Many Seattleites, especially sports fans, are still scratching their heads over the mayor's about-face in allowing the Sonics owners to break their KeyArena contract. During the months leading up to the recent trial, Greg Nickels insisted that he would do all he could to force the team to play in Seattle until the lease expired, in 2010. Instead, he took the money: $45 million. The mayor said it was the best deal the city could get, that he wanted to repair Seattle's image with the NBA, etc. But could there have been something else effecting his decision?
Like, say, the city's looming budget crisis?
Over the past several months, as Nickels was playing cat and mouse with the Sonics, the city government's treasury has materially deteriorating. Revenue continue to come in below forecast. Department directors have been told to start cutting budgets — immediately.
We are not alone. Across the country, the economic slowdown is forcing cities to table transportation projects, scale back human services, and rethink new programs. In one Georgia town, police are being ordered to walk their shifts to save gas.
Will it come to that here in Seattle? In some ways, it might be worse. We may be losing the cops, not just their cars. The very public plan to add 20 to 25 new officers next year (as part of a multi-year ramp-up of the force) could get scaled-back or put on hold. "I think we are going to have to take a hard look at that," admits Seattle City Council President Richard Conlin. "Is this the right time?"
After three or four years of adding ornaments to the budget tree, Seattle leaders are now faced with removing some of the decoration. The fiscal holiday is over. At least $25 million will have to be cut from next year's budget. And that assumes nearly that much belt-tightening can happen by cutting the current budget, creating a two-year hit of close to $50 million. Those cuts will come straight out of the $900 million General Fund, which provides money for basic city services, including police, fire protection, and parks.
How much would that $50 million buy? It's 500 police officers for a year. It's all 27 branch libraries open for over three years. It's the whole street-cleaning budget for almost 14 years. Of course, any cuts will be spread over many services to minimize the impact, creating lots of little wounds instead of one big gash. Still, you can see why the mayor and City Council are extremely anxious about the city's fiscal condition. It's the first time in a few years they'll really have to say "no."
Or could they say "yes" by raising taxes? Not very likely, given that Seattle's taxing sources are pretty much at their legal limit. And it's rare that politicians impose tax increases during an economic downturn. So slashing spending is the only practical solution.
A little Budget 101. The four main tax sources for Seattle are sales, property, business and occupation, and utilities. The sales tax, which accounts for about a quarter of the budget, is affected by consumer spending. It has not turned negative, but the growth rate of spending is way down. Also hurting things is the real estate slowdown. The city gets a small piece of the action every time a property gets sold (a real estate excise tax, or REET). Fewer transactions means fewer dollars. In 2007, the tax generated about $70 million, quite a windfall during the recent years of the real estate boom. However, this year it's expected to be only half that much, $35 million. Next year, it could be down even more.
The bottom line: City Hall will take in less this year than it did last year, and probably less next year as well.
Meanwhile, city expenses keep going up because of inflation of roughly 5 percent for government services. What makes things particularly hairy going forward is that city leaders had been planning to increase spending next year. The most notable addition is the generous new contract with the Police Guild, which will increase pay by roughly one-third and add about $8 million to the budget. And, of course, there's that very public commitment to hire 20 to 25 new officers, costing another $2 million to 2.5 million. You can just feel the wrath of the math.
It won't be the first time Nickels has had to face tough budget choices. He was elected just weeks after 9/11 and spent the first two years making hard cuts, to the tune of $125 million. By the time he ran for re-election in 2005, he was comfortably back in spending mode (right where you want to be, politically speaking). The current round of cuts, while not as big, are poorly timed, since Nickels is up for re-election next fall.
There's another big unknown that could make things even worse. Its name is Ron Sims, King County executive. The city is usually considered to be "downstream" of King County, meaning that whatever mess the latter throws into the social river quickly becomes a problem for Seattle (and other local jurisdictions) to clean up. If King County, which has a $68-million budget bugaboo of its own, ends up closing some health clinics (likely), Seattle will inevitably be called on to provide relief. Same with courts. If the county raises the standard for felony crimes to reduce caseloads in the courts (likely), the city will be faced with lots more misdemeanors cases — and lots more costs. Each of these could add millions to the city's current crunch.
Maybe that $45 million Sonics settlement makes sense after all.