Earlier this week Seattle Mayor Jenny Durkan proposed a city budget for 2020. The Seattle Times reports, “The mayor’s proposed budget calls for $6.5 billion in total spending in 2020, including infrastructure projects and $1.5 billion in general-fund allocations for basic services such as parks maintenance and policing.”

The mayor does not propose major spending reductions:

Missing Monday was the warning tone Durkan adopted leading up to her budget speech last year, when she stressed there would likely be a slowdown in the city’s economic growth and vowed to exercise more cautionary spending than her predecessor, Ed Murray. . . .

The prediction that local economic growth, which has powered record tax collections, would start to slow “has been largely realized,” according to Durkan’s budget office.

The mayor still had room to increase the budget in 2020, the office said, partly because Seattle is selling a super-valuable property in South Lake Union for $143.5 million and because the city’s soda tax has continued to raise more money than anticipated.

Mayor Durkan is also proposing a new tax on transportation network companies like Uber and Lyft. In conjunction with the new tax, she proposes mandating a minimum wage for drivers at these companies.

The new tax would be $0.51 per ride, on top of a current $0.24 per ride fee that funds wheelchair accessible taxis and industry regulation. The tax would go into effect on July 1, 2020. The city estimates it would increase revenues by $9.7 million in 2020 and $21.7 million in 2021. Through 2025, it would bring in an estimated $133.2 million. (The estimated 2020 revenues would represent about 0.7 percent of general fund revenues in Durkan’s budget proposal.)

The mayor proposes using the revenues to:

• Build over 500 units of housing near transit ($52 million through 2025),
• Fully fund construction of the Center City Connector streetcar ($56 million through 2025), and
• Create a Driver Resolution Center for Uber and Lyft drivers ($18 million).

In addition to the new tax, the mayor proposes mandating that drivers for these companies (who are independent contractors) be paid minimum wage, benefits, and expenses. Details are forthcoming: “Understanding the complexities of the current business model, the City will commission an independent study to evaluate average hourly work and expenses for drivers as well as costs to drivers not currently included such as paid sick and safe time, worker’s compensation, and unemployment.”

As Crosscut reports,

The minimum wage implementation is complicated. Drivers are currently paid only when they have a passenger in their car, not when they’re waiting to find a rider or driving to pick that person up. Responding to the companies’ concerns about drivers logging onto the app, but not picking up passengers, the city is trying to set high enough minimum rates while a passenger is in the car to work out to the city’s $16 minimum wage.

A 2019 study from Uber and Lyft estimated Seattle drivers spent 55% of their time driving a passenger — which would mean the minimum rate would need to be around $30 an hour to achieve Seattle’s minimum wage.

Kevin Schofield of SCC Insight has more on the tax and minimum wage proposal here. He reports that the mayor is proposing both the tax and a minimum wage because the companies had told the mayor that increasing the tax would reduce driver earnings. He makes the good point that mandating a higher wage for drivers would have a similar effect as the tax in increasing the cost of a ride:

There are two ways that increasing the tax could decrease wages: if the tax is passed on to consumers as a price increase that decreases demand, then drivers will get fewer trips (or Uber and Lyft will need fewer drivers); or if the tax comes out of driver compensation, then drivers earn less per trip.  Durkan is clearly hoping to enact a compensation model where neither happens, and in so doing is relying on demand for Uber and Lyft trips to continue to increase. On that point, it’s worth noting that the minimum compensation may add significantly more to the cost of a TNC ride than the increased tax. All told, the Mayor’s theory that pairing the tax increase and the minimum wage together will protect drivers from economic harm is an interesting hypothesis that may not stand up when tested.

Indeed, rather than counteracting the negative effects of the higher tax on some drivers, the wage proposal could exacerbate them.