Seattle 'head tax' has no rating impact
As Seattle prepares to implement a new “head tax” on large employers to pay for homeless services, the city’s credit strength remains unchanged, according to two major ratings agencies.
Moody’s Investors Service called the $275-per-employee tax “a credit positive for the city,” in a May 23 report.
Fitch Ratings stated in a May 18 report that it expects any impact “to the city’s strong economic growth as a result of the new tax to be limited.”
After months of debate, the Seattle City Council approved a tax earlier this month that officials say will go towards building more affordable housing in the city along with emergency and shelter service for the homeless.
Starting next year, the tax will be levied on for-profit companies that make more than $20 million a year – which represents 3% of the companies operating in Seattle, according to the city.
It is expected to generate $47 million a year and will expire at the end of 2023. The council had originally considered a higher tax of $500 per employee that would have raised $75 million a year.
Two of the city’s largest employers, Amazon and Starbucks, have criticized the tax and some businesses have talked of a voter referendum, according to the Seattle Times.
Moody’s stated that the revenues from the tax will be modest but “an important offset to the city’s growing costs associated with homelessness.”
In its report, Fitch stated that Seattle remains attractive to employers due to a large pool of educated and qualified employees. It also cited as pluses the city’s many amenities, including its status as a cultural center with sports, entertainment, transit and nearby airport and seaport facilities.
“The city's revenue framework and overall credit quality could be affected longer term if the tax increase leads corporations to decide to move out of or not to locate in the city,” the report states. “However, any impact would be felt marginally over many years and would thus be difficult to distinguish from other rationales for corporate decisions.”