This morning, elusive city finance director Dwight Dively (best known to reporters by his voice-mail message, which invariably begins, “I’ll be in the office starting at 6:00 this morning, but will be in meetings most of the day…) sat down with reporters in the Norm Rice conference room on the seventh floor of city hall to discuss the latest revenue forecasts for the city, released today. The lowlights:
•Nationally, the economy is doing worse than anybody predicted. By the end of the year, Dively said, national unemployment is expected to hit 10 percent. “It’s the worst recession since the Great Depression.” However, the local impact will probably be less than that of the recession that hit between 2001 and 2003, because “the employers that are getting killed nationally, like the automakers, aren’t here.”
•Still, things don’t look good for Seattle city government. The latest projections, an update on projections released last November, show a $29.5 million shortfall for 2009. Added to a $13.3 million shortfall in 2008, that’s nearly $43 million that needs to be cut before the end of 2009 in order to balance the budget. The projection for 2010—which Dively acknowledged is “really squishy”–shows a $41 million shortfall for that year alone.
•The biggest reason for the shortfall is that people are saving more and spending less. “The people who still have jobs are saving a lot of money because they’re afraid they’re going to lose their jobs,” Dively said. The more people save, the less they spend, and the less sales tax revenues there are at all levels of government. In Seattle, sales tax revenues are expected to drop nearly 11 percent. Construction sales taxes make up about a quarter of all sales tax revenues; those, too, are declining dramatically—the drop in construction sales taxes in 2009, Dively said, will be “the biggest decline since we started keeping records”—as developers finish projects and don’t start new ones. The city’s general fund—the biggest chunk of the city budget—is about 20 percent sales tax-funded. Meanwhile, business & occupation taxes are projected to drop just over 8 percent in 2009. Sales taxes and B&O taxes, combined, make up about 40 percent of the city’s revenue. Things could be worse: At the state level, about two-thirds of all general-fund revenues come from sales and B&O taxes.
•Although they don’t go into the general fund (and thus don’t contribute to the $43 million 2008/2009 shortfall), real-estate excise taxes (REET)—the taxes paid each time a piece of real estate changes hands—are projected to drop by about a third. Those taxes pay for major capital construction projects—things like parks, police and fire stations, and shops where city vehicles are repaired; the decline, Dively said, will mean that funding major maintenance projects, such as parks improvements, will be cut “by about half.” The REET shortfall won’t affect projects that are already underway or contracted (like fire station upgrades, a top priority for the mayor’s office) or projects that are funded by other sources (like paving projects being funded by the the 2006 Bridging the Gap ballot measure).
•The city will probably make up the 2009 shortfall with a combination of departmental budget cuts (all departments have been asked to find cuts of between 1.5 and 3 percent) and money from the city’s “rainy day” reserve fund, which contains about $30 million. (The reserves come from automatic deposits made every year the city has a surplus over budget projections, and at the city council and mayor’s discretion. In 2010, Dively said, city departments will have to make “more significant cuts,” especially if the shortfall turns out to be greater than the city is currently projecting.
Check out Dively’s presentation for yourself (PDF) here.
so we’re all going to be stealing red wine from QFC now.
If you steal, you deprive the state of income.
One can only hope that the City of Seattle will take this time and use it as an opportunity to shear off layers of excessive bureaucracy that plague most of its departments. But alas, they will probably just end up cutting things that help poor people.
It won’t be truely bad until they have to eat Central Staff.
Well, I guess there’s nothing for it but to cut services for the poor and middle-class and lower taxes for the rich.
You Liberals realize that by the time unemployment tops 10% this ‘worst recession since the Depression’ will have Obama’s name all over it, don’t you?
The Welfare State is collapsing.
It is going to get ugly.
‘In Seattle, sales tax revenues are expected to drop nearly 11 percent…”
Perhaps, however one could interpret the data in the presentation that suggests the trend is accelerating, and the drop could be significantly higher by year end. I am also a bit alarmed by the suggested notion:
“…. local impact will probably be less than that of the recession that hit between 2001 and 2003, because “the employers that are getting killed nationally, like the automakers, aren’t here.”
Seattle doesn’t live in an economic vacuum. Continued economic slow down and unemployment in the rest of the country and worldwide will and does adversely affect the economic vitality of this region.
The scary chart in the presentation is household debt relative to household income. In an economy that has been 70% dependent on the whims of consumer spending, the idea that consumer debt has reached a level that makes it virtually impossible to sustain spending does not bode well for any sector of the economy.
The Seattle City Revenue Dept., should rethink thier estimates. My guess is they are too light.
@8, You’re right but don’t let a Realtor see that. Things are supposedly different here. Supposedly.
The projections are rearwards-looking. People shut down for a while, but you can see signs they’re coming back.
I predict in mid-summer that we’ll hear that things are better than we thought now, but not massive growth that means we should be wasting tax dollars on busting people for pot.
“..but you can see signs they’re coming back.”
Really? Where?
Judging from some of the extravagant homes that people are building, I’d say that there’s still a little bit of money out there.
@11 – CNBC, CNNFN, CNN, Economist, you name it.
Heck, just look at the leading indicators graph in today’s NYT.
@11 – CNBC, CNNFN, CNN, Economist, you name it.
Heck, just look at the leading indicators graph in today’s NYT.
AFAIK, none of the media entities you cited above recoignized nor did any investigative analysis
of the potential of the economic downturn prior to its occurance. What is the worth of paying attention to them now when they got it so wrong to begin with? CNBC??? Yikes, Bloomburg is much better.
As far as the NYT’s leading indicators graph is concerned, you haven’t appeared to recognise the world economy has been contracting. That means negative growth. Shrinking. The indicators reside and report within that contracting economy. It is the same thing as being behind 10-2 in a ball game and scoring a run. You’re still 7 runs in the rear, and to make matters worse, the other team is still continuing to score.
ON MY FUCKING FISCAL GOD …
“possible cuts of 1.5 to 3 per cent … tht isn’t even the fat in all departments….
these people are comical and empty when it comes to the cash flow to friends and themselves.
will someone post to tell us the city bureauacracy that Cannot take a ten percent budges cut?
You’re right, Cranky Old Man, Seattle doesn’t live in an economic vacuum, but Mayor Jowly and the Nine Dwarfs live in an intellectual and moral vacuum, as shown by their craven support for the Mercer Street do-over. At over $30,000,000 per block it will likely top out as Seattle’s most expensive road project ever. So what if po’ folk are getting evicted, the Health Dept. is getting axed, homelessness is burgeoning, etc. We need to get these 6 blocks dolled up, and we need ’em dolled up NOW!!!
@16,
Make that Eight Dwarves – Councilmember Licata has been waging an all-too-lonely fight against that obscene boondoggle for several years now.