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Council should reconsider the new scooter and bike share tax

Seattle’s City Council needs to be very careful with its proposed new taxes on scooter and bike share services, which Councilmember Andrew Lewis has proposed as part of the 2023-24 budget. It is expected to cost $540,000 in 2023 to set up a taxing system to charge 25¢ per ride in hopes of collecting $716,000 per year, though the new collection process won’t be ready until 2024. The new tax would be in addition to the annual street use permit fees companies already pay, which is currently $150 per scooter or bike.

However, collecting those fees assumes that these companies continue operating at current levels, and that is not at all guaranteed in the volatile business of micromobility. Bird, for example, is in dire straits financially with their stock trading at 40¢ per share as of closing yesterday, down from their initial public offering price of $8.40 one year ago. Take two Bird rides and the city’s proposed tax could buy a whole share of their stock plus a stick of gum. Lime is no longer part of Uber, though that company does have a stake in its ownership. Seattle also lost Spin scooters earlier this year when that company decided to pull out of cities that do not limit the number of companies enough to make operations sufficiently profitable. While Bird surely has financial issues not shared by all micromobility companies, the industry can’t really be considered stable. These companies are still fighting to prove their viability as businesses.

Beyond the budget implications, scooter and bike share services are helping people move around the city under human and electric power, and that’s a good thing. If companies get into a spot where they need to scale back operations, cities with the highest costs to operate could very well be on the chopping block. While Seattle seemingly has a healthy number of rides, thanks in large part to the city’s quality bike facility network relative to other U.S. cities, it’s not clear how profitable it is to run the services here. Prices have risen significantly in recent years as companies try to find the price point that maximizes profit. It’s not clear whether adding 25¢ of tax to each ride would be swallowed by the companies or passed onto riders, but it feels to me like Seattle has more to lose than we have to gain.

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Cutting a potential revenue source from the budget might be a tough ask, though. Seattle’s updated revenue forecast this week dumped a bucket of cold water on the city’s 2023-24 budget dreams. The biggest reduction is an anticipated $64 million decrease in real estate excise taxes, though the general fund is also expected to decrease $9.4 million and the sweetened beverage tax should decrease $4.5 million.

However, it will cost the city’s general fund $540,000 in 2023 to set up this tax, which the city can’t even begin collecting until such a system is established in 2024, so it is not an immediate help to the budget. The budget proposal document acknowledges this issue, saying that though the tax would be effective January 1, 2023, collection might not begin until 2024. “This lag would not change the total amount of tax due, but may have cash flow implications for when tax revenues are available to be spent,” the budget proposal document notes (page 56-57 in this PDF). “Because initial tax collections may lag until 2024, this Council Budget Action does not anticipate spending of tax revenue in 2023.”

In defense of this budget action, the funds would be limited to bike lanes, traffic calming and Vision Zero work. These investments help scooter and bike share companies get more rides, so they are relevant and worthy expenses. I also don’t fully understand the benefit of establishing a new per-ride taxing system when we already have a per-device fee system in place. Street use fees can and often are used to build bike lanes and other street safety improvements just like the proposed tax would. While I am not necessarily advocating for increasing the street use fees for many of the same reasons noted above, that seems a lot easier and cheaper than setting up a whole new tax.

UPDATE: I meant to add this list of better revenue options from Seattle Neighborhood Greenways:

We recommended looking into seven other better options instead:

  1. DC’s surcharge on excessively heavy vehicles
  2. Portland’s Parking Climate and Equitable Mobility Transaction Fee
  3. A tax on employers that subsidize parking or businesses that validate parking
  4. LA’s smog fee
  5. A tax on Uber/Lyft surge pricing rates
  6. A low emissions zone fee
  7. Finland’s income adjusted ticketing system

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8 responses to “Council should reconsider the new scooter and bike share tax”

  1. Confused

    Why does the city continue to tax and fee activities that would reduce undesirable activities? More scooter and bike share means less people in cars clogging up the streets. Same with the 99 tunnel fee. The whole point is to reduce street level traffic. Why would you charge a fee to adopt the solution?

    1. Tom Fucoloro

      The 99 tunnel is a whole other story. That was a state decision, and the tolls were part of how they funded it. Now they have to collect tolls to pay the debt for money they already spent on a tunnel that does not alleviate street traffic like they said it would because it turns out people really didn’t need it as badly as they said we did. Oops!

  2. peri hartman

    You bring up some really good points, Tom. First, it’s very strange that they would implement a new mechanism, which takes time and costs money, rather than use the existing licensing structure. Not only will it cost to set it up but it will cost additional admin to run it. If they simply add 50 cents to the existing mechanism, I can’t imange that the admin changes significantly.

    But I also appreciate your point that these companies are generally not very solid financially. Maybe if scooters were widely acceptable and solidly established in Seattle, they could simply pass the fee along to riders. But, i think, while scooters seem to be accepted, their use is still fledgling. I’m afraid that we’ll lose scooters on the street and drop below critical mass.

    It’s kind of like the EV road usage tax. Up front, you get a sales tax discount but you have to pay a fairly steep annual tax. That pushes against encouraging people to switch to EVs.

    What can we do ?

    1. asdf2

      The EV road usage tax is $225/year. Sounds like a lot, but compared to all the other costs of car ownership, it’s rather trivial in the scheme of things. It is somewhat odd for one piece of the state government to be subsidizing EV while another piece taxes them, but the system is what it is.

      Speaking of EVs, I suspect the carbon emissions may actually be less driving an EV than riding a Lime scooter for the same trip. EVs are very efficient at city driving, and the 1.5 miles in an EV corresponding to the average scooter trip is an energy usage roughly equivalent to a 10 watt LED light bulb left running for 24 hours. A scooter uses much less electricity than this, of course, but a rental scooter requires a gig worker to chase after you in a car, which is probably powered by gas, to reposition the scooter and charge the batteries. By the time you account for the gig workers’ vehicle emissions, all of the energy saved by replacing a two ton vehicle with a scooter goes out the window. And that’s not even getting into the fact that rental scooters barely last a few months of service before ending up in a landfill.

      1. Peri Hartman

        First, I agree that $225 is not very much. It’s the perception and the irony. Maybe I shouldn’t have brought it up…

        On efficiency. a typical EV travelling 1.5 miles would use somewhere around 500 Wh. According to international.lbl.gov, scooters use on average 33 Wh/km, or 80 Wh for 1.5 miles.
        However, since they sit idle, around 40% to 50% of the energy is wasted while the scooter isn’t being used, according to sciencedirect.com. So, let’s say about 150 Wh total, for 1.5 miles. And then, you have to throw in the energy wasted to redistribute the scooters from time to time. I suspect it’s substantially less than a car, even with that.

        But I think the more important point about scooters is they get cars off the road, reducing congestion and the need for parking spaces. At least for me, that’s a big part of the goal of getting more people to bike & roll !

  3. asdf2

    My personal take on this is that I used to ride bikeshare quite a bit, but at current rates, it just doesn’t make financial sense anymore.

    For short trips, where the bike/scooter might cost under $5, it seems silly to pay for it when I can just walk or jog the trip for free. For longer trips, the cost savings of public transit over the micromobility services is substantial. And, if you’re really in a hurry, it’s not that much more money to just hop in an Uber. And that’s not even getting into the issue that you still need to walk to where the scooter is, and potentially try multiple scooters to find one that works.

    At these prices, the target audience is clearly not local residents, but visiting tourists, paying for the experience, not caring how much they pay because they’re on vacation. And a ride tax, like what the city is proposing, is a much easier political sell if it’s mostly out of towners, rather than locals, paying for it.

  4. Ballard Biker

    Why on earth does it cost $540,000 to set up a tax?

    It seems like Seattle should just say “Hey for-profit companies using subsidized public infrastructure, pay us $0.25 per ride” and be done with it. There’s already a mechanism for these companies to pay fees to the city.

    If it indeed costs Seattle a non-zero amount to implement, it seems like these for-profit companies should be on the hook to implement, not taxpayers.

    Also, the fact that these companies can’t survive in the face of competition or small taxation kind of makes me think they shouldn’t exist at all. The safety of non-motorized trail and sidewalk users would definitely improve.

    1. Tom Fucoloro

      The companies will pay for the admin set-up, as soon as they set it up. Why it costs so much? I don’t know. Probably need some custom coding and staff time?

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