(Bloomberg) -- The Seattle City Council voted 9-0 to impose a new tax on large employers to raise almost $50 million in funding for affordable housing construction and homeless services. The vote comes after weeks of intense debate over what responsibility large employers like Amazon.com Inc. have for the growing number of people living on the city’s streets.
Under the new law, companies bringing in more than $20 million in revenue a year would be required to pay $275 per employee every year. Amazon has more than 40,000 employees at its headquarters in Seattle, so the tax could cost the e-commerce giant more than $10 million annually. The city council would need to review the tax, which kicks in next year, after five years if the city wants to extend it. The unanimous vote for the ordinance protects it from a mayoral veto.
In a separate 5-4 vote on Monday, the council recommended spending two-thirds of the new tax revenue to build and operate low-income housing units. A count last year found King County’s homeless population to have reached more than 11,000, and a pro bono report issued last week by McKinsey & Co. for the Seattle Chamber of Commerce found that it would cost about $400 million to address the shortage of affordable housing in the area.
In a statement, Drew Herdener, an Amazon vice president, said Amazon was "disappointed" in the vote and remains "very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here." He said the city’s revenue growth has outpaced its population increase. "The city does not have a revenue problem – it has a spending efficiency problem."
Seattle-based Starbucks Corp. also criticized the tax, saying the city “continues to spend without reforming and fail without accountability, while ignoring the plight of hundreds of children sleeping outside.” The coffee-shop chain also said that “no one believes they will be able to make housing affordable or address opiate addiction,” according to an emailed statement from John Kelly, senior vice president of global public affairs and social impact.
The council has been debating the so-called head tax for months, and had been considering a higher tax of $500 per employee that would have raised $75 million a year, largely to build about 1,000 new affordable housing units. On May 2, Amazon halted expansion plans for office space that would house about 7,000 employees in Seattle pending the outcome of the vote, and Mayor Jenny Durkan later said she’d veto a tax that high. The mayor instead proposed a tax of $250 per employee.
Amazon’s Herdener said the company will resume construction planning on the office tower it had paused.
Council member Lorena González, a co-sponsor of the bill, said in a hearing before the vote, "It is regrettable we weren’t able to find a path amongst our colleagues and the mayor that they would be able to support a higher taxation rate." She said she ultimately supported the compromise because it creates "a significant new revenue stream" to build more affordable housing.
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