What the Seattle City Council learned just two weeks before the head tax vote
The bloom is off the boom.
That’s the message Ben Noble, director of the city’s budget office, gave Seattle City Council’s finance committee on April 30, two weeks before the full council passed the head tax.
The growth that allowed the city to spend, Noble said, is starting to slow. “What you see is continued growth in employment but at lower rates of growth,” Noble told the committee.
Job growth instigated the construction boom in the city. Less hiring means there will now be less building.
“You’ll note for 2019 and 2020 we show that declining, so we are actually anticipating a slow downturn in construction activity,” Noble said at the budget meeting.
That's a problem for the city, because it has been raking in tax revenue because of construction. That means tax revenues will start to decline, even as Seattle increases spending to combat some of the consequences of growth. For several years now, Seattle has overspent its budget. But surprise windfalls from growth, like sales tax revenues from construction, covered the gap.
That's over now. If current trends continue, Noble told the committee, Seattle will operate in the red in 2019, to the tune of $28.5 million.
Councilmember Sally Bagshaw asked Noble what city spending was blowing the budget.
Homelessness, Noble said, adding, “The demand for those services, far from declining, is continuing to increase."
Noble told the Council that the city doesn’t have room in the budget for long-term spending on homelessness. It would be wrong, he said, to think the boom is going to surprise the city with more tax money like it used to.
Underlining this point: As the need for money to curb homelessness increases, money from the boom declines.
What does that mean for the head tax — that $275-per-employee charge to big businesses? Well, the $47 million the tax is expected to raise annually could plug the shortfall. That would decrease how much head tax money would go to new spending on homelessness.
To be clear, that’s not set in stone.
Shortly after Noble's budget presentation, Mayor Jenny Durkan asked city departments to submit a budget with cuts between 2 and 5 percent.
Durkan won’t agree to the City Council's plan to spend the head tax money, signaling there are problems with that plan.
To recap: The city of Seattle overspent its budget on homelessness before the City Council voted on the head tax. Unless something changes, most of the money raised by the head tax will cover previous spending commitments — not new spending.