Economic and Revenue Forecast Council meeting of 8/4/25

Good morning, everyone.

The August 4th meeting of the Office of Economic and Revenue Forecast will come to order.

It is almost, it is 947.

I'm Sarah Nelson, Vice Chair.

So I'm here today with City Finance Director Jamie Carnell.

I am Andrew Meyerberg from the Mayor's Office, and I'll be the designee for the Vice Chair, Jeremy Rocca.

We're joined today by staff from the Office of Economic and Revenue Forecast, as well as from representatives from CBO and City Council Central Staff.

So the main purpose of today's meeting is for the forecast council to receive and review the updated economic and revenue forecasts.

This forecast is particularly important because it will serve as the basis for the mayor's upcoming proposed budget, city budgets.

While we're waiting, I misspoke.

I am not the vice chair.

Jeremy Rock is the vice chair.

Let me know if I can get a start again.

They can't hear you on Webex.

I think you have to connect to this through the bed exit panel.

Do you remember how to do that last time?

No, you were starting to do that last time, so.

She's, she's, she's not.

She's killing, she's not.

That's it.

So, good morning.

Today is Monday, August 4th, 2025, and this meeting of the Economic Revenue Forecast Council will come to order.

I am Andrew Meyerberg.

I am the Chief Innovation Officer in Mayor Harrell's administration.

I am attending this meeting today on behalf of Chief of Staff and General Counsel, Jeremy Rocca, who is the Vice Chair.

I'm here today with our forecast council colleagues, City Council President Sarah Nelson, City Finance Director Jamie Carnell, and we are still waiting for the other vice chair, Councilmember Dan Strauss.

We are also joined today by staff from the Office of Economic and Revenue Forecasts as well as representatives from the City Budget Office and the City Council Central Staff.

The main purpose of today's meeting is for the Forecast Council to receive and review the updated Economic and Revenue Forecasts.

This forecast is particularly important and this will serve as the basis for the Mayor's upcoming proposed budget.

City budgets must always be balanced so the Mayor's proposed spending will be directly affected by the forecast that we will be reviewing and approving today.

City Council will then begin its review of the proposed budget, and we, the Forecast Council, are scheduled to receive a final revenue forecast update this year on Monday, October 20th.

This final October forecast will set the stage for the City Council's budget deliberations and determine the total resources to be appropriated through the Council process.

So I'm now going to do the adoption of the agenda, and I get to wait for it.

Thank you for waiting.

Where would you leave me?

Good morning.

Good morning.

Good morning.

Great to see you.

So I'm going to give you the adoption of the agenda and take over unless you want me to go through it.

Has the meeting been open?

It's been open, yeah.

Okay.

Apologies.

Have we taken any actions yet?

Just been at ease.

Thank you.

So, Councilmember, I did some introductory remarks.

Are you ready for the adoption of the agenda?

So I've got a script in front of me.

I'm sorry to the award-winning Seattle Channel for, so we are at adoption, so you don't need my introduction.

Okay.

Thank you.

Before moving on to the forecast presentation today, let's begin by formally adopting the agenda.

For the day's meeting, I will make my own introductory remarks.

Thank you for waiting.

The comprehensive plan meeting that was scheduled was scheduled over this, which has been a standing committee.

I'd also like to bring up at the last, and this is a question for the table.

At our last meeting we had some technical issues, so I'm hoping that that won't present itself here today.

One of the conversations we had was about using council chambers.

This is a question because I don't actually know the answer.

Who is in charge of reserving the room for who administratively is in charge here?

Well, usually it's me, just preserving the rules.

Okay.

You need to use myself and the council president.

A little bit more to ensure that what we agree on in here, that we can use council chambers, is something that we can do together.

Because we have that ability, you probably don't, to reserve that room.

And I just bring that up because had we stayed to that course of action as described, we wouldn't have had the conflict, the comp plan this morning because this is a standing meeting.

That the schedule is set forth at a longer duration than the comp plan meeting.

So let's work together.

Let's use council chambers so the award winning Seattle Channel doesn't have to set up with their tripod in here.

Thank you for letting me have my introductory remarks.

Copy of the agenda has been circulated to members and it is available online at the Forecast Council website.

I move to adopt the agenda.

Is there a second?

Second.

Thank you.

It has been moved and seconded to adopt the agenda.

Today's agenda is before the Forecast Council and this is the opportunity for members to move to amend the agenda to add an item if desired.

Are there any proposed amendments?

I'm seeing no proposed amendments.

So if there's no objection, today's agenda will be adopted.

Hearing no objection, today's agenda is adopted.

We're going to move on to item number one.

A copy of the minutes from April 10th meeting of the Forecast Council has been circulated to the members and posted on the website of the Forecast Office.

I would move to seek a second for the approval of the minutes.

Thank you.

It has been moved and seconded to approve the minutes from our last meeting.

If there are no objections, the meeting minutes will be approved.

Hearing no objections, they are approved.

Let's move on to the meat of the agenda.

While we're all gathered here today, Director Duras, the presentation of the 2025 economic revenue forecast.

Moving on to today's main item, which is the presentation of the Economic and Revenue Forecasts.

The forecast presentation will be led by staff from the City's Independent Office of Economic and Revenue Forecasts.

As a reminder to the public, this office was established in 2021 and is modeled on similar independent forecasting offices operating in King County and Washington State.

The purpose is to ensure the utmost transparency and accountability around the city's revenue forecasting process.

That's why it's a joint oversight by the legislative and executive branches.

And you even saw some of this this morning.

We're five years in and still getting our best practices in order.

And this joint responsibility is what creates actual transparency and actual accountability.

Because Director Duras does not just report to either the executive or the legislative branches.

To ensure that the Forecast Council is fully informed and able to have its full range of questions addressed, staff from City Council Central Staff and City Budget Office will also participate in the briefing.

Staff from the City Budget Office is also present today to provide briefing regarding revenues still in the purview of the Budget Office.

Forecast Office will present three economic and revenue scenarios, baseline, pessimistic, and Optimistic.

Optimistic, which I don't think we're quite there yet today though.

The office will then provide a recommendation about which of these scenarios should become the formal forecast.

We will then have the opportunity to discuss the recommendation and whether to affirm the recommendation or consider a different forecast scenario.

As a reminder, at the last forecast meeting we did something unusual and prudent, which was adopt the pessimistic forecast.

With that, I will now turn it over to the Forecast Office.

Director Duras, please take it away.

Okay, so let's...

Let's look at the update for the revenue forecast.

Before we get to the forecast, the revenue forecast itself, I will quickly go over the update on recent economic developments and summarize the US economic forecast and regional forecast.

Those are the initial starting points when we develop the revenue forecast itself and inform the revenue forecast.

Here's a summary of recent economic developments focusing on tariffs and their impacts.

The announcement of tariffs in April led to a large amount of volatility in the stock prices, a spike in uncertainty.

Economic uncertainty is still high.

The financial markets have recovered.

As you can see in this chart, the S&P Global Actually recovered all the losses and that red point shows where it was on Friday.

Today it has actually gone up by about 1.3, so it's around 6300, essentially a record high, slightly below the record high.

There have been some announcements last week that brought it down a little bit.

That said, overall the economists assessed the current situation as better as in April.

There was a study, there was a survey of Wall Street Journal Economist that conducted in the beginning of April, and the average probability of a recession in the next 12 months in that survey was 33%, so that's down from 45% in the April survey.

Again, overall, the situation has stabilized somewhat.

That said, in the last few days there have been some developments that shifted the balance of risk more towards the downside.

There were new tariffs announced on the last day of July and then on Friday last week an employment report was released that was weaker than anticipated and has revised previous employment estimates down as well.

On a bit of a brighter side, the layoffs have not picked up yet, even though the employment report was weaker.

There are no signs that the economy is currently in recession.

The risks are higher, that it might go into a recession, but the economy still believes that it's possible to avoid that recession.

The chart here summarizes the economic outlook from two organizations that we subscribe to, that we obtain U.S. forecasts from, and compares those forecasts to that Wall Street Journal survey median.

Overall, the reason why the economic outlook has improved, the economic situation has improved, is that the tariffs have not yet resulted in higher inflation and have not led to job losses, as a lot of economists were afraid of.

There was a concern that by summer this year we are going to see inflation which is Significantly higher as a result of the tariffs and we are going to see the first impacts on real economic activity on employment and GDP.

Again, that has not materialized yet and so there is some discussion among economists why that's the case.

There is considerable disagreement in terms of What it implies, what it means for the outlook.

And you can see that reflected in that top part of a chart which shows the CPI-EU inflation, US inflation, as predicted by the S&P Global, that's the red point.

The Moody's Analytics, that's the blue point.

And then the median in the Wall Street Journal survey, that's the black point.

This is their estimate for summer next year.

And so the belief, General belief is that there are going to be effects of tariffs on inflation.

They will materialize eventually.

How large they are going to be, what the magnitude is, is a little bit uncertain.

Also, how long it's going to take is uncertain.

And so, again, that disagreement manifests itself in the fact that S&P Global, in their July forecast, believed that In the summer next year, the inflation will be only somewhere around 2.5%.

Moody's analytics on the other side, they have more concern and they believe that the effects of tariffs will be more pronounced and the inflation will be somewhere around 3.5% in the summer next year.

So that's a whole one percentage point difference between those two.

The median in the survey is somewhere in between.

When it comes to the federal funds rate, economies in general believe that the Fed will resume the monetary easing in fall this year, and so the interest rate, federal funding interest rate will start to come down from the current From the current level which is above four percent and so by summer next year or by the end of next year there will be closer to three percent which is again a whole one percentage point lower than where we are right now.

The other place where you can see that disagreement about the impact of tariffs is at the bottom part, which compares the real GDP growth forecast for 2026. Again, Moody's Analytics is a little bit more concerned about the effects of tariffs.

Expect that they will have more of a negative effect on economic activity while S&P Global is more optimistic given what we have seen in recent months and given that so far there hasn't been a particularly negative reaction to tariffs.

Traditionally, we have used the S&P Global as a starting point to develop both the regional economic forecast and the revenue forecast to address the risk that in this particular case, their forecast might be too optimistic.

It's certainly more optimistic than the median in the Wall Street Journal survey.

To address that risk, we have actually used the average of two US forecasts, the one from S&P Global and the one from Moody's Analytics.

An average of those two, essentially asking for a second opinion and then using that average to be more conservative and to prevent, to mitigate the risk that come October or April next year we'll have to revise our revenue forecasts down.

A little bit more on how the forecast has changed.

Again, looking back at where we were in March or early April and what the expectations were for the inflation, that gray line shows the forecast from S&P Global.

That's the one that we used as a starting point for the April forecast.

And you can see that they were predicting the inflation to rise quite quickly.

Reach almost 4% by the summer of this year.

That did not happen.

The second quarter's inflation was significantly lower than they were predicting, about 0.8% relative to that March forecast.

So that together with the overall Weaker but still reasonably stable economic situation when it comes to the employment growth has compelled the S&P Global to that significantly large revision for the inflation that they brought down quite considerably.

And so after that initial The initial scare which led them to increase their inflation forecast in April after the tariff announcement.

They have gone the opposite way and they have since revised their inflation forecast down.

The red line here already shows the average Of the S&P Global and the Moody's analytics forecast.

So it's already higher than what S&P Global is predicting again on that previous slide.

You can see that they were expecting central to inflation to continue coming down.

So that relatively steady rate of inflation here is a result of more conservative outlook from Moody's and more optimistic outlook from the S&P Global.

Well, that said, there is that pessimistic scenario in which the tariffs have a more negative impact on prices, more pronounced response of the trading partners and the overall impact of the economic outlook.

In that scenario, one part of it is that the inflation will peak.

Above what the baseline scenario predicts, more than half a percentage point higher than what the baseline scenario predicts.

So in regard to the interest rate, the Fed has not decided to lower its interest rate at its last meeting on July 30th, but as a result of that big employment data that was released on Friday, the financial markets now put about 80% probability on the first cut, on the interest cut of 0.5% in September, and then One or two potential cuts in the meetings in October and December.

So again, that is expected to resume monetary easing.

How that will play out depends, of course, on which of these two inflation scenarios Will turn out to be the one that the economy is heading down, together with the next employment report to show if it's very weak, then Fed will be very compelled to cut that interest rate.

There is going to be a lot of pressure on the Fed to do that.

Director, I have a question.

Why don't we do this section, the PowerPoint, and then we'll come back to questions.

It actually helps me going forward, and it's really just a quick question.

You said a chance of a 0.5 rate cut in September, but this says 0.25.

0.25 percent, I'm sorry.

Okay, thank you.

I just wanted to make sure that it hadn't changed.

Okay, thank you.

Okay, looking at the outlook for employment and real GDP, again the gray line shows what the starting point was for the April revenue forecast.

We used the pessimistic mark scenario again as a way to be more prudent and more cautious about the overall outlook.

One reason was that, again, the April tariffs announced were made after the March bonding forecast was released by S&P Global, so did not incorporate the extent to which the tariffs rates have gone up.

Compared to that March pessimistic scenario, the current baseline is again brighter.

The outlook is slightly brighter.

It's less, especially when it comes to the employment for 2026 and beyond.

The current baseline has some slow, very slow employment growth, so the employment losses, again, did not occur yet and the belief is that, well, hopefully this will continue and businesses and consumers, their confidence will not erode significantly and the economy will not go into a recession.

The recession scenario is, or the assumption of a recession is kind of, or set of assumptions that lead to recessions are built into the pessimistic scenario.

In that case, higher tariffs, larger response of trading partners, stronger immigration policy which restricts the labor market, employment in the labor market.

And overall deteriorating financial conditions leads to eroding confidence and result economy going into the recession.

So that essentially means that fundamentally the current pessimistic scenario, which has a recession built in, is fundamentally different from the March pessimistic scenario, which assumed lower GDP growth, some employment losses, but not a recession Not what the economies would call a recession.

It would not lead to a broad decline in economic activity and decline in GDP.

Turning to the regional labor market.

The regional labor market is weaker than the national one.

Employment has actually declined slightly marginally by 0.1% in the first six months of 2025, relative to the first six months in 2024. That happened at the same time as the U.S. implemented by about 1.1%.

Those large declines, particularly large declines have been seen in the construction sector and manufacturing and financial activities.

The first one, construction sector downturn, that's a continuation of the trends.

We have already seen these declines over previous two years, so it's the extent that it's obviously quite striking here.

Moving on to regional inflation forecasts, in a similar way as in the US inflation, we have actually seen lower inflation in the second quarter than what we have expected in early April, based on the March pessimistic scenario forecast.

We foresaw an increase in U.S. inflation that led to similarly large increase in regional inflation.

Regional inflation actually cooled down faster than on the national level.

The first two points in the 2025 in the trend line are the actual inflation numbers.

They are about one percentage point lower for the second quarter.

Overall, there was a Much slower rent grows and that slower housing inflation led to over inflation overall for the regional economy.

That said, again, tariffs are expected to have a negative impact on inflation, are expected to lead to inflation rate which picks up and re-accelerates.

In the baseline scenario, reaching about 3.5% by summer next year.

In a pessimistic scenario, it would be about 4% by summer next year.

So that would be a considerable increase relative to where we are right now.

For the regional employment forecast, similarly as in the U.S. national forecast in April, the tariffs were assumed to lead to some employment losses, not really a recession per se, but employment losses nevertheless.

The forecast is again, the outlook is slightly better currently.

Even though actual employment data has been revised down slightly by the Employment Security Department for the second half of 2024, the lower interest rates, Fed resuming the monetary easing in fall 2025, That expected to lead to modest employment growth starting in fall and then going into 2026. And similarly as in the US employment data, we are not expecting, in the baseline scenario, we are not expecting employment to decline.

But if the pessimistic scenario happens to be the class that the economy goes down, this would lead to cumulatively about 2.9% employment losses between where we are now and the bottom that would occur in the second half of 2027. This would be a recession that's similar in the magnitude and in duration, similar to the 2001 recession, so definitely shallower and shorter than 2008 or 2020 recession, for sure.

But recession may be the last piece of all the implications.

Paul's here.

See if there are questions about the underlying economic environment leading into our forecast today.

Are there questions here?

I'll take back to the numbers of employees.

I'm sorry.

This is an operational.

I just want you to know that I will be going and joining at my desk so that I can raise my hand on the screen.

And then it occurs to me that Maybe the chairs can work with reserving chambers.

I think the next one will be during budget, so that would be up.

So I just wanted to take the burden off of the director.

Anyway, I'll join.

Excuse me.

If you could tick back, and if somebody can also help, if she raises her hand on the screen and I don't see it, just let me know.

This number, so manufacturing and trade, and this is, I guess I'll just prime you for an offline conversation that we can meet and go over these numbers a little bit more in depth.

I appreciate that I hear them at the same time that the public hears them.

I think that that is also something that is important for transparency, so the public can see via Seattle Channel and me.

Interacting with this information for the first time.

Within manufacturing and trade, and it could have been a different slide that looks very similar in the past, I believe that we were outpacing national averages in the past for both manufacturing and trade.

Is that a different graph that has the same colors?

And I'm thinking in the past economic updates.

Yeah.

So maybe rather than doing this all on camera, why don't we come back to these numbers?

Sure.

You'll hear this request from me a couple times over where I'll be asking for, let's look at this graph or this set of information as compared to past years.

And I think one of those graphs is also ticking back to slide 10. I guess taking forward to slide 10, sorry.

Which is, and one of the questions that I'll have for this next section as well, is if we had adopted the baseline in April rather than the pessimistic, well I guess this is the March pessimistic for the Seattle whole area.

I want to know and see those visualizations, and we don't have to do it today, but when we meet to see if we had chosen the baseline in April, what would the differential be today?

Just wanted to flag those are my questions.

Yeah, we can certainly provide that information.

Going back to the first one, when it comes to the manufacturing, Yeah, I would have to look back at the last couple of presentations.

The one that, the similar chart that we showed in April, I believe will have similar, qualitatively similar Changes for the Seattle metro area for manufacturing.

That's the impact of Boeing layoffs, essentially.

The aerospace manufacturing layoffs in Boeing are showing up here as a large decline in manufacturing employment this year relative to the previous one.

For trade, I'm less certain.

I have to say here that this employment data for the regional economy is more noisy than the national level.

It's subject to large revisions.

In general, the quality of data has declined over the last couple of years as the agencies are struggling with lower response rates.

The employment data is constructed in two steps.

First, there is a survey of large employers.

Based on that, there are some initial estimates made, and then the administrative data on actual employment in most of the Of the businesses is used to revise it and occasionally this leads to large revisions, especially again for original data.

So it's possible that one of the previous versions had shown trade doing better than in the national economy.

This is what the ESD data shows currently for that comparison based on how the data was revised in the latest release in July.

Thanks.

And as a reminder to myself and others, this is Pierce, Snohomish.

This is King and Snohomish countries.

Only those two in the metropolitan division does not include Pierce.

MSA, the metropolitan statistical area would include, and that's the one, that's the area for which the inflation is reported.

But for the employment, we use the King and Snohomish.

How does Tacoma feel about that?

Don't answer that.

That gets to my next question about trade, and this is something we can get into.

Is this data representing the Northwest Sea Port Alliance, which also operates the Tacoma Port, or is this just Seattle and Port of Everett?

So again, this would not include anything in Pierce County, only King and Snohomish, everything, all the employers that fall in that area.

We can certainly look at the split King versus Snohomish counties and look at all the employment looks in Pierce County.

We do have that data, we just don't use it as an input for regional economic forecast and consequently the revenue forecast.

Fair point.

The reason I ask is Port of Tacoma and Seattle operate as one entity, so I don't know how they split their data.

It would be something to learn.

But I don't need to spend any more time here because this is not why we're here today.

Are there any other questions on the economic environment in which we find ourselves in?

With that, bring us to the show, please, Director Uros.

With that, let's move on to the revenue forecast.

Before looking at the forecast itself, quickly, again, summarizing what the revenue collection looks like, what sort of information we have right now, what sort of outlook and risk We see in general.

So at this point, usually we have about 38% of the general fund revenues collected.

That's the information that goes into the forecast.

So it's mostly the revenue collection for quarter one obligations and some quarter two obligations, but not all of them.

There is usually a delay between The economic activity taking place and then when the tax is due.

In particular for business and occupation tax, again, it's just first quarter obligation payments that we have that are informing the forecast.

For sales tax, we have data from the Department of Revenue that covers in general the obligations From January through May, another whole first half of the year, but almost three.

That data comes with the smallest lag and so for that revenue stream we do have January through June revenues.

Looking at those main economically driven revenues and how they perform for sales tax collection, again, there is a continuation of the trends that we have seen in the last couple of updates.

The revenue collection has been, the growth has been quite weak.

A large part of that is due to a downturn in the construction sector.

Looking at the decomposition, that black line here shows year over year Change in the total sales tax revenue obligations by filing month.

The bars show the decomposition, how individual parts of the economy contribute to the overall revenue collection growth or, as we have seen more recently, declines.

And the yellow bars in particular, if you focus on those, those yellow bars recently are weighing down on the overall growth as construction sector decline and less construction activity.

Means that we are also receiving less in sales tax revenues from that sector.

That kind of trend is expected to continue on looking at the construction permits issued by the Seattle Department of Construction and Inspection.

The value of permits, the issue has declined further in recent months.

In the 2016-2019 period, the average was about 3.9 billion.

Currently, for the 12th month ending June, it's only 2 billion.

That's even less than last year.

In 2023, it was 2.3 billion.

The decline in the demand for new constructions, how much the developers would like to build, that continues to decline.

The reasons are the same that we have discussed previously.

High interest rates lead to overall Financial difficulties, construction inflation, construction material inflation has been high.

In addition to that, the demand for office space is in general low.

So that's again something that we have seen for a while now and just continues.

Just like last year, the VTS platform, commercial real estate platform VTS, which constructs the Office Demand Index, has reported that in the second quarter of 2025, the demand for office is only one-third of the pre-pandemic average.

Lowest among the cities that they report these numbers for and in the recent report they know that demand is particularly low for downtown Seattle area.

You can see that those office vacancy rates in the chart shown here for First, the U.S. as a whole, then for the Seattle metro area in green, Seattle City in yellow, and Seattle Central Business District in red.

Those office vacancy rates have gone up considerably.

They are still expected to rise somewhat.

What's quite concerning is that they are not really expected to come down anytime soon, and they don't CoStar, which is the source of this forecast, again we use as one of the inputs for the revenue forecast.

CoStar does not expect office vacancy rates to meaningfully decline until meet 2030. So it's just a continuation of the same situation.

Finally, sales tax revenues from leisure and hospitality sector are quite dependent on tourism.

One of the concerns that has come up since the beginning of this year and was already present in April and this chart here provides some kind of additional insight.

On that, there is a concern that there are going to be fewer international visitors or visitors in general, and international visitors in particular in the Seattle area.

Tourism Economics, that's a subsidiary of Oxford Economics Company, provides some data analysis regarding the travel.

They predict a 27-point decline in the number of international visitors In 2025, they do expect a recovery beginning in 2026, so overall improvement next year, but not full recovery until 2028. Again, this will weigh down on sales tax revenue forecasts.

That additional data point is one of the things why the sales tax forecast looks the way it looks when we get to it.

Moving from sales tax to business and occupation tax, there are large policy changes that have been adopted or proposed that will lead to potential Potential recent, potentially larger variance in the actual collection relative to the forecast.

The first, the Washington State Senate Bill 5814 reclassified certain services, and as a result, there will be a different rate imposed on the B&O taxable For those activities, in addition to that, there is currently a proposal to restructure Seattle's BNO, which will narrow the tax base and increase the rates.

For both of those, we have tried to do our best to Incorporate the likely impacts into the revenue forecast for state Senate Bill 5814. It is already part of the August forecast for the proposed restructure.

Since that has not been adopted, approved by voters, it's not part of the August forecast, but we performed analysis on the impacts, revenue impacts of that proposal.

When we were doing that in general there is a limited data to inform those estimates and so what the direct effects are is quite uncertain and thus the potentially large variance between what the collection will eventually end up in 2026, 2027 relative to There's not enough information to incorporate all the likely effects.

In addition to that, I do need to point out that these two changes are just the last two in a number of recent policy changes that overall have led to an increase in And so what the impact will be, what the Reaction of the large businesses will be, the large taxpayers will be, is again very difficult to predict and thus can again lead to larger variance between our forecast and the actual collection.

We'll have to wait out and see how these things will play out because there isn't anything that would inform us to incorporate it into our forecast.

Council President, I see you've got your hand.

I'm wondering, I've been taking down my questions.

I'm holding them to the end.

Can we get through this section and then we'll go through this section of slides?

Or is it a clarifying question?

Thank you.

That would be helpful.

So with that introduction, let's turn to the actual forecast.

First, looking at the general fund revenues for the August baseline scenario.

The table here shows in the very left column the 2024 actuals.

The next two columns are the current August forecast for 2025 and 2026. And then column four and five, they show the difference between the current August forecast and the April forecast.

So those are The additional revenues or declining revenues changes in revenue in general compared to what we expected things will look like when we're back and back in April.

So first looking back at looking at the overall change for the general fund.

It's minus 5.1 million for 2025, and then 33.4 million in 2026. The first one, that 5.1 million decline, that is to a large degree driven by a lower fund balance transfer from Jumpstart Payroll Expense tax fund.

Looking at the total general fund, Without grants and transfers, so the very bottom row, excluding those two revenue sources, the change is 29.2 million to the plus side for 25, 33.6 million to the plus side for 2026, so a combined increase of 62.8 million.

Looking at individual revenues, first of all, our office, the forecast office is responsible for those revenues which are highlighted blue.

The remaining ones are remaining, their forecast remain with the city budget office.

So I'll first talk about those revenues that we oversee and then I'll hand it over to the city budget office staff to provide insight on the others.

For sales and business occupation tax, as I mentioned, the Washington State Senate Bill 5814 reclassifies activities and makes them subject to sales tax.

As a result, they are also going to see different rates imposed on those activities, the business and occupation rates imposed on those activities.

And so the overall changes for the two years presented here are a result of first changes in the economic outlook and then those other things that affect the overall revenue forecast.

So overall it's 20 million each to the plus side for the two years in For the two years in the baseline scenario.

Then looking at the utility taxes, Sean can comment on that one.

Thank you, Jan.

Yeah, utility, private utility taxes seem to be consistent with the modeling for the rest of the year so far, so far of the year.

For some private utility taxes, they're more impacted by weather patterns like natural gas, steam.

We've seen that at the beginning of the year was a lot colder than initially expected and therefore we had a little higher revenue for those years or for those revenue streams.

As a result, that raises the base for the current expectations and how it impacts throughout years.

Outside of those kind of weather impact private utility taxes, we have cable and telephone.

Since like the last decade, people have been moving away from these kind of For their entertainment and communication needs, away from cable and telephone to more digital-based things.

We still continue to see a decline in those revenue streams.

What is nice, though, is that the decline is not as large as we initially expected before.

We're hoping to kind of bottom out on the decline to have a kind of stable tax base for these revenue streams.

Overall, though, all these changes to the modeling culminated to about $2 million over the couple of years and more beyond that.

But for this presentation, that's kind of the main focus.

And it's a CBO for their revenue streams.

So I will take property tax first.

Please.

We've introduced Director Duras, and maybe I'll take this moment.

Can everyone who's presenting today introduce themselves?

My apologies.

That was my oversight.

Sean, I'm going to start with you.

Can you reintroduce yourself for the table?

Thank you, Councilmember Strauss.

Yes, it's Sean Thompson.

I work with you on the Office of Economic Revenue Forecast, and I forecast primarily the private utility taxes for revenue and then some other things for assessed value and stuff like that.

CBO?

Alexandra Zang.

I'm an economist with the City Budget Office.

Joseph Russell, also on the economics team, economics and revenue team in the city budget office.

And I'm Richard Dadsey.

I'm replacing Dave Hennis, and I am with the economics and revenue forecasting team as well.

Welcome.

He's our new lead.

Not new, but he's new to us.

New to Israel.

Thank you.

Back to you, Alex.

So with the property tax, there is a little bit of a decline in 2026. Just as a refresher, under state law, the property tax is allowed to grow by 1% plus new construction.

So if there's a lot of new construction activity, that can add quite a bit to property tax.

Unfortunately for 2026, the outlook for new construction has been significantly revised down.

So that explains that slight reduction there.

Moving to public utility tax, those taxes, which include electric and water, have been performing according to baseline expectations.

So, of course, compared to the pessimistic scenario of April, they're doing much better.

For other city taxes, there's also a slight reduction in 2026. That was actually an error made in one of the revenue streams that just assumed a higher That number for 2024 actuals then actually occurred.

And then we'll move to Joe for the next two.

Sure.

I'm going to speak to the parking meters and court fines line.

So parking meters, you see a slight downward revision relative to the April forecast.

That is largely due to paid occupancy continuing to come in lower than we expect it to.

There was also a rate change in July.

The April forecast had anticipated those rates to be a net neutral.

They ended up, well, we project they will have a slightly downward effect on revenues, in fact, just based on the mix of parking areas around the city that saw rate changes.

The court finds this is a mix of different revenue streams, mainly driven by parking tickets and red light cameras.

The $1.1 million downward revision is mostly due to red light cameras coming in much lower than we had expected them to.

The citations in the spring were quite a bit lower.

The larger adjustment in 2025 relative to 2026 is mostly due to several cameras that were out in the spring that we had not expected to be not issuing very many citations, that is.

With the court fines line, there's also some change going on with parking tickets.

Those fees went up substantially starting in January of this year, and we're still monitoring the behavioral component of that change.

So are folks paying those tickets on time like they used to?

Are they paying them Later than they used to.

So some of the downward revision is because on-time payments have lagged a little bit relative to what we had expected.

Though it's still a little bit early to assess the overall behavioral change.

I'm going to pass it to Richard to talk about the licenses, permits, interest income, and other.

Yeah, thank you, Joe.

So with regards to licenses, permits, and interest income, you can see sort of a total uptake relative to the April forecast of $2.6 million.

Much of that is influenced by things like The interest rate environment declined as fast as was anticipated.

However, this calculation here still assumes two potential rate cuts for the remainder of the year, consistent with what Director Drew has talked about.

And so you see a dip there in 2026, and that's also in anticipation of the fact that The forecast kind of calls for relatively more rate cuts, right, potentially happening in 26. With regards to revenues from other public entities, a lot of this has to do with things like liquor board profits, marijuana enforcement, and other distributions that the city is receiving from the state.

So much of those receipts, if you will, are very formulaic.

Many of them are based on, you know, certain sort of thresholds and per capita and In other words, population growth and so forth.

And so we see a marginal increase there relative to the April forecast of about 500,000 and on a combined basis about 1.6 million.

So I'll pass it on back to Alex to talk a little bit about the service charges.

For service charges, the uptick in 2025 is due to higher than expected reimbursements from the state, specifically for the fire department, and then for 2026, just slightly Expecting slightly less reimbursements in 2026. For grants, the reduction in 2025 is completely owing to simply a cleanup of expected carry forward revenues coming in.

And then for fund balance transfers, as Director Bureau said, that takes into account the legislation currently in the pipeline that reduces the transfer from PUT to the general fund.

So unless there are some questions about the baseline scenario, I would move to the pessimistic.

Just keep taking it on, and then we'll come back for questions at the end, because I suspect there will be a lengthy number of questions.

So we want to make sure you get your information out.

All right.

So the pessimistic scenario, again, same structure of the table, 24 actuals.

The next two columns are the current August forecast, then the difference between the August forecast and the April forecast.

The two-year total difference.

Again, I want to remind everybody that the April forecast was based on a pessimistic scenario but did not incorporate, did not assume a recession.

The current pessimistic scenario does assume The recession is based on a set of assumptions that lead to a recession.

And so that's why you can see that for 2026 the revenues forecasted are actually lower than the pessimistic scenario, than the April forecast itself.

And so economy entering into a recession would have a negative impact on a number of revenue streams here.

Overall change is Minus 5 million to the total general fund relative to that already pessimistic scenario forecast.

For 2025, however, again, things look in general better than in April, even though that can change quickly.

The overall amount of additional revenue added is 21 million.

Again, that's excluding the change in the fund balance transfer here.

One more thing that I want to again point out is that the changes For sales tax and for business and occupation tax are the result of both changes in the underlying economic outlook and then the other things that we incorporate into the forecast that are related to We gave 14 changes in legislation, changes in the amount of free funds or similar changes.

Moving on to the August baseline scenario.

For the selected other non-general fund revenues.

The payroll expense tax revenues have been revised up and that's the largest change in the table here.

Again, since the financial markets and equity markets have recovered since April, the overall outlook for stock prices is more positive in this current forecast.

We do rely on the outlook that the Wall Street Journal Analysts provide for individual companies and we build that forecast based on their outlook for the stock prices of individual companies here.

We have discussed in the past why that's the case.

For rate, there is Slightly more revenue in 2025. There have been a couple of large sales, about three large sales that added additional revenue above what we were expecting in the first half of 2025. For 2026, The interest rates still lead to a market that's frozen.

There is still that lockout and lock-in effect.

There are fewer sellers.

Mortgage rates are still higher and so fewer homes are sold.

Thus, the lower forecast in the baseline scenario for 2026. The admissions tax that revision down is a result of both the lower collection and the change in the outlook.

You have seen in the slide on the international visitors that there is overall lower amount of visitors expected that would then feed also into the lower admissions tax forecast.

One final revenue here that's highlighted blue that's our preview is the transportation benefit district sales tax.

Changes here reflect for similar reasons as in the sales tax that goes into the general fund.

Now turn again to the budget office staff to talk about their revenue streams.

Thank you.

So the first one I want to talk about is the Sweden beverage tax.

So as you recall, that tax, it's kind of behaved in a very seasonal kind of manner.

There was a tremendous dip during the COVID years.

And it appears to be stabilizing right around the $20 million collection mark.

And so this forecast here is a reflection, if you will, of what appears to be a stabilization in the behaviors and exposure, if you will, of the taxpayers to this tax.

But also it incorporates potential sort of upticks from FIFA and the World Cup.

So that's why you see a slightly higher uptick there in 2026. Alex?

Do you want to talk about license fees?

Yeah, sure.

Okay, yeah, so also the other one to talk a bit about, which is the, you know, Seattle Transportation Benefit District related to the vehicle license fees.

As you can see, sort of the growth in the forecast from 25 to 26 tends to also kind of mirror, if you will, the sales tax as well.

Much of this fee, if you recall, is around $50 to help register your car.

So the analysis incorporates, if you will, the stock of registered vehicles in the Seattle area and also incorporates some measure of, you know, tries to capture, if you will, more people moving into Seattle and so forth and therefore potentially paying that vehicle license fee.

Okay.

Jumping back to short-term rental tax.

So this forecast is primarily dependent on the hotel outlook for Seattle CBD.

And as Director Doros has been talking about with the ongoing declines in international visitations, that outlook has weakened quite a bit for the next couple years at least.

And so we can see not much of a change in Short-term rental tax compared to April.

There are a few assumptions built into 2026, which is why you see a little bit of a bump in 2026. And then for commercial parking tax, so that forecast is mostly driven by the leisure and hospitality sector.

Which is a fairly good barometer for economic activity, especially downtown.

And so there are two reasons why we actually see reductions this time.

One is that Director DeRoss alluded to ESD revisions to employment, and so for leisure and hospitality, that was revised down noticeably for the first quarter of this year, and so that shifted the base down.

And then going forward, the growth is essentially flat, or the expectation of growth is essentially flat.

And so you can see that also a bit more clearly if you compare the 25 and 26 to 24 actuals.

Slightly up from 24 actuals, but pretty much no change.

I'll speak to that final line, the school zone speed enforcement cameras.

There is a substantial downward revision in this forecast that is driven in part by lower citation volumes than anticipated for the end of the school year that wrapped up in June.

And these are, again, these speed cameras when you go through too fast in a school zone.

So we saw citations come in a little lower than we had expected, but the lion's share of this revision is due to the slower-than-expected installation calendar for the new stock of cameras.

In the 2025 adopted budget approved basically a doubling of the number of these cameras that will be on Seattle streets.

And we had anticipated some of those being online already for this school year that just finished, but that didn't happen for a mix of reasons.

This is a very large Project and SDOT has revised their installations to say that all of these will be installed by the end of the year, but that pushes back the calendar that we had anticipated during the April forecast.

Another factor in here is that the April forecast had not anticipated a 30-day warning period for these cameras.

That 30-day warning period that exists for other camera types was extended to these school zone cameras via an amendment to the May 2025 legislation that made various revisions to the city's automated camera program.

So anyway, that new 30-day warning period also delays when these cameras actually start issuing citations.

So that is reflected in this downward version as well.

Moving on to the August pessimistic scenario for the selection of general funds revenues.

Again, the largest changes here for 25 and 26 are for payroll expense tax.

As I said before, a large Large share of the compensations for a lot of companies paying these tax is in the form of restricted stock units and so that part of the compensation is sensitive to changes in the stock prices.

In the pessimistic scenario, the decline in the stock prices in 2026 2025 and then 2026 would imply a much lower, much smaller tax base and much lower revenues collected in the pessimistic scenario to the order of almost 40 million less over the two years.

For REIT, economy going into a recession would have significant impact on real estate excise tax collection and overall impact close to 20 million here.

Admissions tax, fewer visitors, weaker purchasing power of consumers implies less admissions tax revenues.

For sales tax, the revision is to the plus side, but again, In addition to the changes in economic outlook, the Senate Bill 5814 changes the way how this tax is imposed and so that's the reason why there is actually additional revenue relative to the April forecast.

Turning it over to the CBO.

Yeah, so, you know, for sweet beverage, again, You know, on the pessimistic forecast and taking that relative to the April forecast, you know, we expect 2025 to, again, come around, come in around that sort of stabilized number of right around the high end of 19 million to 20 million, partly because Sweden beverage taxes It's a syntax, in essence, right?

So unless we have large changes in people's behaviors, we should expect that to effectively stabilize.

And then we have a slightly moderate increase, if you will, for 26. And that's sort of a relatively pessimistic outlook on the impact of people drinking soda and so forth, and the distribution of soda, if you will, during the World Cup.

And much of that we would expect to see in the second quarter, if you will, of 26. And then, again, for the vehicle license fee, that again, much of those calculations are very much population driven and very formulaic in terms of certain Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Tanya Woo.

Liza Rankin.

Larger reduction over the two years in line with an economy dipping into a recession.

Short-term rental in 2006 doesn't quite go negative, again, because of the FIFA assumptions that are buoying it a little bit.

Yeah, and the speed zone cameras again under the pessimistic scenario here are not substantially different, mostly again because the downward revision is related to installation calendar, which isn't driven by the regional economy or recession.

So not a substantially different outlook here.

So certainly some pessimism around citation volumes is also built in.

I'll turn it back to you.

All right, this is a slide that summarizes the alternative scenario, compares them to the current baseline.

We have gone over the pessimistic scenarios, so those are the red numbers in the left part of the table.

The optimistic scenario in the right part of the table Overall, it leads to higher revenues collected, about $44 million for the total general fund over the two years.

In addition to that, a significant amount of payroll expense tax revenues and REIT revenues above the baseline.

So combined general and non-general fund revenues, Combined would add about almost 100 million relative to the current baseline scenario.

And so there is a significant range between the outcomes in a pessimistic scenario, which would mean about 146 million less relative to the baseline, and then 100 million more in the optimistic scenario.

The baseline is somewhere in between reflecting general improved outlook since April, thus in general revenues being higher than in the April forecast, not to the extent that the optimistic scenario would suggest though.

Finally, we have been requested to estimate what the social housing tax would collect.

So we used the Employment Security Department payroll data to develop an estimate for the 2025 tax year obligations, which will be due in January 2026. These revenues will not stay with the city, but again, we have been requested to produce a forecast.

An estimate of 65.8 million that resulted in this work has a large amount of uncertainty attached to it.

This is due to data limitations, the tax base itself, the factors and its size.

It's harder to determine how it might, how that might change over the two years between The time for which we have the payroll data and when the tax will be due, it will be imposed and due, it introduces additional uncertainty and so the range is quite large here.

39.2 to 80 million are plausible.

That said, even larger variants cannot be ruled out for these particular revenue streams and we'll see how things will play out and then over Longer period of time, we'll get a better understanding just like with the payroll expense tax.

So that brings us to the summary.

Before making a scenario recommendation, which scenario should be adopted as the official forecast, there is a not so short summary here.

It's essentially summarizing the main points that I went over, so I'll just briefly go over them.

Overall, the outlook is better because tariffs have not had those negative impacts that the economies were afraid of.

Probably the recession in the recent Wall Street Journal survey has gone down from 45 to 33%.

And so the overall outlook by S&P Global is better than it was in March and April.

The current assignment of probabilities is 50% for the baseline, 25% for optimistic, 25% for pessimistic.

And pessimistic scenario now incorporates the recession.

So again, it's fundamentally different from the April forecast where The same probabilities were attached to the three scenarios, but the pessimistic one was a scenario where growth was slower, but the economy would not go into a recession.

That has led us to recommend the pessimistic scenario as a more prudent As a proven way how to prepare for and deal with the uncertainty.

Prepare for a potential negative revision come summer if things don't play out in a particularly great way.

I have included here a summary of what these probabilities have looked like.

Last two or three years there have been several occasions where The economy was on the brink of recession, particularly summer 2022. The S&P Global was attaching a 45% probability to the pessimistic recession scenario forecast.

Due to Fed increasing its interest rate and the fear that Fed will not be able to manage a soft landing.

So overall, as I have shown in the slide with the Wall Street Journal survey, The forecast by S&P Global is slightly more optimistic than preferred.

For more cautious approach, we have developed our forecast based on the average of the S&P Global's forecast and Moody's analytics.

Which we believe is a more conservative and more proven way to prepare the forecast and plan for the risks and the uncertainty that are still ahead.

The two announcements made last week regarding new tariffs and then the employment numbers shifted the balance of risks to To the downside, that said, there had not been layoffs in the employment data, and as I have said, the economy still believes that the U.S. economy can avoid the recession, though.

Probability of the recession is now, again, somewhere close to the 45% than the 25% that's attached by the S&P Global.

So the next couple of months are going to be quite crucial.

The regional economy faces additional risks, lower employment growth, There are risks coming from the policy changes and our limited understanding and limited ability to incorporate those policies and prepare forecasts based on those policy changes.

We just have to see, again, how the tax base and revenues Will change over time.

But the overall summary, the overall conclusion here is that with all those considerations taken into account, the baseline scenario of the August revenue forecast is the one that we believe to be the most likely outcome.

That said, when developing a budget, decisions should recognize that the risk is really high, that there will be a downward revision, not necessarily to the extent of a pessimistic scenario, but somewhere in between.

Again, employment, job market weakens, even though the economy still does not go into recession.

So we will strongly encourage to plan for that eventuality.

So that brings us to the end of the presentation, and I'm happy to address any questions.

Thank you, Director Duras.

Council President, I see your hands, so don't worry.

Feel free to lower it.

I'm going to call on you next.

I want to thank you for all of your work in this, colleagues.

We'll take questions first from the members of this oversight committee, and then Ben, if you've got questions or if others want to get into the discussion, we're going to do that.

We'll take questions on anything under the sun, but focused on the second part of the presentation.

Council President, I know that you've had your hand, and thank you for waiting.

Thank you very much, Chair.

I am concerned about vacancy rates, so could you go to page 14, please?

So the reason I'm so worried about this is that they keep going up and they signify potentially some really bad things.

So are those businesses that lease those buildings, are they leaving town?

Are they having workers work at home?

Either way, that impacts our PET revenues and also a whole host of then downward impacts.

To the small businesses that serve those employees, of course, but then ultimately the banks and what happens when a property owner has a hard time paying the mortgage on these really tall buildings.

So I ask myself, well, then who is leasing these spaces, these floors in the buildings that are having such high vacancy rates?

And I'm assuming, correct me if I'm wrong, that it's service industry.

So I'm looking at the categories of Businesses that, you know, per the IRS categorizations.

And so I would assume that that is services, I'm not really sure, tech, I don't know what category that goes into, but I'm referring now to the memo that the office put out on June 26th in response to Tom Mikesell's question about the impacts of the, you know, tax on revenue and tax estimates.

And page one does break out the different sectors and the tax collections.

And at the very bottom line is service and other business activities.

And that has a massive, and the businesses with a taxable amount of over 2 million is really significant.

Out of 324 million, 219 million of that is coming from the service and other business activities.

So am I correct in assuming that those are the businesses that are largely responsible for the vacancies?

And if so, then is that connecting of the dots between your risk, the noted risk that you note of the business and occupation tax increase related to potentially Worst vacancy rates going forward?

Yeah, so...

When it comes to which companies have not renewed the leases, we can go to the underlying data and provide some additional information on that.

Our subscription to CoStar data would allow us to do some analysis on where that vacancy space is coming from.

In general, as you mentioned, Working from home means companies require less space.

That does not directly translate to higher vacancy rate immediately.

An office can be leased fully with employers working from home and nobody being actually present at the workplace.

So eventually that however can lead to higher office vacancy rate as the businesses.

Downside adjust.

They will not renew those vacancy rates.

And so the lower food traffic data that we occasionally present, which I'm not showing here, which suggests that the return to the office is ongoing, but certain areas of Seattle, and in particular the Seattle Central Business District, is lagging, significantly lagging in that food traffic and return to the office.

That, again, is kind of consistent with what we are seeing here with higher office vacancy rate for that particular area as less solar return to the office means less demand, less need for office space in that part.

And so companies not renewing the offices, which eventually leads to higher office vacancy rates.

That has impact on business and occupation tax directly.

The two-factor apportionment allows us to see to what extent the share of a payroll in the city of Seattle as a fraction of overall payroll by companies has changed over time and we do see some declines there as well, which means that essentially the tax base is smaller than it was a couple of years ago because some of that work is not being done I don't know if that answers the question, but again, we can provide additional information on the companies which are not renewing the leases.

Okay, so that last point, thank you.

I'm just looking at the categories of businesses, and I think that's what you use to sort of track your projections.

There are manufacturing, wholesaling, retail sales and retail services, printing, tour operator, transporting freight, and then service and other business activities.

And so I'm just assuming that it's not the top, you know, sectors.

And so that's why I am Assuming that it's service and other business activities, but I think that would be a good thing for me to understand to see who's paying what.

And then I have a couple other questions.

On page, if you don't mind, going back to page 17.

Council President, just one question for process.

I see Director Dura scrambling to write down the questions.

Can you ask them one at a time?

You can have the floor until you're done.

So don't feel pressured to get them all out at one time, but please just ask them one at a time.

Go for it.

The floor is yours, Council President.

Okay.

The second one is on page 17. I keep looking at the negative $33.3 million in the 2025 April forecast, and then it ends up again in the two-year total difference forecast.

Could you please explain that difference.

It has been said that that money was shifted from one account to another, but could you please go into that more detail?

Yeah.

So that, again, reflects the legislation that just moved out of committee, I believe, that reduces the transfer from the Jumpstart Payroll Expense Tax Fund to the general fund by $34 million.

And that's just slightly offset by something else in that category, but essentially that's what that is.

Okay, well, we sort of went through that part quickly and there was not a discussion explaining the two pieces of carry forward legislation, so maybe I will get more information from you on that offline.

And then finally, in the line on that page that says licenses, permits, interest, income, and other, my question is do you disaggregate Business license renewals from that whole line?

And if so, what trends are you seeing?

Are there increases or declines in business license renewals?

Because again, that gets at how businesses are doing.

Are they leaving Seattle or what?

We can provide that information.

We do forecast those separately.

They are not reported here, but they are in the revenue reports, reported separately in revenue reports, those quarterly reports that we send out.

Business license fees are in general paid towards the end of the year for renewals for the next year, and so for the first half of the year there usually isn't much received yet, so we'll have to wait and see.

But for past years, yeah, we can provide the information for past years.

Okay, yeah.

And if you want to just take chunks of years, like two years from here to here, I mean that, rather than trying to deal with the time of year that the number is coming from, that would be helpful.

Because I'm wondering if it has to do with the, on page 22, the social housing information, the range Why is, I keep asking myself, why is the revenue, why is the social housing tax revenue estimate range so wide?

So the range from like 40 to 80.

Yeah, the range is so large here because the employment security data that we have used to develop The forecast allows us to essentially understand what the payroll is, gives us good insight for payroll, employment and wages on the county level.

Assigning it to the city level is harder because some companies essentially report all their employees to a single location.

Some taxpayers might simply have just one headquarters officially, let's say in Seattle, They have additional offices, let's say, in Bellevue.

And so when they employ some workers who work in Bellevue, those are reported to the Seattle location.

And so they do show up as additional wages paid in the city of Seattle, but they would not be subject to the social housing tax.

In that sense, the data that we have is imperfect.

We do have to estimate the extent to which what's being reported and what we see in that employment security data coming from the unemployment insurance program reflects the actual tax base.

We have tried to use the payroll expense tax and how the collection for payroll expense tax relates to what we are seeing in The payroll data from ESD and inform the social housing tax forecast that way.

Again, it's not the same tax base and thus the range being larger because we don't have a perfect understanding of the relationship between what's being reported in the payroll data and what will eventually be the tax base for the social housing tax.

Essentially saying it's hard to estimate what share of those workers and wages that are being reported in Seattle are really people working in Seattle and not elsewhere because of the way how the companies report their headcounts.

Thank you for that.

I'm not well versed in the nuances between how the The payroll expense tax is collected and how the social tax, social housing tax is collected.

They're both really important because one pays so much of our services and the other one will pay for housing, desperately needed.

But they all seem to be related to, you know, who's working jobs in Seattle is what they're related to and the companies being in Seattle.

If the payroll expense tax is going down, which it has been, which is part of our risk, then that, so we're having to make up for it by increasing the B&O, well, that's one of the reasons why we're increasing the B&O tax rate, you know, later today or whatever, probably later.

So one tax goes down, so we have to raise another tax, but they're all related around the general jobs economy here.

So just to be continued, Correct my misassumptions later.

Thanks.

Thank you, Council President Zell.

Yeah.

I will disagree, but I do not need to argue with you.

I will disagree with the characterization of one tax goes down, which is why we have to raise another tax.

Just the characterization, we can go, we can have that conversation later today though.

Plus Trump's, you know, cutting of You know, the federal cuts that are coming that we haven't quantified exactly yet, that is also a big part of it too.

Thank you.

Are there other questions from the table?

Then I'm going to run through my, and Director Duress, thank you for coming to my committee later this week.

If we could start with slide 13, I'll try to tick through these quickly because I know We're running a little long.

This is a great, great chart.

You've got trade, construction, leisure, hospitality, and rest of industries.

Can you tell me, what is rest of industry?

I know we've had these slides in the past.

It is consistent from time to time.

But just to help me understand, maybe the general public to just say, Here you've got three very small niche areas and then one pretty large one.

I'll go to one of the slides in the appendix.

Back pocket here, which shows the sales and use tags, collection, 2022, three and four actuals.

And here they are disaggregated in industries in a narrower fashion.

So the trade and the construction sector are the same as in that other slide.

And Leisure and Hospitality, that's again same as the other slide.

So these three groups are essentially a large part of a sales tax base.

The rest of industries is what you are seeing here.

Information, financial activities, professional and business services in particular contribute not on their own significant amount but combine They are a significant share of the overall sales tax plus others and that really includes everything.

The rest of the industries is mainly driven by trends in information, professional business services, financial activities.

In general, you can think of that as tech sector and adjacent and related financial activities.

Excellent.

So to better understand slide 13, we go to slide 29 in the appendix of the presentation attached to the agenda.

Thank you, Director Duras.

That was helpful.

Moving on to slide 15 regarding fewer.

The headline here is fewer international visitors are expected in Seattle in 2025. I would, if I had the power, but I don't because this is a transparent process, if I had the power to tell you to change the title, I would change it to Higher number of visitors expected in Seattle in 2025, international visitors lack.

I only say that because if I'm doing the back of the envelope calculations here, rough numbers in 2016, it looked like Canada had roughly 1.75 million visitors.

International had roughly 2.25.

I'm kind of guessing where the numbers are here.

And that domestic was 5 million or so visitors.

When I look at 2026, I'm seeing 6.5 million domestic About 2 million international and about 1.5 Canadian.

I'm being conservative in mine.

The 10-year comparison is that there were 9 million visitors in 2016 and 10 million visitors projected in 2026. I don't know if this includes FIFA World Cup.

I would hope that you are not, candidly.

I know that we're including it in some projections, but I would prefer to be surprised by Liza Rankin.

Tanya Woo.

Liza Rankin.

The convention center, they're astonished by the work that we've done to revitalize downtown.

Granted, we've still got some more work to do around places that have troubled downtown Seattle for 30 plus years, but that things are back on the right track.

Are you getting the same sense from the data, or am I totally off my rocker here?

No, that's a fair point.

So overall, the trends in number of visitors is increasing.

The pandemic went to a large decrease, and that's not the kind of decrease that this graph shows for 2025. That said, there are concerns that Some visitors, not just Seattle, but US in general, are afraid of what might happen at the border.

The relationship with Canada, they are not as great as they were.

And those visitors from Canada, they are a large share of overall visitors.

So it does have an impact on the sales tax revenues.

That's the reason why this slide is...

Headline the way it is looking at 2025 and 2026 by extension.

2026, again, there is a recovery here, not just in international visitors, but visitors more broadly.

Again, PFI is expected to improve on that as well.

So you said that?

Yeah.

I guess my point here is, and I'll take it a step further with you about visitors, is that if we did not have the cruise industry that was taking visitors to Alaska, we would be in a lot of trouble.

If Seattle still wasn't the gateway to Alaska, also through SeaTac Airport, I think we'd be in worse trouble.

But I'm seeing an overall trending in the correct direction, and I also agree with you completely about international and Canadian visitors.

Is that, are we, I think we're on the same page.

Yeah.

And so on to the next one.

I don't, on to B and O.

I don't, again, disagree with the characterization made earlier in this meeting.

And I understand that this graph can only show what the proposed rate is.

It can't show what the standard deduction changes are, et cetera.

So my question here is, in your projections, I know that there's just general uncertainty.

Have you also taken into account the relieving of the B&O obligation for the smallest businesses and its potentiality of creating, like, what its impact on the economic activity?

Is there great enough change that it could create actual economic growth because folks have so much more freedom or are we still just talking about activity within our own economic sector?

Yeah, so our analysis did take into account that part of a proposal on the revenue collection we have not I think the main concern here is that for payroll expense tax, for example, those small businesses are not really contributing by construction to the payroll expense tax.

And so what happens to the tax base?

Sorry, I was just talking to P&O.

Right, but whatever the impact and whatever the decisions of large businesses are as a result of not just changes in B&O tax but overall decision process, those decisions will have implications for payroll expense tax because it's the same businesses that are going to be taxed at a higher rate for business and occupation tax and they are significantly contributing to the payroll expense tax.

In our memo.

I read those points loud and clear when I read your memo.

I've heard those points loud and clear.

My question here was about the smallest businesses.

Yeah, so that's the first part.

The second part, will those deductions lead to more economic activity?

Here I guess the main concern is that based on the Washington State input-output studies and what's called multiplier effects, essentially looking at how much an additional job or additional One thousand dollars in wages in different parts of the economy generates through some kind of chain effects.

They essentially, that study confirms the fact that a lot of small businesses are dependent on the behavior of large businesses.

And so additional wages, additional employment Those large businesses lead to more spending by those employees on things like Things like daycare, spending in restaurants, landscaping, remodeling.

Those are the kind of expenditures that then mean that there are some smaller businesses that have customers.

And because of those spendings, there are those additional jobs created.

That's the sense in which that input output income study by Washington State.

Office of Financial Management says that a lot of the impacts are through large employers on the small ones.

Opening additional restaurants around Amazon campus would be one example.

And so the concern here is again that any changes in the behavior of the large businesses will then have potentially negative impacts on the small businesses as well.

It will not go the other way around.

Thank you.

And that's for your revenue forecast.

Is that correct?

That's economic impacts and revenue impacts by extension as well.

Thank you.

You've been able to give us a fair amount of guidance here over the course of the number of years of you providing the forecast on what you believe different changes will create as far as the macro economy or the micro economy here in Seattle.

One of the questions that I'll have for you, not today because we don't have the data for it, which is how do we assist those smallest businesses?

And so I'd like to dig in on that with you.

And the reason that I want to dig in on that with you is because even before we had Amazon or Microsoft, we had thriving businesses here in the city that were small.

And so we'd like to dig into that with you.

Let's move on to slide 17, though.

Joseph, I'm going to give you, don't worry, you're doing the best job possible.

We just keep changing the ground.

We keep changing the landscape on you.

And so I want to talk, you were very humble about those changes, and I appreciate that for not pointing the finger at me.

I will point the finger back at myself.

In the course of the last year, Or so, we've had just a number of different things that have made projections difficult.

Number one, we had a lot of people avoiding paying parking, just paying for parking.

Because paying the fine was cheaper, and so we were maybe inflating the amount of parking fines that we were receiving and undercounting the amount of parking actually to occur.

To fix that, we raised parking rates so that they were higher than the parking fine that you could receive.

And when you do something like that, it's not clear how that's going to impact People's uptake on parking, much like small businesses back for Director Duress for a future conversation, right?

So a lot of these small changes have impacts on people's, the amount that they're willing to pay for parking, the elasticity of that good, right?

And so not only did we change the parking rates, But then that impacts your fines.

We also then changed how many speed cameras were going out there.

I will admit to even going a step further with removing some of that money so that we could do, or sorry, we took some of the school red light, school speeding money to do citywide red light speeding, or citywide speeding camera enforcement.

To then adding on another 30-day warning period, which I believe is the right thing for Seattleites.

And all of that makes your data very noisy.

Absolutely.

So I'm just going to say thank you.

Because, you know, I think in the next few years as these tendencies, and we'll see what people's elastic ability for some of these different things is, or the elasticity on those goods, we'll start to see these things smooth out.

Any thoughts for us as we look into the future on this?

I appreciate the acknowledgement there.

It has been a lot of moving targets in these transportation-related revenues.

Yes, we have for some time seen the Paid occupancy is sort of the technical term I use for parking meters going down.

We don't really know where the floor is, to be honest.

And when I say paid occupancy, what I really mean is the number of people paying the meter.

We believe, and it's very hard to know how many people are actually on the street, but SDOT, you know, I communicate with their CURB team quite a bit, and we believe that those rates are pretty steady, the number of people actually parking in those spaces.

What we've seen is sort of an over...

A continual decline in the number of people actually paying those.

And as you alluded to, that was likely because they were doing the math of, well, the ticket's not that much.

It's like 45 bucks.

And as the rates sort of climb up over time, they're just saying, if I get caught one out of three times, then I've made, I've broke even, basically.

So they're playing some risks.

So yes, there is potential for those, for parking meters to go up.

In terms of the number of people who are paying those because the fines for not doing so have gotten quite a bit larger.

So I have not baked in too many assumptions in that regard.

It is very difficult to model those sorts of behaviors.

So we may continue to see some of these revenue streams go up and down.

We are trying to analyze those behavioral components, but yes, we may continue to see a bit of a rollercoaster here in some of these.

Thanks for acknowledging.

Fair enough.

And Council President, I see you've got your hand, but I'm going to tick through the rest of my questions and come back to you if that's all right, just as I did for you.

Thank you.

Alex, you mentioned the property tax.

We each year are able to count for new construction.

New construction slows down, so it is a negative number here in 2026. I do just want to confirm with you, we are collecting our 1%

Yes.

Increase.

Great.

Thank you.

And then Director Duras, question here.

Overall, how does the August baseline scenario compare to, especially if we had adopted an April baseline?

I say this because, you know, as you were talking about your risk assessment on tariffs, In April I had less risk associated with those tariffs than you did.

But today I have higher risk associated with those tariffs than you do.

And I say that because in April we were in the second of three weeks.

You took the numbers in the second of three weeks of the administration blustering.

We saw that bluster come down.

But where we are today is In the last number of months, it feels like we are calm.

But it is in last week, this week, and the next week that we'll see who is actually having these tariffs applied, who's making deals.

And so in April, I was confident we would get to where we are today.

But today, I feel more risk than what you're presenting.

So those are the two questions.

We'll split them out.

First one, just general, this baseline compared to April, what would it look like?

And maybe that's where you just give me another chart and we can meet offline.

But then, what's to say the worst is not still to come?

Right, yeah, so we'll provide you with that comparison, the table, similar table that compares it with the baseline.

Baseline from April rather than the pessimistic scenario from April.

When it comes to the risk assessment, again, we are basing the recommendation here based on the overall changes and in part, for example, the changes in Well, the financial markets have assessed the tariffs back in April and how they are reacting to the news right now.

In April, the announcements have led to a really significant decline in stock prices.

That was not really the case recently.

Again, as I mentioned, the S&P Global 500 index is actually up today when I checked in the morning.

That might not be the case.

But when I checked this morning, it was actually 1.3% above that red dot which shows where we were on Friday.

And so there hasn't been a large negative reaction by the financial markets.

So again, the financial markets definitely and the economies to some extent as well believe that the tariffs, that the first reaction The worst of those fears have not materialized.

Some of those tariffs that have announced have been walked back and in the end, the effective tariff rate is going to be higher than what the belief was in January, but not as high as I think this is where you, maybe for the first time in a long time,

I feel greater risk than you do, but that's okay.

I trust you.

If we could slide on to slide 12, this will be my kind of last question statement.

Statement is that we see uncertainty at the federal level.

Slide 21. I have uncertainty of the federal policies, whether we will see interest rates change or not.

You presented, Director Duras, earlier in this meeting, your uncertainty about inflation.

I just discussed my uncertainty about tariffs.

You expressed your uncertainty of the jumpstart payroll expense tax, as well as the social housing tax.

There is a lot of uncertainty today, and that's okay.

That is in part of why in April it was a prudent decision to adopt a pessimistic outlook rather than a baseline outlook.

What led us to adopting that pessimistic outlook in April and why are we not adopting a pessimistic outlook today?

Yeah, so as I mentioned, the pessimistic scenario in April and the current pessimistic scenario are fundamentally different in the regard of whether they expect the economy to go into a recession.

Back in April, the pessimistic scenario was slower growth, no recession occurring.

Definitely negative effects of tariffs, lots of uncertainty.

So in that regard, given the option to choose the baseline and the pessimistic, the pessimistic was the one.

Right now, comparing the baseline and the pessimistic scenario and choosing one of them essentially means taking a stance over whether the economy is going to go into a recession or not.

Adopting a pessimistic scenario means that we do have a significant amount of confidence or we are worried enough about that recession to adopt a scenario that It builds revenue estimates around a case where the economy enters a recession.

Again, given what the economies believe the probability of a recession is, around 40, 45, maybe as high as 50%, and given where the financial markets are after all the announcement, right, at this point, When it comes to just the assessment of which of those outcomes is more likely, the more likely scenario is the one without a recession.

Can I repeat back?

I see Director Eder's got his hand here.

We have volatility in both April and today.

The difference between April and today is that the likelihood of recession is much, I think in your slides it went from 45 down to 33% just in this intervening time.

And that is a primary driver of even all other things held constant.

That one variable says to us that we should be confident today that we can adopt a baseline in April with all of those variables with so much noise plus the recession likelihood.

That is why we needed to take a pessimistic.

Is that generally correct?

And if not, I'm going to turn it over to Director Eder.

If I can add one more thing, we have been in similar situations several times over the last couple of years.

Going back to August 2022, again, the likelihood of a recession was somewhere where it was right now, and the recommendation was to adopt the That did not look like the most likely outcome.

It's something that would be a good idea to prepare for, build enough financial reserves, plan for the worse, but it's not going to be the most likely as the economy will go down.

In August 2024, last year, We were, again, in a situation with a large amount of uncertainty.

The July employment reports were weak in a similar sense, in a similar way that the weaker employment reports now have increased the fear of a recession and increased the risk to the downside.

And again, we did adopt the baseline scenario.

Primary on the belief that the most likely way how things are going to go is along that path.

Maybe slightly to the downside, more to the downside, but not to the extent that a pessimistic scenario would suggest.

Not planning for a significant drop in revenues.

So again, there are other ways how to plan for a race.

We will strongly encourage for the funding decisions and the financial planning to take into account that there might be a possible downward revision, hopefully not to the extent that a pessimistic scenario suggests, given the belief that it is still possible to avoid the recession given that that's not a foregone conclusion.

Thank you.

Director Adrian.

I just wanted to offer some takeaways from my perspective.

That I don't see clearly called out in the summary slides, particularly on the general fund and the PET.

In October, the forecast that supported the adopted 25 budget and the endorsed budget, We assumed a certain level of payroll expense tax and general fund.

In April, things were much worse than were assumed in the adopted and endorsed budget to the tune of about $218 million of revenues that were no longer, as of April, expected to come in the door in 25 and 26. This is very good news.

Much better than was included in the April forecast.

You're assuming about $95 million of more payroll expense tax and general fund coming in the door in 25 and 26 than in April.

But it's still well lower.

Then what was it included in the adopted budget?

So it's 218 is my calculation of bad news that came in April that this partially but doesn't at all fully offset that bad April forecast.

Bad forecast, but the bad news included in the April forecast to the tune of about 95 million.

So there's still over $100 million of general fund and PET that is not Expected to come in the door in 25 and 26. So that's my key takeaway.

Yeah, that's a good point.

So there was a significant downward provision for a payroll expense tax forecast back in April because of two things.

First, the stock prices have really dropped significantly and the outlook was much worse compared to the October.

The second part, the second reason was that 2024 collection came lower than expected.

And so those two led to, I believe it was about 80 million less per year, give or take, 80, 90 million each year.

So here, this slide shows the change Between April and the current baseline scenario.

So we are, as you said, not reversing by any means all of those downward revisions.

We are only adding 23.7 million for 25 and just 8 million for 2026. So significantly less than what the downward revision was.

That means that the payroll expense tax forecast, even in the current August baseline scenario, is below the October baseline scenario forecast.

The reason why this adjustment is done here is, again, stock prices have recovered some of those losses.

In 2025, we have also received some late payments for 2024. Not a huge amount, not in tens of millions of dollars.

But they do add up to about half of the 2025 revision.

And it's what we have received plus what the Office of City Finance has informed us what they believe are revenues eventually coming in for this revenue stream in the next couple of weeks or months.

So again, yes, we are below the October

I guess my worry here is that with the amount of volatility that we have, to the executive's office, I appreciate all of the Holding back spending that might not be best to spend.

I appreciate you holding back as much as possible.

This definitely gives more room for the mayor's proposed budget.

My fear though is that we get to October and we're back to a downturn situation.

I guess here's our commitment working together to make sure that we've got it.

I won't take the rest of your reserves for housing vouchers next year.

Sorry.

With that, Director Carnell or Mr. Meyerberg, do you have additional questions?

No, only wish that there was a pessimist If we didn't have the recession piece of this, I think that the pessimistic scenario would be more likely.

But I think the recession piece of that kind of puts us back into the baseline.

But I would always urge us, as Jan has said, to be very conservative as we're going through.

We're not there yet.

We're not to the October forecast.

Mr. Mayrard, anything?

Council President, I saw you had an additional hand or no?

Yeah, I really appreciate you, Chair Strauss, trying to drill into the pessimistic versus the baseline, et cetera, and the optimistic, because that's where I'm always trying to go.

And from what I understand from what Jan was saying is that, Director was saying, is that the scenarios that we adopt are Based on recommendations that are based on whether or not we're going to go into a recession.

What is the likelihood of a recession?

Well, I'm looking at how much money are we going to have this fall when we're deliberating the budget.

And so that's sort of what, that's where my mind goes.

And it looks like, and so I'm always, whenever these forecasts occur, I'm always thinking about what is the takeaway?

Do we have more money or less?

And so I'm assuming Is it true that we do have a positive revenue forecast before us and how much positive is it?

I'm assuming it's not 99 million that's on page 21 because that is between optimistic and baseline.

So I guess if we're adopting the baseline, what is the positive difference?

So it's about Looking at the general fund, it's about 62.8, excluding grants and transfers, so 63 million.

Then adding the non-general fund revenues here would add something a bit less than 30 million.

Based on quickly glancing at those numbers, I have not done the math.

I haven't done the math more precisely, but on that, it's roughly $90 million over the biennium.

Again, the majority of that, either in the payroll expense tax and the general fund.

These other funds, they don't exactly offset, but there's a mix there.

But again, their individual uses are restricted, so offsetting is not necessarily the way to think about it.

Yeah, let me go back a slide.

I do think it's the same time that we acknowledge that there's 90 million there.

I think it is important to note that the, oh, sorry, one more.

Sorry.

Yeah, on the baseline, that the increment, looking for the increment for 26, there's 33 million roughly, but then if we go to the PET slide, the increment for 26 is only 8 million.

So in combination, from the general fund and payroll expense tied together, the 26 increment is roughly 40, so essentially 50 million in 25 and 40 million in 26. I think that's important to recognize that the implications in terms of 27 and beyond are not 90 million a year, certainly not.

It may be slightly more than 40 million, but more in that range.

So as the council considers the implications for the longer run and the projected deficit, again, when we have an opportunity, we need central staff to present This revenue in the context of those longer rain forecasts, we'll highlight this point as well, that there's still a significant roughly $200 million deficit on a projected basis in terms of expenses associated with the payroll expenses fund and the general fund in 27 and beyond.

So I don't want to minimize the good news, but recognize that essentially $50 million is one-time money rather than implying an increase in the ongoing revenue streams.

Well, when can we use that one-time money?

Is that for 2026, or does that backfill expenses in 2025?

I believe that's a conversation for our budget deliberations, Council President.

Okay.

Thank you.

All right.

And just, I really do also appreciate, Chair, that you really are asking questions about small business, and it is really, and Director I really do believe that you answered that question well.

You said that the impacts on small business largely depend on the behavior of larger businesses.

So that's something to keep in mind.

And Director Eder, that was what I was trying to explain earlier this morning, if you recall.

So thank you.

Thank you.

Anything further, Council President?

No.

Thank you.

Director Duras, last words, but these are yes, no questions.

So I can't go on for three minutes.

No, if I can have just one minute regarding the change, the overall size of a change.

So it was about 240 million to the downside in April for 25, 26, two year.

We are now adding about 90 million for those two years.

So it's still about 140 million below the adopted budget forecast based on in that.

It's not that kind of calculation.

So we are reversing some of those downward revisions, but not to the full extent, only partially.

And again, I want to point out that 5814 was not incorporated in the forecast in April, and that results in some additional revenues that are here, that are driving the revisions in sales and then PML forecast.

Thank you for putting the bow on the top of the present for us because I think that $140, $150 million hole is the only thing that I can see.

And so, yes, this is good news today, but I'm still staring at a hole that is burning my retina.

So thank you for that acknowledgement there.

Colleagues, I'm not seeing additional questions, so I will move on to item three, which is the actual adoption of the recommendation of the August 2025 revenue forecast per the ordinance that created the Forecast Office and this council.

It is the role of the council to review and approve the forecast in terms of approving the forecast.

If we concur with the recommendation of the forecast scenario, Then no formal vote is required.

The goal of the legislation was to remove the risk of political influence over the forecasting, which is why we don't have a slide that says visitors are up, but internationals are down, and thus the independence of your office.

Thank you, Director Duress, for that.

That said, as the elected leadership of the legislative and executive branches, it is also appropriate that we have the authority To override the recommendation, should our judgment lead us to that conclusion.

For establishing ordinance, such a decision would require a three-member majority vote.

As you've heard, Director Duras recommends the baseline scenario for the August 2025 forecast to be used as the official forecast.

Are there any objections at this time?

Council President.

This is not an objection.

I just wanted to, I always ask Arson.

Can you hold?

If it's not an, I'm asking only for objections at this moment.

You do not have an objection, Council President?

Well, am I allowed to ask my question?

I always ask Mike Sill, Tom Mike Sill, Central

I am going to take this out of the motion to approve this recommendation.

Do you have further questions on the presentation that we just received?

No.

Do you have questions for Tom Mikesell about the presentation you just received?

I'll ask him offline after the fact.

Sounds good.

So, as you've heard, Director Duress recommends that the baseline scenario for the August 2025 forecast to be used as the official forecast.

In the case that there are no objections to this recommendation, I will simply request that the meeting minutes reflect our concurrence regarding that recommended forecast.

Are there any objections to using the recommendation from the Forecast Office?

I am hearing no objections.

And so having heard no objections, this we have concurred with the forecast office and the minutes will record our concurrence with the recommended forecast in the meeting minutes.

Thank you.

I will now move on to item four.

I know this has been a long meeting that started late.

My apologies.

I believe we still retain quorum with three members.

So somebody has to go.

I understand.

Moving on to item four, which is the presentation of the 2025 work program for the Office of Economic and Revenue Forecasts.

I know that we had deep discussion ahead of the April meeting, which is why we've kind of allowed things to move forward as they were.

But with this, I will turn it over to the Office of the Forecasts, the Forecast Office, to walk us through the presentation of your work plan, which you've already been underway with.

All right, I'll be really brief here.

I'll be really brief here.

So this is a quick background for the Forecast Office, but I'll skip that.

The revenues that we are forecasting are the ones that we have talked about, so I'll skip over that part and just move over straight to the 2025 work program.

It's very similar to the previous year's work program proposal.

We are producing Regional forecasts four times a year in January, March, July, and October.

Three of those are used to build a revenue forecast in April, August, and then October.

And then we present those forecasts.

In addition to that, we work on regular revenue reports, which are published each quarter.

And we have now recently, thanks to the work that Sean has done, RBI dashboard version of a revenue report, which I would encourage you to have a look at if you have not, because it presents things in much more Much more streamlined, much more approachable way.

We have started to work on the forecast accuracy assessment.

Hang on real quick.

Mr. Nolte, you might be off mute, just so you're aware.

Continue.

You can go ahead, Director Duro.

Sorry, I heard some background noise, and there's only one person now on the screen, so I just wanted to improve situational awareness.

So in addition to those revenue reports, we have started work on an update to the forecast accuracy assessment that we have conducted in 2022, essentially looking at how accurate our forecasts have been over the last couple of years.

So that's the work in progress.

We are, in addition to The forecast and the revenue monitoring working on refinements to our forecasting models, improvements where we have enough time and the reasons to believe that things can be made better.

We certainly have a lot to improve on the payroll expense tax forecast, which we have now some additional data.

From Washington State Employment Security Department Office that can be used to inform the forecast.

We have incorporated additional information from Moody's Analytics as I have talked about today.

We are now Looking for a second opinion on the overall outlook, economic outlook, and that's part of the work that has been done to improve the overall forecast accuracy.

We have new data for tourism, for cruise ships that we are going to incorporate in our forecast and some consumer spending data that can provide insights into sales tax revenue forecasts.

In addition to those improvements, we are then available to do any policy analysis as required by either, as requested by either the executive or the legislative branch.

We're working in a confidential manner to the extent allowed by the law.

So whenever the request is made by one side, we're working on that confidential arrangement.

We do have...

Some time for that, but depending on where we are in the forecasting work, that amount of time might be limited.

In addition to supporting the executive and legislative branch, we do support the City Budget Office in preparing sections of the budget book and the City Finance in preparing the LTGO Writing presentations for Moody's S&P Global and Twitch program.

But, yeah, that's essentially a quick summary of what we are doing, the kind of work that, again, we have been doing it best, and to large extent, we're continuing improvements, monitoring and forecasts with the additional work to support the other departments.

And thank you for doing this work while this official work program was not formally adopted.

Yep.

You're welcome.

We are here to help in any way we can.

One of our significant thanks and appreciation to Jan and team.

The council has just been considering this B&O rate proposal, and the technical analysis involved to support that policy work has been significant, and Jan and team were doing it whilst they were also preparing the forecast, which is a significant peak load for them.

So again, just appreciation.

There is a significant partnership there on the policy analysis side, and the one that's proven very successful.

Millions of thanks.

And I know that only because one of those amendments was mine.

Thank you.

That was an easier one.

I aim to be straightforward.

But it's also the ability for me to be straightforward in this realm is because of the assistance that I've received Liza Rankin.

And again, just thinking about this further, this is really speaking from the legislative side of this.

In the past, that kind of analysis would have been dependent on the budget office to assist, having played in that role as well.

It's not that the assistance would have been provided, but it is meaningfully different to have an entity that is not on the executive side that's providing that kind of policy support on a really technical basis.

to the City Council.

So just in terms of how the office functions, it was Council's initiative to create it.

It is serving that purpose, which was part of its original intent.

I would just say, again, thank you for the conversation that we had in May about your work program.

It looked good then.

It looks good today.

Thank you for moving forward with that work while that April forecast meeting needed to be altered in part because of the pessimistic outlook.

Colleagues, any other questions for the work program?

Thank you for letting me wax poetic about Director Duras and his work.

So with that, I will move to adopt the 2025 forecast offices work program as presented.

Is there a second?

Second.

The motion has been moved.

Second.

Seconded.

Any comments before we call the vote?

Seeing none, it says Director Duras called the roll.

Yeah, sure, call the roll.

We're not sure how to do it last night.

Yeah, I don't know.

We might find a Seattle Channel would call the roll, but if you will, go for it, Director Gerard.

Director Carnell.

Yes.

Chief Innovation Officer of Rural Work.

Yes.

Council President Nelson.

Aye.

Director Charles.

Yes.

Four in favor.

That's a unanimous approval of 2025 work program.

Thank you.

This does bring us to the end of our formal agenda.

Before we adjourn, and I do want to work with the Forecast Council, I know that you've been chairing Monday, October 20th as your next forecast meeting.

I will tell you Mondays are not We can get into that as to why, but I also want to make sure that we sync up on the budget calendar.

So while October 20th is the posted date, I may request that altered by a day or two here or there, as well as I will work with the executives team to understand If we do a joint meeting or if we simply have a small meeting ahead of and then you come and join our presentation later on.

Because I did find that bringing the other council members into the forecast meeting during the budget session was helpful for their understanding, but also understanding we're changing our budget calendar this year so there may be less time.

So all of that said, thank you for your flexibility.

Any further questions?

Hearing no further questions, we are adjourned.

Thank you all.