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Council weighs using lodging-tax-backed bonds to finance workforce housing; legal risks and income limits cited
Summary
Council discussed exploring lodging-tax-backed bonds to fund affordable housing projects; supporters said bonds could leverage steady tourist revenue to preserve local workforce, while skeptics warned about diverting funds from downtown priorities and legal uncertainty (including whether a cited RCW amendment applies outside King County). Council asked staff to return with legal guidance, project proposals and concrete numbers.
Council discussed a proposal to explore using lodging-tax revenue to back bonds for affordable and workforce housing projects. Speaker 2 framed the option as a way to leverage lodging-tax receipts to create repayable capital rather than repurpose general fund dollars. "It's a minus in that you're not able to deal with just dollars to dollars, but on the plus side, $50,000 payment out of a $4,000,000 lodging tax for a million dollar bond," Speaker 2 said when describing the leverage potential.
Supporters argued the tool could help preserve the local workforce that supports tourism. "We're a mature tourist town ... you need a workforce to do it," Speaker 2 said, urging the council to explore options to sustain local businesses. Opponents warned that diverting lodging-tax revenues could undermine downtown projects and tourism priorities; several councilmembers said they prefer continuing to seek legislative funding and other sources rather than tapping the lodging pool.
Councilmembers raised legal questions. One councilmember noted that some state organizations interpret the cited RCW amendment as applying only to King County and requested examples of other municipalities that have tested the amendment. Staff said the council requested an opinion from the state attorney general in 2023; the request stalled when a sponsoring senator left office but staff said they recently met the new attorney general and submitted materials again for consideration.
The council did not vote. Instead members asked staff and the housing subcommittee to solicit potential projects, provide bond-structuring scenarios, quantify likely dollar amounts and return with a legal memo (including any attorney-general opinion) before any commitment. Several councilmembers also suggested exploring parallel options such as rental subsidies for current local workers while capital projects are developed.
Next steps: staff will gather project proposals and cost scenarios, pursue legal guidance from the attorney generals office, and return with concrete numbers and recommended guardrails before any decision.
