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Treading water on finances: Mayor asks departments to underspend

Mayor Ed Murray is directing departments to withhold spending 1 percent of their 2014 budgets in order to help make up for a $25 million projected annual gaps in the coming two years.
Mayor Ed Murray

Mayor Ed Murray John Stang

To help offset projected $25 million shortfalls in Seattle's general fund during each of the next two years, Mayor Ed Murray is telling all city departments to leave 1 percent of their 2014 budgets unspent.

It is a sign of ongoing challenges in the city's budget, despite an improving economy.

The unspent funds should amount to about $10 million this year, according to Murray's city budget director, Ben Noble. The city will apply that money toward the general fund shortfall for the coming years. Typically, city departments do not use up all of the money that they are allocated in the city budget each year, and have 1 or 2 percent left over, which means the underspending should not dramatically affect services.

The Mayor's Office informed finance managers for city departments about the underspending request last Wednesday.

The budgeted amount of the city's general fund was about $1 billion in 2014. Of that total, $25 million would equal roughly 2.5 percent. While Noble described an anticipated budget gap of that size as manageable, he also warned City Council members in an email last week that the need for underspending highlights "the very real financial stresses that the City continues to face."

"In the language of some budget people, we have a structural problem," Noble told Crosscut on Monday. "We are spending more than we are taking in."

Although the local economy is recovering from the recent recession, the city's revenue growth has remained at a moderate pace — between 3.5 percent and 4 percent annually. The city's costs, Noble said, are rising at about the same rate.

"We can maintain a steady state without necessarily doing institutional cutting," he said. "There isn't a whole lot of margin left, but we can tread water."

The revenues that feed into the general fund are a combination of property, business, utility and sales taxes, as well as other charges, fees and fines. The largest share of 2014 general fund revenue — about 27 percent or $267 million — came from property taxes. In Washington, cities and other taxing districts are not allowed to increase property taxes by more than 1 percent each year.

About 56 percent, or $576 million, of the general fund is currently allocated for public safety expenses, which are mostly tied to the police and fire departments. The fund is also the primary source of cash to for services and amenities like courts, parks and libraries.

There is no one item that can be blamed for the shortfall. Cost increases are occurring in a variety of areas within the budget, according to Noble.

Some examples of areas where increases are taking place are the city's retirement and health care systems, as well as expenses associated with the police department's federally mandated reform process. There are also items like the new administrative costs that will be required to enforce the city's recently passed $15 minimum wage ordinance.

Technically, the city is facing a general fund shortfall this year, spending about $25 million more than it is collecting in revenues. But that difference is covered by about $40 million that was left over in the fund at the start of 2014, Noble said.

Councilmember Nick Licata, who chairs the City Council's budget committee, said that that he understood why the mayor has asked for all city departments to leave 1 percent of their budgets unspent. This approach should be faster and easier to administer than coming up with specific, targeted cuts.

Licata said, however, that the council would take a look at how the proposed 1 percent underspending will affect areas it may regard as critical. And if the requests for spending reductions go any deeper, he said the Council will "need to start discriminating between what departments can afford it and what departments cannot."

Impact fees are one option the councilmember suggested when asked about how Seattle could find longer-term solutions for the shortfall. Cities typically charge these fees to land developers to help pay for items like roads or parks. Licata sees the construction cranes towering in the downtown skyline as a sign that parts of Seattle's economy are booming and he thinks this is an opportunity for the city to improve its finances.


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Comments:

Posted Tue, Aug 12, 7:27 a.m. Inappropriate

So our revenue growth is in keeping with economic growth and tax revenue collections are up, but they just aren't going up as fast as the city government wants it to? And they are worried because they won't be able to expand services (aka spending) as much as they want?

We just voted in a taxing authority to fund city parks and recreation separately from the city budget. The city council just voted for a tax increase to provide pre-K education. We're increasing sales taxes to pay for a shortfall in the county's Metro budget. And this sounds like the groundwork is being laid for tax increases on employees and parking. And I'm sure that there are lots of other little tax increases that I'm forgetting about that have happened in the last year or two. And still, with all this extra money, they are starting to create the narrative for the inevitable next tax increase that they are planning for us.

If Sawant and the rest of the council were serious about helping the little guy then they would be looking at how to reduce city spending and thus give the little guy more money to spend on food and housing instead of spending it on admin assistants and advisors in the Municipal Tower. Increased taxes on parking and employment are just going to be passed on to consumers and are going to make living in the city even more expensive.

talisker

Posted Tue, Aug 12, 8:55 a.m. Inappropriate

Talisker,

No matter what you do or say, there will be fewer and fewer "little guys" in Seattle in the coming years. It's simply too desirable a place to live; in a world of millions of millionaires, a place with mountains in every direction, a beautiful inlet on which to boat, clean air and a temperate climate is going to be popular.

Which means it's going to be expensive.

So no matter what you and folks like Kshama Sawant say or do, the "little guys" are headed for the exits, voluntarily or no.

Anandakos

Posted Tue, Aug 12, 9:48 a.m. Inappropriate

Yes, but if she is going to give lip service to helping the little guy then she needs to walk the talk and find ways to reduce the tax burden on them as part of the whole package. We need to focus more of our money on actual services rather than on a 62-story office building filled with middle managers, admin assistants, and advisors.

talisker

Posted Wed, Aug 13, 9:30 a.m. Inappropriate

Well, first, you're somewhat inaccurate with your information... Voters just approved a Metropolitan Parks District. A taz for pre-K education will be on the ballot in November, and has not been approved yet. A vote to raise sales taxes to pay for Metro will also be on that ballot, and has not been approved yet.

Second, the employee tax Licata mentions was previously approved by voters, and was withdrawn by the City Council at the start of the recession to help businesses while we were going through hard economic times. Why is it crazy to propose bringing that back as the economy recovers? And why is a tax on parking tied to transit a crazy idea?

Finally, the "problem" around here is that we don't have a state income tax, so we depend primarily upon sales and property taxes in Washington -- unlike many other states. The "problem" with our property taxes, is that they are limited to 1% growth per year thank to Tim Eyman. Unfortunately, inflation generally exceeds 1% per year, so the costs of the City's business increase faster than tax revenues.

Mickymse

Posted Tue, Aug 12, 8:20 a.m. Inappropriate

The other day Sawant railed against the proposed utility service charge increases - and then voted for them with the rest of the Council.

Lily32

Posted Tue, Aug 12, 8:51 a.m. Inappropriate

She's a hypocrite? I'm shocked, just shocked.

Posted Tue, Aug 12, 9:26 a.m. Inappropriate

Here, here. If Sawant wasn't spending so much time grandstanding on the Israeli-Palastinian conflict, then she might have time so figure out why Seattle's water rates are so much higher than other cities on the region
http://www.mytpu.org/customer-service/rates/water-rates.htm
That might help some of the low income people that she purports to represent.

WSDW

Posted Tue, Aug 12, 9:36 p.m. Inappropriate

Isn't that cat already out of the bag? I've kept reading where the Mayor is paying higher-than-needed salaries for so-called "public" servants who work for him.

bricsa

Posted Sun, Aug 17, 12:54 a.m. Inappropriate

There is no shortage of money for whatever "progressive" boondoggle comes along. Any claims that spending cuts are needed are completely bogus.

NotFan

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