The Seattle City Council is moving ahead with a new tax on Uber and Lyft rides pitched by Mayor Jenny Durkan as a way to fund affordable housing, the delayed downtown streetcar and new support for the drivers who work on ride-hailing apps.

Council members unanimously approved the 57-cent tax Monday, as they voted on the 2020 budget.

Durkan and the council have also promised to ensure Uber and Lyft drivers make Seattle’s $16 minimum wage starting next summer, but the city first plans to study driver pay.

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The new tax is a city effort to capitalize on the wild growth of the ride-hailing industry. However, it stops short of a more widespread tolling scheme some say is necessary to truly address congestion choking downtown streets.

Durkan’s administration has explored the concept of congestion pricing, in which all drivers downtown would pay a toll. Uber and Lyft back that type of widespread charge and decried the new tax, claiming it could stymie ridership and hurt drivers.

The proposal split Uber and Lyft drivers, with some arguing more of the money should support drivers instead of projects like the streetcar and some worrying that higher costs could discourage people from taking rides.

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“Any way I look at it, there’s not much benefit to the drivers,” said Tony Oh, who has driven for Uber and Lyft for five years.

Other drivers backed the measure, particularly the plan for a new driver center.

“This community is a diverse community. They are immigrants. They come from across the world,” said Lata Ahmed, who has been driving for Uber and Lyft for two years. “We need this kind of support system for drivers.”

Mayor considered higher fee

The new tax totals 57 cents but Uber and Lyft passengers may only notice 51 cents of that as a new cost. Seattle already charges 24 cents per ride but plans to reduce those fees by 6 cents.

Durkan’s office considered a much higher fee before announcing the 57-cent fee, internal records show.

An April presentation from the mayor’s office staff outlined a fee of up to $3 per ride, with $1.50 on all rides and another $1.50 on rides in certain neighborhoods during morning and evening rush hour. Durkan’s office negotiated with Lyft, Uber and the Teamsters Local 117 throughout the summer and announced the tax in September.

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The mayor decreased the fee for fear of hurting demand for rides, according to her office.

“Our goal is to balance achieving our policy objectives and not create harm to the drivers whose industry we are working to improve,” Durkan spokeswoman Chelsea Kellogg said in an email.

The tax the council approved is “quite low if we were going to manage congestion,” said Councilmember Mike O’Brien, who chairs the transportation committee and supported the measure. “But it will generate revenue for some important things to mitigate the impact that the industry has had on us and the radical displacement of jobs that has been created.”

Council tweaked spending plan

Durkan’s office projects the new tax will raise about $25 million a year. Over the next six years, about $52 million would fund affordable housing, including rental units for people making about $59,800 for a family of three.

Another expected $56 million over six years could be used to fund the delayed downtown streetcar, bus service, light rail tunnels to West Seattle and Ballard, or a transportation-voucher program for seniors and people with limited mobility or low incomes.

Durkan’s original proposal zeroed in on the streetcar for those funds. The streetcar is planned to travel along First Avenue and connect Seattle’s two existing streetcar lines. The project now faces a $56 million funding shortfall.

But council members expanded the possible uses, potentially setting up future budget fights as tax revenues roll in and the new council members continue to consider the streetcar project.

Councilmember Lisa Herbold, who has long opposed the streetcar, pushed for allowing the new tax money to fund bus service and light rail. Durkan’s office said the mayor is “committed to fully funding the streetcar.”

About $3.5 million a year from the new tax would fund a center where Uber and Lyft drivers could seek help with deactivations from the apps.

Uber and Lyft can remove drivers from the app with little warning, and some drivers say the process of trying to get reinstated can be lengthy and opaque. The council passed an ordinance barring Uber and Lyft from subjecting drivers to “unwarranted deactivation,” though details of what constitutes unwarranted deactivation will be defined later in city rule-making.

Durkan also has promised to require Uber and Lyft to ensure their drivers are making Seattle’s $16 minimum wage by July 1, but some details remain up in the air.

The council approved an ordinance stating that the city will require that drivers make a minimum wage after first doing an analysis of pay and other issues. The mayor’s office announced last week it has hired two economists to study driver pay and a firm to survey drivers.

The analysis is expected to be done by the spring.