Seattle City Council shields JumpStart tax revenue, creates new budget-forecasting office

The Seattle City Council has passed a pair of bills meant to alter how City Hall will put together budgets in the coming years. Both bills involve the council seeking more control over budgeting, and both passed unanimously last month.

Mayor Jenny Durkan strongly opposed the bills but opted against vetoing them, knowing the council could override her. Instead, Durkan returned the bills without her signature last week, allowing them to become law while warning that they could cause problems down the line.

The first bill will create a special fund to hold revenue from the council’s new “JumpStart” tax on high salaries at large corporations, and will establish special rules for how the money can be spent.

The bill will ensure the dollars are spent according to a plan the council passed for the tax last year, Councilmember Teresa Mosqueda said.

For 2021, the council earmarked the money to provide COVID-19 relief and close COVID-19 budget gaps. For 2022 and beyond, the council promised the dollars would be used for affordable housing, business assistance, community development and environmental-justice programs.

Staff estimated the tax would raise $200 million-plus this year, which helped Durkan and the council balance the city’s 2021 budget, avoiding pandemic-related cuts and adding investments for communities of color.

But it was hard to know exactly where the proceeds were being allocated, because they were blended into the city’s general fund, along with revenue from other sources.

That confusion exacerbated conflict between Durkan and the council.

Under the new bill, the JumpStart proceeds will flow into their own fund, starting in 2022, and the money must be spent on the uses the council initially assigned, with one exception.

The bill says some dollars can continue to bolster the general fund until other revenue sources return to pre-pandemic levels; as much as $117 million could support the general fund next year, according to a staff memo.

In a letter last week, Durkan suggested the JumpStart money may be needed for other uses and argued the council’s bill will tie City Hall’s hands. It would make more sense to sort through spending options during the 2022 budget talks that are to start next month, she said, mentioning that COVID-19 variant cases are now threatening Seattle’s economic recovery.

The bill “purports to control budget decisions in years to come, when our budget history demonstrates the importance of flexibility and the obligation of every elected official to make budget decisions for any year based on the priorities, demands, emergencies and revenues for that year,” Durkan wrote.

New office for revenue forecasts

The second bill will create a new Office of Economic and Revenue Forecasts.

Currently, analysts in Seattle’s budget office and finance department use economic indicators to forecast how much revenue the city is likely to collect. They present their predictions to the mayor and then to the council. The forecasts matter because state law says cities must pass balanced budgets.

The work will be done by existing analysts and new hires, with an added cost of about $500,000 annually. The bill’s sponsor, council President M. Lorena González, said the new system will make forecasting more transparent and put the council on a level playing field with the mayor.

Under the council’s bill, a committee with two council representatives and two mayoral representatives will appoint a director for the new office. The office will submit quarterly forecasts to the committee for approval, in public.

The state and county use similar processes, she said. The county’s system, in which the county executive and County Council share control over a forecast committee, was established by a charter amendment that voters approved in 2008. The amendment was required because the county charter’s default setting says the county executive controls new offices.

The website Seattle City Council Insight argued that González’s bill also requires voter approval. Seattle’s charter says the mayor “shall direct and control all subordinate officers of the city, except insofar as such enforcement, direction and control is by this charter reposed in some other officer or board.”

The council president disagreed, saying the city charter jointly vests legislative powers, including budget powers, with the mayor and the council. González cited her review of a legal analysis by the city attorney’s office, without sharing that analysis.

Durkan harshly criticized the bill in a letter last week, asserting it requires a voter-approved charter amendment and a modification to a state law that says the city’s budget director must assemble revenue estimates.

“Council chose to cut corners and do neither,” she wrote, pointing out that the mayor and council will retain the authority, under the bill, to deviate from the forecast office’s predictions.

“In other words, the legislation spends significant money to create a new office that likely violates state and city law and provides in the legislation that the key work of the office can be disregarded,” Durkan wrote.

She added: “It is a waste of resources at a time we have so many critical needs. It shows contempt for the people’s right to vote on any charter changes.”

In a statement Wednesday responding to Durkan’s letter, González reiterated that she believes the bill is legal under the charter and state law. Independent offices, commissions and mayor-council boards have existed by ordinance over decades, she added.