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Good morning.

The March 3rd, 2026 Finance Native Communities and Tribal Governments Committee meeting will come to order.

It is 9.30 a.m.

I'm Dan Strauss, Chair of the Committee.

Will the clerk please call the roll?

Council President Hollingsworth.

Here.

Councilmember Kettle.

Here.

Councilmember Sacca.

Vice Chair Rivera.

Present.

Chair Strauss.

Here.

Four present, one excused.

Thank you.

And before we get going today, today is Megan's last day with the city.

She's graduating into a bigger and more important position, so just take the moment of appreciation for all of the work that you've done for city council over the last two years.

Thank you, Megan.

and we'll rum...

Yeah, thank you.

And with that, we are gonna move into the two items that we have on the agenda today.

Both are presentations, there are no votes.

The first presentation, and we've got council member Saka here with us in person.

We have the first item, which is the city of Seattle levy capacity update.

And the second is the 2019 to 2026 budget overview or review.

If there's no objection, the agenda will be adopted.

Hearing no objection, the agenda is adopted.

We'll now open the hybrid public comment period.

We have two people signed up.

Public comments should relate to items on the agenda today and within the purview of this committee.

Clerk, how many speakers are signed up today?

Currently we have one in person and one online.

Wonderful.

If the in-person wants to come up to the microphone as we are, reading the instructions, although I see reduced arterial.

This is not the Transportation Committee, so just make sure that you're talking about the levy capacity or how we've spent our money over the last seven years.

I'm going to read the instructions and then I'll call your name.

This year we have new rules regarding public comment if there are less than 30 people signed up each person will receive two minutes if there are between so in this case we Will provide two minutes.

We have two people signed up to give public comment each person will have two minutes start with in person first and Public comment will be moderated in the following manner period is up to 60 minutes speakers will be called in the order in which they registered and speakers will hear a chime when 10 seconds are left of their allotted time and speakers' microphones will be muted if they do not end the comments within the allotted time.

With that, the public comment period is now open.

We have Shelly Morrison in person and Loom G. Loom, I'm sorry for not pronouncing your name correctly, but with that, Shelly, welcome.

Just please make sure that you're talking about the budget.

It does impact the city's budget, yes.

So I apologize if we weren't informed that it has to be specifically on a specific topic, but.

Megan, pause the time real quick.

I'll just provide additional context.

This afternoon, the full city council meets at 2 p.m.

and that's where we receive comment on anything really under, you know, under our purview.

Oh, I'm so sorry.

For our committees, we ask that public comment is related to items on the agenda of the committee.

And so there's a couple of different options, but I.

Should I come back at 2?

Yeah, but I'm also gonna give you the rest of your time if you'd like to speak about whatever you are speaking about, as long as it relates back to the budget.

That's all I'm asking.

I'm Shelley Morrison, and I am speaking for Coexist Lake Washington.

It's an all-volunteer group of residents and businesses who rely on Lake Washington Boulevard and the other major roads in District 2. We're concerned about SDOT's using misleading data and imbalanced outreach to push through plans that are not community-based, but driven by well-funded advocacy groups.

Barely used bike lanes have reduced our arterials and created congestion.

Pardon?

The budget.

Yes, okay.

We are asking the council to slow down before converting more arterial expensive bike lanes on our arterials and demand accurate data and ensure community outreach.

We have seen no cost-benefit analysis of what has already been built, and so we're just asking the Council to be thoughtful and slow down before using more city money to make more major changes, which is causing more pollution, it is causing more congestion, more stress, and mass transit isn't always the answer, but we're hoping that more of the community will be involved instead of just the special interest groups that are advocating for more bike lanes.

That's not what I wrote, but off the cuff.

Is it enough on budget?

My concern is the new bike lanes aren't being monitored, so we don't even know what was...

on Columbia and McClellan and Van Asselt, and we don't know how many people are using them, but we don't see any, so thank you.

Should I come back at 2?

Thank you, Shelley.

We have another public comment period at 2, and I believe that Councilmember Sokka and I switched time slots, so this used to be the time slot for Transportation Committee.

It is now the Budget Committee, so that might be part of the confusion.

Okay, thank you for the information.

Yes.

We'll now move to online public speakers.

As a reminder, I would say that please be a little bit more tied into budget, Mr. Loom.

But I see you are being promoted now.

Star six to unmute.

There you are.

You're off mute.

Two minutes.

Take it away at your convenience.

Okay.

I think I also should come back at two because mine is not related to budget.

It's related to housing.

I'm sorry.

Okay.

Not a problem.

Thank you.

I really appreciate everyone's attention to the committee's purview.

And with that, seeing as we have no additional public speakers present, we will move on to the next agenda item.

The first agenda item before us is regarding the City of Seattle levy capacity.

We have Director Ali Panucci, Joe Russell, and Alex Zang from the City Budget Office.

We have Dwight Dively, our Interim Director of City Finance, and then Calvin Chow and Tom Mikesell of our Council Central staff here to do a joint presentation across all three departments.

if you wanna help them get the presentation set up.

I'll turn it over to the committee table for introductions.

Colleagues, as we shared yesterday during council briefing, we're gonna keep focused on our levy capacity.

Specific levies such as the library's levy may be touched on just because it is right before us, but potential levies such as Seattle Center or Pike Place Market we should save for an additional briefing because today's intent is to give us all an equal foundational understanding of where we are at with our legal levy capacity.

And so I see that we've got screens shared, so I'm gonna pass it over to Director Panucci to start introductions down the table.

Director.

Morning, Chair Strauss, council members, Ali Panucci, City Budget Director.

Good morning, Alex Tsang, City Budget Office.

Good morning.

Joe Russell, City Budget Office.

Dwight Dively, Acting, City Finance Director.

Tom Mikesell, Central Staff.

Calvin Chow, also Central Staff.

Wonderful.

And with that, take it away.

Colleagues, if we could hold our questions to the end, and then I'll give everyone time to ask questions.

Please take it away.

Thank you.

Well, I'll just sort of set the table a little bit, which Chair Strauss mostly already did, but we are here today to talk generally about property taxes and levy capacity.

This is to inform decisions that will or may be before you this year, and so we wanted to sort of all start from a shared understanding of where we are in terms of our property tax levies and the capacity that the city has left.

I just want to take a moment to say thank you to the collaboration.

I think this has been a good example of what we talked a little bit about my confirmation where The budget office, central staff and city finance have worked collaboratively to come to an agreement, share our assumptions, think about different ways of going about the analysis.

So really appreciate the engagement and thanks to Chair Strauss for helping facilitate that.

So today we're gonna just go over some property tax mechanics and then talk about the city's remaining levy capacity informed by previous decisions.

that have been made for some of our other levies.

And with that, I'm gonna hand it over to Joe, and then I'll just invite my colleagues at the table from all the different offices.

We'll try to pause, but also just, if you wanna add something, please jump in, stop us, that sort of thing.

Thank you.

Thank you.

So I am going to speak to the first half of this deck, and then I'm gonna pass it to my teammate here, Alex, from the budget office to take us through the second half.

So in the first half of this presentation, I'm going to focus just on some basic property tax mechanics, particularly focusing on the city's regular levy and the cap that we face under state law for that levy.

We're also going to get into some math here about how it's calculated, because that's important to understand as we are approaching a legal cap on those levies.

Then I'm going to pass it to Alex, who's going to say more about an estimate for exactly how much capacity we believe we have left and some essential assumptions to get to that point.

And I'll reiterate that these slides were prepared in collaboration with our colleagues from City Finance council central staff, so I invite them to cut me off or chime in any time they have a comment or a clarification.

So looking now at this lovely pie chart, I wanted to start here because I think this grounds us in exactly what we're talking about under the city's regular levy.

I'll draw your attention to the one-third here, which that gray area is about a third of this pie, which is the city's general expense levy.

That is general fund, for any purposes the city sees fit, it is about a third of our regular levy.

Then the rest is made up of these five special levies that we call lid lifts, and I'll get into that terminology on the next slide.

But you can see that the largest of those five is families in ed, followed by transportation, housing, and then the smaller library and much smaller election vouchers levy.

This pie represents 2026 property tax collections, so this is a moment in time, the current moment we are in now.

So again, the one-third of that pie was the general expense levy.

This is non-voted, meaning it perpetually renews.

However, under state law, it is capped at 1% growth, 1% plus the value of new construction in that year.

The lid lifts, or those other five levies, allow us to surpass that 1% growth mark.

And those five levies are listed again here.

They are called lid lifts because the 1% growth cap is considered the lid, and they allow us to simply lift that lid in a given year.

So that's why we call them lid lifts.

However, there's a limit, and this is the focus of this presentation.

State law limits us to $3.60 per thousand dollars of assessed value for our city's regular levy.

In 2026, we were at $3.02.

So that suggests that we are not at the limit, but we are somewhere approaching it.

And so we wanna focus on how much we have left and what can be done This does not include, the bottom bullet here says, there are other city-imposed levies that are not included under this cap, under what we call the city's regular levy.

That includes the Alaskan Way seawall bond and the Seattle Metro Park District levy.

That is a special levy that is allowed to be outside the cap under state law.

so those are not included in this regular levy that we're speaking to.

So I wanna go through some of the fine print, if you will, on how these lid lifts work and what's required of them.

They require a simple majority of Seattle voters to pass.

They can be used for any purpose, operating or capital expenses.

The annual amounts that we raise or the inflation of these special levies each year is dependent on the duration of those levies.

So these levies can inflate by more than 1% per year if the duration is six years or less.

If the duration of the levies is longer than six years, we are limited to the 1% growth cap.

The city has generally opted for the latter, to do levies that are longer than six years and limit their growth each year to 1% or less.

The city has generally defined in our ordinances that we are gonna collect essentially a flat amount each year of these special levies.

And our levies currently are somewhere between six and 10 years.

In fact, I believe they are all longer than, they are all under this paradigm of a relatively flat collection amount each year.

So, and then we state again here, and you're gonna hear me say it on the next slide too, that we are capped at a growth rate of $3.60 per thousand dollars of assessed value.

Now, you may say, well, we're collecting millions of dollars, how do we convert this $3.60 to something meaningful for us?

And that's what we're gonna get into in this next slide.

There is some math on this slide.

I don't mean to traumatize you with algebra here, but it is important to understand how that $3.60 is calculated.

This is the formula here for the tax rate.

What's important to understand here is that the tax rate is really an output.

It is the result of the right side of this equation.

There are two variables on that right side.

the collection amount and the assessed value.

The collection amount is really predetermined.

It is based on, it is capped generally at the 1% growth, and it is determined by an inflation rate that is published by the Department of Revenue every year.

And assuming that that inflation rate is higher than 1%, we are capped at 1%.

So it's relatively stable, it's relatively predictable.

The assessed value, is the less predictable variable.

And so we want to spend some time both here in the bottom half of the slide and then in the next slide talking about the variability and the unpredictability of assessed value and what that does to the potential for the tax rate to move up and down.

So assessed value is determined by the county assessor every year.

Growth in the assessed value, and this is where the algebra comes in, growth in that assessed value means a decrease of the tax rate, which means we have more room under the cap.

It means we have more levy capacity if assessed value goes up.

It's the denominator, so its growth means the tax rate actually goes down.

But it doesn't affect collection amount.

Again, those two are sort of independently determined.

So if our assessed value takes a big jump up, we don't suddenly get more collections and revenue that year.

However, it does affect this tax rate, and therefore it affects how close we are to our legal limit.

Likewise, a big drop in assessed value doesn't affect our collection amounts, but it will cause the tax rate to suddenly increase, and that decreases room under our cap, and if we're very close to that cap, it could potentially cause us to surpass that limit.

So for this reason, we advise that the city keep a buffer or some reserve so that we are not at risk of going above that 360 suddenly because assessed value is out of our control.

And we're going to show you some of the historical variability in it and help you understand why.

a sudden change in assessed value could have risks as we get close to that legal limit.

So I'm gonna pass it here to Alex, who's gonna walk us through assessed values, legal limits, and then talk about the calculation.

Sorry, I'm gonna pause here.

I just wanted to underline, especially for people who are viewing in, that Washington State is, unlike many other states where you increase the rate and you gain more revenue that way, we are increasing the amount of collections and the rate is backed in.

And so that is partly why it's more difficult for us to explain this concept and why it's also so important because a lot of this is out of our control in terms of how the rate affects us.

It's in control of what we collect, but the AAV calculation is not.

Okay, so moving on to the crux of this topic, which is the capacity.

So first, since assessed value or AV plays an outsized role in determining levy capacity, we wanted to show kind of how AV growth has looked historically in recent history.

So there is a lot going on in this chart, so bear with me.

The dark blue line that turns dotted in the later years is the actual amount of assessed value per year.

So as you see in 2026, the assessed value in Seattle is $306 million, about $306 million, or sorry, billion, billion dollars.

and then the orange bars are showing the percent growth year over year.

So you can see in the early 2010s and in 2024 and 2025 is when we experienced some AV declines.

In between those two periods, however, we had seen remarkable AV growth.

And one point we're trying to make here is because AV determines our capacity, we did see tremendous growth in our capacity in those sort of later 2010s.

However, we may be entering a new normal right now.

And so the other two key points we wanted to make through this slide is first, we don't anticipate seeing that kind of growth that we experienced going forward, at least in the medium term.

And so that's going to start constraining our levy capacity.

We'll show a bit more of that in the next couple of slides as well.

And this is, I mean, this is given that there have been pressures weighing on the real estate market, high construction costs, high vacancy rates, those really are all dragging down the commercial sector in particular.

So the official city forecast right now is about 5% in the out years.

which as you can see is quite a bit lower than historically.

The second main point is because we are getting so close to the cap and we do see that these economic shocks, so the financial crisis as well as the pandemic has led to drops in AV to mitigate what declines may happen in the future, and they probably will.

Both CBO and Council Central staff recommend adding a 10% capacity reserve, which is essentially a buffer in case, as Joe said, AV drops, and that pushes us up even closer to the limit of 360. And I can go into a little bit more about how we calculated this 10%.

And maybe it just bears iterating that If we do suddenly surpass that limit, we would have to reduce our forecasted collections for these levies.

So we would suddenly be seeing substantial cuts to what we had planned to spend for these promised levies.

Going to the next slide.

So we've done some modeling to estimate how much capacity we might have in the medium term in the next about seven years or so.

So we've calculated a remaining levy capacity of approximately 780 million over the next seven years.

That's about an average of 111 million per year.

There are some key assumptions that we need to make to be able to forecast what we might have under our capacity.

And so the first one is of course AV growth, right?

So that's again what determines both our capacity and our current tax rate for the regular levy.

And so, as I said, the city's official forecast is a 5% out-year growth.

We've decided to be a little bit more conservative here and use 3%, given what I've mentioned about the economic pressures that are dampening the real estate sector, commercial in particular.

And so this is just simply trying to minimize the downside risk to us in the next few years.

The second key assumption is our current levies will certainly be up for renewal.

The housing levy is going to be the first one, and that would be in 2031. In this particular scenario, we've assumed that all of our current levies would renew and would only keep up with inflation in the next renewal cycle.

So there are obviously infinite different ways we could model this.

We could model this by assuming they could keep up with both inflation and population growth.

We can double them, we can triple them.

Obviously, it's important to note during the last renewal cycle, all of our levies have renewed at least twice the amount, if not more.

So this is certainly a conservative assumption the other way around, in that it's always a possibility they would renew for higher.

However, I mean, the important thing to note is, again, AV growth is mostly outside of our control.

at what size the existing levees renew is a purely policy decision.

And then this third recommendation that we've already talked about a little bit is this capacity reserve of 10%.

So we've built that into this model as well.

And 10% is essentially the largest EV decline we experienced during the financial crisis.

And so that's the benchmark we wanted to use.

Another key point is that this remaining capacity of 780 million would need to cover any renewal of the library levy.

So the library levy is not outside of these assumptions.

So for example, if the library levy renewed at $500 million, there would only be 280 left for other needs.

I'll just add here, it is just an illustrative example.

This is not a proposal of the library levy.

Just want to make that extra clear given that that proposal will be coming forward very quickly.

So just want to make sure that's clear for the record.

Tom?

I just want to point out with regards to the assumptions being made here.

So by way of only assuming inflationary growth and not population, so if the levy is, say, an eight-year levy, you're not including the accounting for the fact that the population is going to grow each year over those eight years.

So then when you're renewing, the amount that you can renew on a per capita basis is lower.

So just, I mean, it's in intuitively makes sense, but I just want to point that out, that there are more conservative approaches that can be taken in this exercise, and this is just one possibility.

And that logic likely drove why the renewals were as high as they were, I mean, at least in part, so.

And this is sort of a visualization of what I just talked about.

There's also a lot going on here, so I'll walk through it.

So the colored sections of the bars represent the different parts of the regular levy.

The green at the very bottom is the general expense.

Like Joe said, it's about a third of the regular levy.

at least for now.

You have families in ed, you have low income housing, transportation, library.

You do see that, for example, going from 23 to 24, the purple section that represents housing, you see that get much bigger.

And that is a result of simply the renewal that happened in 2023. The same goes for families in ed in 26 and transportation in 25. So you can see up until about 2024, which was the last renewal cycle, we had a good amount of space under our cap.

Sorry, so our cap is represented by actually the purple line.

The top purple line is the 360 per 1000 AV.

The blue line that just bumps that down a little bit, that is what we're saying is sort of the cap in practice.

That's incorporating that 10% buffer that we talked about, and so that simply shifts the cap down to, again, mitigate that risk of AV dropping.

And so you can see, starting in 24-25, our growth in the regular levy has far exceeded the growth in the cap.

And so we are now quickly approaching the cap.

And the gray dotted line that kind of deviates from the blue is actually just showing the assumption of 5% AV growth.

So of course, if you have higher AV growth, you do have increased growth in the cap.

And that's just the less conservative assumption just to show you what that looks like.

and so that growth obviously compounds year to year.

So this green or light green hatched section at the top is representing this remaining capacity we have, which basically bumps up against that blue line and that remaining capacity is about 780 million over seven years.

Again, some of this will need to be used for the library levy.

So I'll just reiterate sort of building on what Alex is saying and what Tom said is that there are a lot of different ways we could sort of present this in terms of the assumptions.

We're being moderately conservative as Tom described.

We could be much more conservative based on sort of past practices of levy renewals and population.

taking into consideration population growth.

A lot can change between now and 2033, right, in either direction.

So we'll continue to monitor this year over year.

But in the short term, we just advise sort of keeping this in mind as we're making decisions about any levies that are before you or new ideas, because there we are sort of, no matter how we cut it, it looks like we are at risk of bumping up against that cap unless we see a

I think the 5% underlines that even if that were to occur, it would take years of that growth to actually move the needle significantly.

In the near term, we are under this cap.

And then this final table is simply also similar to the pie chart showing the relative sizes of the pieces of our regular levy.

And so the first column is the levy name.

The second column is the annual amount for 2026. And this is ordered by that annual amount.

So the general expense is the largest followed by families in ed and transportation.

housing library and election vouchers.

We also show the total amount of the levy over the duration of the levy.

And so you can see that transportation is actually the largest levy at $1.5 billion.

However, due to the fact that families and education is only a six-year levy, that just increases the annual amount.

And so transportation looks a little bit smaller.

and then we have the duration in years and then the next renewal date.

Of course, libraries is up this year and then we have sort of this respite before housing goes up again in 2030. Then this is just a brief calculation of the remaining levy capacity of 780. That would be about 109 in the first year if we're assuming the seven-year long levy or multiple seven-year levies, I guess.

and we do have this fine print at the bottom just emphasizing that these are all estimates.

There are a lot of variables in here that could change even by the April forecast because we will get a new assessed value forecast at that time.

This is the information, working from the information we have now.

I will just say that these are long-term decisions, obviously.

It is difficult to forecast, even two years ahead.

But seven years ahead is a whole other kettle of fish, so to speak.

So yes, as Alex said, there are a lot of variables that can change, even year to year.

But we think these are reasonable assumptions to make at this moment in time, to give a reasonable snapshot of where we think capacity is.

That's all that we have for our slides today.

I think we're ready for any questions that council members may have.

Wonderful.

And while we opened up this meeting with congratulating Megan on graduating to her next position, today is also the first time that Director Panucci is here as a fully confirmed Director of City Budget Office, as well as the first time that we have Mr. Dwight Dively back with us.

I believe this is the first time at the committee table that you've had in a number of years.

Before we move on to the questions and answers, just want to check in to see if there's any other closing remarks from either central staff, Mr. Dively.

Nope.

Wonderful, I'm gonna just ask three questions off the top for framing and then colleagues, I'm gonna give you the rest of the time and I've got some more questions that I'll ask at the end if time permits.

First, if we could go back to slide 11 regarding area value Colleagues, area value as we've just heard is what determines our ability to collect.

So if the value of the land in our city goes up, we have more ability to collect.

If value of our property of the land in our city goes down, we have less to collect.

I appreciate that the projections are made at 3%, which is less than the forecast.

However, I am concerned that growth may be closer to 2% and that is just in the last year and a half, two years, we expected slow growth to begin and then instead we got tariffs from the Trump administration, right?

And so we were expecting slow growth to begin much like a few years ago and we're just now starting to get to it.

So my concern is that 3% may be even too high.

So I guess this gets to my, I guess I only have two questions.

If we have negative land value, like downtown has been losing land value over the last six years because of the office space vacancies.

We're only buoyed by our residential areas.

What happens if area value drops to a point that, you know, and we have existing levies that are already at or exceeding the cap, how are reductions made to levies?

So the reduction, it follows a pretty formulaic approach that DOR has come out with.

It's called pro-rationing.

Essentially, it ranks certain levies so that if you exceed your limit, it starts sort of with special districts.

So for example, Metropolitan Park District would actually be hit first and then it goes kind of down the line.

I think when it gets to the regular levy, there's a choice as to how we spread it among the different parts of the levy, but we would get, simply get knocked down to 360.

I mean, I'd say it essentially becomes a budget discussion because we have choices within these and we would have to decide where do we want to take the revenue hit.

Just to add a complication not to get into all of this, there are also limits in the state constitution and in state statute on how levies imposed by different governments add together.

And so there become possibilities if assessed value declines significantly where the sum of levies from the city, the county, any other special districts like the Metropolitan Park District get to some of these other state-imposed limits.

And so that's when these state law prorationing things come into play, because it sets an order of who has the ability to maintain their levy and who has to start giving away some of their capacity.

If it's only the 360 limit that's affected, then as Kelvin says, it is up to the mayor and the council to decide how you prioritize between the general fund and the levy lid lifts.

Thank you.

And just as a reminder, this is my last question, then I'll turn it over to colleagues.

Currently, it says on slide number 10 that the city has a remaining levy capacity of about $111 million per year.

That's the assumption of a 3% growth.

do we know what a 2% growth is?

Is it just 75 million?

And with that, what is the required buffer of that?

Is it then just $10 million or $11 million or is it really just that simple?

What is our amount left if we have less growth and what is the buffer that is required for it?

So our recommendation of the capacity reserve of 10% doesn't change because it's benchmarked to sort of the worst we've experienced, which was during the financial crisis.

But yes, bumping it down to 2% growth would certainly shrink the remaining levy capacity.

We can definitely run those numbers.

Okay, so I guess that's my call out to colleagues that they're saying 111 and I'm saying until we see our economy really start moving again, I think that's even, I would put a more conservative number to that.

But with that, I see Councilmember Rivera and then Councilmember Kettle.

Thank you, Chair.

Thank you all for being here.

Thank you, Director I believe for talking about the other levies for other municipalities because that was going to be my question.

I know King County for instance has a library's levy at the same time I believe that we do.

So would love to get more information about how those levies that the county assesses that our folks pay for as well because we have city levies that our constituents pay for and they pay into the King County levies as well.

So would love to see a list of the King County levies because they do have an impact on our constituents.

And I think we need to be able to have that information in the context of our levy conversation at the city.

So can I just speak to the library?

So the King County Library is actually not part of King County government.

It is a separate government and it provides library services everywhere in the county except Seattle and except the Point Cities which have never opted in because they don't feel like they need a library.

and so that tax actually is not paid by Seattle taxpayers because they don't get any services from the King County library system.

But your point about the King County, the actual county government levy, so things like the new parks levy and the veteran seniors and human services levy, we have that data and we can provide that because those absolutely are paid by Seattle residents as well.

Thank you, Director, and I, sorry, may I?

Please, take it away.

Thank you.

We're going to do conversations today.

Okay, thank you.

Wanted to not run afoul of our rules.

Thank you for that.

Thank you for the education on the King County Libraries Levy, because I wasn't sure how that worked.

It's confusing.

Yeah, but we do pay into other county levies.

Like I think the, I'm going to call it Medic One, but I don't think that's what it's called.

There are other...

Emergency Medical Services.

Yeah, and the Human Services Levy.

There's a Veterans Human Services Levy.

There are a number of levies.

And so I think it's important for us to look at both as we're looking at our levy cap.

Because this is something that we're asking taxpayers to tax themselves.

And I think...

like I said earlier, that is important to note and should be part of this conversation as well.

And then in terms of the assessed value, we don't, I hear that's, I'm gonna use the word volatile.

You didn't use those words, that's what I'm gathering from what I'm hearing because we don't control that and we, there are a lot of things happening across the world that may have an impact, current affairs, world affairs that may have an impact on our economy here in the United States, which then would have an impact on our real estate market in the United States.

So not just the commercial, as my colleague Chair Strauss just pointed out with the situation downtown and all the office vacancies, which are I think at 35%.

Then there's also these other things happening across the world that also have an impact.

So I say that to say I just want to say it out loud because though we may use that 10 percent benchmarking, we just don't know what's going to happen.

So I think we are in a really delicate space with bumping up to this cap.

And I think that we need to be really mindful.

This is just thank you for this today.

It's very timely obviously.

and we need to be really mindful that just because we have the 780 left doesn't mean we actually should be using the 780 even though we may reserve the 10 because we just don't know what's gonna happen later.

And so I think I always err on the side fiscally more conservative so we're not running into a situation where we have to take money away from the levies, away from these these things that we are investing in, because that's really what would happen if we go beyond the cap, the levy cap limit, is that then we would have to, and it will be determined based on what you director talked about in terms of the other levies across the state, but how we're gonna take away from the investments that we've made and we never want to be in that situation.

So thank you, Chair.

Just wanted to say those things out loud.

I think for the record, it's important as we weigh what we are to do, not just with the library's levy, but any other investments that we're considering that might have that might need a levy, for instance.

Can I just make one technical point?

Please.

So the 2027 assessed value, so the assessed value for next year, will be determined by the assessor based on property values on January 1 of 2026. So anything that happens this year, at least in theory, will not be reflected in the 2027 assessed value.

reflected in the 2028 assessed value.

There's a one-year lag in the property tax assessment.

And so just as you think about this, you probably aren't going to get a big surprise for 2027. There could be a big surprise for 2028.

Thank you, Director.

That is really important.

And since these levies are multi-year levies, the least of which is six years, it would potentially have a huge impact, the 2028 assessed value.

and I will say that for this year's assessed values, I've already heard from constituents who are very, have sticker shock on what they're gonna have to pay based on the current levies that we have.

That's not including the library's levy coming up and any other levies that are being contemplated.

So also wanna say that for the record, want to note that we have heard, at least I have heard from constituents.

I can't be the only one to have heard that from constituents.

so being mindful of all of these facts.

Thank you, thank you, Chair.

Thank you, Council Member Rivera, Council Member Kettle.

Thank you, Chair Strauss.

First, I want to congratulate our new director, Panucci.

Congratulations.

Also, welcome to Mr. Russell and Ms. Zhang.

Welcome, and good to have you back.

Also, welcome to interim director, Dively, although I told chair before the meeting started, if I said professor, I should be, you know, given some grace.

Particularly when you present, the team presents, you know, slide seven, I'm taken back to our class.

there at the Evans School.

So welcome in this new capacity for you and of course our own central staff, Mr. Chow and Mr. Mike Sell.

When I look at these slides, this is almost like it should be an annual requirement as we go through these various levies.

I'm thinking about the idea of growth and then the ability to have growth.

and assess value.

I see it as comparable values, location, property characteristics, improvement renovations, physical condition, local market conditions, tax levy rates and so forth.

But a key thing is neighborhood desirability.

And so one question I had is like, we're investing and how does that impact and how does the levees impact where we are now?

So we are investing in our neighborhoods with the transportation levy.

That is but major improvements into our levies, into our transportation networks, which should improve the desirability of those neighbourhoods and our city.

Is there a connection or is there a connection that we can draw or that we can measure or we can at least assess in terms of the investments that we're doing in our levies currently and then particularly in transportation, but also education schools is always very important in terms of where you're going to live and how much you're willing to pay.

You know, maybe the FEP levy too.

Is there a connection that's measured or at least can be an informed assessment on?

This is open to anybody, by the way.

I recognize I was looking at Professor, I mean Director for a second there.

That's a very interesting and complicated question.

I don't know that I have ever seen a direct analysis of investment on a city scale, not just a neighborhood scale, and then how that translates into changes in assessed value that then would give you more levy capacity and so on.

Let's distinguish between commercial property and residential property for a minute.

So residential property, if you make it more attractive, so you have better schools, you have better transit systems, you have better parks, whatever it happens to be, then presumably more people will want to live in the city and that will drive up housing prices and assessed value which is good on that scale but it means that you price out a whole bunch of people who can't afford to live here anymore.

But I think there is a positive correlation there.

It's a little harder I think with commercial property because definitely you can imagine if you improve freight transportation that maybe the port would become more attractive and we'd have more commerce here and that that would also raise value of commercial property.

But if you think about the downtown office buildings, those investments are not really what's driving that.

That's being driven by whether there's You know, people who want to lease office space in the way they used to.

So I think, at least for me, the connection is less clear on the commercial side.

So, you know, we could probably do some research to see.

I'm sure someone somewhere has studied this in a different location.

But I don't, in all the years I've been working either at the city or the county, I don't remember that we've ever looked at it for our own city investments.

I think I would also just quickly add, I believe the extraordinary growth we experienced in the late 2010s, a lot of that was driven by new construction, so a construction boom.

And so to the extent that we make investments in the city that lead to more construction, that would certainly add to assessed value.

And does anyone at the table know the rough sort of breakdown of residential versus commercial in our tax base or assessed value base?

So I believe the residential commercial split is about 70-30, which is of course a little industrial in there.

And then we also recently took a look within commercial, how much of that is just office buildings.

And I think the share of office buildings the share of total assessed value was, I think, between four and 5%.

So residential does drive a lot of assessed value, and I think that's why we're now starting to see a bit of positive growth, even though commercial has still been pretty sluggish.

Just for historical context, when I started working for the Seattle City Council in 1987, it was exactly 50-50.

I remember asking this question.

So 50% residential, 50% commercial.

And that was before a whole lot of the buildings that we see were built.

So just the world has really changed in that period of time.

Thank you.

I was curious about that.

And so I'm basically in some ways given a homework assignment back.

The other way.

And the transportation's really important.

By the way, it's not just the city.

You know, we're investing in sound transit, and the impact that that has, not just on the city, but our neighboring cities.

You know, the impact on Ballard, with the Ballard Regional Center that PSRC and the state's driving us to have on the land use side, and with Sound Transit, the Bad Lid Light Extension going there, that's going to be key in terms of improving desirability on that front.

But to your point about commercial, and I get it because I do represent downtown, that's really interesting on the commercial side, but also like the lid.

Our neighbors who are impacted by the lid with this beautiful waterfront, their values haven't gone up.

and so what I bring back to here is that we as a council and as a city need to be mindful of all things that are impacting in that desirability to include the public safety piece.

I've been accused of turning everything into public safety but is such a direct consequence, because I have countless commercial property owners or representatives or businesses that have left downtown to greater downtown, but especially our new downtown, the Belltown, Southlake Union, Uptown, because of these challenges.

And I think it's really important for us to be mindful of this as we look to do policy on that front, because the impacts play out in so many different ways.

to include on the commercial side to the point you made.

And so I was gonna look to turn that into a question, but Chair, I've figured I won't.

Fair enough.

Thank you, Council Member Kettle.

I see Council Member Saka is up next and we're gonna try to wrap this part of the presentation up in the next 10 to 15 minutes at most.

So with that, over to you, Council Member Saka.

Thank you, Chair, and thank you, Director Panucci, the entire team, for being here today.

Really appreciate this presentation.

Very insightful.

Yes, thank you for traumatizing all of us on that slide seven.

As a non-practicing lawyer, I'm not particularly good at numbers.

I went to law school on the implicit promise I didn't have to be good at math, but I'm glad you all are smarty pants and are able to expertly calculate those numbers for us, so thank you.

And appreciate the kind of sort of level setting, from a purely factual perspective on kind of the history of why we're here.

Let me double click, talk a little bit more about the politics of the artificial, highly arbitrary and capricious 1% Tim Eyman limit on our property tax every single year that passes.

So that is a relic and creature of Tim Myman that the state legislature chose to codify and enshrine into state law in 2007-2008 timeframe.

And every single year that passes, and we continue to do nothing and continue to be subject to that artificial 1% Tim Myman cap Our state is slapping Tim Hyman a high-five.

Good job.

We're handing him a win on a silver platter.

Meanwhile, our ability to fund critical programs and services is severely constrained.

Our ability to meet the needs of our communities, severely restrained.

I'm thankful that we have other tools, which themselves have their own limits, which is the subject of this conversation, to help address the total need.

But we need relief from the state as well.

And I'm hopeful that sooner rather than later, we'll get that relief.

because we continue to honor Tim Eyman with this arbitrary 1% cap, plus the cost of new construction, we have to go to the voters every single time.

We need to fund the gap because obviously with this 1% constraint, our ability to raise money doesn't even keep up with the cost of inflation, the cost of goods, cost of services.

which themselves are escalating and mounting.

Therefore, we need to go to the voters every time for these property tax and rely heavily on the generosity of voters to meet the need.

And so we need relief at the state level, My hope is that there would be some additional relief on seniors and our most vulnerable, because to Councilmember Rivera's point a moment ago, these decisions, all of them, at the state level and locally here, aren't without consequences.

They directly impact affordability, they directly impact for seniors on fixed incomes, the ability to age in place.

They directly impact rents, all of which continue to mount.

And so being mindful of the various factors at play, at the state level and at the local level, we can have better property tax relief programs to serve our most vulnerable, which is in part why during our transportation levy a couple years ago, we created a new property tax relief program for our most vulnerable.

What we actually did was we amplified the impact of existing state and county programs, to provide more education and outreach.

But in any event, all these things work together and they're increasingly...

I'll stop there.

But I do wanna just mention bonding authority versus levy and talk a little bit more about that distinction.

We are able to, and we have today with the...

There is an existing voter-approved bond, the Alaska Sea Wall.

We do have the ability to raise money from a bond, but a bond is not at all new revenue.

A bond is the city's 150-year-old self borrowing against its 190-year-old self.

And it's a credit card against our future self.

We'll pay ourselves back.

It's not new revenue.

So just want to clarify there.

Can you help me better understand the permissible scope of special purpose districts?

excluded or carved out from the levy cap are these special purpose districts.

We have one for parks.

Under current state law, are there any parameters that sort of govern the creation and utilization of those special purpose districts?

Cal, great, take it away.

There's a lot there.

So a couple things that I did want to highlight.

One, if I can go back first on, you asked about sort of our ability to bond, and I just wanted to highlight that we did kind of exclude it from this conversation.

as you pointed out, bonding is just financing.

And so when we ask voters to approve a bond, we're actually asking them to raise their property tax outside of this capacity limit to be able to service that bond.

And so we can do that if the voters approve with the 60% voter approval.

And then they are then approving us to issue a bond and to pay that with increased property tax for the life of that bond, which 30 years, 20 years, whatever that is, that is outside of this capacity constraint.

So we've done that for the seawall.

There's things we've done in the past.

It does have to be bondable.

It does have to be sort of a capital program.

So that's one issue.

And then you asked about special taxing districts.

All those are under authority that the state grants us.

So there is special carve-outs for these districts that we've taken advantage of.

To the extent that the state gives us more or thinks about things, there's a conversation about fire districts and how that might play into this.

I don't actually know the details of what that would necessarily mean for us, but it's largely whatever the state allows us to do.

There becomes other financial and governing tools that we might be able to use.

Anyone else?

I think just to note about special districts though, Director Dively talked about the limits that are applicable to a combination of different jurisdictions.

So we, you know, the city faces this 360 cap, but the city and the county and special districts face a 590 cap.

And so the special districts are not completely exempt from any cap.

They are simply exempt from the 360.

Are they junior to ours?

And the state per rationing, those would get hit more first.

Yes.

Got it.

Thank you.

And appreciate the call out on some of the pending legislation at the state level to expressly authorize the fire district whatever the appropriate terminology is there.

I actually, right before this meeting, got off the, had a great call with our local firefighters union, and we were closely monitoring and tracking that.

and that's definitely worthy of a, if that comes to pass, definitely worthy of a subsequent sort of more fulsome conversation.

All that is to say is we have these tools, they're limited, they're not without impacts on people and other, I sit on a number of regional committees, colleagues, as I know you all do, and other jurisdictions, aren't as well off in terms of having very generous voters that, for the most part, approve these requests to tax themselves.

So the solution for all of us is relief at the state level with other things as well.

And make no mistake, we also need to Prioritize and align our spending with current priorities as well.

That doesn't absolve us of that responsibility and that duty and be disciplined with our spending.

But the needs are growing, they're mounting, and they're very compelling, and we can't ignore that.

So in any event, And just so I'm clear, five total levies in our inventory, the FEP, transpo, housing, library, and vouchers, is that correct?

That's correct.

Awesome.

Awesome.

Thank you, Chair.

No further questions.

Thank you, Council Member Saka.

Vice Chair, I see you have your hand.

We have three minutes left.

We're already over time, but I gave 15-minute warning about 10 minutes ago.

So with that, you've got last remarks, and then I'm going to turn it over to the committee table for last comments.

So over to you.

That's not without pressure, Chair.

Just kidding.

Last word.

I just more, this is a request.

I'd love to see what I asked for earlier, all the county levies that our constituents also pay into our percentages.

It'd be great to have, you know, I've never seen if your average house is valued at X amount, this is how much you pay on the lowest end or the highest end or in the mid.

that would be I think helpful because it's hard like I said for us to see all these levies and their actual impacts as is happening and then the district ones aren't in here because they're not part of the cap.

We talked about some of them but I'm not clear on all the different district special districts that our constituents pay into as well because one thing is and I keep reminding myself even, you know, when we were asking constituents, the same constituents that are paying into all our levies are the same constituents that are paying, well, a general fund is a levy, but these are all the same constituents that are paying into the King County ones that are constituents, you know, that are within the city of Seattle's have to pay into.

So I say that to say this aren't, everyone is paying into each of these levies.

That's the point I'm trying to make.

So I'm mindful of that.

And thank you, Council Member Saka for your comments.

The need is great.

We do need to prioritize while we're meeting the needs and then be mindful.

And this is why I think it's so important.

And this is a conversation for another time.

to make sure that the investments we're making are working for our people in the city.

Because if we're collecting all this money and we're not actually meeting the need, we just need to make sure that is it that we need more money or is it that the money that the choices we're making are not actually getting to meet the need we're trying to solve for.

So that's an important piece of all of this as well.

Goes back to looking at our programs and how well they're working.

and the prioritizations that we're making.

So anyway, I would love to see on the special district side also be part of this conversation.

If we could get information on that, we'd surely appreciate that.

Thank you, Chair.

Really well said Vice Chair.

The last thing I will say is just that this is the foundation for many conversations to come and so that's why we did not get to everything in Pandora's box today.

We just opened the lid.

With that over to the committee table for last comments and then we'll move on to the next agenda item.

I'll just say thank you, and we'll follow up with some additional information, including we can sort of present on, and I think central staff could do this as well, or together, the sort of overall impact of the levies.

Sometimes it is helpful to just take an example property tax bill for an average homeowner because there's also So if someone gets a property tax bill and they just pay their property taxes and aren't really looking necessarily at school, state, that sort of combination, it can be helpful just to sort of look at an example to see all of the different pieces that are playing into that.

So happy to present that and we'll follow up on the 2% analysis as well.

Wonderful.

Thank you.

Anything else from the committee table?

Tom?

Thanks, Chair.

Throughout this presentation, we've sort of referred to the 10% reserve.

So that is just an informal practice that staff uses for modeling.

Given kind of the, I guess, scary-ish sort of future projected, might be time to consider maybe making that a more formal standard, kind of similar to our emergency fund reserve and our revenue stabilization reverbs, which all have Council-endorsed policies around them.

So just something, I guess, to take away to consider from the information that we've shown you today.

Wonderful.

Thank you.

Alex.

Just to add to Tom's remark, the point Chair Strauss and Council Member Rivera made about the uncertainty that we're facing right now, the point is well taken.

I mean, there's continued economic and policy uncertainty around us.

And so...

the point of the buffer is to mitigate that uncertainty and that risk.

I would also add that the 10% is a number we arrived at based on historical experience that's justifiable and reasonable.

However, it also, again, is a policy choice and it depends on our risk tolerance.

And so we could decrease it, we could also increase it.

Wonderful.

With that, thank you for coming.

We will have you back to continue the conversation.

And as we transition the committee table, I'll take this moment to plug Association of Washington Cities has continuing learning through their certificate of municipal leadership.

Some of those webinars talk about trying to explain the rate because property tax rates, as Cal alluded to, are not intuitive at best.

And so my follow-up questions were going to be about that.

Since we didn't have time, we'll come back to it later.

With that, clerk, will you please read the second item of business into the record?

Item two, 2019 to 2026 budget review.

This item is for briefing discussion.

Presenters include Ed and CISIC of council central staff.

Wonderful, we have Ed and Tom and Cal still with us at the table.

Colleagues, this is meant to be just an informational moment as well as reading into the record our seven year update that we have continued.

This year I asked central staff to be prompt right after budget so that we didn't have to wait until September to think about what we did in November.

Thank you very much for meeting that quick request.

This is the fastest this turnaround has occurred.

and wait, there is more.

Central staff has also provided a document regarding the city council changes to the 2026 budget that also illuminate the changes that the mayor made, where we had with the endorsed budget, the changes that the mayor made, the changes that the council made.

This is very helpful.

While not an...

an audit of how, this is not a performance-based audit on particular programs within the budget.

This is the most in-depth budget review that the City Council has done in 20 years when we started and each year as we add to it, it gets even better.

So with that, I'm gonna turn it over to you, Ed and colleagues.

Let's save questions to the end.

This really is meant to be an informational, here's how to use the document, Here's the documents will be in your inbox shortly.

With that, over to you, Edin.

Thank you, Chair.

Good morning, Council Members.

My name is Edin Sisic with Council Central Staff.

So Central Staff has produced two budget documents that we hope will be helpful for you throughout the year.

by popular demand.

We present not five, not six, but the seven-year budget review.

And the second is the 2026 legislative budget report, which I'll cover in the last two slides.

But it's essentially a council appropriations book that highlights all the council changes to the 2026 mayor's proposed budget.

So the 2019-2026 budget review document is an update to the five and the six year documents that we've provided over the past two years.

Includes updated budget information and added context that resulted from the 2026 adopted budget.

The document explains and describes relevant programmatic expenditure changes focusing on key drivers of growth, that occurred between 2019 and 2026 with the intent to provide you with a concise overview of the city's budget and can serve as a resource for you throughout the year, particularly ahead of the upcoming budget deliberations process.

And it could be a great tool for you to decide whether current funding levels of the city's services and programs are funded at the appropriate levels.

While the review provides context for all citywide appropriations and funds, since the projected deficit is in the general fund and the jumpstart fund is used to help balance the general fund, this focus, the analysis is really focused on the jumpstart fund and the general fund, while all other revenue sources are grouped together.

Though that's not always the case, but certain funds are called out, for example, you know, since City Light is funded by City Light Fund that is called out or the Arts Fund, so that's a significant source of funding for the Arts Department.

And so the elements of the report are pretty straightforward.

This slide defines the elements, but maybe if I could go to the next slide to see the example.

So it starts at the top with the summary table, which highlights growth over the past seven years at the budget summary level.

Then the bar chart below that visualizes department changes at the fund level with emphasis on the general fund and jumpstart fund.

That's followed by a narrative summary, which explains the drivers of budget growth beyond inflationary standards and provide context for the charts above.

And lastly, we have the labor budget and FTE table, also followed by a narrative to explain any notable changes.

So the executive presents the annual budget with departments grouped into these six policy areas.

So for ease of reference between the documents, we have organized our reports using the same policy groupings.

Just as an example, public safety has police, fire, Municipal Court, CARE, a few other departments in there, nine that are relevant to that area.

So at the highest level, the city's budget has increased by $2.9 billion over the seven years, or 47%, which represents an increase of about $400 million, or 6.7% annually.

although we do have some double counting in there due to, for example, central rates and the biggest one here is the Jumpstart Fund transfer to the general fund which inflates this number.

So if we accounted for that transfer, the overall increase would be about 2.7 billion or 43% and I have some slides later that'll explain that and you can visualize it a little better.

but so most of the programs and services provided by the city rely on city workers to deliver those services and particularly those funded by that general fund.

So the personal costs for city workers across all departments comprise one third of the 2026 adopted budget and over half of the $2 billion general fund budget.

and the labor budget is increased by 55%, and that accounts for the addition of 1,241 new FTEs, which is about 10% increase in staffing since 2019. So at a high level, we've categorized the primary drivers of growth into three of the buckets, as you see here.

The first is inflationary adjustments that impact the cost of delivering city programs and services.

So this includes increases in personnel and internal service costs, so wages, healthcare costs, IT, facilities, etc. and for context the consumer pricing as inflation is up about 30% over the seven-year period which is an average about 4.3% annually Next, we have new and expanded programs supported by new sources of revenue.

For example, Jumpstart Fund didn't exist in 2019 and it comprises about 15% of this $2.9 billion increase.

over this time period.

Furthermore, new and expanded voter-approved funding propositions including Seattle Park District, education, transportation and housing levy renewals significantly contribute to the increase, adding about $500 million of added resources.

and finally we have about $125 million of general fund, additional general fund revenue due to the BNO restructuring and the local sales tax that was adopted in the 2026 budget to support public safety, small business tax relief, housing, human services and workforce programs.

and the last grow driver is expanding programs and services to serve a growing population.

You guys talked about population a little bit in the previous presentation, so I'm gonna put some numbers to that.

The State Office of Financial Management estimates that the city population grew from 724,000 to 816,000 in 2025, which is a 13% increase.

and growth in population directly impacts utility budgets and demand for housing can also indirectly impact service quality if programs are not expanded to meet that demand and need.

So this is just a visual chart of the seven-year growth including all funds as expected utilities transportation environment represents the largest bulk of that numerically because they comprise about half of the total city budget On a percentage basis, livable and inclusive communities increase more than any other policy area by about 193%.

This is primarily due to the introduction of the Jumpstart Fund spending for increased investments in housing, economic development, equitable development, etc. and this is followed by 98% increase in education and human services policy area primarily driven by investments in the city's homelessness response programs and expanded investments in early learning and educational support supported by the levy.

and I won't go through all of these for the purposes of time, but these are all summarized in much more detail in the reports.

And so this is the same chart as the one I just previously showed, except it focuses on the Jumpstart Fund and the General Fund, and you can really see the impact of that Jumpstart Fund transfer to the General Fund in that administration policy area.

Just to explain that a little bit.

So to balance the general fund, the 2026 budget reflects a $211 million transfer from the Jumpstart Fund to the general fund, which is accounted for as an expenditure in finance general.

in the jumpstart fund, but then that is also programmed into the general fund, so that dark blue lines that you see there are also programmed for that $211 million, hence the double count.

and so this is just a duplicate of the above chart just to exclude that so you can see the change.

It goes from $293 million to $82 million in administration.

I won't spend any time on that.

So since 2019, the total general fund city budget has increased by about $646 million and over two thirds of that, this growth is in four departments.

Human services increased by $165 million, most significantly for addressing homelessness and safe and thriving communities budget summary levels.

This is followed by public safety departments including fire, SPD and CARE and it's primarily personnel related costs and the expansion of CARE since its creation in 2021. and excluding the Jumpstart to general fund transfer and finance general, the Office of Housing's $142 million allocation represents roughly two thirds of the remaining Jumpstart fund budget that supports multifamily housing and sustainability programs.

And I believe that concludes the summary of the seven year look back.

Should I just keep going for the last two slides, or do you guys want to pause here?

Just keep rolling.

Okay.

So before I cover the next couple of slides, I'd just like to say that this report will be provided to you very soon after the budget is adopted, so you can expect this report in December of this year.

but so this 2026 legislative budget report provides a comprehensive summary of the changes the City Council made to the Mayor's 2026 proposed budget and there are three sections pretty much for every single department in office and it is appropriation of position changes, provisos and statements of legislative intent.

So every department that had changes to the mayor's proposed budget is included with the exception of 13 departments which had no changes to the mayor's proposed budget and they are listed at the end of the summary section of the report.

and just a quick summary slide on that.

So the adopted budget reflects a 4.4% increase over the 2025 adopted budget and a 1.7% or $181 million increase compared to the 2026 endorsed budget.

Of this increase, 125 million results from changes in the mayor's 2026 proposed budget while 57 stems from council budget actions.

Council's budget increases were funded by existing cash fund balances, council budget actions, and the good news from the October revenue forecast, which was over $30 million, if I recall correctly.

And so combined, these adjustments increased total resource for $8.77 billion to $8.95 billion for the adopted.

and with that, I will conclude this presentation.

Thank you, Edin, a lot to think about here.

Want to just give us some baseline comments then I'll turn it over, colleagues, if you have questions.

This also is another foundational moment in the budget committee's annual work and so we will just continue adding on to all of this.

This is a seven year look back because our last baseline pre-pandemic was 2019. Eventually we will move to post-pandemic, but the years between 2020 and definitely 2023 are a lot more volatile and don't necessarily provide us the same baseline as those pre-pandemic years.

As Eden has provided us, the city has grown nearly 100,000 people in the last seven years, which is nearly the population of a city council district.

So if we're thinking of population in city council districts, we would almost add another one.

I will note that with your comments about the jumpstart transfers, we have also transferred general fund back to the jumpstart fund when those dollars reduced.

My one question is about the administration category, but before I say that, I'll just say that the photo, colleagues, if you notice the photo on the front of this report, it is very beautiful, taken by a wonderful photographer.

With that, can you please share, and I'll share my challenge.

and if you want to bring up slide 11, if you will, because that's a little bit more straightforward.

These are categories that were designed many years ago by the executive and the CBO.

They are inflexible, is the best, kindest way that I would share them, and they are not necessarily focused.

And so we operate our budget in many different ways.

Can you ground us out here?

There are both jumpstart departments and general fund departments in all of these categories.

Is that correct?

Correct.

And then specifically within administration, can you say more what does that mean?

Is that just FAS?

Is that just the administration of those departments?

Help us understand that one a little bit more, please.

Administration is just a policy grouping that City Budget Office uses for many departments, and I can list them for you here.

It's City Budget Office, Civil Service Commissions, FAS, Employee Retirement System, Ethics and Elections, Finance General, Legislative Departments, Revenue Forecast Office, Intergovernmental Relations, City Auditor, Ombud, Office of the Mayor, HR, and Seattle IT.

Thank you.

Very helpful.

And some of those, such as Seattle IT and FAS, serve the entire city.

Correct.

Fun fact, we're sitting in council chambers, and the legislative department is renting this room from FAS.

With that, I see Cal, and then I'll turn it over to colleagues.

Well, just the other complication, obviously, some of those departments draw on other funds than just what's shown here.

So just FAS, for example, has a completely different fund that's funded by...

You get the point.

Yep.

Wonderful.

Colleagues, questions at this time?

Council Member Rivera.

Thank you, Chair.

Thank you all for being here.

I just really have a point I would like to make about this.

First of all, this is really helpful, so thank you for all the work that you do year round to make sure that we are well equipped leading into budget.

We are at March, so this is a great time.

Budget comes here faster than you think it will, so thank you for that.

central staff.

And I did want to point out that from 2019 to 2026, in those seven years, our population increased by 13%, but our budget increased by 47%.

That is a huge increase in seven years.

And I think some of that, and CBO can correct me if I'm wrong, but my recollection, because I was in the mayor's office during those years, is that we got some federal funding because of COVID and we used some of that money to start new programs and then we had to find money to continue those programs.

So I'm not making a comment as to whether or not we should have continued them, but it is important to understand part of where this growth is coming from is there were new programs started with money that was not ongoing and then we had to find ongoing money for those programs.

These are policy decisions and it is important to ground us and make sure we understand how these decisions or what the decisions that were made were at that time and how it is that we came to have such a huge budget growth in what I think to be a very short amount of time when we're talking about city budgeting.

So wanna keep, that's an important point to raise.

I've raised it before, I wanna raise it again because it is an important one.

So thank you, Chair, and thank you all.

Thank you, Council Member Kettle.

Thank you Chair Strauss, welcome to the table Mr. Susich and of course Mr. Chow and Mr. Mikesell, thank you for still being here with us.

I really do appreciate these briefings, because it's good reminders, because when you get caught up in the day-to-day, it's good to be reminded in terms of where the budget was and where it is, and then try and understand that delta and how things have changed.

You know, it is worthy to know CPI 30%.

That's massive.

And, you know, it reminds me of the 70s.

And, you know, in the population growth, you know, that is also we're about to take over San Francisco in terms of, you know, size of cities if we maintain what we're doing.

So thank you for that.

One question I'd ask is, you know, there's been a lot of talk about payroll expense tax, aka jumpstart.

What I've noticed is that there's the jumpstart that we have today, and then there's the jumpstart that people describe, which is the jumpstart of yesterday.

Can you explain, in terms of jumpstart today, and how it plays into, you know, what we're seeing on these slides?

basically reflecting the changes over the last number of years.

I suppose I can take a try at the question.

So original Jumpstart was devised as a funding source for a set of specific spend categories, housing, Green New Deal, Economic Development and EDI.

And it was a smaller amount.

Since then, it has grown sizably, which has offered the ability to use some of those funds for general fund backfill for basically growth in general fund costs that are exceeding the portfolio of existing general fund revenue.

And that has been done largely.

That was done in the 25 and 26 budget process.

but now we're kind of at this inflection point where Jumpstart isn't growing as rapidly.

So a lot of what you see in the seven-year look back is the kind of the initial phase of Jumpstart and then the rapid expansion.

So what's it look like going forward?

Who's to say?

It's kind of it's based on payroll and large corporations and how that plays out is, of course, remains to be seen.

but it's heavily present in terms of the growth in spending over seven years in terms of being a funding source.

Otherwise, cuts would have been necessary.

I don't know if that helps with the question or- It does.

It does.

And there's things like the reserve that we put in and that flexibility.

I just say it because we have to deal with the PET of today.

as I've said before, the chattering classes have talked about the PET always of yesterday.

It's like they don't acknowledge the change.

But as we're doing the business of budget this year, we deal with the PET of today.

And I just wanted to note that because I think it's important because we have to have the baseline in terms of what we're working with and the like.

I appreciate the points about public safety as well, the provisos and those other pieces, obviously the care department and then the wage growth, which is a big issue across the board, but particularly in multiple elements of the public safety world.

And one of the things that I note on this is that we've always looked at what revenues that we could increase or new revenues that we can do, but there hasn't really been a strong look at the spending.

There's a revenue stabilization task force, but there wasn't a spending version of it.

and someone who does believe in these programs, I believe in progressive tax revenue, but the layering of them and then not looking at the spending pieces, these factors are something that we have to grapple with, particularly as we're apparently going to be for the first time really tackling the budget structure, the deficit, with our new director, Panucci, and that's gonna result in some hard decisions.

In order to make smart, hard decisions, good governance, is to also look at the spending pieces as well.

So no questionnaire, just a note, but I appreciate the head nods as I'm walking through that line, so thank you.

Thank you, Council Member Kettle.

Tom, over to you, and then...

I think I could just add one point about the kind of the growth over the seven years.

And so I believe it was that...

Vice Chair Rivera, who mentioned the growth in the population and how the costs have outpaced that.

Another factor, and I believe Director Pernucci covered it in the how we got here analysis from the confirmation, but inflation has gone up.

We have all lived it fairly dramatically since 2019. Not quite the highest levels in history, as some may say, pretty darn high.

And so that plus the inflation is kind of why we have this kind of challenge with meeting the needs of the community through public spending.

And it's a matter of whether or not the revenue base that is built can keep up with it or not.

And that's kind of the question.

That's what the kind of forecast shows.

Perhaps the answer is no, requiring difficult decisions.

So just wanted to add that part because it's an important piece about why expending has grown.

That's largely out of our control.

That was roughly 30%.

Yeah, 30%.

So between that inflation and then new services that we have gotten ourselves into over the last seven years, that is the message.

And all of this follows 10 years of high growth, low inflation, where we had a lot of one-time funding and low inflation.

So that decade of high growth, low inflation then met with a pandemic, increased CPI of 30%, increased population of 13%.

That's where we are today.

Without this type of pause and look back, it's easy to forget that.

Councilmember Rivera, I see you have your hand.

I'm going to give you last words.

I'm going to just say my comments and then I'm going to give it back to you, which is the jumpstart conversation over the last six years is an important one.

When it was initially set out, it was to buoy the city during that economic recession.

When we were there in, geez, what was it?

June of 2020, we still thought that the, you know, in March of 2020, we thought the pandemic would last two weeks.

By June, we thought, eh, maybe six months.

And so, we could not forecast the length of economic volatility and downstream impacts from the pandemic in June of 2020. That said, it is important that we maintain and hold true the North Star of those initial investments because housing in particular was something that we as the city had not invested in.

We had under invested in during a high growth timeframe.

And so we were actually back a decade, which requires in my opinion, twice the funding out front.

But as we continue these conversations throughout the year, whether it's housing funding, jumpstart funding, whatever it might be, what I appreciate about this is that we, for me, this is baking budget reform both in process and content into our annual cycle, right?

So the content of looking back seven years, the process of having these check-ins and right after budget, because Jumpstart has doubled what we initially thought it would bring in for revenue.

We are also near a place where we can do five-year smoothing.

Its returns have been very volatile because it's a new tax.

I'll also make this reminder, it expires in 14 years, which means that a large percentage of our budget relies on a revenue source that will expire in 14 years.

So with that, I'm gonna give it over to you, Councilmember Rivera, for last word, take us home.

Thank you, Chair.

I just want to say because we operate in a society of soundbites that when I said earlier about being fiscally conservative, I was saying it in the context of ensuring that we have our reserves.

Tom and I, we've had a lot of conversations about ensuring that our reserves are robust because otherwise we're faced with a situation where we might have to cut services because we weren't conservative enough in our reserves piece and also ensuring that that the investments that we're choosing to make are ones that are actually meeting constituents' needs, community needs across the city.

So definitely want to make sure we're meeting the community needs across the city and making sure we're not in a spot where we're cutting off our nose to spite our face because we're not being fiscally responsible enough to be able to foresee if there's a downturn to be able to continue to meet those needs.

And that is what I mean about the fiscal conservative piece because that term is being thrown about and I don't want to be in a space where someone says, well, Rivera doesn't want to meet community needs.

Not true.

I want to and that's why I want to make sure that we have enough funding and reserves to be able to weather some downturns.

And I think sometimes we look at how much money this piece about the levy cap and how much we have that 780 and not being in a space where we utilize all of it.

And then if there's something that happens in the future, and it will happen, something always happens, that we're not leaving ourselves that wiggle room.

it's sort of like how we were taught growing up how to manage your budget is make sure you're not if you can and I know my family like many families lived paycheck to paycheck but if you can at all be in a situation where you're trying to manage if something happens somebody gets sick etc you're gonna have to still pay those bills, and as a city, we should be managing for that.

Constituents can't always do that when they're living paycheck to paycheck, but we as a city can, and we're here to also help them with that because we have a lot of services to help people meet needs when they're not able to, as we should.

So, thank you, Chair.

Thank you, Councilmember Rivera.

With that, colleagues, last check.

Any final comments?

Back to the committee table for final comments and then I will close us out.

I would just like to thank my central staff colleagues for helping produce these reports.

They are time intensive and particular shout out to my colleague Tom for his infinite budget knowledge, and Tracy Ratzliff who helped produce these reports, and Patty for making it look way better than I would.

And you will be receiving both of these documents, the materials, in your inboxes shortly, as well as your staff.

Well said.

Thank you to Patty, Tom, Tracy, and Eden.

With that, and thank you to Megan on her last day here with us.

Thank you for your service to our City of Seattle.

This does conclude Tuesday, March 3, Finance Native Communities and Tribal Governments Committee.

This committee will meet next on Tuesday, March 17, and don't worry, The St. Patrick's Day parade that Councilmember Kettle is leading is not that day, it is the Saturday before, so he will be with us in attendance.

Is there any further business to come before the committee?

Seeing no further business, we are adjourned.

Job well done, Megan.