Sawant Memo Shows Money Tabbed For North Precinct Could Help Pay for Housing Instead

The finding contradicts prior assessments by mayor’s budget chief.

A central staff memo commissioned by Seattle councilmember Kshama Sawant reports that tax revenue from the Real Estate Excise Tax (REET) can be used to indirectly pay for affordable housing. REET is the major funding source for the proposed $160 million north Seattle precinct. The finding that it could pay for housing contradicts conventional wisdom and official claims about the limits state law places on REET spending. The revelation could upend annual budget negotiations and pose hard questions about funding priorities to other city leaders who’ve previously scoffed at Sawant’s proposal as unrealistic.

“In brief,” the memo reads, “the City cannot circumvent State law that prevents using REET directly to fund the development of affordable housing. However, the City could amend its financial policies to employ REET as a substitute for other more flexible funding sources and then use those flexible fund sources to pay for affordable housing.” Specifically, REET money in coming years could be used to service debt on previously-issued city bonds. The money that would otherwise have gone to pay for that debt service lives in the city’s General Subfund, and could be redirected into affordable housing. “This approach is consistent with the Mayor’s recently transmitted proposed financial policies legislation, changing only the eligible use from the North Precinct project,” the memo reads.

Typically, REET money is supposed to be used for infrastructural improvements—bridges, sewers, sidewalks—but the relevant RCW specifically includes “law enforcement facilities” on its list of qualifying capital projects. However, current city financial policies don’t allow for REET to pay for police stations. As part of his north precinct package, Mayor Ed Murray proposed changing those policies specifically for the sake of funding the north precinct.

The memo’s findings are a big surprise to some. In an extended interview with Crosscut’s David Kroman titled “Councilmember asks if Seattle has lost touch with reality,” District 5 councilmember Debora Juarez recently called Sawant’s proposal to use REET funds for affordable housing “a false narrative” that “raises expectations and hope.” Kroman also reports that Murray’s budget director Ben Noble agrees: “REET cannot be used for housing. Per state law, housing is not one of the eligible uses.”

There’s an irony here. Elsewhere in city politics, the Murray administration has argued for moving homelessness funding “upstream,” meaning to invest in subsidized housing and social services that prevent people from becoming homeless in the first place, rather than spending all our money on emergency shelters for people once they become homeless. It’s simple: prevention is easier than a cure.

The irony is that the central staff memo allows Sawant and other advocates to take that “upstream” argument and turn it around against Murray and the precinct and use it in favor of investing the REET money into affordable housing. After all, if your goal is to prevent crime and public disorder, keeping people housed is a lot more effective in the long run than a bigger, better police station.

UPDATE. Murray’s predecessor Mike McGinn tweets that using REET to free up other funds is a known strategy in city hall:

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