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This November, the people of Seattle will vote on a special levy to increase the property tax by $365 million over nine years to pay for street repairs, bridge retrofits and many other services.  The owner of a $400,000 home would pay about $155 more a year, in addition to current property taxes of about $3,800 a year.

The proposal is the largest levy in city history.  It is one part of a three-part “Bridging the Gap” financing plan which raises $545 million over nine years.  The other two parts, a head tax on workers and a new tax on commercial parking, have already been enacted by the City Council and signed by the Mayor.

The three-part, $545 million plan is designed to fund half of projected street maintenance needs by 2015.  It is Phase 1 of a larger 20-year plan.  The cost of the total plan is $1.6 billion.  Additional taxes will be needed to complete the total plan.

While the street maintenance backlog has been growing, the city’s total tax collections have increased on a year-to-year basis for more than a quarter century.  Seattle’s General Fund budget, adjusted for inflation, has more than doubled since 1980, when it was $156 million.  While the amount of revenue the city collects has increased sharply over 25 years, the city’s population has remain constant at around 560,000 people. 

Placing street maintenance on a special levy continues a trend in public budgeting, in which low priority services are funded through the regular budget while high priority services are neglected until the need is urgent.  Placing core functions on special levies makes voters feel they must either agree to pay higher taxes or do without a vital public service. 

Most people see maintaining public streets and bridges as a core function of government.  Passage of the November measure would continue the trend of enacting special levies to pay for routine public work.  Should the measure fail, elected leaders would likely be induced to re-examine priorities within the existing budget to determine whether street and bridge repairs could be addressed at current taxation levels.

I. Introduction

This November, the people of Seattle will be voting on a special levy proposal from Mayor Greg Nickels and the City Council that increases the city property tax to help pay for repair of city streets and a number of other services.

The proposal raises new revenue to address years of insufficient surface work and neglected road upkeep.  Despite steadily rising budgets (Seattle’s public spending, adjusted for inflation, has more than doubled since 1980), the city has accumulated a large backlog of basic street repair and maintenance.  City officials estimate the current maintenance backlog at $500 million.  They report that 29% of arterial streets are in either poor or fair condition.  As the Mayor puts it, “we’re in a bit of a fix” on street repair.[1]

In all, the city maintains 1,500 lane-miles of arterial streets, 150 bridges, 22 miles of retaining walls, 480 stairways, 1,000 traffic signals, 120,000 street signs, 2,000 miles of sidewalks, and 30,000 trees.[2]

The November special levy proposal is one part of the Mayor’s three-part “Bridging the Gap” financing plan which raises $545 million over nine years.  The plan is designed to fund half of projected street maintenance needs by 2015.  The other two parts of the plan are a new tax on commercial parking and a head tax on people who work in the city.  These two tax increases do not require voter approval and have already been enacted by the City Council.

The nine-year $545 million proposal is Phase 1 of a larger 20-year plan.  The cost of the total plan is $1.6 billion.  Additional taxes will be needed to complete the total plan.  Once Phase 1 is in place, the Mayor promises to “come back to the voters in 9 years to finish the job.”[3]

This study explains how the three tax elements of Phase 1 work, assesses how these fit within the current tax burden in Seattle, and how the new money would be spent on road repair and other projects.  It also reviews city budget trends and looks at how the street repair levy fits with likely future ballot proposals to fund regional transportation projects.  Finally, this study reviews how the proposed levy relates to the 16 bonds and special levies, totaling $1.4 billion, already in place at the city and county level, and what Phase 1’s higher property tax would mean for the owner of a median priced home in Seattle.

II. The “Bridging the Gap” Plan, Phase 1

The Mayor’s street tax plan contains three elements: a head tax on people who work in the city, a new tax on parking in commercial lots, and an increase in the city property tax.  This section gives a brief summary of each element.

The proposed higher property tax requires voter approval.  The head tax on workers and the new tax on parking do not require voter approval.  These were enacted by the City Council on August 7, 2006 and signed by Mayor Nickels on August 15th.

1.  Head tax on workers in Seattle – $128 million.

The tax on workers, “for the act or privilege of engaging in business activities within the City,” goes into effect July 1, 2007.[4]  The new tax is also called an employee hours tax, or, in the legislation, “The Business Transportation Tax.”  It has no expiration date.  Here is how it works.

Calculating the tax.  Business owners must calculate how much tax they owe by either multiplying the number of full time equivalent (FTE) worker hours by $0.01302, or by paying $25 per full time worker per year.

The tax applies to the city’s own workforce of roughly 10,700 employees, adding about $267,500 a year in public payroll costs.

Very small businesses exempt.  The tax only applies to employees who work for firms that do more than $50,000 in business a year, or that employ more than three workers. 

Applies to non-Seattle businesses.  The tax applies to any worker who “performs any part of their [sic] duties within the City of

• Commuter tax.  The employee head tax also functions as a commuter tax, because it applies to people who travel into the city for work.

• Exemption for some governments.  The tax does not apply to Metro or other county employees, or to state or federal employees.  About 150,000 government employees work in

• Only workers who commute by private single-occupancy vehicles are taxed (about 90% of daily trips are by private vehicle).  Workers who commute by bus, rail or car pool are exempt.

• Private sector exemptions.  Employees of certain businesses are exempt because state and federal laws do not allow Seattle to tax them.  These are:

  • insurance companies;

  • gas stations;

  • liquor stores;

  • household servants;

  • gardeners and caretakers at private residences.

The city is authorized to issue bonds based on the employee tax revenue stream.  Once the city takes on debt based on future revenues, legal precedents show that it becomes nearly impossible to repeal the tax or for a court to strike it down.

The city estimates the employee head tax will raise $2.1 million in 2007 (for a half-year’s collections) and $5.5 million in 2008.  The new tax raises an estimated total of $128 million in the first nine years.

2.  New tax on parking in commercial lots – $52 million.

An ordinance imposing a new tax on parking in commercial lots was passed by the City Council on August 7th and signed by the Mayor on August 15th.  The tax applies to “the act or privilege of parking a motor vehicle in a commercial parking lot within the city.”[6]  It has no expiration date.

• The 10% tax will be phased in over three years.  A 5% tax starts July 1, 2007.  It rises to 7.5% on July 1, 2008, then to 10% on July 1, 2009 and thereafter.

• Exemptions.  Certain types of parking are exempt:

  • parking provided with a person’s residence;

  • parking at stadiums and exhibitions that the city is not allowed to tax;

  • parking on city streets;

  • parking owned by the city, county, state or federal governments.

            The city estimates the new tax on commercial parking will raise $3.6 million in 2007 (for a half-year’s collections at 5%).  The tax raises an estimated total of $52 million in the first nine years.

3.  Property tax special levy – $365 million.

On September 22nd the City Council passed, and the Mayor signed, a proposal to appear on the November 2006 ballot which would impose a special levy, in addition to the regular property tax and existing special levies, on taxable property in the city.  The measure must receive voter approval before it can go into effect.

• The proposal is the largest special levy in city history.  The next largest recent levy is $198 million for the seven-year Pro Parks, or “Parks for All,” levy approved in 2001.

• The cost to the owner of a $400,000 home would be $155 the first year, or about $1,395 over the life of the levy.

The levy would be added to the approximately $3,800 in property taxes paid each year by the owner of a median-priced home in Seattle.

The proposal would raise $365 million over nine years, or an average of $40.1 million a year.

The levy would expire in 2015, and would be subject to renewal by voters.

The $365 million levy is subject to renewal, but there are conflicting views among city leaders about what they intend to do once the levy expires.  One City Council member says the levy will be temporary, saying, “We will pull the plug in nine years.”[7]  This viewpoint contradicts the Mayor’s contention to “come back to the voters in 9 years to finish the job.”  Since it is possible no current elected official will be in office when the levy expires, it is unclear who would be accountable for commitments made to the public nine years earlier.

In practice, temporary levies in Seattle tend to become permanent, and to grow larger with each renewal.  For example, the Families and Education levy has been renewed twice, most recently in 2004, and today is 70% larger than when first enacted by voters.

III. “Bridge the Gap” plan spending

The new tax revenue raised by the three-part Phase 1 of “Bridging the Gap” would be spent on reducing the City’s $500 million backlog on street repair, increasing bus service and a number of other public services.  Following is a summary of the services that would be funded.[8]

• $21.2 million for paving city streets.  The amount would improve an average of 25.3 lane-miles a year.  The proposal reduces the City’s arterial street maintenance backlog by 50% after nine years.

• $6.3 million to rehabilitate and seismically retrofit up to 10 bridges over nine years.

• $4.2 million for signs, signals and safety.  The amount would replace 150,000 street signs, restripe 5,000 crosswalks, update traffic signals and replace 20,000 feet of guardrails.

• $2.7 million for sidewalks, trails, walkways and stairways.  The amount would restore 27 blocks of sidewalk per year, and repair six stairways annually.

• $7.5 million for transit, freight and pedestrian corridors.  The amount would improve bike and pedestrian safety on transit, and add 45,000 hours of new bus service (by leveraging money from the proposed King County Transit Now sales tax increase).

• $8.5 million for pedestrian, bikes and safety.  The amount would complete 3.9 miles of trails, install three new signals a year and improve left-turn arrows at two intersections a year.

• $1.1 million for landscaping.  The amount would allow the City to respond within 72 hours to citizen calls about trees blocking traffic signs, and allow City crews annually to prune 3,000 trees and plant 800 trees.

IV. City of Seattle Budget

While the street maintenance backlog has been growing over the years, the city’s total tax collections have increased on a year-to-year basis for more than a quarter century.  Seattle’s General Fund budget, adjusted for inflation, has more than doubled since 1980, when it was $156 million.  While the amount of revenue the city collects has increased sharply over 25 years, the city’s population has remain fairly constant at around 560,000 people. 

In 2006, the General Fund budget, which pays for police, fire, parks, libraries and other basic services, is $776 million.  The current proposed budget would increase this to $807 million for 2007, and to $813 million for 2008.  The General Fund is just one of many accounts within the city budget.  The total proposed budget for all funds, including utilities, for 2007 is $3.3 billion.

1.  The current tax burden on Seattle residents

Seattle residents are currently paying to support 16 county and municipal bonds and special levies, totaling roughly $1.4 billion.  The table below shows the total cost of each bond or special levy, the year it was enacted and the year it expires.  In addition to voter-approved measures, residents also pay a steadily-rising basic property tax (Seattle imposes the maximum annual increase allowed by state law), plus uncapped revenues collected from new construction and real estate excise taxes serve to increase the cost of housing throughout the city.

Seattle Bonds and Special Levies

Property Taxes on an average King County home of $399,500

In addition, Seattle citizens recently paid $110 million for the failed Seattle Popular Monorail Project.[9]  The first phase of Sound Transit, currently under construction, is $4.7 billion, or about $143 per person per year.  Sound Transit officials plan to send a new tax proposal to fund a second phase to voters next year.  In 2000, the County sales tax was increased to raise an additional $80 million for Metro bus services.

V.  Policy Analysis

The three new taxes of the “Bridge the Gap” proposal must be assessed not only based on the existing tax burden, but on how that burden may increase in the near future.  Separate from the need to repair streets and bridges, the tax burden in Seattle is likely to grow for a number of reasons. 

• Mayor Nickels is proposing a $4.6 billion tunnel project to replace the aging Alaska Way Viaduct, which will be funded in part by Seattle-based taxes.

• In June, King County Superior Court Judge Mary E. Roberts struck down the state’s 1% limit on yearly property tax increases.  The ruling is on appeal to the state supreme court.  If upheld, Judge Roberts’ decision would clear the way for Seattle elected officials to again increase the regular property tax burden by 6% a year, which was the City’s common practice before the 1% limit went into effect.

• Mayor Nickels has announced a new $37 million program to reduce carbon emissions in Seattle, in an effort to reduce greenhouse gases and promote the goals of the Kyoto treaty.[10]

• County leaders have proposed Transit Now! for the 2006 ballot.  The measure seeks to increase permanently the county sales tax to raise an additional $50 million a year to expand Metro bus services.

• Regional leaders are considering an estimated $7.2 billion ballot proposal for the Regional Transportation Investment District (RTID) in King, Pierce and Snohomish Counties.

• Possible additional funding for major projects, like replacing the Alaskan Way Viaduct in Seattle, replacing the 520 bridge across Lake Washington, expanding I-405 capacity in the Bellevue – Redmond area, in case RTID fails or is not sufficient.

 If these proposals are enacted, the average person who owns a home and car in Seattle would pay about $306 more a year for transportation spending in 2008.  If total state and federal gas taxes are included, the same consumer would pay almost $600 in additional transportation related taxes. 

As noted, special levies initially proposed as temporary tend to become permanent.  For example, King County’s innovative Medic One emergency medical service was created through a special levy in the 1970s.  The service was a success and is now a central function of local government.  Elected leaders, however, keep Medic One dependent on a temporary voter-approved levy, meaning they give it lower priority than every other line item in the county budget.

Most people agree that government officials should not ask voters to pay extra to receive core government services.  For elected officials, though, the temptation to do so is tremendous.  If voters are told they will lose the core service if they do not approve a levy, people have a strong incentive to renew the levy again and again.  Many voters feel they simply have no other choice.  Placing core functions on special levies makes voters feel they must either agree to pay higher taxes or do without a vital public service. 

The practice creates a pattern:  low priority services are funded through the regular budget while high priority services are left unfunded.  Public leaders then act as if they share no responsibility in creating this situation, and call for new funding through special levies.  When voters say yes, it encourages public leaders to move more core functions to special levy funding, thus freeing up the regular budget for spending on other programs.

The tendency toward funding core government through special levies highlights the need for budget discipline.  It is in the nature of government to expand. Government has no competitors and cannot be put out of business, so it operates without the natural constraints that bring financial discipline to private organizations.  Instead, policymakers are under constant pressure to channel public money to various public programs, or toward advancing a particular group or special interest.

An added pressure is that people in government, just like those in other parts of the economy, want to work in a growth sector, so they tend to benefit when government takes on more tasks.

That is why it is so important for policymakers to keep government focused on its core functions.  A clear focus on core functions enables policymakers to resist lobbyists pushing for higher levels of spending, which can cause government to become over extended.  Not trying to do too much and using regular tax revenue to pay for basic services allows elected leaders to improve the quality of the services they provide, and enhances the public’s confidence in government’s ability to act effectively and positively.

VI. Conclusion

City leaders’ street repair plan reflects long-standing budget practices and sheds light on how elected leaders allocate the tax money citizens are already paying.  Governing is about setting priorities, and past budget decisions contribute directly to why the city’s streets and bridges have fallen into disrepair in the first place.  Once the problem became unavoidable, most of the regular budget had already been promised to other purposes, prompting elected officials to seek more money through two new taxes and a special property tax.

This is part of a pattern – elected leaders spend the regular budget on lower-priority items, then ask citizens to pay extra for essential services.  While collecting more money helps elected leaders avoid setting clear priorities, each new tax results in lower take-home pay for Seattle residents.  Since City revenues are growing due to the natural expansion of an improving economy, many people feel it is not fair for the City to ask citizens to pay even more to keep basic services.

Imposing a special levy to pay for a basic municipal service essentially means citizens are being taxed twice for the same service.  Over the years the money the City collected through regular taxes for street maintenance was diverted to other general spending.  Through this budget practice City leaders allowed a $500 million backlog of unmet street repair needs to build up.

Most people see maintaining public streets and bridges as a core function of government.  Voters will determine whether the $365 million special property tax levy called for under the “Bridge the Gap,” Phase 1 proposal is needed to provide this basic service.  Passage of the measure would continue the trend of enacting special levies to pay for routine public work.  Should the measure fail, elected leaders would likely be induced to re-examine priorities within the existing budget to determine whether street and bridge repairs could be addressed at current taxation levels.

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