The tax that Seattle imposed on its largest employers, including household brands like Amazon and Starbucks, to help combat rising homelessness wasn’t the first of its kind. It’s unlikely it will be the last.
Tight budgets pinched even further by the recession of 2008 have spurred state and local governments across the country to try novel approaches — some of them focused specifically on business — to address urban problems from tent cities for people without housing to worn-out roads and decaying downtown business districts.
Some, including Washington, D.C., have created tax-increment districts that recoup money spent on improvements by taking advantage of higher property valuations. New York Gov. Andrew Cuomo has proposed using such a strategy to pay for improvements to Manhattan’s beleaguered subways, though the Legislature has yet to buy in.
While such proposals aren’t limited to businesses, as Seattle’s plan to charge its largest employers an annual tax of $275 per worker is, companies are typically among the largest payers. And among the most vocal opponents.
The controversy over the northwestern city’s efforts on homelessness, in fact, is merely a microcosm of the much broader dilemma facing heavily populated metropolitan areas.
As the number of homeless people surged after the 2008 recession, service providers struggled to keep up. Tent cities, or encampments, mushroomed from 19 nationwide in 2007 to 274 in 2016, according to the National Law Center for Homeless & Poverty.
Cities responded with measures from so-called dedicated taxes like Seattle’s, which generate revenue solely for a single purpose, to zoning laws that require luxury developers to include affordable housing as well as opening up vacant public buildings for residences.
Miami, for instance, has a longstanding 1 percent tax on alcohol-serving restaurants that garner more than $400,000 in annual revenue, which funds both a homeless trust and domestic violence centers. The levy was established in the early 1990s, when more than 8,000 people were camped on city streets.
Last year, residents of Los Angeles County approved Measure H, a 25 cents sales tax to pay for housing and other homeless services for 10 years.
Seattle’s measure, expected to generate $47 million a year to address an issue over which the city declared a state of emergency, is smaller than an original proposal of $500 per employee applied across the board. The revised ordinance affects companies that garner annual revenue of $20 million or more, a measure that encompasses about 585 businesses, or roughly 3 percent of the city’s total. It expires in December 2023.
“People have told us they want to see action — action that means people out of tents and in safer, healthier spaces, and cleanup of the public spaces in our neighborhoods,” said Council member Sally Bagshaw. “This tax contributes toward the long-term solution of affordable housing, while giving immediate attention and resources to fund shelter services, so those living on the streets tonight can find a dry, warm and safe place to stay.”
Neither Amazon, Starbucks nor the Seattle Metropolitan Chamber of Commerce disputed the importance of affordable housing or assisting a homeless population that topped 11,000 in 2017, about 1.6 percent of the city’s residents. Almost half of them had no shelter at all.
Instead, the businesses argued that the city spends tax revenue irresponsibly and has proved unable even to shelter children sleeping outside.
“This city continues to spend without reforming and fail without accountability, while ignoring the plight of hundreds of children sleeping outside,” said John Kelly, senior vice president of global affairs and social impact at Starbucks. “If they cannot provide a warm meal and safe bed to a 5-year-old child, no one believes they will be able to make housing affordable or address opiate addiction.”
Supporters, however, say the new law reflects the realities of a state without an income tax and a metro area that has experienced rapid economic growth and surging prices that have put housing out of reach for some residents.
While Seattle has increased its budget for homeless services by more than 60 percent over the past four years, to $63 million, it failed to keep pace with the problem, said Mayor Jenny Durkan, who threatened to veto the larger tax proposal because it might cost the city jobs.
“My priority was to find the right balance of meaningful progress on our affordability and homelessness crisis while protecting good, family-wage jobs,” added Durkan, who plans to sign the council’s measure into law. Along with its sunset clause, the ordinance requires an evaluation of the economic effects and an independent oversight committee; it exempts all hospitals as well as healthcare providers for whom 25 percent or more of patients receive Medicare or Medicaid.
“I believe in my bones that our city will continue to be the place that invents the future,” she said. “Seattle can continue to innovate, invent and grow — and we can continue to come together to build a more affordable, inclusive and just future.”
Amazon, the e-commerce giant whose global payroll totals 566,000, isn’t quite as certain, though it has resumed construction planning for its 17-story Block 18 complex in Seattle’s Denny Triangle, which executives halted amid debate over the tax.
“We remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here,” said Drew Herdener, a company vice president. It’s a statement whose punch is heightened by Amazon’s search for a second headquarters, which was narrowed to 20 locations including Washington, D.C., earlier this year.
Seattle’s revenue, said Herdener, has climbed from $2.8 billion in 2010 to $4.2 billion in 2017, a 50 percent increase that shows the city’s problem is spending efficiency, not income.
“We are highly uncertain whether the city council’s anti-business positions or its spending inefficiency will change for the better,” he added.
