Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Sales Tax Construction topic
No spam. Unsubscribe anytime.
Sales-tax forecast hit by construction downturn, high downtown office vacancy; B&O policy changes add uncertainty
Summary
Forecast staff reported weak sales-tax growth driven by a sharp drop in construction permit value and rising office vacancy rates downtown. They also flagged state and local B&O tax changes (Senate Bill 5814 and a proposed Seattle B&O restructure) as added sources of uncertainty for business-tax collections.
Forecast Office staff told the Forecast Council that sales-tax collections have been weakened by a marked decline in construction activity and by lower demand for office space that is especially pronounced in the Seattle Central Business District.
Staff showed that the value of building permits issued through June had fallen from a 2016–19 average of roughly $3.9 billion to about $2.0 billion year-to-date, and noted that construction-sector declines were a significant downward contributor to sales-tax obligations. CoStar data cited by staff show elevated office vacancy rates and projections that meaningful declines in downtown vacancy are unlikely before the mid-2030s.
Tourism data were also cited: Forecast staff said a Tourism Economics analysis expects a large drop in international visitors for 2025 and only a partial recovery beginning in 2026, which reduces leisure-and-hospitality sales-tax receipts and short-term rental tax collections.
On business and occupation (B&O) taxation, staff reported two policy items affecting forecasts: Washington State Senate Bill 5814 (which reclassified certain services and changes tax treatment) and a separate local proposal to restructure Seattle’s B&O tax (not yet approved by voters). The Forecast Office said SB 5814 was incorporated in the August forecast; the local restructure was analyzed but not incorporated because it had not been adopted. Staff noted limited data to fully estimate behavioral responses by large taxpayers, and that combined policy changes can increase variance between forecasted and actual collections.
Council members asked for industry-level detail and for comparisons showing how the August baseline would have differed if the April baseline had been adopted instead of the April pessimistic scenario. Staff agreed to supply additional visualizations and more disaggregation on request.
