Rideshare tax increase will fund streetcar & other projects

First Hill Streetcar (Image: Atomic Taco)

On Thursday morning, the Mayor will propose increasing taxes on rideshare trips that begin or end in the city of Seattle by 51 cents beginning in 2021. (see coverage from Seattle Times, Puget Sound Business Journal). Among the beneficiaries of the tax is the Center City Connector which would see $56 million over five years, closing the deficit in funding that project after the City Council recently approved another $9 million for a reworked project design.

If the tax increase and spending plan are approved, and the project otherwise stays on track, it would resolve the streetcar's funding gap without a messy budget cycle duel over other priorities for general fund spending. The 51 cent levy adds to an existing 24 cent levy on rideshare trips that supports licencing and wheelchair access. That levy might be reduced, but the total levy proposed by the Mayor's office would be 75 cents in any case to meet the spending goals.

The Mayor's presentation reported about 24 million rideshare trips last year would have been eligible for the tax, a number expected to grow to 28 million this year. The math of the new levy clearly assumes continued rapid growth in these numbers. Tax revenues are projected at $24 million in 2021 and increase to $27 million by 2025 (implying some 50 million rideshare trips in the city by then).

Beyond the $56 million for the streetcar, other planned uses for the levy proceeds include $52 million for 500 affordable housing units near transit and $18 million for a center to arbitrate disputes between rideshare firms and drivers who have been deactivated from the service. After 2025, revenues would be dedicated to improving pedestrian, biking and transit infrastructure in the city.

The City continues to explore congestion fees on downtown. The calculus for those taxes is now a little more complex. By design, congestion fees will erode ridership. At least some congestion fee revenue would be used shoring up the spending priorities financed by the rideshare levy. Politically too, the city will have enacted the popular taxes on Uber and Lyft first, and would face a public vote with only the less popular fees on regular drivers to create a general congestion charge.

The tax will be formally proposed as part of the Mayor's budget next week, and may change as it works its way through the Council budget process. Minimum income regulations for drivers are also expected soon. Details of those regulations remain under study, but they seem likely to take effect by the middle of next year.