KCRHA faces $16.7 million shortfall as leaders debate its future

KING COUNTY, Wash. - The King County Regional Homelessness Authority (KCRHA) is facing a $16.7 million financial shortfall, deepening a debate among local leaders over whether the agency can be restructured or be shut down.

The dispute comes with millions of dollars in federal funding at stake. King County Executive Girmay Zahilay says abruptly dissolving the agency could jeopardize $67 million in federal resources that support housing and services for about 4,000 people in the region.

But King County Councilmember Rod Dembowski, who has introduced legislation to shut down the authority, argues the region cannot keep investing in an agency he says has failed to manage public money and deliver on its mission.

Financial review reveals millions in shortfall

The backstory:

KCRHA’s latest financial review identified a $16.7 million shortfall. Dembowski said the findings include administrative overspending and about $2.4 million in interest charges tied to borrowing from King County’s investment pool.

He said the agency spent more on administration and overhead than it should have based on the amount of money it deployed.

But Dembowski said the larger concern is the money that did not go toward sheltering people experiencing homelessness.

"The bigger scandal I think from this report is that they didn't spend over a quarter billion dollars on the number one pressing human condition issue in our county, and that's getting people sheltered," Dembowski said.

The financial problems have also raised questions about KCRHA’s structure and whether it can operate sustainably under its current funding model.

During the King County Executive Finance Committee meeting last week, KCRHA Chief Operating Officer William Towey said the agency needs more upfront capital. Dembowski said he does not support providing additional money and has introduced legislation to shut down the authority.

"Hell no, absolutely not. I've introduced legislation to shut it down," Dembowski said when asked whether he would support giving the agency more capital.

Zahilay warns shutdown could put federal funding at risk

What they're saying:

Zahilay said the financial failures are unacceptable, but his administration is taking steps to ‘right-size, re-stabilize and reset’ the agency rather than immediately dissolve it.

"We need to continue to hold that agency accountable," Zahilay said.

The county executive said the county and Seattle have embedded a financial consultant to strengthen oversight and accounting practices. The governments are also working to take back contracts for broader homelessness services, allowing their own departments to administer those programs.

Zahilay said those contracts are expected to return to King County and Seattle in January 2027. Under the plan, KCRHA would have a narrower role focused on regional functions, including the homelessness information system, coordinated entry and extreme heat response.

The executive acknowledged he has lost faith in the agency as it is currently structured but said an abrupt shutdown could put federal resources at risk.

"If we get rid of that entity prematurely, we risk 67 million dollars, and those are not just dollars," Zahilay said. "Those go on to house about 4,000 people in our region."

He said the county and Seattle are taking corrective action while beginning a longer-term conversation about what a better regional homelessness system should look like.

Dembowski says change is a matter of when, not if

The other side:

Dembowski agrees the federal funding is important, but he believes the region should ultimately move away from KCRHA.

He said the federal government’s notice of funding availability identified the agency as a problem organization. Dembowski argues local leaders should demonstrate they recognize the problems and are making changes.

"In their notice of funding availability, they called it out as a problem organization, and I think it would behoove us to face the federal government and say we see the problems and we're making a change," Dembowski said.

Dembowski said the timing of a shutdown will depend in part on the pending federal grant process. He expects the region to have a clearer path forward in the first quarter of 2027.

Zahilay, meanwhile, says the immediate priority is to strengthen oversight, narrow the agency’s responsibilities and avoid putting federal resources — and the services they support — at risk.

Seattle leaders call for a regional approach

Local perspective:

The debate also highlights longstanding disagreements over how responsibility for homelessness services should be shared across King County.

Seattle City Councilmember Alexis Mercedes-Rink, who serves on the KCRHA board, said during a recent Council Edition discussion that her focus is on maintaining services. She did not directly say in that discussion whether the agency should be shut down.

Seattle City Councilmember Dan Strauss argued that other cities in King County need to contribute more to the regional response.

"We need a regional approach," Strauss said. "The county is not paying their fair share. The other 38 other cities in our county are not carrying the weight that they need to. Some are carrying the weight, but not the weight that Seattle is."

The comments underscore the challenge facing local leaders: deciding how to oversee homelessness programs and distribute costs while preserving services for people who need them.

Taxpayers could be responsible for the shortfall

What's next:

If KCRHA cannot cover the $16.7 million shortfall, Seattle and King County taxpayers could be responsible for the debt.

Zahilay said the city and county are working to determine how to divide that responsibility.

"The City of Seattle and King County are working aggressively right now to figure out how we apportion that debt," he said. "But yes, it is King County and the City of Seattle who have to address that debt."

The final financial picture is expected in the first quarter of 2027.

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