A slowdown in the tech sector is hurting Seattle's payroll jumpstart, targeting Amazon and other big companies.
What's happening: Payroll tax revenues through 2024 are projected to be about 10% lower than forecast.
- That's down $62 million over two years, according to city revenue forecasts released last week.
- Plus: The city now expects to collect $103 million less in taxes than it expected between 2025 and 2027, largely due to the continued impact of the tech sector slowdown.
Why it matters: The JumpStart levy funds a variety of city initiatives, including affordable housing projects, climate protection efforts, small business support, and community development programs.
- It will also be used to fill a gap in the city's $1.6 billion general fund budget, worth approximately $100 million annually over the next two years.
Context: The city's general treasury is in a long-term deficit because the city is spending more than it should be taking in.
- City officials agreed to use the JumpStart funds as a temporary fix for 2023 and 2024, but it wasn't meant to be permanent.
Backlog: The JumpStart levy applies to companies with annual payrolls exceeding $8.1 million and at least one employee earning $174,337 or more annually.
- Few companies meet these criteria and many are in the technology sector, Ben Noble, director of the city's Office of Economic and Revenue Forecasting (OERF), said at a meeting last week.
- As a result, recent declines in the share value of tech companies have hurt JumpStart's tax revenues, Noble said.
Many technicians have continued to work from home even after the pandemic. This means that at least part of the working time of workers living outside the city is not taxed.
Status: To avoid potential cuts to JumpStart-funded programs this year, the board may need to vote to reduce the amount of money transferred from the JumpStart fund to the general fund.
Seattle City Councilwoman Teresa Mosqueda , who chairs the council's budget committee, said declining payroll tax revenues weren't a major budget concern right now.
- Over the next two years, other taxes entering the general fund, including corporate taxes and sales taxes, are expected to be $70 million more than currently projected. Mosqueda told Axios that the extra cash could be used to offset lower-than-expected tax collections from JumpStart.
Yes, but: in the long run, the city is threatened by a major budget crisis.
- By 2025, according to city officials, the city's general fund is projected to have a shortfall of more than $200 million.
Next: Masjida said the city's projected budget deficit indicates the need for a new tax stream.
- The task force is examining potential options for the new tax and is expected to make recommendations in July.
- Meanwhile, City Council is reviewing revenue data and may issue updated spending guidelines to departments if needed, Jamie Housen, spokesman for Mayor Bruce Harrell, told Axios.