AN ORDINANCE relating to imposing a tax on engaging in the business of being a short-term rental operator; adding a new Chapter 5.54, Short-Term Rental Tax, to the Seattle Municipal Code; and amending Sections 5.30.010, 5.30.060, 5.55.010, 5.55.040, 5.55.060, 5.55.150, 5.55.165, 5.55.220, and 5.55.230 of the Seattle Municipal Code.
Thanks very much. So please read the next agenda item, which I believe will be number three because we referred number two. Correct. So please read agenda item number three. Very part of the Affordable Housing Terrorism Finance Committee. Agenda item three Council 1190 83 relating to imposing a tax on engaging in the business of being a short term rental operator. Adding a new Chapter 5.54 Short term rental tax to this year on a speaker and amending sections five point 30.0 ten 5.30 .063 55.0 ten. 5.40 5.0. 45.40 5.0. 60.1 50.1. 65.2 20 and point 230. Salem Speaker The committee recommends will pass as amended. Thank you very much. And Councilman Johnson, before you introduce this legislation. I do have central staff, Ali, panicky sort of in cue in case we have any questions on what passing the tax piece without the regulatory piece could sort of mean in case there's need for clarification, she's in she's in queue if we need her. And Councilman Johnson, you have the floor. So so we have I think everybody has a pretty good understanding of the best piece of legislation in front of us, which is it allows for the city of Seattle to tax short term rentals and sets forward a pathway for which the Facilities and Services Department would set up the collection process for taxing short term rentals. What we have in front of us are two amendments to the legislation, and if you'll permit me. Council President I'll just speak briefly to each of those amendments and then take questions from them and then maybe move each of those amendments in order, and then we'll move the base legislation. Sounds perfect. Amendment number three, and I'm just going to read it out loud because again, some of these issues are pretty late. Breaking would basically set up a circumstance to allow the city to work with the convention center should they be successful in advocation and advocating in Olympia to collect a short term rental tax. So the language as proposed would change section 11 of the bill, which adds the words the Washington Zoo, Convention Center and Public Facilities District to the list of potential local jurisdictions that could be collecting a short term rental tax and then changes the language to say that in the event any short term rental tax is imposed by any such jurisdiction and the jurisdiction imposing such tax enters into a legally binding agreement with the city to provide the city proceeds equivalent to the city's collections from tax authorized. Under this ordinance, the city may commit in such agreement with the other jurisdiction to spend to suspend collection of the city's tax for the duration of the term of such agreement. That's a lot of legal language, but let me boil it down for my colleagues. If the convention center, the county, the state of Washington or any of those three bodies were to start a collection of attacks on short term rentals, this allows the city to negotiate directly with that entity, allows us to eliminate the , uh, the process that the city would go through to set up a regulatory arm to collect that revenue and enter into an agreement with that body, which would at that point then be collecting the revenue to dispense the revenue that we would have otherwise collected directly to the city of Seattle. So I'm going to give you a hypothetical. If we were to vote on this today and we were to set up a circumstance where we're going to collect $8 million a year starting in 2019, and the convention center were successful in advocating in Olympia to apply a short term rental tax to the convention center. We would this language gives us the ability to set up an analytical agreement with the convention center, to have them collect the tax and pass $8 million over to the city of Seattle to be used as we see fit. So this gives us a framework to continue to negotiate with those folks who are eyeing short term revenue, short term rental revenue for other purposes other than the Equitable Development Initiative and affordable housing bond payments, as we've talked about in the next amendment. Very good. Let me answer questions on that amendment. Should there be any? I'll refer to that as amendment number. Amendment number three. Councilmember O'Brien. Councilmember Johnson. I want to clarify one aspect to see if it's a clarification or if there's a distinction here. If we. And to be clear, I'll be bringing amendment number two, which we skipped over. But if we were to pass to change the the tax from a flat $10 to an eight in a $14, depending if it were. A partial unit or an entire unit. The my intent on this amendment, number three, is that we would continue to collect whatever we would be entitled to under that tax structure. So if the number of units in the city grows, that we would be negotiating with the state or the convention center to get whatever that is . The distinction I'm making is if we projected this may collect, as you mentioned, $8 million, but it turns out it actually collects $11 million because there's more units than we thought that we would continue to collect whatever that was on the dollar basis as opposed to setting some sort of lump sum amount that we would get. So part of the reason I was hoping this would go back in committee is I think that this language does need a little bit of additional time to be able to answer that question. But I would ask that the council president suspend the rules and allow a penalty for and central staff to answer that question. I can't guarantee you that it is getting what you're asking, Councilmember O'Brien. But Ali may be able to shed more light on the topic. And maybe Will Ali's coming up if bend the rules. Let's suspend the rules. If there's no objection, Ali, you could set a chair, your comfort zone there to table. We won't put you in the middle there. And you know and as you get just one sec. Ali, as you get comfortable, do you need the question repeated at all or did you were you following Councilman O'Brien's question ? I I'll ask a clarifying question on top of X and may kind of be moot our back and forth. Councilmember Johnson, I read this. This whole section, frankly, is not necessary. It feels like more intent language. If we didn't pass this, I assume we could continue to negotiate with them. And this doesn't bind us to I mean, we would have to pass new legislation to implement any sort of agreement to waive it. So I guess my high level question and I'm okay with the intent language, I just wanted to clarify my personal intent on this. Is this really just intent language or does this bind us to any sort of outcome? Good afternoon. Council President Harrell, Councilmembers Members, Energy Council, central staff. You are both correct, but yes, it is not binding the future council or the current council to any specific action. It is expressing the current council's intent that there is an expectation that there will be revenue generated for the city's use through this tax. If another jurisdiction imposes a tax on the industry, then the expectation is that there would be an agreement that the city would receive the equivalent amount. It is not binding. It would require a decision to be made to suspend the tax or to take the tax out of the code. It would also it's also silent on exactly what the revenue expectation is, in part because I've talked with many of you about it's a little bit of a moving target. Okay. Councilmember Herbold. It's reassuring that the language is not binding. But I want to speak to my concern that should we pass this amendment, I think it might actually go counter to what would be best for the city of Seattle, which would be that we would continue to collect the tax in addition to whatever tax the state levied, and we would pay the state for their portion of of the tax, much like I believe we do with the be an O tax. Rather than ending our tax and ending our structure. I think it would be better should the State enact a similar tax for us to continue to collect it all and pay them their portion. So I'm not comfortable with this language as written and I am comfortable knowing even if it should pass, that it's that it's not binding. But I don't think I'll be supporting this amendment. Um, Councilmember Johnson did suggest, again, a need for clarification. I care. Okay. Councilman Johnson did suggest a need for fine tuning this language again because of this kind of issue. But I guess we won't revote that at least now. Comes from O'Brien. I think you want to respond to cuts from her comment. Yeah. I think Section 11 is in the underlying legislation as came out of committee previously. Correct. And what we're talking about is adding the language that's in the double blue underline and striking the language that struck out. And I think the amendment as proposed, Councilmember Johnson, I think, improves the intent language for me, because I talk specifically about the city being made whole by whatever other jurisdiction. I would also be comfortable, completely striking Section 11 and just talking about our intent if that day ever comes to pass when we get there. I don't know if it would be in order to strike Section 11, because I don't know that that amendment is before us and that may require a suspending of the rules. So let's. So you would be supportive of Councilmember Johnson's amendment number three, however. Correct. And then we'll just put a placeholder on where we strike Section 11. Well, I don't have enough. Sorry. Yeah, Amendment three is an amendment to section 11. So. So it. Failed. You wouldn't be opposed to completely. Correct. Eliminating section 11. I stated my intent publicly about making us whole and how I would expect that. Just so it's out there in the ether, so that when we get to this point or if we get to this point, I will be continue to argue that perspective. I believe the language is vague enough that it's hard to tell what specifically it is, but I just wanted to clarify my intent and given that I'm happy to support the language. Councilmember Johnson, I know what your intent is on that. If you wanted to say it or not. But my objective here is if there is a way for us to reduce the regulatory costs to us, which has been identified time and again by my colleagues as a very high burden, a set of costs for this project has ranged almost to the $5 million mark. This amendment allows for us the opportunity to potentially consider reducing some of those administrative costs by entering into into local agreements with other jurisdictions who may be able to just collect the tax and then pass the revenue on to us without the added significant set up costs or annualized costs. On the revenue collection side, we will have, I would anticipate an annual cost on the regulatory side, but this would reduce some of the expectations about money that we could spend on the revenue regulation side if this were to pass and other things were to happen outside of our control in Olympia in another place. So I will I will be voting for this. Okay. Councilmember Herbold, we'll close debate. On this amendment. Just a clarifying question, because it more has been revealed that I that I understood with the original Section 11. So you're saying that this the intent of this amendment relates to a new tax that would go into potentially that the state would enact that would go into effect before we have set up the short term rental tax as contemplated by this legislation. So it would be to avoid set up costs, correct? It's not. What I would fear is we'd already have a system set up collecting and we would disband that in favor of a system that the that the the state would set up. And the majority of our costs are associated with the upfront set of costs. So this doesn't deal with the after the fact. It's a it's more focused on, again, the set of. Costs before it goes into effect. That's my expectation. But certainly it would give us the flexibility if something came up after we had already set up a structure to work with other jurisdictions on interlocal agreements. That helps. Thank you. Councilman Johnson. I would suggest we just vote on this particular amendment as opposed I know you wanted to talk them all through, but let's just. So I'd move adoption of Amendment three to countable 119083. Okay. All those in favor of amendment number three as described by Councilmember Johnson. Please vote I. I oppose. Please vote no. Okay. The Amendment three is passed. I apologize. Council President. I didn't realize that other members were going to be bringing forward earlier amendments. I had decided not to bring forward Amendment One. I'd like to defer back to Councilmember O'Brien. I didn't realize I was jumping the line. And if he wants to talk about Amendment two, I would happily defer to him in Amendment two. So we don't have to go in numerical order. But it'd be nice if if we know which. Ones are exclusive. I guess that's the issue. And if they're not, we can proceed either way. Do you want to go back and do one or two? Well, I think amendment and I don't I would defer to Ali Banerjee from Central Staffs for guidance and counsel on this as I read amendments to and Amendment four. They're both intended to achieve a similar outcome, but they have different thresholds associated with them. So I would consider those to be mutually exclusive amendments. So maybe it's best if we talk about them both and then allow members to vote depending on where their conscience lies on those two amendments. Okay. So do I have that accurately, Ms.. Banerjee. Yeah. So just to maybe restate Amendment two, they're they're basically they're very similar amendments. Amendment two, which is the would modify the tax rate from a flat $10 per night as it was in the bill that came out of committee to a tiered rate, $14 for an entire unit and $8 per night for a private or shared room. Amendment four would is almost entirely the same, except the rate would be $8 for a private room and $12 for an entire unit rather than $14. Okay. Description of how the intent on how the revenue was spent is this. Okay. So the maker of Amendment two, which is 14 and eight, comes from a bribe. Would you like to speak to that? Yeah, sure. So I'll go ahead and make a motion to move amendment to the second. I'll move it. Keep it alive. I'll second it. Thank you, Council President. So I'll just repeat what Ali said. This would, instead of a flat $10, this would have a $14 per night charge for entire units and $8 for a private or shared room. This would increase our projected revenue by $1,000,000 over the base legislation. Again, these are our projections, but the base legislation, as predicted, would generate about $6 million a year. This would move that to about $7 million a year, I believe, compared to amendment number four. I have the numbers right, which is the eight and $12. This is about $700,000 a year more than that amendment. I believe that the additional revenue, the first 5 million going to the Equitable Development Initiative and the anti displacement investments we've talked about there are important may also need to be paying for the regulatory fees out of this and having a $7 million revenue will make me more comfortable that we'll actually have at least $5 million to invest in actual development on an annual basis going forward. Okay. Although we have. So in order to keep the conversation like we have emotion in a second, but the amendment number four is close to a length, which is less money. So let's have a chat about that one as well. So council members are fully informed of which one they want to vote for. When you get to that customer back, do you have a question? I do. And this is directed to Councilmember O'Brien. Maybe I've got an older. Sheet here in front of me, but it appears that two has been deleted and that your name has been. Added to Amendment four. Was there some discussion there. That I missed or we re raising something that sort of last week when. We were voting on all of this today? My intent was to do that in support of the other set of amendments. But now that they've been bifurcated and we're moving forward on the tax alone today, but not the regulatory bill, I'm going to go back and support my amendment number two, which was the original. Was there some $2 for a. Platform fee that was included in one of. These? And that's on the regulatory side. Okay. And so that would come up on that piece of legislation. Okay. Let's talk a little bit about amendment number four, which is the $12 for the entire unit, $8 per room. And who's the maker of that amendment? Maybe he or she could speak to that. So that that one is me as well. And the the reason why I was hoping to have the regulatory and revenue discussions together is because, as Councilmember O'Brien just stated, there is a question on the table about a regulatory fee associated with it and then also questions about the boundaries. So when you draw boundaries differently on where the regulations apply, that has an impact on the amount of money that you raise depending on the levels of the fees. So, you know, while I concur with you, Councilmember O'Brien, that there is a $700,000 difference between amendment to an amendment four, that number could change either for the positive or for the negative, depending on where we land with the geography, about where the regulations end of applying as the bill was being discussed in committee not only was other first to discuss both the revenue approach, but I was also the first to bring forward an idea that would set up per night charge at different tiers and a both amendment to an amendment for set up a structure that allows for an individual who's renting a room down the hall to pay less in a per night charge than an individual who's renting out their entire unit. Whether that is an entire home or an entire condo unit or however however, we we've determined that and we define both the guest room and the entire dwelling unit in the legislation, amendments that are in front of us, the $12 per night rental fee for the dwelling units and the $8 per night rental fee for each guest room was consistent with what we thought would be the objective of about a $7 million net proceeds based on the number of nights. So we were trying to continue to make this option not just affordable for families who are choosing to use short term rentals as an option for them when they come into town, either for vacations or or for many of those folks that we heard in public testimony here and in previous meetings for longer term stays as they come to our hospitals and medical clinics, but felt like the 12 and eight approach met our revenue goals of $7 million, while also keeping the option more affordable for those families who are choosing to use short term rentals when they come to town. Thank you, Katherine Johnson. So we have two exclusive amendments, one at $14. For the entire unit and $8 per room and the other one is 12 and eight. Are there any further questions we've heard? Councilmember I've got. A question. Because. I do. And this goes back to the $14 per night. If we look at it and consider an $8. Tax and. Whether this is Councilmember Johnson or Councilmember O'Brien. For one. Room and you consider. A whole home. It strikes me that just per square footage, it makes. More sense to ask for a higher tax. For. The entire unit. But I'd like to know, how did you. Arrive at these numbers? Are they are they akin to what a hotel motel tax would be paying at this point? I know that we're we're juggling fees. Versus tax, but if either of you could help explain how we went from 12 to 14 or whether it was a compromise. So the base legislation again was ten. And so the the I agree with the theory of having two different tiers for a partial unit versus an entire unit. Trying to make it comparable to the hotels is something that I think well, that I was trying to do. It's a little challenging because we are using flat rates as opposed to percentages because of the tax authority we have. And so there are entire units that are over $1,000 a night in their entire units that are a lot smaller. And obviously within the hotel world, there's a whole range of hotels. So trying to make a comparison, then comparing a hotel room to a five bedroom house is another tough comparison. So I don't think there's a real science around the comparison, but I think kind of effort was made. I'll just add while I have the microphone that, you know, the central staff analysis on Amendment four is that that would raise 6.3 million, not 7 million, which is why I'm going back to my amendment number two, to get us to the full 7 million. Councilmember Johnson and I have worked on the spreadsheet and so we can play with a bunch of assumptions and I will acknowledge that our data has is not perfect. The platforms haven't handed over their databases of what exactly is happening. So we are operating in a world of some assumptions and we hope in the next few months we'll get more information. But that's not going to come in the next few weeks. I don't believe there's also an open question as to as we go to collect this, what percentage of the taxes will be accurate, able to collect , what percentage of compliance will there be? And I think as IFRS works this out, how they set up the tax, that's kind of an open question. I feel much more comfortable with the $2 additional on the entire units to have a little more revenue to give us a little more buffer zone. And if the end of the day we have a few extra dollars for either anti displacement work or affordable housing, that's not a bad thing in my mind. Yeah. Okay. I think we're ready to vote on these comes from Johnson you on closing the debate. Yeah, if I may. I mean, I think that we're not far off from each other, which is why there was discussion about a compromise language at Amendment four. But generally, I think I'll be voting no on Amendment two and be asking my colleagues to support Amendment Fourth Amendment to were to fail, because I do think it achieves a closer parity to what the hotel motel taxes are are paying. And it also has the tiered approach with I, which I think is a recognition that there is a real difference between those folks who are renting a room down the hall and those folks who are renting an entire unit. And it also, I do believe, because I think that the numbers are closer, as Councilmember O'Brien said, we played around with Ali's Excel spreadsheet, get us to the same policy objective of raising in the neighborhood of about $7 million, depending on where we land in terms of both compliance and the number of nights that are rented. So I'll be asking my colleagues to vote no on the amendment in front of us right now with the knowledge that if it were to fail, I would bring Back Forward Amendment four and ask you to support that in just a moment. So just one last clarification. But it's still eight per room either way, whether it's two or four, and it's just the. Difference of $2 between the. Amendment two and four. That's my. Okay, okay. Printer house. Okay. Are we clear? So I'm going to vote on we're going to vote on amendment amendment number two, which is the 14 and eight breakdown. Are we clear on that? Yeah, it's been already moved in second. And all those in favor of Amendment two, please say I and raise your hand, I. All those opposed to Amendment two, please say no and raise your hand. No. Okay. This was. Yes. So 5 to 4. Amendment two passes. Okay. So we won't vote on Amendment four since they are exclusive. Are there any other amendments to the base legislation? No, not that I'm aware of. Mr. Newton, did I miss an amendment in the memo? No, that's all. I just ask for 5 minutes to go print the correct version of the bill prior to that. Okay. So I'm just noting that for the clerks. So she needs more time to prepare it such that I could sign it. Can I then proceed with other agenda items, or do we have to look at each other for a couple of minutes? Okay. So we're going to showcase. So. Yeah. Okay. So we're going to call for the vote and then I'll sign it when it's ready. Okay. So all those in favor of the. We we we already voted on the amendment. Number two. We are we that passed an amendment. Number three passed. So now we're going to vote on the entire bill as amended. Mr. President. And we're going to do a roll just just one sector and we're going to do a roll call. Okay. So please call the role on the passage of the amended bill. Her bill. Hi, Johnson. Right. Juarez. O'Brien. I saw what I shot. Harris. Tally I. Gonzalez, i. President Harrell. I. Nine in favor and unopposed. Okay. The bill passed and the chair will sign it upon the new language that will be presented to me in a few minutes. Okay. Okay. Report of the Civil Rights, Utilities, Economic Development and Arts Committee.