to loan up to $50 million to the general fund.

I believe, I don't want to speak for the co-sponsors, but I believe that was intended as a starting place to evaluate how much is actually needed.

As you'll see, there are not even amounts of anticipated year-end fund balances to borrow from so that $50 million may want to be adjusted through potential amendments.

This approach would provide the executive with some flexibility about how much the general fund will actually borrow from each of the source funds.

The Interfund Loan Bill provides discretion to the executive about the exact mix, as I was just describing, of which funds will provide how much money.

Section 3 of the bill asks the executive to do some analysis needed to arrive at an approach that minimizes or eliminates any impacts to plan spending from each of the selected source funds.

The bill also directs the executive to provide a report to the council within three weeks that identifies the selected source funds and amounts.

In general, the expectation is that during the period of the loans, the city will not need these cash reserves to pay for near-term spending commitments.

Next slide, please, Kirsten.

Thank you.

The next slide essentially backs up the thinking behind that conclusion, namely that the funds would have sufficient cash balances to make a cumulative $200 million of loans.

I know that there's a lot of numbers on this slide, so I want to walk you through what information we have and what unknowns remain.

For each of the six funds that I mentioned, there are two columns of numbers.

The first column of numbers labeled at the top, 2020 budget, identifies the amount of projected year-end fund balance, that is to say cash reserves that were not expected to be spent by the end of 2020. This is from the perspective of the adopted 2020 budget So that what that the City Council took action and the mayor signed the adopted budget in November of 2019 before the 2019 had officially closed its books the second column called labeled CBO update has more recent information that reflects information that was available subsequent to the adoption of the budget.

Both of these columns in general, what I want to draw your attention to the bottom line, there appears to be enough money from the anticipated year-end fund balances to support a $200 million loan without impacting planned spending from these funds.

In the 2020 budget column, I'm going to draw your attention to the middle of the chart where it says subtotal $245 million.

That's how much cash is expected to be available that won't be spent for other purposes as of the viewpoint from the 2020 adopted budget.

That number has increased for the four funds that are being subtotaled.

by about 69 million dollars to a new anticipated ending fund balance for these four funds of 314 million dollars.

That's good news from the perspective of the city's ability to support an inner fund loan of 200 million dollars.

I broke out the four funds at the top because we have more detailed information about each of those funds.

The two funds at the bottom, the Housing Incentive Fund and the Metropolitan Parks District Fund, we are still chasing down information about that.

So I apologize that I don't have all the information that I wish I had to share with you.

But just from those four funds at the top, it now appears as of the end of 2019, that there's going to be about $314 million in available resources.

I think there's an important caveat that I want to share with you, which is that the CBO update, the column on the right on the screen, does not yet reflect the revenue hit that the general fund is now expected to take that Ben Noble, the CBO director, described to you at your previous meeting on the 22nd.

The expectation is that CBO and Ben Noble in his presentation described this, some of the tools in his toolkit, is that he may be looking to use some of the fund balances from these funds to address some of the shortfall in the general fund.

That, of course, is subject to city council review and your approval.

So you essentially have policy choices about what you want to do with the anticipated revenue that will be in the city's consolidated cash pool from these funds at the end of 2020. Kirsten, I'd like to go to the next slide, please.

So this slide provides some additional context.

In general, I wanted to just make sure everyone understands that it has been a routine practice of the city to borrow between funds, to do inter-fund loans.

I just pulled out some recent examples, did a search on Legistar.

The largest inter-fund loan that I could find not only recent history, but going back many years, is an $85 million Interfund loan for the seawall replacement.

And we essentially borrowed to begin doing construction on the seawall ahead of receiving property taxes from a voter-approved bond measure.

But there have been many other Interfund loans.

Here are some examples.

$29 million in 2019, $26 million for Mercer West in 2019 as well.

We borrowed against the expected revenues for the waterfront lid.

And we also authorized about $5 million to stand up the short-term rental tax in 2017. That was a city-approved, not a voter-approved measure.

So it is in the city's financial toolkit, if you will, to use interfund loans.

There is always an expectation that monies will become available in the future to repay the interfund loan that has been taken out.

That has generally been the city's experience.

But on occasion, we have found that the city's expectation is not met.

And some examples come to mind.

There are an Interfund loan that we took many years ago to begin construction of and actually complete construction of the South Lake Union streetcar.

The Interfund loan was intended to be paid off with a variety of revenues that didn't come to fruition on the timeline that was originally anticipated.

And then we took another Interfund loan related to the streetcar operations that we also took longer than anticipated to pay back.

But we are paying back and I believe now have fully paid back.

The other things I wanted to call your attention on this slide is that Ben Noble's discussion of the various kinds of revenues that feed the city's general fund are on the decline.

The one exception to that in Dr. Noble's presentation from April 22nd is the property tax.

Property taxes are, at least in the foreseeable future, anticipated to be very stable.

I think Ben Noble's presentation anticipated perhaps a 1% decline in property tax.

And the six funds that are the source funds for the Interfund loan to the general fund, contemplated by this council bill, are almost entirely, not 100%, but are predominantly funded with a property tax revenue.

So we think that the revenue picture is pretty stable for the feeding of these funds.

But the fiscal impacts on the year-end balances depend not only on the revenues coming in, but also the planned uses.

And so I describe that as unknown because there are some policy decisions to make about what level of spending will continue throughout the balance of the year and what other competing uses for the fund balances may be proposed and considered and ultimately approved by the City Council.

Next slide, please.

The last thing I wanted to mention was like with the other two bills, there is an emergency clause.

The purpose of the Interfund Loan is to support emergency 2020 appropriations.

So the Interfund Loan would be the funding source and the bill would be effective immediately upon both an affirmative vote of three quarters of council members and the mayor's signature.

I guess the last thing I'd leave you with is that the three bills, the spending bill, the tax bill, and the inner fund loan are proposed to work as a package.

The 2020 emergency spending relies on the inner fund loan as a revenue source, and the inner fund loan, in turn, relies on the tax bill going into effect to provide a way to repay the amount borrowed by the general fund.

And that concludes my prepared remarks.

address any questions you may have.

If I can't address them immediately, I commit to doing my best to get you quick answers after this meeting.

Excellent.

Well, we appreciate your flexibility.

Can you hear me OK?

Yeah.

OK, good.

I appreciate your flexibility.

Colleagues, we are going to ask for questions on this interfund loan proposal.

And we do have confirmation that Tom is back on.

No worries for our council colleagues, the viewing public and the press.

We will do his presentation again.

We still have another hours worth of time in this committee.

So we have plenty of time to have his presentation in detail walk through again.

Council colleagues, I appreciate your patience as we all participate remotely.

And I will ask if council members have any questions.

Council member Peterson.

Hearing no questions.

Council member Strauss.

Hearing no questions.

Council President Gonzalez.

Hearing no questions.

Council Member Lewis.

I do have a couple of quick questions.

One of them is clarifying.

So, Dan, earlier you talked about how, you know, there's a certain amount of money in these different funds that we're looking at to potentially enter into inter-fund loans with that don't have near-term spending commitments.

I'm curious what the definition of a near-term spending commitment is, just for clarification.

Like there's no current plan to use it or there are current plans, but it's not for another year.

Like, what does that mean?

Well, I would say that the answer is year by year, the funds are fed by resources, revenues.

In most cases, as I mentioned in my prepared remarks, we're talking about property taxes coming in generally in April and October.

The annual budget authorizes spending to happen out of these funds so that there can never be more spending than there is money on hand to spend.

The year-end fund balance is a straightforward difference between the revenues that are coming in the door and the anticipated spending and authorized spending that is allowed from each of the funds.

So by near term, I guess for 2020, I mean between today and the end of 2020. If there is a positive fund balance, and there always should be a positive fund balance, that means that we're anticipating more revenues to be available than planned spending.

And Madam Chair, I do have an additional question.

I don't know if you want to go through.

Yeah, you're OK.

So then Dan, going back, you discussed earlier that there had been an Interfund loan on the streetcar.

I didn't see a number enumerated for how much that Interfund loan was unless I missed it.

But the streetcar Interfund loan was one you said that the expectation hadn't been realized on the timeline of how it would be backfilled.

So I guess my question is, how big of an interfund loan was that one?

And where did the money come from to backfill it?

Was it just general funds, normal general fund revenue when the budget was put together in that year?

Or was there some other way that money was realized, brought back?

Yeah, my understanding is that that is a long, a question which needs a long answer, probably longer than you want me to go into here.

But I can find out both the original amount, I believe that amount, I'm sorry, I don't know the number offhand, but I believe that number was actually increased because, The interest began to accrue, and so the amount of money that was eventually owed was more than the original amount.

I don't know the answer to what specific revenues were used to repay the loan, nor do I know in particular the status of the loan today.

So I will follow up with all of that information for you.

All right.

I appreciate that.

I'm really, really interested in that, obviously, given the size of the inner fund loan that's envisioned by this legislation and given the challenges we have with the general fund.

I just think it's important to make sure that we look at some of our past experiences and just.

This is kind of related to my conversation for Tom in the sense of the strength and viability of this funding source in the wake of the strains that COVID might cause on the economy, making sure we don't set up a massive time bomb for the general fund on top of what's already happening is going to be a priority for me.

Um, so that, that information would be really, uh, um, instructive, I think for, for how I'm engaging with this legislation.

And, um, I'd really appreciate that.

And, uh, like I said, kind of related to Tom's question.

So, uh, when we get back into that presentation, I'll, I'll bring it back up.

Uh, but madam chair, I don't have any additional questions at this time.

Thank you very much.

Council member Lewis.

Councilmember Juarez, any questions from you?

Hearing none.

Council colleagues Morales and Suwan, I do have a few questions.

If I could get to those before hearing from the sponsors, that'd be great.

I'll just ask two for right now.

Question about the date.

The legislation sets the date of no later than 12-31-2021 for repayment to each loan account.

but also provides the Director of Finance with the ability to modify the repayment schedule.

Is there any chance that the Director of Finance could push the due date out beyond December 31st, 2021?

I don't believe so.

I think that the modification is generally to make the repayment sooner than the final authorized date of repayment.

In the event that it does take longer than 12-31, of 2021 to repay the loan, then my understanding is that additional council authorization would be needed to extend the period of the loan.

OK.

And then a question about the inter-fund loan impact.

I understand that you said, based on previous calculations, that we believe there's a buffer within these fund sources.

that would not mitigate or not impact the programs that had been originally slated for using those dollars.

Could you explain a little bit more about housing?

I know that when we do affordable housing, often funding is committed in out years while the funds may still be in the fund source itself.

a lot of times those dollars are accounted for.

Can you talk a little bit more about the Office of Housing or any analysis that we've done to analyze whether or not the Interfund loan would affect the future funding cycles for affordable housing, for example?

Yes, of course.

And as your question points out, the low-income housing fund is the largest anticipated year-end fund balance.

So you're right to be asking, probing about how stable that expectation is.

My understanding of how the Office of Housing partners with housing developers who are building affordable housing is that it makes a commitment of city resources generally as a partner in a larger funding scheme for any given project.

Our funding is used to leverage other funding sources to support the entire project.

In order for other funding sources to come to the table with their money so that the project can actually begin construction, the city has to demonstrate that it has It has the resources actually committed to all of the projects that are anticipating a partnership contribution from the city.

So the way that the city books its resources is it makes a commitment to fund X number of millions of dollars for ABC housing development, and it puts that money aside in the low-income housing fund.

It is typically in that particular fund for one or two or sometimes even three years before the housing project advances to the stage that it actually needs that money.

So that's why the low-income housing fund has a rather large anticipated ending fund balance in 2020. These are dollars that are in large part committed, I think, of the roughly $250 or so million.

I'm sorry, I can't see the slide immediately.

About $150 million is committed to very specific projects that are simply not ready to accept the money and don't anticipate to be ready to accept the money in 2020. The remaining approximately $100 to $110 million is unreserved and is available for future commitments to other projects, but we haven't yet identified which those projects are.

Okay, thank you.

Yes, but I may have some follow-up questions and would love to maybe think through some examples.

And then lastly, before turning it over to the sponsors, you briefly touched on this, but could you elaborate a little bit more given the forecasted downturn in revenue.

While assumptions were made prior to COVID looking at years back, can you talk a little bit more about if there is unanticipated decreases in the revenue projected for these fund sources that we're using to pay the Interfund loans?

Can you talk about a backup plan or what other strategies may exist to repay these accounts?

the city would be essentially borrowing from itself and would eventually, I think we are good for repaying ourselves the money that we've borrowed.

There are no examples in the past that I know of where we have not repaid an Interfund loan.

The example that I touched upon earlier, the streetcar capital development loan and the operating loan, those are examples where it took us longer to repay the loan than we had initially anticipated.

But those loans were repaid or are being repaid.

And I'm sorry, I don't know the exact status of both of those loans.

maybe a small amount still owing over a period of time.

And during the period of time, interest continued to accrue.

So it's relatively low interest amounts because it's equivalent to what the city would be earning on its short-term, very conservative investments of the city's consolidated cash pool.

But we effectively would in the future, Um, if, if there wasn't a way to repay the loan, uh, we would, uh, have to make some hard choices about, uh, what, what to do with, um, with the remaining funds that we do have.

I think it's separate from the question that you were asking, which is, um, what, what is the, um, what happens if the, um, if the revenue sources themselves go down?

Um, there is a, right now there's a cushion of about $140 million above the $200 million.

So unless the property taxes decreased by more than 35%, about 150 out of, I'm sorry, I can't do the math in my head, but unless there was a dramatic decrease in the property taxes that feed these funds, I wouldn't anticipate that being a problem.

Well, Dan, thank you so much for walking through those questions for us.

Council members Sawant and Morales, as the sponsors of the legislation, do you have any questions before we go back to Tom to talk through the first bill?

Yes.

Can you hear me?

Yes.

Council Member Morales, go ahead.

First of all, thank you so much, Dan.

I know the whole central staff has been working really hard to help help navigate us through all of this development and questions.

So I really appreciate the work you've been doing.

I'm looking at the memo that you sent last week.

And when you're talking about the effective and due dates, it does indicate that the earliest we expect to be able to to collect the tax and have the infrastructure set up would be 2022 or the first quarter of 2022. That is substantially different from the conversation that we were hearing in January and February when there was a similar idea being proposed in Olympia.

we were hearing at that time that the city would be able to collect payroll tax, and in fact, would offer, was doing it on behalf of King County.

So I just wanna understand a little bit better the discrepancy there.

Council Member Wright, I'm sorry, I don't know exactly what information you were referring to in terms of conversations about the county tax and the timing for collection, I can tell you that in the conversations I've had with the city budget office and the Department of Finance and Administrative Services, the executive staff I've spoken to have been consistent in telling me that it would take on the order of a year and a half to set up the infrastructure to begin to responsibly accept revenues from taxpayers do the rulemaking that would establish for the edge cases and for the general taxpayer, what they owe in different circumstances and have the financial systems in place to track, audit and enforce the tax collection.

Okay, thank you.

Council Member Morales, any follow-up questions?

No, thank you.

Council Member Sawant, any questions from you?

I don't have questions because a lot of this is familiar to me, but there are things that I can help clarify on some of the points that have come up.

I really, first of all, appreciate Dan sharing the sort of common sense slides that, you know, inter-fund loans are a standard mechanism that municipalities use.

And, you know, there are examples that he has given.

And I also appreciate your question, Council Member Mesteta, that Dan responded to about how the low-income housing fund works.

I won't repeat those points, but I would say that for council members who are concerned about budget shortfalls, and I am extremely concerned about budget shortfalls, I just want to point out that we have to understand that rejecting a new progressive revenue source is not a smart strategy for us because, you know, we may, first of all, I just want to appreciate, just in terms of numbers, Dan pointing out that the kind of buffer that exists and also the relative stability of the property tax as a revenue source.

But the point being that when we're heading into a deep recession, which we don't know how long it will last, You know, it may be okay to use existing buffers this year, but what about next year and so on?

And so as long as there's a reliance on regressive taxes, then revenues are going to plummet, you know, continue plummeting if we don't have new taxes through progressive revenue sources.

And I think that that's a very important point we ought to point out, which is the difference between this legislation saying we will do an interfund loan and then cover it with new revenue sources that will come into effect when the tax revenues are available to taxing big business, that's completely different than the city saying that we're going to cover budget shortfalls through the buffers that are available because that, the latter case, is an example of an austerity budget because that would mean that those funds will not be available for the needs that are actually available.

So, for example, effectively it would mean that The mayor would cut tens or hundreds of millions of dollars from affordable housing to cover the budget shortfall because those funds will not then be available later.

So I just wanted to point out a very key difference between the two cases.

And then lastly, just on the emergency clause, just to clarify why we have done this emergency.

I mean, it is not some technicality.

It is because people are in an emergency that the legislation has been drafted as an emergency legislation.

And we know that the emergency will not pass once the immediate medical danger is also going to pass.

We know we're going to be in a recession.

So I just wanted to point out concretely, if there were no emergency clause, then we would have to wait for 30 days for the legislation to go into effect.

The city would lose $40 million, and the workers who would get cash assistance, families, they would have to find other ways to make rent.

And also that we saw the example of the big business backed referendum.

And I think that the emergency clause should be seen in that light, why it is so important for people to have this immediately.

I will just stop there and if there are further questions I can help clarify.

Thank you so very much.

Before we move to the payroll expense tax, we do have some questions from Council President Gonzalez.

Council President Gonzalez, thank you so much for waiting.

Please go ahead.

Thank you.

And if I can ask Council Central staff to go to the slide that shows the inter-fund loan types.

Nope.

I think it's slide 11. There we go.

Thank you so much.

So, Dan, on this particular slide, so it's my understanding that all of these, number one through six, so this legislation proposes taking $50 million from each of these funding sources in order to get to $200 million.

Is that, is my understanding accurate?

With a slight amendment up to $50 million.

Cause if you took 50 from each of the six, that would, that would get to 300 million.

Okay.

So, um, nonetheless, setting aside the amount of where the dial would be set, these are the funding sources proposed to get to up, up to $200 million.

That's correct.

Okay.

And on all of these six items, are all of these levies?

All of them are fed with levies, except the housing incentive fund, which we think we're still investigating, but we think is actually a sub fund to the low income housing fund.

That one is generally supported by MHA.

I mean, I get the terminology wrong, Mandatory Housing Affordability Act payments in lieu of building affordable housing for additional height incentives.

Okay, so then if I'm looking at these six options, then number three, four, five, and six are accurately characterized as voter-approved levies.

Yes, that's correct.

And the low income housing fund is...

I don't want you to talk about the low income housing fund right now.

I'm asking you to confirm my simple question, which is number three, four, five, and six are voter approved levies.

Is that accurate?

That is accurate.

Okay.

And three, four, five, and six listed on this slide are all reliant on property taxes.

Is that what I heard you say?

Yes, so far as I know, that is the only source for those funds, property taxes.

Okay.

And in the context of those voter approved tax levies related to 3, 4, 5, and 6 on slide 11, what language in the enabling ordinances and any implementation and evaluation plans related to those funds permit those funds to be used for inter-fund loans?

I don't have a ready answer for you other than I can tell you that I am not aware of any language that either specifically authorizes or specifically constrains the city's ability to Um, doing an inter fund loan from these funds.

Okay.

So my understanding of, um, at least the family's education and preschool promise levy, which I.

was a prime sponsor on.

That has an enabling ordinance that uses a lot of shall language for the items that will be supported through that funding.

So has the law department been engaged on either items three, four, five, and six to provide us with their legal opinion?

on how those dollars may be used either for the program's, I'm sorry, for the program's proposed Salant Morales spending plan.

You cut out a little bit, Council President, but I think I understood the gist of the question.

Yes, the law department has been engaged in a review of the proposed legislation.

So I wouldn't ask you to divulge attorney-client privilege in open session, but I would ask that you share that legal opinion with me in my office.

I would certainly appreciate seeing that.

And then sort of a second line of questioning here is in the examples of, and I think this is where we can go to slide 13, Sorry, maybe it was 12 slide 12. Nope, 14, sorry, I'll get it right, 14, there we go.

So on this slide, Dan, I understand the concept that you're describing, which is that it's pretty, Interfund loans is a common concept and by definition allows us to use existing revenue sources and streams to to pay for other services on the promise that we'll pay these back.

So it's, you know, giving ourselves a credit card and then paying back on that credit.

So in these cases, however, on the seawall replacement, affordable housing, Mercer West, waterfront lid, and a short-term rental tax, while I understand that we have borrowed against ourselves for other purposes, I guess what I'm asking is what details can you provide us right now about how those dollars were used?

So in other words, I'll just play it out on that $85 million for the seawall replacement, what were the $85 million used for?

Same question for the $29 million affordable housing, the $26 million Mercer West and the $19 million Waterfront Lid and the $5 million short-term rental tax.

What were the purposes of the spending for which we took out the Interfund loan?

And was it in one chunk or was it in sort of over a period of time, and we took bits here and bits there.

I just want to know a little bit more, and if you have some details about that now, I'd appreciate hearing it.

If not, you can get it to me offline.

But I want to hear more details about sort of the mechanisms and the principles, you know, frankly, the fiscal policies and principles that were underlying the the inter-fund loaning that was going back and forth in these particular examples that you have here.

Yeah, what I have from each of these examples is what the money was used for.

What I don't have offhand is exactly which fund did the loaning that was repaid with the funding sources.

And I think that's what you're really probably after.

So I think it would be best for me to follow up offline and get you this information rather than tell you what I know that isn't that interesting to you.

Yeah, Dan, I appreciate that.

That is a good clarification because I actually had heard it the other way around.

I had heard you say that these dollars were taken from these projects for other things.

And what you're saying now is that these dollars were taken from other places to fund the things that are listed here.

And so I think my question still stands.

I appreciate you giving me that correction, but I would really appreciate understanding again, where did that $85 million come from in order to do the seawall replacement?

Where did the $29 million come from in order to do the affordable housing?

sort of what was the place, the revenue stream for that, and sort of what were the underlying financial fiscal policy principles that were at play in the course of making those decisions, and were they executive initiated, or were they council driven?

Yes, I'll be happy to follow up with that information.

I understand the question.

Thank you.

I don't think I have any other questions.

Chair Mosqueda, I appreciate your indulgence in looping back to me.

Thank you so much.

Absolutely.

Well, thank you very much, council colleagues.

We do have Tom who is back on the line from central staff.

Colleagues, I'm going to ask us to walk through the presentation in full again.

If you are paying attention online, you can see the full PowerPoint presentations linked in the agenda.

Kirsten, I'm going to ask you to start with slide number one so people can see the difference.

We just concluded a conversation about the Interfund Loan led by Dan Eder, Council Bill 119773. And because of technical difficulties and audio quality, we're going to ask Tom Mikesell to walk us through Council Bill 119772, the payroll expense tax, so that there's full transparency both with our colleagues and the viewing public and any press that are following this.

So Tom, I believe your audio has been tested, but let's test it out before we begin.

And then we will walk through the first part of the presentation so that there's full transparency.

Before we conclude, I'll also turn it back over to the sponsors for any clarification on legislative intent before we wrap up.

But we will have plenty of time to ask questions on this as well.

Tom, let's test your audio.

Hi, Chair Mustapha.

Can you hear me?

I can.

It is still a little glitchy, but if there are any problems, we will make sure that this gets transferred to our next committee meeting so that there is not any concerns.

And Tom, please try to speak slowly just in case the audio needs to catch up with your presentation.

And I believe Kirsten has teed you up for the payroll expense tax overview.

So we have your slides ready to go.

Thanks so much, Tom.

Thank you.

Okay.

So, um, I will try to fill in any gaps and go over the presentation and complete.

Um, and so we are talking about council bill 1 1 9, 7, 7, 2. This, uh, first slide just gives an overview of the slides that, uh, I will touch on through the presentation.

Uh, we will cover the annual revenue amount, the tax structure, including the rate and, um, threshold.

We'll go into what businesses are generally subject to the tax and talk about some of the descriptions of different business situations.

We'll talk about the exemptions in the bill.

There is an emergency clause that is included in the legislation, and so I'll speak to the effect of that.

And then finally, I will touch and conclude with a discussion of the date that the tax is enclosed and the actual due dates for tax payments.

So next slide, please.

At a high level, the tax is structured to bring in $500 million per year.

The tax goes into effect of June 1st of this year.

So there is a partial collection assumption that's included in revenue estimates.

Since it goes into effect June 1st, there is approximately seven months of collection.

And so just doing the simple math, that would be a $286 million of revenue for 2020. Next slide, please.

The rate for the tax is 1.3% of payroll assigned to Seattle.

Assigned to Seattle is a technical term, and it's similar to the way that the city's current business license tax the way that it determines the amount of economic tech activity that happens within the city limits for purposes of determining business tax liability.

So for the purposes of this bill, for businesses to determine what their payroll is against the $7 million exemption threshold, they would apply a three-part test similar to the business license tax.

First, we'll look at whether or not an employee is assigned to work in Seattle.

So they work for a business that's operating in Seattle.

Next criteria is if they are not primarily assigned to any one location, it would look to see where the employee performs 50% more of their work.

So if the employee performs 50% or more of their work in Seattle, then the entire amount of that individual's payable would be included in the tax base.

And then finally, in instances where an employee works in multiple locations and does not perform work in, does not perform 50% more of their work in any single city, but that person does live in Seattle, that total amount of the payable would be included in measuring against the $7 million threshold.

Next slide.

So there is the exemption threshold.

So businesses below $7 million will not pay.

I just wanted to talk a little bit about some of the different business situations.

So this slide covers some of those situations that have come up in discussions after the bill was introduced.

essentially trying to understand how the tax would apply in different situations.

I would note the first, independent contractors, is actually specifically included in the legislation.

The second two, integrated enterprises and franchise businesses, are not specifically noted within the legislation.

The points on the slide and my comments will just basically provide an interpretation of how the tax would apply for those situations.

With regards to independent contractors, these are, I guess, when you hear the term gig workers, that's essentially what we're talking about.

So, in cases where a business has a, so they hire and pay compensation to an independent contractor, and in instances where that person is not working for some other business, then the entire amount of the payments to the independent contractors would be included in the business's calculation of its total payroll expense.

The next, integrated enterprise.

So again, this is not specifically included in the legislation, but it is a interpretation of how the legislation would apply.

These are instances where a business may formally or informally advertise itself as a larger business structure.

But in terms of practice, it is actually a collection of smaller businesses that perhaps report to or are managed by a larger management corporation.

So each individual business that holds a business license would be tested against the $7 million threshold as opposed to aggregating all of those individual cases as one group entity and testing against the $7 million threshold.

So finally, franchise businesses, these will perhaps be more familiar.

These are cases where a business can enter in an agreement with a larger national, in many cases, corporation and use trade information, naming information, business plan information to operate their own individual business.

Um, so in these instances, each one of those, um, franchise businesses will be measured against the $7 million threshold.

Um, as opposed to aggregating them, um, there's all of the different franchises that, that operate in the city and testing against a $7 million threshold.

And so, uh, the example I like to refer to as McDonald's at the.

national name, and there were many McDonald's within the city of Seattle.

In the instance that each one of those holds a business license, each one of those individual restaurants would be measured against the $7 million threshold in the legislation.

Next slide, please.

So I covered it a few times, but generally, the $7 million threshold applies.

There are a number of exemptions in the bill.

Those include nonprofit organizations, any educational employers, grocery stores, including retail and wholesale.

And these are generally stores that sell 75% or more of their sales are for tax exempt food products.

Local government employers.

Next slide, please.

Federal and state governments.

insurance businesses, which are generally not subject to tax, businesses that sell, manufacture, distribute motor vehicle fuel, and businesses that sell or distribute liquor.

And next slide, please.

So with regards to the due dates and the effective date, the tax would be effective June 1st of 2020. Businesses would then, at that point in time, begin to determine their liability for the tax.

However, there is an element of administration outreach and audit that needs to be established in the Department of Finance and Administrative Services, and the bill provides for a approximately 18-month period from the effective date of the tax to the end of next year for the determining the liability and then making the final payments.

And so the all tax payments for 2020 and 2021 would be due with the final quarterly payment of 2021, which is due within one month at the end of the fiscal year, which would be due by February 1st, 2022. Accruals, this is essentially just the accounting speak for the ways in which governments can monitor the revenue flows against the obligations that they have.

And this is similar to our current practice.

Any tax receipts that are measurable and receivable that come in successive periods, so in this case, the payments that come by February 2022, those could be accrued back into the 2021 fiscal year to meet the end of fund loan, which Dan Eder described earlier, as well as other spending obligations as a result of the spending plan.

And then finally, the emergency clause.

So the legislation does include an emergency clause with an immediate effective date to have successful passage of the legislation that would require a three-quarter council vote and the signature of the mayor.

So hopefully that came through loud and clear this time, and I'd be happy to answer any questions.

I do believe there was a Council Member Lewis question that I'm I'm prepared to respond to but I would defer to the chair as to how how that would how she would like me to proceed.

Thank you very much, Tom.

We did hear you loud and clear.

I hope the viewing public who was having concerns is still tuned in and could hear you as well.

And for anyone who does write in with concerns about not being able to hear your previous presentation, we'll make sure to send them the recorded link to Seattle Channel for this full walkthrough.

Council Member Lewis, I'm going to turn it directly back over to you.

Do you mind posing your question again for the continuity of the conversation?

Of course, thank you, Madam Chair.

So just to rephrase the question from earlier, it was essentially have the revenue projections going forward from this tax changed at all given the potential impacts of COVID on the economy and how that might have an impact on the payroll of firms, the bankruptcy of firms, if it would potentially reduce the tax base.

I'm just wondering if that is, I mean, I guess first, if that is a valid concern, second, whether that's been factored into the current estimates on the integrity of the projections on how much this would raise over the next couple of years?

Okay.

So I guess to acknowledge the concern, when we were developing the rates, so we had information that came by way of the Employment Security Department.

It was 2018 data and estimates were being developed prior to the COVID emergency truly was revealing what the impacts were going to be.

So we were kind of a little bit trying to figure out a way to account for the potential impacts of the COVID emergency, particularly with regards to social distancing.

Given that there is little information at the time about what those impacts could look like, the approach that we used was to look at the share of employment, share of total covered employment that was represented by accommodation and food service, arts, entertainment, and recreation businesses, which is about 12% of the total employment, and use that, since those are those business sectors which are most clearly being damaged by the social distancing or seeing impacts from that.

We use that as a proxy.

And again, this was earlier on.

Subsequent to that time, we have now seen CBO's presentation, which of course they're dealing with great levels of uncertainty as well.

But it's, you know, as we learn more information, it gives us a possibility to test assumptions that are made.

The report from that is that unemployment, which it would probably be the best read as to what the impacts would be from a payroll expense tax.

Unemployment has increased anywhere from 3.1 to 9.6% in 2020 based on those estimates.

So that compares to the 12% adjustment that's made for sizing the rate that's used in this tax.

So it's, again, that was the approach that was taken to kind of account for the economic uncertainty, and it seems at least given the more recent information, as bad as the information is, it at least verifies that the adjustment that was made was in the right direction, and that's approximately the correct order of magnitude.

Councilmember Lewis, any additional follow-up questions from you?

No, Tom, thank you so much for that response.

Okay, great.

Council colleagues, I'm going to go back to the roll call to see if there's any questions.

Now that we could hear Tom's presentation, there may be more questions.

Councilmember Peterson?

Hearing no questions.

Councilmember Strauss?

Hearing no questions.

Council President Gonzalez?

Thank you, Chair Mosqueda.

I do have, I think, just one quick question.

If Council Central staff could scroll back to this one.

Yes.

Thank you so much.

Slide eight is great.

Thank you so much.

So I just want to get clarification from you, Tom, on a couple of points on this.

on this particular slide.

So on the tax effective and due dates, the first bullet point says effective June 1st, 2020. I want to make sure that I understand what that means.

Does effective mean that is effective the same as implementation or effective means it's something else?

Can you just talk about that a little bit?

Yes, absolutely.

So the effective date is when the tax liability will begin for those businesses that have liability given the exemptions and the thresholds.

Though it is clear that the administrative functions are not set up and in place.

And those will include procuring systems, technology within the Department of Finance and Administrative Services to administer the tax, hire the outreach and audit staff necessary to administer the tax, and essentially stand up the tax collection infrastructure.

And that's why the other side of this equation is when the payments are due, and there is an 18-month period between when the tax liability begins and then when the actual payments will be collected and received in the City of Coppers.

And that period is what allows for the administrative functions to be stood up.

But that being said, the liability would be in place, and businesses will be responsible for making those tax payments.

by the end of 2021. And in the interim period, the administrative functions we set up and the outreach will be established and the interface with the businesses will take place to make the determinations and bridge the gap between the June 1st effective date and the February 2022 payment of all those liabilities.

So the term effective June 1st, 2020 is, it does not mean collected starting June 1st, 2020.

That is absolutely correct.

Okay.

Is there any portion of the payroll expense tax as proposed that would be collected in 2020?

No.

Okay.

On the emergency clause piece, so this has appeared once here and once in Dan's presentation, where it talks about how the immediate effective date with three-fourths city council vote and mayoral signature I think it's really important for us to have a conversation and to hear from you what the impact of an emergency clause is on the council's legislative process.

So I'd like for you to talk more about that.

I can speak to how it pertains to what the approval of this bill.

I don't know if that's the true scope of your question.

That's all I'm asking.

So I mean, I think it's, you know, we've sort of thrown that phrase out a couple of times now in this presentation, but we haven't taken the time to explain in the context of these proposals what the effect is of an emergency clause.

Got it.

Um, a normal bill would require a more, a majority vote of the council, which, um, with a nine member council, that's five.

Um, council members from affirming the approval of the legislation.

And, um, and then that, um, that piece of legislation would go to the mayor for, um, either a signature or, um, or to let it go into, um, action without further, without further action of the mayor.

Um, in this particular case with, since it has an emergency clause, the threshold for passage is higher.

It would require an affirmative vote of seven out of the nine members of council.

And further, it would require the mayor's signature for approval.

Um, so that, um, there is not a situation where the council would approve and then the mayor could not, not act and have that go into law.

And then a final piece that is part of this is if the bill is passed without with the three quarters vote and the, and the mayors does sign, there is no provision for a referendum for this piece of legislation.

And what happens if the city council secures three-fourths of the vote.

In other words, seven council members vote in the affirmative for the bills, but the mayor does not sign the bill.

My understanding is that the bill would not go into effect with that algorithm.

And if the bill doesn't go into effect because the mayor didn't sign it, would the city council have an opportunity to reconsider this legislation?

There would be no opportunity to reconsider legislation, though it could be reintroduced as a newly numbered bill.

Is it as simple as a reintroduction with a new council bill, Tom?

Or would there have to be something that's substantively different?

I do not know the answer to that question specifically, Council President.

Perhaps someone else on the call.

Otherwise, I could follow up.

This is Dan Eater.

I believe that the substantive change that would need to take place in the circumstance that you just described, Council President, where the mayor either vetoed the bill or just simply withheld her signature, as Tom mentioned, the bill would not go into effect.

If the council wanted to take up a new bill, the substantive change would be that it would not be emergency legislation, or also, if it were otherwise the same, At least the emergency clause would need to be eliminated from the proposal.

If Council Central staff could follow up with me offline on that, I think that would be helpful to me because my understanding is a little different than what you've just described, Dan.

So if we could connect offline, that would be greatly appreciated.

I don't have any other questions on this portion of the presentation.

Thank you so much.

Thank you, Council President.

Looking at the list, are there any additional council members besides the prime sponsors that would like to ask a question?

Okay, Council Member Morales and Council Member Sawant, before I turn it over to you, I do have a few follow-up questions as well.

Following up with Council President Gonzalez's question around the effective date of, she asked if there would be any taxes collected in the year 2020, and I believe you said the answer is no, even though the legislation says effective in 2020. Can you also confirm, my understanding was that there would be no taxes collected in the year 2021 either, that those would not be due until 2022, looking back at the 2021 year?

Can you comment on that for us briefly?

That is correct.

The liabilities will accrue for 2020 and for 2021, though the payments are not due for businesses until that final tax payment of 2021, which is formally due February of 2022. OK, thank you.

Kirsten, could you please go to slide number four for us?

Okay.

So looking at slide number four, I had a follow-up question on this.

In determining which businesses have a $7 million or higher Seattle payroll in the previous year, are we also looking at 2021 years or is it a different threshold that we are looking at to determine which businesses have a higher Seattle payroll than $7 million?

If I'm understanding the question correctly, in each year, the businesses will be looking at their most immediate prior year.

So for making a determination of tax viability in 2020, businesses will be looking at their 2019 payroll.

And so going in order, if businesses are determining their tax viability for 2021, they will be looking at whether or not their payrolls were above or below the $7 million threshold in 2020. And that basically carries through the life of the tax, always looking back at the prior year's payroll to determine whether or not they have liability in the current year.

OK, thank you so much.

And in looking at slide 4, definition of Seattle-assigned payroll in our conversations over the last two weeks in thinking about how we respond to the emergency that is COVID and the need to get assistance out the door to small businesses, workers, to ensure food security and housing security, among other things.

I know that there's been reference to the House Bill, House Bill 2907. I just want to crosswalk the definition of Seattle Assigned Payroll and see if we are using a similar definition.

I believe the answer is yes, but I want to double check.

When you look at the three sub-bullets here, is it similar language that you have pulled from the House Bill to identify how we would define which companies have Seattle payroll?

similar in language that the House bill used?

Chair Mosqueda, I do recall looking back, if you will recall, there was a House Bill 2907 and there was a House Bill 2948. And they both looked at a countywide tax.

I do recall, I believe it was 2948, had a similar construction bill.

making the permutations with the county as the focus versus the city, since it was a county tax.

So I do not know if the language is exactly the same, though I do recall that it was similar to 2948. Okay, great.

I may ask for a follow-up on that as well.

And I know that it'll probably just take a quick second for me to do too.

So if you don't mind, maybe let's just follow up on that to see where there might be any deviations, as I know that how we define Seattle assigned payrolls is an important question that was asked during public testimony as well.

Council colleagues, I appreciate your questions.

I'm sorry, did I cut you off, Tom?

I want to make sure you got all the chance to say everything you needed to.

I'm all good here.

Thank you, Chair.

Okay, hold on for a second.

Let's just double check.

Are there any additional questions before I turn it over to the prime sponsors?

Hearing none, Council Member Sawant and Council Member Morales, thanks again for your feedback as we go through this.

I know you provided your comments about legislative intent last time.

Are there any follow-up comments on legislative intent or questions that you'd like to throw out while we have central staff on the phone?

Thank you.

Yes, I just do have kind of a technical question, Tom.

We have had a little bit of back and forth with folks from the grocery industry.

And so I do have a question similar to Council Member Mosqueda's about whether the exemption language that we have here mirrors the house bills that were introduced in Olympia.

And depending on the answer to that question, I'm wondering if kind of a technical cleanup might be to to reference the NAICS code for the industry that we are intending to exempt.

The point here is not to exempt, you know, gas stations or quarter stores or even Target that sell lots of things besides groceries.

But we do want to acknowledge that there are food stores that are providing really critical service and that we match the intent with the language that we actually have.

Okay, thank you, Council Member Morales.

With regards to the exemption, it's similar to my prior response about the assignment of payroll calculations.

The language is similar.

I don't know, I don't recall if it's word for word the same.

I do know that I had conversations with individuals who were involved in drafting the state legislation and that the intent was to have the language be be similar and be based on a metric that is established in state law, which is the exemption for retail sales of food, to use that as the threshold.

The NAICS code was not used given that it's more of a subjective exercise in terms of assigning the NAICS codes and not viewed as precise and as auditable a standard as is the percentage of sales.

That being said, there's possibilities for a different threshold mark that could be applied through an amendment or some other measure, or an extender could be used with the understanding that, at least from the administrative perspective, it perhaps is not as clearly auditable as what's currently in the bill.

Thank you, Council Member Morales.

Any other comments from you, Council Member Morales?

Okay, appreciate it.

Council Member Sawant to wrap us up.

Thank you, Council Member Mosqueda.

Just very quickly, first of all, and I had other clarifications as well in a bit, but on the question you asked and the question from Council Member Morales about whether the payroll portion of the language and the exemption for the grocery stores is the same as House Bill 2907 or 2948, I Second, everything that Tom is saying, but just from my standpoint as a one of the sponsors of the bill, the intent of my office has been for both things for payroll and grocery that use the same language as the house bill and for the same for the grocery stores and tax revenue and the tax rate were calculated, assuming that grocery stores would not be taxed.

We've since then heard from the Grocery Association, who is claiming that indeed they would be taxed from the legislation.

They have not substantiated their own claim, which we're asking them to.

But at the same time, as Tom said, my office has reached out to central staff.

already to see if we can clarify the language any further.

And on that note, I'll also mention that we've also asked central staff to draft an exemption for home care agencies.

And on the grocery stores, just one last point is that we've also reached out to the UFCW, which is the union representing grocery store workers, for their perspective on what is needed in order to clarify the language.

And on the referendum, I realized I didn't fully explain my point about why emergency clause and how that relates to other things that have been speculated in the media.

And one of the media speculations has been that the legislation was drafted in this way in order to avoid referendum.

I just wanted to clarify that that is not true.

As I said before, it is truly an emergency.

Whether anybody agrees with me or not on the Amazon tax, I think there will be broad agreement that we are truly in an emergency.

and ordinary people are f and you know, the whole p provide cash assistance an date being june 2020 beca even a month delay will b right now wondering whether they can even afford food for their children.

And that's not hyperbole.

That's actually what's happening to people.

So the question of losing $40 million for that month from June effective date, that's a question.

And on the referendum business big business back referendum.

I and I just wanted to say I'm very confident that we would win that election, just like we had when we just like we did last year when Amazon tried to buy the city council election, but there is a question of delay here again you know we would have to wait until after November in all likelihood.

And I'll also note that.

You know, in the Great Depression, the help for people didn't come until two or three years into the crisis.

And the wave of evictions and foreclosures and drop in home construction hit its peak before then.

And you can see that from the University of Washington's project, you know, Great Depression in Washington State project.

They note that actually that delay had a big impact on people.

And so hopefully we're not going to engage in that kind of delay.

So I just wanted to explain the motivation behind Behind that and then on the.

On the question that Council Member Lewis asked about the adjustments that would need to be made if there are certain companies that may not fit into the threshold given the impact on the crisis, obviously a lot of things are unknowable.

In addition to that, we are also unable to predict what kind of positive impact will be experienced by those same big businesses as a result of the record-breaking federal stimulus that they have got, the monetary policy stimulus, and local state and local fiscal aid.

So, you know, we don't know how those considerations will impact 2021 payrolls either for those businesses.

And so all of those uncertainties are wrapped around this in what Tom was reporting about the, you know, the tax rate, the tax rate estimate of 1.3% applies a 12% reduction to the payroll base, which is a conservative reduction because the true extent of the impact will not be known.

On the questions on inter-fund loans, I think all of the clarifications should be engaged in and I really appreciate that.

But I just, for the benefit of the viewing public, I want to point out that there's been a lot of questions from council members on inter-fund loans, but I just want to remind members of the public that these are routine functions and also any loan that lasts, any inter-fund loan that lasts longer than 90 days requires Council approval.

And by that measure, many of us who've been on the Council for several years, we have voted on inter-fund loans as a routine measure, you know, as a Council.

And I don't remember even a single instance really offhand where it was controversial.

So I just wanted to make that point.

There's nothing unusual about having an inter-fund loan.

And also, there have been questions about when the taxes are going to be paid, when the money will be spent.

I just wanted to also point out again, this is no for the viewing public that this is again, no different from how the city does its taxing and spending as usual.

And also for ordinary people, you know, when you pay your federal income taxes, you pay in April for the previous year.

So in other words, the city collects the taxes in February of each year, but then spends the revenues in the previous year.

We do this for, and so on.

So all of the city's revenues are consolidated in a cash pool.

Each fund knows how much it's entitled to, but it's one pool.

So you spend the money in one year knowing that you will replenish the pool the following year.

And I just wanted to thank Dan Eder for this explanation that we received from him offline, because we were hearing that question quite a bit from a lot of sources.

So I just wanted to add that clarification.

Thank you very much.

Council colleagues, it is 1.02 PM and we've covered a lot of ground, including going through one of the presentations twice to ensure that the viewing public and our council colleagues could hear it.

Hearing no additional questions, please speak up now if you have them.

We will assume that if you have any additional questions that those get sent by Friday this week to Sejal Parikh, my Chief of Staff, and Kirsten as well in Central Staff, the Director of Central Staff, so that we can make sure that those questions get responded to.

I want to thank in advance Allie and Tracy who were with us last week and did field a number of questions for us offline.

They are prepared to walk through those questions as well the next time we meet, so apologies That we did not get a chance to hear from them today, but I feel like we've covered a lot of ground.

I am looking forward to having future conversations with additional stakeholders who did not get a chance to chime in today.

We understand there was a lot of people who wanted to comment publicly and I'll be following up with some folks to make sure that we get a chance to hear from.

people in our next public hearing, or I'm sorry, public testimony, a little bit longer.

And I do appreciate all of your time and participation to stakeholders across Seattle for continuing to engage in this discussion.

Council colleagues, you've been generous with your time as well.

A three-hour meeting is greatly appreciated.

And again, please, a reminder to send any questions that you have to the staff by Friday at noon.

We've reached the end of the agenda.

So our next meeting is scheduled for Wednesday, May 13th at 10 a.m.

If there's no other questions or comments, today's meeting will be adjourned.

Thank you council colleagues for all of your time.

I hope you enjoy some of the sunshine out there and stay home and stay safe.

Thank you all.