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.