Head tax passes, nearly unchanged, out of committee

At least it was civil.

This morning all nine Council members showed up for the Finance and Neighborhoods Committee deliberations on the proposed head tax. Several of them offered substantive changes to the tax. They debated and voted for two and a half hours, and when the dust settled, none of the substantive amendments proposed had passed — just a few technical changes and clarifications. They then voted the bill out of committee, sending it to Monday afternoon’s Full Council meeting for final approval and a probable veto by Mayor Durkan.

The good news is that for the most part civility ruled the day, both in the audience and on the dais. But it was a frustrating session for the Council members, who resorted to “consensus-building by amendment”: offering variations on the tax rate, a sunset clause, and the spending split between housing and emergency homeless services in the hope of finding a sweet spot that a majority could live with. Instead, each variation included something that at least five Council members couldn’t live with, and they all were defeated.

Harrell offered up the deal that he, Juarez, Johnson and Bagshaw had negotiated with Mayor Durkan:

• a $250 per employee annual tax, which would raise about $40 million per year;
• eliminating the payroll tax;
• a sunset after the fifth year, unless the Council votes to extend it;
• a monitoring and evaluation program.

But the Harrell/Durkan plan was light on the details of its revised spending plan, particularly in how it would fund the ongoing needs of permanent supportive housing and rental subsidies, which are usually 20-year commitments. That brought opposition from Mosqueda; the other four Council members simply believed that $40 million was insufficient to address the need, and Sawant was firmly opposed to any sunset clause. Harrell noted that Mayor Durkan had given him assurances that they could find $35-40 million in additional revenues from other sources to keep the total at around $75 million through a combination of new revenues and cuts from other budget items, but without details he couldn’t swing anyone else over to his side.

Herbold tried to offer a compromise of her own, similar in some ways:

• eliminating the payroll tax;
• Reducing the employee-hours tax from $500 to $180 after five years, which would be enough to fund debt service and ongoing support for permanent supportive housing and rent subsidies;
• a full assessment of he impact of the tax in 2023, with expectations that the Council will vote on what the tax rate should be in year 6 and beyond.

That only gained the support of Mosqueda and O’Brien; everyone else voted no.

Herbold offered a separate amendment that would lower the employee-hours tax to $350 per year; for Harrell, Bagshaw, Juarez and Johnson, that was still too high; for Sawant, that was still too low. It failed too.

Sawant offered her amendment to double the tax rate to $1000 per employee; all eight of her colleagues voted against that, in a rare moment of consensus.

So after all that furious inactivity, the Council was back where it started, with a $500 per-employee tax for two years followed by a payroll tax, and no sunset clause. It passed by a 5-4 vote, as expected: the bill’s four co-sponsors (Gonzalez, Mosqueda, Herbold and O’Brien) and Sawant all voted for it. They then voted to suspend the Council’s rules so that the bill can receive final approval at Monday afternoon’s Full Council meeting.

Monday afternoon it will likely see a few more amendments, likely including one to remove the payroll tax, and a refined version of an amendment offered by Bagshaw today to exempt healthcare organizations whose client base is 25% or more Medicare and Medicaid recipients. Harrell might also try again with the deal he and Durkan negotiated, in an attempt to win Mosqueda over with a better spending plan.

There are currently two ways this would likely play out:

• Some updated version of the Harrell/Durkan compromise deal ($250/employee; no payroll tax; sunset in five years) picks up one more vote (most likely Mosqueda) and passes by a 5-4 majority. Durkan then signs it into law.
• The current bill is amended to remove the payroll tax, and passes by a 5-4 majority. Then Durkan vetoes it (as she has already threatened to do), the Council can’t bring the votes to override the veto, and we’re left with no head tax at all.

Send positive thoughts (and maybe some pizza) to the Council’s staff as they work through the weekend trying to cobble together new and updated amendments and run the numbers on various spending plans for their bosses.

The Council didn’t even get to the spending plan resolution this morning, which still has two amendments up for consideration. That bill is still sitting in committee, so expect Bagshaw to call a special meeting for Monday to finish that off. It’s worth remembering, too, that the Council is rushing to get this done by Monday afternoon because… well, because they arbitrarily picked that day several weeks ago. The bill doesn’t take effect until January 1, 2019, so they could take another week to try to write a better bill and build some consensus around it, and there would be no downside.

If you need some light reading, a staff member for Council member Mosqueda circulated a memo riffing off a recent McKinsey report looking at the true cost of solving King County’s homelessness problem, and running some numbers on how that cost could be spread equitably across the county.

One last thought: if you’re feeling a sense of deja vu, you’re in good company. This situation is reminiscent of what happened the first time the head tax was up for consideration last October: high-stakes poker, then it all fell apart at the 11th hour because our elected officials couldn’t build a political consensus.