Two equally misguided tax proposals were floated this week to raise additional funding to pay for public services in Seattle.
First, in a Sunday column, Seattle Times columnist Danny Westneat proposed that new Seattle residents pay impact fees to help fund things like parks and transit service.
Then, on Monday, City Council members Nick Licata and Kshama Sawant suggested taxing employers for every worker they employ in Seattle.
While the intent of these proposals, to fund transit service and other public programs, is laudable, the approach would do more harm than good. By penalizing density, both proposals would exacerbate the issues each measure intends to address by threatening continued economic growth in Seattle’s urban centers.
Impact fees would unfairly force individuals who recently moved to Seattle to pay twice for the same services all current residents enjoy.
Bought that Craftsman in Ballard in 1997? You’re in luck! Plan on following your significant other to Seattle for a new job and looking for a new apartment in Ballard? Get ready to pay the Seattle new-resident fee … plus your share of existing city, county, school district, state and special levy taxes.
Westneat’s premise that new growth and new residents are getting a free ride is inaccurate. New residents pay the same property, sales and vehicle taxes that longtime residents of Seattle pay, but would be required to pay additional fees embedded in new apartments or condos under his proposal.
This approach is also counter to the city’s comprehensive plan. Impact fees would fall disproportionately on the densest areas of Seattle, such as downtown, where, ironically, residents have a lower impact on the environment and public services than individuals living in single family neighborhoods. Residents of downtown Seattle also have a lower car ownership rate, lower carbon footprint, and pay more on a per-acre basis in property tax than individuals who live in single-family neighborhoods in Seattle.
Impact fees would make the production of housing more expensive. And in general, when you make something more expensive to produce, you get less of it and the costs increase. New taxes on development in urban centers would be passed on to purchasers or renters and increase price.
In his proposal to implement impact fees, Westneat fails to acknowledge Seattle’s current program already imposes significant fees on new development. Developers in Seattle that elect to build to the maximum allowed density in an urban center, are currently required to pay fees for affordable housing, open space, child care centers and historic preservation programs, depending on whether the project is commercial or residentialInstead of rushing from one tax idea to the next, they should strategically plan for how to invest new property, sales, B&O and other revenues derived from new growth and development to preserve important services and encourage additional investment and job creation in Seattle.
Amazon.com agreed to pay the city of Seattle $45 million in 2012 for the right to construct three new towers in downtown that will come with approximately 15,000 new jobs (jobs that will produce ongoing tax revenue to the city). Amazon’s contribution will make possible public benefits in the form of a new protected bike lane on 7th Avenue, additional streetcar service, the design for a new park at Westake and Lenora, and creation of affordable housing.
While some projects, such as Amazon’s, are being built to maximum allowable density, most developers in Seattle are building to the base zoning height because of the risk, costs, and existing city fees already in place that make it difficult to develop to the maximum allowed height.
More than 60 percent of all development projects constructed in Seattle since 2001 have been built to the base allowed height and have chosen to forgo the city’s density bonus program. This has resulted in lost tax revenue, lost jobs and lost public benefit for the city of Seattle. Westneat doesn’t mention this in his recommendation for adding additional taxes to development.
Meanwhile: The Licata/Sawant proposal to tax employers for each person they employ is the wrong message to send to employers that are here, and to those that are looking to create jobs in Seattle.
This is a shortsighted policy at any point in time, but is particularly problematic at a time when the city of Seattle is poised to significantly increase the costs on small and large businesses through a 60 percent increase in the minimum wage, to $15 an hour from $9.32
And it comes on top of recent policy adopted by the city that requires businesses to provide paid sick leave or safe leave to employees. Leaving aside the merits of either policy, both the minimum wage increase and the existing paid sick leave requirement will result in significant additional costs to Seattle employers than what they faced just two years ago. These are costs that could be borne by existing employee in the form of reduced benefits or reduced hours. These costs could also make it more difficult for Seattle employers to create new jobs.
Th council was right in 2009 when it repealed the so-called “head tax” —a proposed $25-per-employee annual tax that would have been Seattle’s first flirtation with taxing jobs —by a vote of 8-1 (Licata voted in favor). Other cities have followed suit. In 2011, Chicago Mayor Rahm Emanuel proposed eliminating the city’s employee head tax and the Chicago City Council voted to phase out the tax entirely by 2014.
What Licata, Sawant and Westneat fail to take into account in their rush for revenue, is that a fiscal policy that disproportionately taxes new housing and job growth in Seattle - two major tenants of the City’s comprehensive plan - risks increasing the tax burden on existing Seattle residents and eroding current and proposed public programs.
Today, downtown Seattle provides one out of every five dollars in property tax collected by the city of Seattle and more than 50 percent of all local taxes collected in the four square miles downtown.
Downtown’s four square miles (out of 80-plus in the city) provides enough funding to support the entire 2014 Seattle Police Department budget (nearly $300 million). A typical apartment building in Downtown Seattle provides an average of $354,000 per acre in property tax revenue compared to approximately $20,000 for a home in one of Seattle’s single family neighborhoods.
Continued development in downtown and other urban centers in Seattle is the Craftsman homeowner’s best friend— keeping taxes low and focusing growth in a defined area. Consider that the VIA 6 apartment project, recently constructed at 6th and Lenora in downtown Seattle, will pay over $1.4 million in property taxes in 2014 – more than ten times the amount paid by the property owner before the project was constructed. The additional tax revenue from this half-acre parcel, and others where new development has taken place, holds down tax rates for all Seattle residents and supports important new public programs.
If jobs and new buildings are not developed in Seattle’s urban centers and economic growth stagnates because of misguided fiscal policies like those proposed this week, a greater tax burden will slowly shift to single family-ome owners in Seattle, new development will slow and housing costs will increase.
This at a time when city voters will likely soon consider two major property tax proposals to fund universal pre-kindergarten and a new Metropolitan Parks District. These measures will increase the property tax rate for tax payers across Seattle and come on top of the Seattle Housing Levy, which was doubled in 2009, and th eseawall bond measure, approved in 2013.
If job creation and new development are made more expensive and difficult in Seattle’s urban centers, the property tax rate on single-family home wners necessary to support these levies will automatically increase to meet the revenue target established by law in each levy.
City leaders should welcome and encourage growth, investment and job creation that is consistent with the Seattle’s Comprehensive Plan. Instead of rushing from one tax idea to the next, they should strategically plan for how to invest new property, sales, B&O and other revenues derived from new growth and development to preserve important services and encourage additional investment and job creation in Seattle. Taxing new jobs and new residents sends the wrong message about Seattle’s innovative values and long-standing commitment to smart growth.
Jon Scholes is vice president of advocacy and economic development at the Downtown Seattle Association.