Revenue reality closes in on City Hall
The Mayor lays out the dismal picture for tax revenues, warning that late March revenue projections will be down by tens of millions of dollars. To get ready, departments are asked to examine cuts of 3% in the current year.
By David Brewster
February 20, 2009.
Here's a copy of the email just sent by Mayor Greg Nickels to City Hall employees, laying out some of the details of how the economic downturn is affecting the government:
Dear Friends:
We are all aware of the turmoil affecting the local, national, and world economies. Seattle's economy was not hit as badly as most when the recession began, but we have now started to see effects such as layoffs at Boeing, Microsoft, and Starbucks, plus the collapse of Washington Mutual. The Seattle housing market has been stronger than most metropolitan areas, but we've seen significant reductions in prices and sales over the last six months. I expect President Obama's stimulus package will begin adding jobs in the coming months, but this alone will not fully offset the most serious national recession we've seen in at least 30 years.
In my State of the City address this week, I spoke about the challenges confronting our city budget and the need to work together to make wise decisions. Allow me to share more details with you about what we face. We have begun to see effects on many of the City's revenues. Our sales taxes were down by about 8% in November compared with the previous year. Real Estate Excise Taxes, which are collected when property is sold, are at levels last seen in 2002. Utility revenues are down as residents and businesses cut back on uses of electricity and water. Building permit revenues have plummeted because construction activity has slowed.
Last fall, we worked with the City Council to close a $19 million gap in our 2009-2010 General Fund budget, which covers most or all of the costs of traditional city services such as police, fire protection, parks, libraries, human services, and transportation. This required reductions in many programs but we managed to avoid almost all layoffs.
Unfortunately, continued economic problems mean that revenues are likely to be significantly lower than projected when the budget was passed in November. We have not yet received final 2008 revenue figures. Once we do, the Department of Finance will prepare an updated General Fund revenue forecast, which should be made public in late March or early April. We expect the forecast to be tens of millions of dollars lower than in November. We expect forecasts for utility revenue and other City revenues to be lower, as well.
To prepare for this lower forecast, I've asked department heads to begin identifying possible 2009 General Fund budget reductions of up to 3%. The utilities and DPD are working on their own budget reductions. I've asked for these reductions to be submitted in mid-March so I can review them and work with the Council to adjust the budget in April. The Council and I will examine budget suggestions from departments and ideas generated by the Department of Finance as we make decisions to rebalance our budget.
We will make strong efforts to avoid layoffs, but the magnitude of the budget situation means that some employment reductions are inevitable. Our Labor Relations unit has opened a dialog with unions representing City employees to explore ways to minimize the number of layoffs.
I want to thank all of you for your hard work in providing services to Seattle's residents, businesses, and institutions. We're proud of all we've accomplished in recent years, including reducing crime, expanding human services, improving the condition of our parks, opening new libraries, increasing recycling rates, improving the reliability of our electric system, repairing roads and building sidewalks and bike lanes. Working together we will seek to preserve services in these difficult times.
I will continue to send these e-mails as we learn more about the budget picture. I know all of you are concerned about your jobs, your families, and your community, and I hope that having this information will help make the situation more clear. Thanks again for all your work in service to the residents of Seattle.
GREG NICKELS
Mayor of Seattle