(The Center Square) – The Seattle City Council appeared reluctant on Wednesday to sign off on Mayor Katie Wilson’s proposal to “bail out” the transportation department with a $63.5 million interfund loan.
The request comes alongside a proposed parking tax increase to address years of cash-flow issues in the Seattle Department of Transportation following the pandemic. Legislative analyst Traci Ratzliff told the council during Wednesday’s SDOT budget presentation that the city is still identifying the causes.
The last time SDOT received an interfund loan was in 2021 for $15 million, which was paid off in 2022, but it still had an outstanding balance on a $25 million interfund loan from 2020. Ratzliff said SDOT paid off the balance in December, but Councilmember Dan Strauss said he’d heard otherwise that morning.
“We had a long and robust conversation on this,” he said, referring to a Debt Management Advisory Council meeting. “We’ll be including additional language regarding repayment, specifically on interest, so it’s scheduled rather than voluntary because SDOT did, in fact, not repay their last interfund loan.”
If approved, the $63.5 million interfund loan wouldn’t be a fixed amount but rather a ceiling, meaning SDOT could draw from it on a revolving basis as long as the outstanding balance doesn’t exceed that.
Repayment would be due at the end of 2036, with payments of $2.2 million annually beginning in 2027 under Wilson’s 2027 budget proposal. A budget analysis from Wednesday shows the funding coming from the city’s Transportation Levy Fund and the Real Estate Excise Tax Capital Projects Fund.
“They will really do what they need to do to keep their cash balance positive,” Ratzliff said, explaining that SDOT doesn’t plan to spend it all. “I will tell you that the end-of-month balance for that cash fund for September was negative $24 million – the average daily balance was negative $41 million.”
“That is just one data point, and obviously these things can fluctuate. But I think what you don’t want to have happen is for them to have to come back for multiple interfund loans,” she warned the council.
Ratzliff said the city’s Transportation Fund often has a negative cash balance because payroll and other expenses hit the account before some revenues come in and the costs can be split into other SDOT funds.
Councilmember Maritza Rivera said the loan was a “bailout” and questioned why the dais should authorize another as SDOT apparently underdelivers to the taxpayer. She said if the council approves the loan, they expect constituents in every district to receive adequate services.
“All the while, the projects that we’re requesting aren’t getting done, even when we do identify the money for it,” Rivera said.
The plan is to cover the shortfall with the interfund loan while trying to make up the difference by increasing the commercial parking tax and street permit fees.
If approved, the parking tax rate would rise from 14.5% to 17%; while only 2.5 percentage points, it represents a 17.2% increase on the existing rate.
The tax hike would generate an estimated $9.3 million in 2027, amounting to a 50-cent increase on a $20 parking bill, bringing it to $23.40 before additional state and local sales taxes that fall on top.
Councilmember Rob Saka questioned whether they should authorize a smaller loan given the situation that SDOT has already found itself in. Strauss said the issue needs to go to the state auditor or to an external consultant to conduct a forensic audit on SDOT and recommend how the city should proceed.
“As I’ve been digging into this situation, this issue, the information that I’m receiving is worse than I expected,” Strauss said before closing Wednesday’s Select Budget Committee meeting. “Through this whole experience, I frankly have more questions than I have answers starting out here.”