After a week of political jockeying, the Seattle City Council rejected, 5-4, a new business tax dedicated to housing the homeless.

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An effort to tax high-grossing businesses and use the money for homeless services collapsed Tuesday, as the Seattle City Council voted down the proposal, 5-4, amid boos from the activists and homeless advocates that crowded the council chamber.

The swing vote was Councilmember Bruce Harrell. He sided with four other council members in opposing the latest version of the tax, which would have created about $25 million a year in new revenue by taxing businesses with at least $10 million in annual grosses.

While generally supportive of an employee hour tax and generating new funding for homeless services, Harrell said he’s “not comfortable” imposing a new tax on businesses in the rush of budget season. His own push to transfer about $8 million from the city’s “rainy day” fund to beef up services for the homeless also failed.

Councilmembers Debora Juarez and M. Lorena González also voted no, but they pledged to work with other councilmembers to revise the plan into a version they could support.

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González said that if a new version has not been passed by March, she will propose one that raises even more than the one rejected by the council on Tuesday.

The vote caps weeks of political jockeying by councilmembers, who produced several versions of the business-tax proposal as pressure mounted from groups supportive and opposed to it.

The original version of the proposal, as sponsored by councilmembers Mike O’Brien and Kirsten Harris-Talley, a temporary member of the council whose term ends this month, would have imposed a tax of $100 per full-time employee on businesses grossing $5 million or more.

A revised version introduced by councilmember Lisa Herbold Tuesday applied the tax to a smaller number — about 5 percent of city’s businesses, about 1,100 in all — and set the threshold at businesses grossing $10 million a year.

The proceeds would have added millions in new dollars for emergency shelters and low-cost housing for the homeless.

Besides dividing the council, the proposal created a wedge among constituent groups. This week, 91 business owners, organized by the Downtown Seattle Association, sent a letter to the council arguing that tax was not an appropriate solution to the city’s homelessness emergency.

On the other side, Housing For All, a coalition of homeless-service providers and advocates, called on the council to support the tax and demanded city officials end the removal of unauthorized homeless encampments.

Before Tuesday’s vote, O’Brien said he hoped the tax would supplement the new spending proposed last month in interim Mayor Tim Burgess’ budget. Burgess proposed increasing city spending on the homeless-response system to $63 million, nearly 40 percent more than four years ago.

Still, O’Brien and other supporters of the proposal said that’s not enough to make a dent in the city’s growing homelessness and housing-affordability problems.

Two years ago, the city of Seattle and King County declared states of emergency on homelessness, O’Brien said. “I do not want to be in a position a year from now where it’s actually worse after three years,” he added.

Had it passed, the tax would have been dedicated to long-term subsidized housing built through the city’s Office of Housing, as well as rental vouchers. Supporters said the city could have borrowed against the tax stream to more quickly develop low-cost and affordable housing.

Councilmember Lisa Herbold, who supported the proposal, said the city needs dedicated and sustainable dollars to apply to the homelessness emergency, “not temporary cuts or budget gimmicks.”

 

The council’s budget deliberations will continue through the week, with the next session scheduled for Wednesday.