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How Seattle went broke

The city let the spending flow during good times, playing generous with everything. Now, the revenue has slowed and the challenges are huge. A good place to start with cuts is at the top, where the big salaries are.
A Seattle Department of Transportation crew works on a curb.

A Seattle Department of Transportation crew works on a curb. Kent Kammerer/Crosscut

In an old Broadway musical, "Music Man," a lead song warned of "trouble in river city." It would be difficult to find any time in the last half-century when Seattle or most other American cities have been in as much trouble. No, it's not just floods, tornadoes, tropical storms, or oil gushing out of the ocean floor; it's the realization that our economic bubble has burst. So mesmerized by the bountiful life we all have had, many Americans and their leaders didn't take the need for austerity, even at the local level, seriously enough.

Our financial trouble lingers from a recession that hasn't been safely overcome even now. The trouble now isn't from trading in derivatives, but from not having the revenue to meet governmental payrolls that swelled during the booming years, along with cities borrowing excessive amounts of money for infrastructure that existing economies can't repay.

While of little solace, we aren't alone. Over half of the nation's cities are in a form of fiscal crisis. San Francisco, Houston, Los Angeles, and Pittsburgh are among many who have contemplated bankruptcy. Revenue, much from sales taxes, has plummeted, and with unemployment hovering around 9 percent nationwide, people simply aren't spending as much as they did a decade ago. With record numbers of homes in foreclosure, property taxes aren't always collected, and the same can be true with real-estate excise taxes.

To make matters worse, while there are some bright aspects to the economy, world financial advisers are more than a little concerned that there are so many nations carrying debt they can't repay and that their collapse might take healthier nations along with them. Last year's bailouts of financial institutions both here and abroad weren't much more than the Dutch boy with his finger in the dike.

European nations and the IMF have agreed to bail out Greece, which can't pay its debt, and they are worried about Portugal, Spain, and Italy. Many Greeks are rioting in the streets in opposition to the austerity requirements for getting international financial aid. The Greek people feel entitled to pensions and government subsidies.

The problem for our local leaders seems to lie more in their unwillingness to realize the few who are shouting “fire” really mean it. The attitudes of local governments are a bit like the tendency to deny that we each are getting older. We don't really want to believe it, but things just aren't what they used to be. Denial is one stage of death.

Here in Seattle, which was slower to feel the effects of the recession, our leadership is just starting to wake up to the realization that we are in far greater financial trouble than we were willing to acknowledge. At first, budget deficits of $40 million were discussed. Now that revenue is unlikely to rebound in the near future, budget deficits as high as $120 million (over the next two years) are being discussed.

There was a day when the mayor and city council would, with an almost cavalier attitude, choose some city service to take the hit, such as closing a library or park. The actions had the appearance of inflicting pain more than doing any serious budget decision making. Another tactic was to trim a few percent from all departments.

This time, cutting library hours, increasing parking fees, or closing bathrooms in parks won't come close to solving our financial crisis. Those won't be enough because in those affluent years our progressive spirit initiated many new programs that responded more to ideas of what we wanted and less to what was essential. We hired new city workers to implement the programs because we had the money. Now the money is gone.

Seattle has always had an aura of adolescence about its image. We perceived our zits were visible, that they somehow prevented us from becoming that "world class city" we wanted to be. We dabbled for years in cosmetic improvements rather than setting aside money to replace things that were certain to wear out. The Magnolia Bridge was but one example.


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Comments:

Posted Wed, May 12, 6:05 a.m. Inappropriate

Excellent summary, Kent. There also are big, pending capital projects
such as the Mercer Project, continuing Sound Transit light rail, the 520 bridge and Alaskan Way Viaduct projects, and Mayor McGinn's proposals for
extensions of light rail to Ballard and West Seattle. The Council recently approved, without much thought, a new streetcar line. Priorities must be set and choices made. What is essential and what not? What is affordable and what not?

If they follow recent precedent, both Mayor and Council will duck difficult choices...fold...and opt once more to seek new tax revenues to pay for all the above. The higher taxes will, in turn, choke economic growth and make the squeeze even worse.

Posted Wed, May 12, 8:13 a.m. Inappropriate

Well stated, Seattle as all municipalities over the years has promised bigger and better for all its citizens. A current example is the question in the news over sidewalks in Greenwood or even today's story about the bike lane in Ballard. All these take money, all these are good ideas. However, perhaps they should not be done until the cash is in hand, along with a fund to maintain such projects, similar to a “lay-away” program.

In the non municipal world I must say that supervision is on a ratio of about 1 to 10, Seattle as all other governmental bodies always seem to be very top heavy in executives and supervision. With their bloated payroll, and overlapping control less gets done with more supervision.

Basic utilities such as roads, power, water, fire, libraries and police should be the city’s basic concern, this is all the city "owes" its citizens. Art Councils, Bigger Better Seattle and their ilk should be separate from the city and become volunteer organizations.

Posted Wed, May 12, 9:16 a.m. Inappropriate

$73,000 for an average city worker seems quite excessive, given that this doesn't even include fairly generous health care and retirement benefits.

I agree with Ted that the capital projects need to be taken into account as well. However, these need to be separated into what is fully funded, what is partially funded and what is essentially just an idea. The Mercer Project seems to be a fully funded project as is the ST light rail expansion, which was just voted on my taxpayers and given the green light. The 520 bridge replacement and Viaduct fall into the partially funded category, with deficits upwards of $2 BILLION dollars. Mayor McGinn's chatter about a light rail line from Ballard to West Seattle is just an idea, and a bad one at that. The ridership on those 2 corridors just isn't there, just like it wasn't there for the ill fated monorail.

Using the term 'essential' is pretty tricky. For some, libraries are a waste of money because they have high speed internet and a laptop and Wi-Fi card. Does that make libraries a nonessential waste of money?

Posted Wed, May 12, 10:55 a.m. Inappropriate

The only reason Mercer is "fully funded" (which even phase 1 isn't, let alone phase 2) is that the City has systematically and deliberately misallocated ALL of the discretionary resources it has available to it for what is essentially a beautification project.

Obscene is too polite a word for it.

Posted Wed, May 12, 11:09 a.m. Inappropriate

Good piece, Kent, but I gotta nitpick. The Seattle Department of Transportation has been known as SDOT (pronounced Ess Dot) for some years now, ever since the arrival of Grace Crunican from Portland, who apparently thought that SeaTran was too much like C-TRAN, the transit agency in Clark County, just across the river from Portland.

Agree with your central premise that cuts should come up and down the hierarchy. Working stiffs are already taking cuts in the form of unpaid furloughs, which hurt low- and moderate-income workers much more than those with six-digit salaries.

And of course the public gets no service on those days when agencies' doors are locked. They have to come back later and City workers end up doing the same volume of work, but with fewer days to do it.

Let's see what the mayor and council can come up with. You might do a followup piece after talking with Dwight Dively. Yes, he's lost to City Hall but he's still around and surely available for a coffee chat. I'd sure like to know what Dwight would suggest we do in this dilemma, advice he can now give unfettered by City Hall politics.

Posted Wed, May 12, 12:42 p.m. Inappropriate

Solutions are obvious, but they require the powers-that-be to hoist themselves on their own petards.

Most mega-infrastructure projects should be canceled or postponed until they have funding. We don't have the money. Why build a new 520 bridge? If we're going to build it, let's wait until it's fully funded with tolls. And let's do it incrementally. The bridge itself costs about $1.5 billion. Build that first. The extra $3B is greasy pork.

And what's with our funding Sound Transit version 2 before version one has even shipped? The debt service for this verges on the insane. Long train trips to the airport are hardly a high priority of the citizenry.

All our infrastructure projects get laden with environmental and legal expense that amounts to 80% greenmail and 20% actual public benefit. Laws for eliminating the greenmail of mitigation should be enacted. Too much environmental expenditure is hidden away in legal fees and unnecessary mitigation costs. More transparency of environmental costs is critical to actually achieving environmental goals.

As for compensation, it's dysfunctionally skewed towards large retirement plans that reward serving quietly & innocuously for 20 years and then retiring. Let's reward performance first and seniority second.

The internet is making a lot of what government does much more user/citizen driven and less reliant on seas of bureaucrats. Any consultant worth his salt could recommend re-engineering and staffing solutions that would be two or three times as productive and require half as many people as government currently employs. But they would assume a competitive environment with motivated, productive employees rather than union employees and high-paid bureaucrats trying to protect their compensation packages above all else. Unfortunately, productivity is a laughable subject in government. So no one expects it, no one cares about it, and people resent it, because it means LESS money will come to a given inefficient, unproductive public monopoly.

The criminal justice system is a great example. It's just an equilibrium system that needs to feed itself by feeding so-called criminals in and making sure that they're criminals when they come out so that the bureaucracy can maintain the status quo. A byproduct is that we do maintain the peace. But we don't make progress. And many young black males pay the price, since they are fodder to the system. All the while police, lawyers, judges, and prison guards do their jobs as the system dictates, and none can be blamed for its overall failures. Indeed, each individual employee is praised.

Overall the problem is the lethargic inertia that drives government to soak up as much money as possible for as little actual output as possible. It's not anyone's fault; it's just the nature of government, bureaucracy and people.

Some day people will develop a cure for bureaucracy and bloat, but I'm not holding my breath. Best to vote down big infrastructure projects rather than gouge schools and fire and police and parks. But they're all inefficient. Attacking future retirement and health care boondoggles is also achievable. Not easy, but at least possible. We'll never get to a "right-sized" government, but we can aspire to something that is not bloat-sized.

Stuka

Posted Wed, May 12, 2:27 p.m. Inappropriate

My father, a business man and life-long Republican many times would chide me, a Liberal Democrate, that the public sector must follow private sector business methods. Now that everything is topsy turvy, he doesn't say such things.

I am however, as those things happen, a small business owner concerned about revenue, paying bills, taxes, employee payroll & benefits. In order to exist I have cut back--employee hours [not rate of pay]and put on the shelf any and all ideas for expansion or buying new equipment. However I am continuing with maintenance projects and making sure that clients receive the best service [which turns out in many cases to be better] than before. Personal pay has been reduced 50%. My goals are to keep people employed and services to clients high. If my business makes it through these bad times, I'd like to maintain the level of discrete money saving techniques I'm using now:
Every employee needs to share equally [in loss-or gain] of revenues & understands the financial ends and outs of the business;
Always maintain a high level of service [respect for others, job-well-done, good follow-through, excellent preformance don't cost anything extra];
Maintain existing equipment and facilities in good condition, recycle and re-use are habits to learn and relearn;
Increase revenue wisely, slowly and incrementally.
Does this help?


Posted Wed, May 12, 5:37 p.m. Inappropriate

Good analysis, Kent, but it's not just the unions and the politicians. When was the last time a bond issue got rejected in Seattle? we, the voters, have given our political leaders the impression that we see ourselves as undertaxed.

kieth

Posted Thu, May 13, 6:54 a.m. Inappropriate

bellringer. Your comment about your Republican father makes me laugh. Maybe we should let BP, TransOcean and Halliburton build the 520 project and let the 'free market' take over. Then we can bring back Joel Horn to manage the whole thing as a public-private partnership. He, of course, will bring in Lloyd Blankfein of Goldman Sachs to tell the public that the whole project will turn a profit by buying the subprime mortgages from the now defunct subprime mortgages that Kerry Killinger sold the people of Seattle the last decade. The subprime mortgages can be invested in Credit Default Swaps used to rescue Greece's financial system.

In the end, the entire economy of Seattle will collapse, the 520 bridge and the deep bore tunnel won't even be needed because taxes and tolls will have to be raised so high that nobody will be able to afford to drive.

All of this will happen just in time for Dino Rossi to be elected Governor. Sarah Palin will be President by then. They will call a joint press conference to celebrate the free market forces that allowed this collapse to take place, then blame the entire project collapse on light rail. Then they'll take Kerry Killinger's private jet to Las Vegas where they can ride the monorail to a Republican fundraiser and book signing for Sarah Palin and watch her pole dance at a strip club.

Posted Thu, May 13, 8:05 p.m. Inappropriate

Excellent article. And to think that Greg Nichols is now teaching at Harvard, given the utter irresponsibility with which he governed this city. This scam of politicians providing payoffs, receiving support from the beneficiaries, and then being long gone when the bills come due--has got to stop. We need leaders with some courage and a modicum of knowledge of economics.

shoreline

Posted Sat, May 15, 11:33 p.m. Inappropriate

I've seen hilly areas that have bike lanes which see very little use. Why do we keep repainting these little-used lanes when most cyclists seem to stick to the flatter terrain such as in the vacinity of Lake Washington? We have roads that need not just pothole repair, but complete repaving. We need to make sure our tax dollars are going towards the correct priorities and that we are not squandering money for the benefit of just a few people.

drizz

Posted Sun, May 16, 11:12 a.m. Inappropriate

Y'know, if these are the best ideas anyone can come up with about this, the mainspring is broken.

Seattle is the city between Vancouver and Portland. Skyscrapers tower, entire neighborhoods bulge with new housing, and mile-long freight trains roll constantly in and out of town with goods and grains. If all of this can't pay the bills, firing a few streetsweepers certainly won't do it.

For decades academic types have pointed out that some policies, like arresting pot smokers, cost us a lot more than they benefit us. Seattle, at least, has figured out that arresting pot smokers is a waste of money. Maybe this policy change contributed to the recent discovery that building a new jail isn't necessary at this time.

The problem is converting good policy into balanced budgets. We know exercise is good health care policy that benefits the people who exercise. Health insurance companies get an indirect benefit, and the City of Seattle, which actually pays for the parks and streets in which people exercise and ride bikes, gets the least measurable financial benefit for the outlay.

As for the overworked baloney about underworked city employees, or the endless moans about megaprojects, couldn't we just assign numbers to these and nod sagely when someone says "And then there's #37" or "But worst of all is #62!" I think we've heard all of this often enough and long enough to know it by heart.

Posted Sun, May 16, 8:01 p.m. Inappropriate

Based on my experience in the corporate world, I'd say Kent is right on in suggesting cuts in middle management and administrative positions. Not only would cutting these high salaries save us money, but you might actually see a rise in productivity from removing the layers of management between those who actually do the work and those who actually make the decisions.

Sean

Posted Sun, May 16, 9:34 p.m. Inappropriate

I guess everyone's inserting their solutions into Kent's commentary. No where in there did I see a solution to Seattle's woes. It appears to be mostly a rant against people making $100K a year.

Should the Seattle have spent less during good economic times? Probably, but to what end? Cities and counties can't squirrel away money for a rainy day. They run balanced budgets and now the insanity of Wall Street is hitting 5th and Cherry. If Seattle had hired less people during the good economic times they would be in no better economic crisis.

2cents

Posted Mon, May 17, 12:33 p.m. Inappropriate

And Seattle played no role in the "insanity of Wall Street"?

afreeman

Posted Tue, May 18, 7:22 a.m. Inappropriate

afreeman -

What does your question mean? It sounds like a baseless comment. So if Seattle played a role in the "insanity of Wall Stree", explain away. Inquiring minds want to know.........

Posted Wed, May 19, 1:42 p.m. Inappropriate

Reverse engineer it: the trading of smoke and mirrors supposedly made the mortgages inspired by government directives less risky, the product Seattle developers produced in response was high end condos and low end townhouse packs. Seattle encouraged both through constant zoning amendments and when even that was held to be too restrictive, it stopped enforcing townhouse access easement requirements and coached micro-permitting, that is, stopped enforcing environmental and design review thresholds. Why? "We need the housing." DPD to press. You can readily see what good this did the townhouse buyer—pick any average development, look the cross streets up on the Assessor's Parcel Viewer, the tiny unit lots are easy to spot on the map that appears, zoom and go to the data for each, see all the huge drops in 2010 values. Not good news: a big mortgage for a home with short term appeal and high difficulty unloading, redeveloping, etc..

As official plans state: the housing we need is new units with as much compatibility and long term appeal as our greenest, most affordable housing—that which already exists . We need it in thoughtful moderation, not in counterproductive over-zealous bursts. A councilmember asked a presenter from Portland how they managed to retain still serviceable houses. Answer: "you have your future use" to high above your current use"

And so on, and so on, unitil enough people question what is being done for the problem that makes it persist.

afreeman

Posted Wed, May 19, 6:30 p.m. Inappropriate

Another anti-car denizen of Bizarro World Seattle.
Cars are bad, density is bad, skyscrapers are bad. Businesses in Seattle should be required to have all employees live in Seattle. Every other street in Seattle should be turned into forests or pea patches.

Perhaps Seattle should accept the guilt of the BP oil spill due to our evil car usage. Maybe we can accept the responsiblity for the Haiti earthquake since it was obvilously set off by Seattle's CO2.

2cents

Posted Wed, May 19, 9:49 p.m. Inappropriate

Seattle along with other booming American cities perhaps does shares some quilt for not relating what was going on at home with similar situations saddling "developing" countries and their citizens with "increased debts incurred for overpriced and poorly planned projects that often provide little benefit to the people or country." (Beyond Developmentality, Debal Deb, 2009).

Hard to tell 2 cents, if you are for or against the marching sea turtles who saw a little farther into the future than one of our better Mayors. I have to admit I came to that understanding after the fact too.

afreeman

Posted Thu, May 20, 9:43 p.m. Inappropriate

The City of Seattle has slashed library hours, raised street parking fees and removed trash cans from parks in an effort to reduce spending and plug city's looming budget gap. Nonetheless, the city has money to burn on a new sockeye salmon hatchery on the Cedar River.

The cost of this hatchery--$40,000,000 to $50,000,000 for design, permitting, construction, the first few years of O&M; costs and scientific monitoring including expensive consultants whose work on this project amounts to brazen biostitution--exceeds all of Seattle's previous salmon recovery projects combined. This juggernaut is rolling forward despite a large body of evidence that shows that three decades of production by the existing Cedar River hatchery has utterly failed to produce a reliable sockeye fishery in Lake Washington.

A search of past news reports and WDFW data indicates that miserably low numbers of sockeye have shown up in the lake MOST YEARS since the existing hatchery started cranking out fish in 1991. Last year only 22,166 sockeye returned to lake Washington, the lowest number record and far short of the 350,000 fish needed to open up a fishery. The current productivity of Cedar River sockeye is far lower that productivity of a set of reference sockeye stocks in BC. Instead of a positive relationship between hatchery production and survival of the released fry to adulthood, just the opposite has been observed in Lake Washington. There also is strong evidence that releasing large numbers of hatchery sockeye into the Cedar River/Lake Washington ecosystem causes density dependent mortality, i.e., lethal competition between hatchery produced sockeye and naturally produced sockeye and other wild fish). Supersizing this hatchery could not only further depress our local sockeye populations, it could also harm Chinook, coho and steelhead in the Cedar River, because every sockeye hatchery that has ever been built has sooner or later run into fish disease problems. Moreover, every dollar squandered on this hatchery is a dollar that can't be spent on habitat restoration, which would benefit all the river's fish species.

In spite of these risks and opportunity costs, SPU clings to the idea that aquatic ecosystems are more or less like feedlots for cattle, so what's the big deal if millions of additional fish are dumped into the system?
Seattle Public Utilities is also ramrodding this project because if it doesn't cracking and build it, SPU has promised to fork over tens of $$$ millions to the Muckleshoots to "mitigate" for maintaining a fish passage at Landsburg for almost a century. Both SPU's ratepayers and fish in the Cedar River are damned if SPU builds it, and damned if it doesn't. This project is just one of many examples of Seattle's long history of stupid natural resource management decisions.

Mud Baby

Posted Fri, May 21, 6:32 a.m. Inappropriate

@afreeman

The city council has a fiduciary responsibility to use Seattle's finances in responsible ways. It is the taxpayer's money. Any loans Seattle made to "developing" countries must be low risk not speculative like Wall Street's crazy derivative schemes.

Mayor Wes Ulhmann is probably one of Seattle's finest mayors; however, you cannot ignore the fact that he was almost recalled by Seattle voters. However, he is responsible for making Seattle what it is today.

I strongly disagree with marching sea turtles I find it inhumane. I believe sea turtles are a federally protected species so any attempt to move them should be illegal. They are not native to Seattle so I don't understand the significance.

2cents

Posted Tue, Jun 29, 7:02 a.m. Inappropriate

A Union that seeks to preserve wages significantly above market levels for all is, unfortunately, no longer a good thing. But Unions are not the biggest problem in this Country, it is the folks who are paying their costs and reaping the political benefits.

@Van Dyk - as a Keynesian we definitely need more projects at this time - but the problem is that we've abused that tool for so long that it itself is a major contributor to the last bubble.

There's plenty of pain left to go around before the economy returns to sanity - slightly lower taxes might be part of the solution - but a much more important need is massively lower real estate prices - including commercial rents.

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