By Erica C. Barnett
PubliCola management has been out of the office for the past couple of weeks (vacationing in a graffiti-covered post-apocalyptic European wasteland), which is why we haven’t been posting our usual detailed city budget updates. Luckily for us, city council budget chair Teresa Mosqueda decided to take an extra week before releasing her final budget balancing package, after the city’s Office of Economic and Revenue Forecast released a new revenue forecast last week that sent budget writers scrambling.
That new forecast predicts a sharp decline in revenues from a number of sources, including the sweetened beverage tax (SBT), the real estate excise tax (REET), and the retail, business, and sales taxes that make up the city’s general fund, which pays for everything from police salaries to homeless outreach workers.
For 2023, the new forecast predicts an additional general-fund shortfall of about $4.5 million. In addition, the new projections predict an additional sweetened-beverage tax shortfall of $1.6 million and an additional REET shortfall of $26.7 million. Over three years, those projections are $9.4 million, $4.5 million, and $64 million, respectively. Revenues from REET and the sugary beverage tax, unlike general-fund revenues, can only be spent on certain purposes, which limits the city’s ability to pull funding from either source to fill general-fund shortfalls (although elected officials have frequently tried); in addition, REET is largely tied up in mandatory debt payments on major bond-financed capital projects, making much of this funding source off-limits to annual budget writers.
Usually, when people refer to the city budget, they’re talking about the general fund, which represents the part of the city’s overall budget that the city council and mayor have the greatest ability to tweak. So let’s start there. On its own, the $4.5 million general-fund shortfall is not a hugely significant number in the context of a $1.6 billion budget. However, in late October, council members proposed budget amendments that would add $80 million in general-fund spending, which would have to be offset by still-unidentified cuts to Harrell’s budget proposal.
To vastly oversimplify, last week’s revenue forecast downgrade means that if the council wanted to fund all of their own priorities, they would need to reduce Harrell’s budget by $90 million. Obviously, many of these budget amendments won’t make it through—looking at you, new Seattle Fire Department program to promote “floatplane awareness”—but any additional spending requires an equivalent cut to Harrell’s budget plan.
And some of these amendments will be sacrosanct. For example, the council has shown virtually no enthusiasm for Harrell’s plan to cap annual increases on human service provider wages at a sub-inflationary 4 percent, effectively cutting these underpaid workers’ wages. (The exception is Councilmember Sara Nelson, a longtime business owner who wondered aloud why a subinflationary wage increase didn’t constitute a “raise.”) Increasing provider wages to the level currently required by law would cost about $7.1 million in 2023.
Other amendments would increase the city’s contribution to the King County Regional Homelessness Authority by $9.4 million annually to offset the loss of temporary federal funding that enabled shelters to reduce crowding during the (still-raging) pandemic; establish new tiny house villages; preserve the LEAD and Co-LEAD programs; and pay for new and existing crisis response programs. Proposals to expand human services will be harder to eliminate than, say, an amendment from Nelson that would spend $1 million on an unspecified new addiction treatment center—something King County, which has jurisdiction over public health and addiction programs, would ordinarily fund.
Achieving a new budget balance will, as always, require some combination of spending restraint (passing only some proposed amendments) and cuts (bringing Harrell’s proposal, which includes tens of millions in new spending on priorities like removing encampments and graffiti abatement, down to size). Council members had already set their sights on Harrell’s proposal to dramatically expand the encampment-sweeping Unified Care Team and his plan to spend $1 million on a gunshot surveillance system like Shotspotter, which civil liberties advocates, including the ACLU, oppose.
Another option will be for council members to overturn a law they passed last year restricting the use of JumpStart payroll tax revenues, which are supposed to pay for affordable housing, equitable development, and Green New Deal programs, to backfill the city’s general fund. The new law says the city can only use JumpStart revenue for non-JumpStart purposes if the general fund falls below $1.5 billion. Harrell has proposed changing the law to pin the general fund baseline to inflation, allowing the city to use more of the earmarked money for non-JumpStart purposes.
The general fund is not the only budget area where the council will have to make some hard choices, nor is it the largest. Projected revenues from real estate taxes, which the city thought would continue to increase this year, have taken a nosedive thanks to rising mortgage rates and the resulting slowdown in housing purchases.
Because a large chunk of REET revenues pay for debt service, a fixed cost, or multi-year capital improvement projects such as road paving and maintenance, the city can only make limited changes to REET spending. Generally, that means cutting new or shorter-term capital projects. Some of these are improvements that mostly benefit city employees rehabbing the elevators at the Seattle Municipal Tower, for example—but others are the kind of visible, council district-level projects that voters tend to notice.
For example, Harrell’s proposed budget includes $2.5 million in new REET spending to promote “safety and accessibility” at City Hall Park; $10 million for a new Tribal Interpretive Center on the downtown waterfront; and $1 million to rehab at least one park restroom. Eliminating or delaying these programs, or any REET-funded capital project, will produce instant blowback from constituents, who will be voting next year in all seven district-based council races.
A spokesman for Harrell’s office said Monday that the mayor “recognizes that this is a challenging revenue forecast. … The mayor’s proposed budget makes critical investments in key priority areas including public safety, housing and homelessness, and the essential city services residents expect. Based on our collaboration throughout this process, we believe the Council will ensure these priorities remain adequately funded in the final budget.”
PubliCola has calls out to several council members, including Mosqueda, and will be posting additional budget updates later this week.
4 thoughts on “Dire Revenue Forecast Spells Trouble for Capital Projects, Delays Council Budget Action”
Is affordable housing stock really something the City needs to invest in? Over the last 40 years, in good economic times and bad, the Seattle City government has never fully funded a realistic affordable housing plan. Nor will it do so this year, or in the near future. At this point the decades of underfunding has dug such a deep hole the City can’t possibly hope to get out of it. In fact the “affordable housing pit” just gets deeper and deeper. I think it’s honest to admit that not everybody can afford to live in Seattle and maybe the City needs to just pay people on a fixed income to go somewhere else cheaper to live. Maybe the City does a anti-SSI (Supplemental Social Security Income) campaign explaining that folks on disability would be much better off somewhere other than Seattle? The dishonesty I see towards down-and-out people in the Emerald City needs to stop. At what point in history did the City ever promise a place to live to anybody? And why would that change now? I don’t agree with the Harrell plans for the homeless, (FEMA style refugee camps surrounded by barbed wire?) but what else is there that Seattle can afford?
Instead of grossly underfunding housing, maybe the City Government just stop and try something (anything) new? This fixes all the problems in the current City budget instantly.
King county regional homeless authority has tons of hotels outside Seattle – why aren’t they all filled? Should Seattle provide more KCRA funding if the KCRA can’t staff the buildings it already owns? Especially when other King County cities refuse to contribute?
Because the KCRA is built on a great big lie. King County, Seattle and every other city in the County have a secret agenda of using the KCRA to shuffle homeless out to some other place and dodge the blame…. mostly Seattle takes it in the shorts on this. Bellevue’s city government has always seen Seattle as a trash can for anything it doesn’t want to deal with, starting with the homeless. Marc Dones might be the biggest fall guy in Washington State history. King Country isn’t going to really carry any water on housing… it never has. It’s all this sham of false support, because affordable housing isn’t going to happen, but no pol has the guts to say so. What we have are endless gestures of political support…. and around 2% real funding in the budget for decades.
“Is affordable housing stock really something the City needs to invest in? Over the last 40 years, in good economic times and bad, the Seattle City government has never fully funded a realistic affordable housing plan.”
The second sentence shows the answer to the first is ‘Most definitely’.