y \ i) City of Seattle ‘Mayor Jenny A. Durkan ‘api 37,2018 Dear Counclimembers: ‘As weall know, our homelessness and affordability crisis demand our urgent action. We need ‘accountable and fective solutions to help thousands of people experiencing Nomelessness and many ‘more wha sufer from housing insecurity. lam proud ofthe steps we have taken together to meet these challenges, but we all agre that more needs to be done. ‘The “Progressive Revenve Task Force” has proposed the largest Councibimposed tax increases in Seatle history to deal with these challenges ~ other than the income tax. The tas force had a number of ‘members that regard very highly, and al gave ther best input on how we could address the criss | also appreciate that their recommendations came in 2 relatively short period of ime, with limited acces to data the aw department, or the ability to receive public input. As Council deliberations are underway regarding these recommendations, several Councmembers have asked for my views on the proposals. understand theresa significant range of approaches under discussion, which fs why I want to outine ny principles as Council begins drafting legislation, First, as Lhave reiterated since last ear, Seattle must protect our smal businesses when considering any ew busines taxes or regulations, Seatle small businesses are our largest employer; they provide ‘economic opportunity and create the rich texture and character of our neighborhoods and city. With ‘many small businesses facing a series of increased commercial rent, taxes, regulations and construction impacts, our City must ensure we're protecting and reinvestng inthe vibrant web of smallbusineses In addition, believe itis imperative that any proposal has full accountability and transparency for our ‘taxpayers from the intial spending proposal to oversight asthe Funds are delivered, These spending priorities must be in ine with our regional implementation plan of One Table. Finaly, we need solutions that improve lives but do not harm our economy. Allour businesses arts and cultural organizations, and civic ventures rely on each ther in an interdependent ecosystem. A large ‘ange of jobs ~from our building trades, to restaurant workers, to nurses, teachers, manufacturing obs and tech workers - have depended onthe economic growth we have experienced. As we work oli Up those that have been left behind and make our City more affordable, we must be careful not to do harm. The sie, scope, and impacts of any proposal must be gauged correct tis critical thatthe Counelincldes these tives and priorities: 1. Protecting Our Vibrant Economy, Smal Businesses, Non Profits, and Community Service ‘Organizations ~ Any new tax should not harm the economy, the small businesses that employ most of ‘our workers, or the non-profits that serve our community. Our neighborhood small businesses are our (ffexo th Mayor | 0 Fourth Avenue, P.0 80" 94749, Sete, WA9EI24 | 20668409 | este govmayrlargest employers with more than 200,000 employees. We aso have some ofthe most highly regarded ‘nonprofits inthe nation working right herein the cty—-we must continue to support their work. Steps to protect our economy and small businesses should include ‘+ Rejecting the so-called “skin inthe ame" flat tax, which san addtional taxon top of recent Increase in business and occupation tax rates, and the substantial increase in business license fees that was imposed in 2017. For ime with worldwide gras revenues of $2 milion or more the cost of their anual business license increase from $110 to as much as $2,400. This recommendation undervalue the many ways small business owners already have “sin in the game” and have been drectiy impacted by affordability crisis, + Craft exemptions fr smal businesses, which provide obs that we cannot afford to lose but are already shouldering significant taxes and regulations. In total, we know that business _actvty provides approximately 56% of our total General Fund tax revenues; + Craftaporopriateexemotions for non-profits. member organizations, and health care providers, + _Biminate the proposed blanket exemption for marijuana businesses, which coud stil {qualify forthe small business or healthcare provider exemption; + Create ew Seatte investment Zones in our most underserved communities tha are at high rk of displacement and need good paying jobs, then rat exemptions for businesses located in those zones; and + Incentvize private investment in homelessness solutions and affordable housing, by ‘creating a creit fr private spending in these areas. 2. Help Workers and Build the Economy by Rlnvesting in ity Businesses ~ As we generate _adeltional tax revenues from larger businesses, we should use the new revenues to provide tax relief to ‘ou small businesses, including our Immigrant and minority businesses. would help even the playing field to: ‘+ Reinvest in Seattle's smal businesses by exempting small startups from the Cy B&O tax for Lup to three years; ‘+ Reduce 8&0 taxes on businesses located in new Seattle Investment Zones (see above); + Reduce costs on smal businesses by offeting other regulatory costs ike business lcense fees; ‘+ Greate more support programs and resources for our smal busines; and + Restore the if sciences research and development tax exemption for federal grants and subcontracts thatthe City allowed to expire in June of ast year. Taxation ofthese funds puts many of Seattle's research entities at a competitive disadvantage in seeking these federal resources 3. Creating a Transparent Spending Plan Working Within A Regional Solution — As my Small Business Advisory Council emphasize, there must be an accountable and transparent spending plan, built around regional solutions. kn County has the third lergest homeless population in the United States. Seattle cannot go it alone, and we must work wit our regional partners. Homelessness and afordabilty challenges do nat respect any city boundary and cannot be solved just by Seattle Not only wil tot work, tunfery shits significant burdens to Seattle taxpayers. Through One Table, we are «establishing framework and implementation plan to address the root causes of homelessness ina ‘comprehensive and regional manner, which we will announce in May In considering the needed revenues as wel a spending gaps, i's critical thatthe Cty, County and our egional partners are allened ‘on any new significant investment that could be made in both housing and homelessness, Seattle's Investment plan should include:4 Investing in bridge housing and shelter options. As partof the legislation that passed Council in February, we have already begun our work to create adetional shelter and housing options, but we need additional safe alternatives; Expanding outreach, including additonal navigation teams to those living unsheltered 3s wells those lvingin vehicles and RVS; Dedicatng resources to meaningful and sustainable mental health and substance abuse ‘treatment. Underfunding behavioral health has a significant, if ot determinative impact on ‘ur homelessness crisis. This isan area where regonal solutions and working in the One Table framework wl be key; Providing dedicated funding for increased need of homeless services, public healt, Iter, ‘rash and debris removal strategies to fillthe gap Last year, the City spent $75 milion, more ‘than budgeted, providing a range of support services, operations of sanctioned ‘encamoments, and the ongoing costs of manaring unsanctioned sts, including hauling {arbage, human waste and used needles; and Directing resources to temporary affordable housing as wellas permanent affordable housing. afore fuly leveraging with Federal Low-Income Housing Tak Crests, the State Housing Trust Fund, and other contributions, the City of Seattle is expected to invest nearly ‘$70 milion in 2018. Once fuly leveraged from state, federal and private sources, this is ‘expected to result in total spending of more than $200 millon; three times our original Investment. However, these permanent affordable housing units wil take years to come online, which s why the ity must consider temporary affordable housing, such as modular homes. Showing Progress and Ensuring Accountability — Unfortunately, many Seattle residents don’t ‘ust thatthe Citys spending their dollars wisely at atime that taxpayers are already paying a significant ‘amount to address this rss. The City spent $75 millon in 2017 for homeless and related services. We ‘also spend significant resources on indirect spending to deal with this criss, including our fist responders, In addition es than two years ago, voters approved a $290 millon affordable housing levy. Forevery dollar the Gty spends on housing, purchasing power has historically been leveraged to nearly ‘$3 in other federal, state and private resources. ‘All new revenue should hae a strong level of accountability and transparency to taxpayers including: Independent oversight committee, similar tothe Sweetened Beverage Tax Community ‘Advzory Board, This board should include members appointed by the Mayor andthe City Council. The board should represent adverse group of stakeholders, but no entity oF person receiving funding shoud be eligible to serve onthe board: Requie improved accountability provisions in al service provier contracts; Requie retention ofan economist to advise the City and the Advisory Board. This economist, shouldbe experienced in both housing markets and inthe economic impacts of increased taxation on businesses othe economic, philanthropic and health of a community. Require the City to monitor and measure the impact of anew tax. We need to monitor the curmulative impact of Seattle's taxes and regulations to ensure tat we ae not pushing jobs ut of our City or creating any unintended consequences. The Cty should measure the impacts through a race and socal justice lens. In aaiion, a City economist should measure whether the new taxes lead toa drop in jobs or philanthropic contributions, that fue everything from our arts organizations, to homelessness services and affordable housing: and+ Re-evaluate progress with an affirmative renewal. By creating a sunset provision, the Cty an hod itself accountable and measure the effectiveness and impact of his tax and allow {or affirmative renewal ~ similar tothe previous employee head tax In the upcoming weeks | ook forward to working closely with each of you as we alm to ensure any proposal meets a robust legal challenge and can be fully and effectively implemented to address the homelessness and affordably criss. Sincerely, A Midees tra