The forecast given to the assembled council members was grim: an ongoing budget deficit, stretching as far as the charts were wide.
“Any remaining choices we have will be very difficult,” a finance analyst warned. “There are no easy answers. How do we bring back a balanced budget?”
Said one council member: “We’re having a budget gap when we’re in the midst of substantial growth … I don’t think we’ve ever been in that position before.”
Seattle? Sure sounds like the growing pains the region’s tech growth center went through during the past decade.
But no, this was from a Bellevue council meeting this spring. It turns out the Eastside city that’s supposed to be everything Seattle is not – staid, business-focused, competent – is having exactly the same problems with its tech-fueled boom as Seattle did.
“We have this wonderful urbanization and growth that’s occurring in the city, and that will require more new and enhanced services,” said Toni Call, Bellevue’s finance director, describing to the council how in the world an unprecedented business boom could simultaneously leave Bellevue staring at red ink into the future.
Welcome to the tech boom economy, Bellevue. As Seattle has discovered, and as I keep yammering about in my columns on the unique phenomenon of the “prosperity bomb,” it can both make and break you.
It brings fabulous wealth. At the same time, it drives up housing costs, widens inequality and strains city amenities. Because we have no corporate profits tax or income tax, all that wealth largely skates free of taxation. This hamstrings a city’s ability to respond to the growth.
Despite all those cranes on Bellevue’s skyline – Call said the city set an all-time record last year of $1.4 billion in development permits – Bellevue is looking at annual deficits of up to $30 million in future years, possibly up to $100 million in cumulative budget shortfalls added over five years. For a city with a yearly budget of around $250 million, that’s a lot – enough that the famously tax-averse city is talking about possibly raising them.
“The trouble is, how do we keep up with all this development?” asked council member John Stokes. “We can’t keep cutting back on services. We’re not set up to be a very successful city or government because of the tax structure.”
For Seattleites, that ought to ring familiar.
Bellevue finance analysts tell a story straight out of Seattle 2015: How tech growth brings in huge one-time boosts via a development and construction bonanza, but then, due to Washington’s antique taxing system, it doesn’t cover in an ongoing way all the growth impacts on roads, transit, schools, parks and housing.
Seattle tried to deal with this, at first, by passing an extravagant series of property-tax levies. After years of political trench warfare, it finally also found a way to tax the rich, with a high-tech-oriented payroll tax on high earners called the JumpStart tax (which was just upheld by the courts on Tuesday).
Seattle is still dealing with general fund deficits, from both the pandemic and new spending programs. But Seattle’s deficit isn’t really a full-on deficit, as it doesn’t include the JumpStart revenues. Those are in a separate fund, earmarked for specific programs. That fund is raking in surplus revenues, far beyond what was expected. If you count that surplus, Seattle is in the black. (This is how Seattle could fix its immediate budget problems – just tap the JumpStart fund).
Seattle is so often compared unfavorably to Bellevue. We’re the wild anarchists to Bellevue’s rule-followers, the socialist spendthrifts to Bellevue’s corporate cost-cutters.
So I about fell out of my chair with what happened next at the Bellevue budget hearing.
They went all the way to the A-word.
“Amazon is coming,” said Councilmember Conrad Lee, “along with other major corporations. And they are doing well – very well. They are – I don’t want to use the word ‘profiting from us.’ But they are a part of our city, that is providing them with their ability to grow. And when they do, they cannot just take the profit and pocket it. They have to participate in helping the city’s growth – in all ways, including our financial situation.”
In other words: Tax Amazon!
What a turn of events. Conrad Lee is a Republican who has been a fixture at Bellevue City Hall since the ’90s. Now after only a few years of Amazon’s expansion in his city, he’s channeling Seattle socialist Kshama Sawant.
OK, he’s not shouting it through a bullhorn like she does. But it’s the same gist. We aren’t your company town, Amazon. You benefit from our infrastructure, our people, our natural beauty. You bring great jobs, but at the same time you stress and strain our systems. So you need to give back, at least commensurately with what you’re getting. Like you’re part of the community.
This light bulb has turned on with Bellevue officials after Amazon grew to only 10,000 employees in the city. It took Seattle nearly 50,000 employees, along with years of squeezing the public for higher taxes, before we boiled over.
I don’t know if Bellevue will tax Amazon – it’s just talk for now. But it’s history-repeating-itself kind of talk. It reveals that there’s something fundamentally out of whack with how we deal with tech growth and its wealth.
How can I be so sure? Because it’s no longer just crazy Seattle saying it.
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