Urban Politics #343: Accountability in the City Budget

Home » Urban Politics #343: Accountability in the City Budget

Note: This piece also appears in CrossCut titled “The Problem with Seattle’s Startup Initiative.” Feel free to leave comments there.

Recently, a Seattle Times editorial lauded the Seattle City Council for requiring clear goals, measurable outcomes, effectiveness and accountability standards for funding projects in our 2014 budget.

For the most part, we accomplished that this year. But one exception struck me as failing to meet all of those criteria. It was not a big request, requiring only a $151,000 ongoing yearly expense plus inflation. Nevertheless, the project’s demonstrated need for city funding was weak. There were no measurable public benefits listed and, in the past, it had been provided by the private sector.

startup-sign-250x250I’m talking about the Startup Seattle Initiative. The initiative is a new effort, by the City’s Office of Economic Development (OED), to support the growth of Seattle’s startup high tech sector. As one of the project’s proponents described it, Startup Seattle provides a concierge service for startup businesses to help themselves find the resources they need to stay in Seattle rather than leave for greener pastures.

It includes $126,000 for a new staff position to manage maintaining a website and developing marketing materials and $25,000 to cover various program costs.

The Office of Economic Development officially launched Startup Seattle this year with the $20,000 purchase of its website domain from a private entity that could no longer afford to operate it. The website, startupseattle.com, includes event listings such as weekly meetings of Open Coffee, where early stage investors and entrepreneurs can socialize and network.

It also notes job opportunities. Staples.com, one notice announced, was number two in e-commerce and seeking individuals to join their development team. The average annual salary for startups jobs in Seattle is $84,000, according to Simply Hired, a technology company that operates job search engines in 24 countries.

It’s important to keep these good paying jobs in Seattle. But if success is measured by the number of startups forming, Seattle is already a success.

Last July, GeekWire ranked us the second of three top U.S. cities for startups. Austin, Texas was number one and Boulder, Colorado number three. This summer, Entrepreneur Magazine ranked Seattle number five in its list of the 25 best U.S. cities for tech startups. The problem is not that we need to attract more startups. We need to retain more.

Retention of startups is a challenge. A number of cities have seen startups purchased by larger companies and relocated. Last year, the Philadelphia Tribune noted that since 2007, four companies, which made up more than $1 billion of Philadelphia’s startup economy, had left the city in search of investment capital — something beyond the scope of Startup Seattle.

If Startup Seattle does not address the problem of long-term investment, it is also programmatically vague. There are several basic questions left unanswered by the initiative: Why are we using public funds for this project? What are our measurable results?

For example, another similar OED project funded by the city budget this year, a business assistance service for restaurants, was designated $130,000. In that case, the city required that certain conditions be met by the OED before funds were spent: The chair of the Council’s Committee on Economic Resiliency and Regional Relations had to file a certification with the City Clerk that the OED had developed a sustainable, long-term business plan to diversify funding beyond city coffers.

That’s something that was lacking in the Startup Seattle Initiative proposal and is why I initially suggested we drop Startup Seattle from the budget until it could be justified to the council.

Without enough support for that approach, I offered an amendment requiring that before OED receive any money for Startup Seattle, it had to satisfactorily answer council questions about the Startup Seattle initiative and Seattle’s existing early stage technology sector; present a sustainable, long-term plan for maintaining Startup Seattle and identify possible 2014 funding commitments from non-city partners. Only councilmembers Jean Godden and Tom Rasmussen voted for that amendment.

In a final effort to achieve accountability, I offered another amendment allowing the Office of Economic Development to spend the funds before responding to the Council’s questions and conditions by next summer. That amendment passed.

OED’s report will present a three-year work plan with targeted and measurable outcomes, will identify monetary and in-kind commitments from non-city partners and will include an analysis of whether Startup Seattle could be sustained in the future if transferred to a non-city entity and provided with reduced or no city funding. You can read more here.

While the city has a proper role to play in supporting and encouraging economic development, it has to be done in a way that demands public benefits in exchange for public assistance. The City Council has yet to receive any guarantees to that effect, but the discussion can be brought forward again when OED reports back on September 1, 2014.

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