A few days ago, I came through a lovely, clean Freeway Park, through the Seattle Convention Center and onto busy Pike Street. A detour showed off the new Ben Bridge flagship store across from Nordstrom.
Then to spotless Westlake Park for a chili dog from Dog in the Park. Finally, Amazon’s South Lake Union-Denny Triangle was full of people and energy. A tourist asked directions to Amazon’s Spheres.
It almost felt like 2019.
Alas, it’s not completely. Worker foot traffic in April stood at only 44% of its level in the same month four years ago. Third Avenue is mostly a sinkhole of boarded-up storefronts that once generated taxes for the city and a street of troubles.
The City Council just rejected allowing City Attorney Ann Davison the power to prosecute drug offenses. Councilmember Andrew Lewis, who represents downtown, so hard hit by the problem, cast the deciding vote. Lewis also voted to defund the police but walked it back as violent crime spiked.
Meanwhile, the city needs money.
City Hall’s tax receipts have increased 94% during the past decade, much higher than employment, population growth or inflation. Taxes imposed on businesses totaled $700 million since 2018.
The so-called “Amazon Tax,” or JumpStart Seattle, actually applies to more than 600 businesses. In its first year, 2021, JumpStart brought in $248 million. (One consequence, intended or not, is that Amazon now considers the Puget Sound region, not Seattle, as its headquarters and is moving jobs to Bellevue.)
Taxes paid by businesses increased from 56% in 2013 to 64% in 2022.
Making comparisons is difficult because tax systems vary widely by metro areas. But according to the Bay Area Economic Council, San Francisco’s office-based businesses, with gross receipts of more than $50 million, can pay tax rates as high as 1.4%. For a large tech company, that can total more than $10.4 million a year. On the other hand, San Jose caps its head count tax at $171,300 per corporation.
Yet Seattle fears a revenue shortfall of $200 million by 2025. Even diverting the JumpStart payroll tax from its promised uses for housing and Green New Deal environmental projects may not be enough.
Mayor Bruce Harrell formed a Revenue Stabilization Work Group this past year to address the issue.
In a statement Harrell said, “The City’s worsening revenue gap is unsustainable, and it’s insufficient for city leadership to only respond each year one budget at a time. This initiative will bring together some of our city’s brightest civic minds to comprehensively consider the fundamental and recurring issues facing our operating budget.”
The group met a couple of weeks ago, and I believe it is holding another meeting in July. Since these are not public meetings and no minutes are published, it’s a bit of a mystery.
According to my sources, it seems that this group was formed with a predetermined outcome of finding new tax streams or expanding them, rather than examining spending and where record revenues are being directed.
This is contrary to many other cities trying to recover from the pandemic.
For example, Portland Mayor Ted Wheeler is calling for a one-year freeze on increases in taxes. Additionally, more than 80% of voters rejected a capital-gains tax in Multnomah County, Ore. San Francisco Mayor London Breed introducing a tax break package this year. And Washington, D.C., Mayor Muriel Bowser rolled out a Vitality Fund to attract and retain businesses.
EMC Research recently completed a poll of 500 Seattle voters that offers some sobering insights. It was commissioned by the Downtown Seattle Association.
Asked on optimism regarding the city, 65% of respondents said it was on the wrong track. Sixty-one percent expressed concern about their personal finances. (The margin of error is 4.4 percentage points.)
Regarding the central core, 80% of respondents said downtown’s recovery was important to the city’s economy and 77% said it’s important to quality of life here. Also, 84% stated that downtown revival should be a top priority of city government.
Mayor Bruce Harrell received only 33% positive ratings on accomplishing the job, although 67% trusted him to accomplish it. Only 8% of respondents said the City Council was doing well.
Seventy-seven percent agreed that “Seattle’s hands-off approach to people using illegal drugs in public is contributing to rampant street crime and is making it much harder for downtown to recover.” And 76% would vote for council candidates who made downtown recovery a central platform of their campaigns.
And 66% agreed with this statement: “Given the fragile state of downtown’s recovery, now is not the time for the City Council to increase taxes on businesses.”
The implication is that they want candidates who will rein in taxes and spending. Portland, San Francisco, Washington, D.C., and other cities have offered constructive responses to revive their downtowns.
Perhaps we’ll see some similar action with Harrell’s call for “Space Needle thinking” in Seattle’s Downtown Activation Plan. If other cities are taking these actions, shouldn’t we at least be examining a similar set of moves?
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