Last year, Seattle Mayor Jenny Durkan allocated short-term rental and sweetened beverage tax revenue to social programs in her biennial budget that fell outside the original intent for which the taxes were adopted in order to free up general funds.

Unable to square the budget without making cuts or adding new revenue sources, the council approved leaving funding in place, the mayor’s shuffling of monies helping to cover homeless-service programs.

The city council will decide Monday whether to approve measures that would preserve the 2019 budget, but also challenge the mayor to maintain funding levels for those social programs in 2020 without taking money from these two dedicated revenue streams.

If Durkan doesn’t, Finance and Neighborhoods Committee chair Sally Bagshaw said the council will.

The mayor is publicly condemning the plan. Her office issued a July 17 news release that states the plan would “raid funding committed to these programs without identifying the millions in other funds needed to continue these critical safety net services.”

Both factions are operating under the assumption there will be a lackluster new-revenue forecast in September.

“She still has a billion-plus of general fund money to solve things, and then let’s see how it comes back,” said Councilmember Mike O’Brien during a July 10 Finance and Neighborhoods Committee meeting.

O’Brien is sponsoring a council bill that would create a dedicated fund for sweetened-beverage tax revenue, making expenditures easier to track.

It also would require that revenues be used to expand existing programs or create new ones that support food-security programs while allowing up to 10 percent to be used for one-time and limited-term expenditures.

The city council passed the 1.75-cent-per-ounce tax on distributors in June 2017, which was passed on to consumers. The goal was to curb consumption of unhealthy, sugary drinks while using the tax revenue to get healthy food to low-income families. A portion of the revenue also goes toward the 13th Year Promise scholarship.

But consumption didn’t go down, and the city’s budget office ended up increasing its initial 2018 revenue projection of $15 million.

The mayor’s budget used the $6.3 million surplus to supplant general funds, which some councilmembers say was a betrayal of low-income residents most affected by the sweetened beverage tax (SBT), because it deprived them of expanded programs consistent with SBT’s original intent that the council had promised them in return for their support.

Durkan’s news release states pulling back the SBT revenue will impact the Fresh Bucks program, food banks, senior meals, children’s nutrition, child care assistance, the Parent Child Home program and Nurse Family Partnership.

Bagshaw rattled off beneficiary groups during the July 10 committee meeting, including a Queen Anne shelter, Bailey-Boushay House, the Interbay tiny house community and the YMCA’s late-night motel voucher program. She (unsurprisingly) did not respond to Queen Anne News’ request for comment, and O’Brien’s office stated he was unavailable.

During the July 10 Finance and Neighborhoods meeting, Central Staff member Yolanda Ho used $1.795 million in SBT funds directed toward food banks as an example of a swap that freed up general fund money. Tracking SBT transactions is difficult, she said, because there’s no dedicated fund.

“Once it’s general, it’s kind of anywhere,” she said, adding it’s hard to say whether $6.3 million in the general fund really was freed up by SBT swaps.

Gonzalez said she was confused by the $6.3 million figure, because the argument for a dedicated fund was because SBT monies couldn’t be tracked.

“I am left with the conclusion that the executive cherry-picked these examples to sort of pull on the heartstrings and create a untenable situation and dynamic of, you know, if you stay true to the intent of the ordinance and move forward, then, you know, you hate homeless people,” she said, “and I think that’s really an unfair narrative to try to build at this point, and I just don’t have a lot of confidence in how suddenly we can track these dollars with this level of confidence and accuracy.”

Councilmembers Teresa Mosqueda, Lisa Herbold, González and O’Brien signed a July 17 response letter to the mayor, criticizing her diversion of SBT revenue to backfill the general fund in the 2019-20 budget.

“This should have been a win for low-income communities and people of color most impacted by this regressive tax,” the letter states. “This meant the excess $6.3 million of SBT revenue, under your direction, was used to supplant general funds and effectively sustain them at status quo levels in the 2019 and 2020 budgets.”

Durkan’s first biennial budget, the total appropriations are nearly $6 billion per year. General fund spending is roughly $1.3 billion per year.

Bagshaw was unsuccessful in tacking on an amendment to the SBT legislation that would have kept the 2019-20 budget as is, putting in policies and restrictions in 2021.  This year’s budget setting will be the last for Bagshaw and O’Brien, who are not seeking re-election this year.

Bagshaw said she’s not opposing the intended use of SBT revenue, but the council should keep the 2020 budget as is through the biennium to avoid impacting the general fund, which she said is a good source for housing and homeless assistance.

“We don’t have, at this moment, a dedicated source to backfill that,” she said.

The council did pass an employee-hours (head) tax on large businesses reporting more than $20 million in gross revenue last year, but repealed it within a month, amid a referendum campaign heavily financed by those companies that would have been affected. That projected $47 million in annual revenue would have been used for affordable housing development and homeless services.

The Seattle Times reported last September how Durkan communicated with a local union official and a business leader about negative polling ahead of the head tax’s repeal in June 2018. The mayor texted support for killing the head tax, writing it would allow the city to “call the question on all the biz that say they are for solutions.”

An alternative to the head tax for generating revenue to address Seattle’s homeless crisis has yet to materialize.

O’Brien said he’s hopeful the city will sell off some surplus properties and other new revenue will come through by September.

“But I’m almost certain the mayor will not send us a budget that says, ‘And here’s the $20 million of extra money we want. Why don’t you go figure it out?’” he said. “It will all be allocated when we get it. And if she does not allocate it as we want to, we’ll be forced to do what we did last year.”

If the programs are as critical as the mayor claims, O'Brien said, she will find a way to keep them funded.

Council president Bruce Harrell said he’s fine crunching the numbers during the fall budget season, and approved of making the change as long as no programs were affected this year. He abstained from voting on Bagshaw’s amendment, which failed in a tie, with only Abel Pacheco joining her in favor of postponing the SBT fund and new policies until 2021.

The mayor has vowed to veto the bill if it is passed on Monday. The council can override a veto by a two-thirds vote.

All five councilmembers at the June 10 committee meeting approved moving the bill forward.

Lumped into the sweetened-beverage tax infighting is Council Bill 119402, which would put limits on how short-term rental (STR) tax is used and also create a dedicated fund.

The STR tax was created to provide at least $5 million in grants for the Equitable Development Initiative.

Under the council bill, a STR tax fund would be established, as well as policies for how the money is distributed, starting with $5 million for EDI grants, then $2.2 million toward  debt service payments for bonds issue for affordable housing, followed by $3.3 million for permanent supportive housing, and finally $1.1 million for EDI staffing and consultant services. With only $10.5 million projected in STR tax revenue for 2020, that means a shortfall for staff and consultants used for implementing the EDI program, which would also need to be addressed through the general fund or new revenue.