Reminder that the 2024 Seattle Council repurposed JumpStart taxes (a volatile revenue stream) to cover city budget shortfalls AND new spending, instead of using it for its original purpose (housing)

https://publicola.com/2025/03/26/jumpstart-revenues-flatten-and-council-questions-plan-to-mandate-earplug-sales-at-venues/

As we reported on Bluesky Tuesday afternoon, the city of Seattle’s revenue update for the last quarter of 2024 shows that the JumpStart payroll tax fell about $47 million short of expectations last year, raising questions about the wisdom of discarding the original spending plan for the tax and using it to pay for basic city services.

Instead of bringing in $406 million last year, as the city’s budget forecast predicted, the payroll expense tax yielded $360 million—more than the $315 million the tax brought in for 2023, but more than 11 percent shy of what city budget planners expected. If this trend continues, it could be a major problem; last year, the mayor and city council added tens of millions of dollars in new spending, much of it ongoing, to the city’s budget, using $287 million in “extra” JumpStart revenues over two years to pay for the new spending and close a massive budget deficit.

Revenues from JumpStart are potentially quite volatile, because the entire tax base consists of fewer than 500 companies, with about 10 companies contributing around 70 percent of JumpStart revenues (and about 90 percent of the tax coming from just 100 companies). Changes at any of those companies, such as layoffs or relocations, can lead to dramatic shifts in the amount of revenue the tax produces.

Despite knowing this, the city has increasingly used these revenues to pay for basic, ongoing city services. Last year, the council gutted the original spending plan for JumpStart, making the original spending categories (housing construction and acquisition, economic revitalization, equitable development, and the Green New Deal) optional instead of mandatory. As we’ve reported, even with ever-increasing JumpStart transfers, Harrell’s 2025 budget already projected another deficit starting in 2027.

The city’s Office of Economic and Revenue Forecasts will release its new budget projections in two weeks, on April 10. That forecast should provide a better sense of how much trouble the city is in financially, and whether the council will need to make budget cuts this year to keep the budget balanced. The budget the city adopted last year assumes that JumpStart revenues will grow continually every year, bringing in $430 million this year, $452 million next year, and $469 million in 2027.