Throughout the development of the Washington State Convention Center (WSCC) expansion, the WSCC has repeated in marketing materials and public meetings that the project would be funded by existing taxes and no new taxes would be needed. However, very quietly, the WSCC also lobbied the state legislature for an expansion of the lodging tax to support the ever-expanding budget for this project. That lobbying effort bore fruit with the recent passage of HB 2015, which expands the current lodging tax (7% in Seattle, and 2.8% elsewhere in King County) to include hotels that have fewer than 60 rooms, as well as short-term rentals like Airbnb, both types of lodging that were previously only subject to regular sales tax.
The WSCC has been pushing for the tax increase since at least the 2016-2017 legislative session, after the project budget was increased from $1.4 billion to $1.6 billion. Another project budget increase of $100 million came earlier this year, and much of that latest increase was tied to the agreement with the Community Package Coalition, which would provide lump sum payments to community groups for projects such as Freeway Park improvements, a study to lid I-5, and payments for affordable housing (the largest piece of the package). During a Seattle City Council Sustainability and Transportation Committee meeting presentation, project developer Matt Griffin indicated the tax increase allowed for faster payments to the priorities of the Community Package, most notably toward affordable housing.
After those lump sums are paid, the future additional tax revenue would go directly to the WSCC. The WSCC desperately needed this agreement in order to convince the Seattle City Council that it would provide an appropriate public benefit to offset the negative impacts of five street and alley vacations (sales of publicly held rights-of-way). Prior to the agreement with the Community Package, the WSCC had struggled to show any public benefit worthy of the sale of valuable downtown streets and alleys.
HB 2015 indicates that the legislature is attempting to equalize taxation across all lodging types, but fails to acknowledge that different types of short-term lodging can serve vastly different populations. KUOW recently reported on how many small motels on Aurora Avenue in North Seattle serve as temporary homeless refuges with payments coming from either the homeless guests themselves or vouchers provided by service organizations. The guests of these small motels, (including both motels featured in the KUOW story) will soon face a significant increase in cost through the lodging tax, essentially taxing many who are struggling with homelessness to help pay for the convention center’s commitment to affordable housing.
While those staying in a hotel or motel after losing permanent housing are not counted in most statistics related to homelessness, King County’s 2017 identified 5% of respondents previously lived in hotels or motels immediately prior to experiencing homelessness. Additionally, collected by the Washington State Office of the Superintendant of Public Instruction (OSPI), over 500 homeless students in King County school districts relied on shelter in hotels or motels at some point during the year, due to lack of alternate housing. These small, older motels, which are not always the best housing option available, often serve as a last resort before living on the street. The increased tax base hits a portion of the population that doesn’t neatly fall into the “out of town” revenue sources that the lodging tax is supposed to tap.
Through the maneuvering of Seattle’s City Council last fall, the WSCC will not see revenue from the recently enacted short-term rental tax in Seattle. Seattle’s tax is going directly to affordable housing and community development initiatives without the WSCC as middleman. Perversely though, outside of Seattle, short-term rental guests in King County (think North Bend, Federal Way and Woodinville) will pay more to fund the expansion of the WSCC’s downtown Seattle facility and the Community Package than short-term rental guests in close proximity to the facility.