Smart budgeting needed in a city with jobs problem
The city of Seattle has been losing jobs while neighboring King County gains. And the city is resisting the kind of tighter budget practices that would help it live within its growing (yes, growing) general fund revenues.
Chuck Taylor/Crosscut Flickr group. Copyright.
It's not news to anyone that employers are still not hiring, and consumers aren't spending. In the shipping industry, this is our busiest time of year as retailers restock inventory and prepare for the holiday season. The increase is temporary however, and there are signals that we are in for another drop — whether we drop as far as last year’s historic lows is yet to be seen.
We are seeing unemployment numbers clicking up again, and we hear the warnings of a double-dip recession. The fragile economic recovery of the past six months calls for thoughtful public policy at all levels of government. Government spending should follow some simple but powerful criteria: 1. Does it help create jobs in the private sector? 2. Is it necessary and timely or can it wait for better times?
The past decade has been bad for the City of Seattle in terms of job growth. We had 30,000 fewer jobs in the year 2009 than in 2000. Of those 30,000 jobs, 21,000 were lost in the Downtown area. Areas outside of Seattle — within King County — had 15,000 more jobs in 2009 than in the year 2000.
According to a study commissioned by the Seattle Business Coalition, Seattle lost 8,900 jobs during the boom years from 2000-2008, while the rest of King County added jobs.
We in Seattle should ask ourselves how we can reverse this trend. If we’re trying to get people to live where they work, we're going to need jobs here in Seattle.
What do businesses consider when they're looking for a place to locate? They consider customer base, quality of life, costs and taxes, transportation, and other factors. Because Seattle is a great place to live we have been fortunate in being able to attract businesses. We also have a natural deep water port and a transportation system that — while a work in progress — has historically been effective at moving people and goods.
So why are we seeing job loss in Seattle and job growth in other parts of King County and how do budget and spending decisions impact this reality?
First, we know that we have a $56 million shortfall in the general fund for 2011. This fund pays for police, fire, parks, transportation, libraries, and other smaller departments like Department of Neighborhoods, Office for Civil Rights, Arts, Office for Economic Development, and others.
Although there will be a deficit in the general fund, it should be noted that the fund will actually grow for 2010 to 2011. The $908 million in GF revenue that the city projects to collect in 2011 is 45 percent greater than the revenue the city received in 2001. Adjusting for inflation, the 10-year increase is 18 percent. The city is projecting to collect more revenue in 2012 than what they project to collect in 2011.
Most individuals and businesses have actually experienced revenue decreases during the downturn. The port of Tacoma was forced to lay off a quarter of their workforce last year. Companies that survive the downturn are doing more with less.
This is a common story in all sectors of our economy. People are making decisions to position their companies to be in a competitive position when the economy heats up again. Analysts in the shipping world have long predicted that we would still be bumping along the bottom for the balance of 2010.
So, how is the city of Seattle responding?
The mayor and city council are going to hire a consultant to do a $600,000 transit study. I am amazed that there has been little questioning of this expenditure given that the city of Seattle doesn’t actually operate a transit system. But beyond that, does it make sense to spend this money at a time of budget cuts and fiscal restraint? The most we'll get is a wish list that sits on the shelf.
Any transit analysis should be paid for by Sound Transit, Metro Transit, and the Puget Sound Regional Council. The first two actually operate transit systems and the PSRC has federal pass through dollars — two thirds of which go for transit. Is this an effort to grow political support to establish a city transit system? If it is, it’s an even worse deal for taxpayers.
How many cops could be hired for $600,000? How many library hours does that represent?
There are many other ideas for how the city can live within its budget. How about consolidating information technology functions across the 22 city departments? Why does every department have to have its own IT function? Not only would this reduce staff and save money, it would also reduce the number of meetings where each department discusses how to coordinate IT help desk functions. There are currently three separate IT help desks for city departments — Seattle Public Utilities, City Light, and everyone else. Why not consolidate these functions?
Instead of giving departments a budget number and direction to make cuts to meet that number, why not try zero-based budgeting. This is precisely what the city of Bellevue is doing. Every department is being asked to build their budgets from the ground up.
Seattle should embark on the same exercise, although I suspect it's too late in the budget process to do it this go-around. Normally, the budget is mostly done by now with the mayor's senior staff and department heads making minor tweaks before sending to council. Traditionally, the council then will make minor tweaks as well.
But we have never had the zero-based budget exercise in any meaningful way. Most of the effort is spent trying to figure out how to grow revenue.
My concern is that without an honest effort to live within our means at all levels of government, the public at large will not support tax increases of any kind. And we may need to increase taxes. But without clear evidence that government is prioritizing and operating efficiently, it’s hard to ask families squeezed by the recession for more money.
And if it's all about raising revenues and not about efficiency, businesses will look for greener pastures. The evidence points to this already occurring. To be clear, fewer businesses, fewer employees, equals less revenue for government, and fewer services. That is a fact of life that some of our neighboring cities have taken to heart. We should too.
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Comments:
Posted Wed, Aug 25, 7:22 a.m. Inappropriate
How any cops could you fund for $600k? Four, maybe five- not that many for a day that has three shifts.
A good transit plan, on the other hand, is part of a healthy diet for growing cities.
It's not too hard to understand, though, that the Port of Seattle might want the City of Seattle to trim the city budget, seeing as they tax, directly or indirectly, the same people.
This whole "inefficiency of government" thing has become a drum that gets beaten mindlessly on any occasion. The most probable cause of Seattle job loss is not inefficiency of city government, but a major recession brought on by the massive failure of the people who most liked to lecture us on "government inefficiency". Give it a rest.
Posted Wed, Aug 25, 9:11 a.m. Inappropriate
Mr Royer,
This seems to be an article about two separate things: job losses in the City of Seattle over the past decade and a laundry list of steps the City of Seattle could take to possibly increase efficiency. The two seem unrelated. You don't even try to prove the case that city taxes or government is the reason that jobs are moving to the suburbs. How does a shortfall in the City's revenue this year lead to job losses over the past decade? By the way, where did your jobs statistics come from anyway? Can you give us an example of the relative level of taxation in Seattle and Redmond? What other suburban cities are experiencing revenue shortfalls? This article is a meaningless word salad that proves pretty much nothing at all.
Posted Wed, Aug 25, 10:16 a.m. Inappropriate
So, it's now official, Nickles truely FUBAR'd this city.
Posted Wed, Aug 25, 11:28 a.m. Inappropriate
Seattle's slightly reduced percentage of jobs isn't a major problem. Our percentage of metro jobs is actually pretty high, which is all the more impressive given that large scale commercial development has very few potential locations in Seattle, and even then land is expensive and entitlements are difficult.
We've actually retained jobs very well in many sectors. Major office and science tenants continue to move INTO Downtown Seattle from the suburbs and from other Seattle neighborhoods, with employee recruitment/retainage (related to transit, lunch places, etc.) and proximity to other firms being major reasons according to the firms themselves (often outlined in the contractor RFPs that cross my desk). Industrial and transportation employment is presumably the largest source of the drop, due to move-outs to the Kent Valley et al. Efficiency pushes have happened in probably every industry.
I agree with serial_catowner that transit planning by the city is smart. Seattle does have a role...Sound Transit and Metro are both strictly limited in how much transit they can add within city limits, and the City needs to pick up the slack.
Posted Wed, Aug 25, 12:19 p.m. Inappropriate
This article raises awareness of some intresting points.
Jobs: On one hand everyone is begging for more jobs....but want to cut city jobs. I wish more attention to agruments against city/state/county jobs wern't based on popular resentment. The author used to work for the city and I'm assuming when he did, he thought his job was pretty important.
Centralization vs Decentralization: The City seasonaly swings between the two, all the time like El Nino or La Nina... I guess the city is in a centralization mood. The philosophy beind citywide centralizing of IT lends itself to the broader notion that any city employee should be universally trained and able to meet basic job qualifications across city departments, which could allow the city greater speed & flexibility to up or downsize accordingly. Centralizing IT is worth a look...as is centralizing Human Resources, Fleets, Admins, Supervisors & Managers.
Posted Wed, Aug 25, 3:04 p.m. Inappropriate
Wow; another transportation study and another $600,000. Conclusion: not enough sharrows and bike lanes; who is getting the $600,000 contract?
Posted Wed, Aug 25, 10 p.m. Inappropriate
Mr. Royer asks the question, "So why are we seeing job loss in Seattle and job growth in other parts of King County and how do budget and spending decisions impact this reality?" but then never seems to answer it.
In one section, the stated budget criteria would focus on job creation while the whole premise of the article seems to be around making Seattle more attractive compared to other King County locations. There is a big diffrence between helping to "create jobs in the private sector" and considering what "businesses consider when they're looking for a place to locate."
Mr. Royer then talks about a projected budget shortfall of $56m and then a $600,000 transit study. But, skip the study, and you are still looking at a $55.4m shortfall.
Budgeting requires making tough decisions between competing priorities. Yes, government should always strive to become more efficient and effective. And there is likely to be some savings that could come from the IT arena. But there is no system of "smart budgeting" in either the private or public sectors that makes those decisions automatic. The debate within the comment thread (and Mr. Royer) on whether the study should proceed is evidence of that.
Posted Thu, Aug 26, 12:28 p.m. Inappropriate
I've floated this idea before but why not consider selling Seattle City Light and use the proceeds to endow parks thereby freeing up a large part of the city budget for basic services and oh yes, tax cuts.
http://clearfogblog.wordpress.com/2008/07/29/sell-seattle-city-light-endow-parks/
Posted Sat, Aug 28, 10:49 a.m. Inappropriate
Wepbesp:
Interesting idea and there all sorts of reasons to both love and hate such an idea.
A few additional points you may wish to consider:
a) Seattle rate payers would almost certainly see a pretty meaningful rate increase. (The new utility would need to provide a return to investors, pay off the large debt they incurred in purchasing SCL plus any effective tax rate differences). For example, PSE rates have historically been significantly higher than SCL rates.
b) Could you come up with $3b(your figure), in cash (not in an ownership interest in the new utility), from the private equity market? If so, at what rate and transaction costs? (The higher the rate, the more utility rates discussed above would increase)
c) It seems very unlikely that an endowment could earn the 5% to 10% return that you assume (unless that is on a very long term horizon and you are will to tolerate more than a fair amount of risk). In addition, shouldn't the net earnings available for other uses be calculated after inflation (otherwise the net present value of the endowment in the out years is much less than it is in the first few years)? I think that rate is likely to be closer to 1% to 2% (getting you $30m to $50m per year; assuming the $3b)
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