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Good morning.

Today is Friday, April 10th, 2026. And this is the meeting of the Economic and Revenue Forecast Council.

And may that meeting come to order.

I'm Dan Strauss, chair of the Economic and

I'm here today with my forecast colleagues, City Council President Joy Hollingsworth, Deputy Director of City Operations Mark Ellerbrook, and City Finance Director Dwight Dively.

We are also joined by staff from the Office of Economic and Revenue Forecasts as well as representatives from the city budget office and Seattle City Council's central staff.

There are a couple substantive items we'll need to act on today, selection of chair and vice chair for the forecast council for 2026, presentation and review of the updated economic and revenue forecasts, and the approval of the 2026 work program.

Before moving on to these items, let's formally adopt the agenda for today's meeting.

A copy has been circulated and there are copies here on the committee table.

Move to adopt the agenda, is there a second?

Second.

It has been moved and seconded to adopt the agenda.

Today's agenda is before the forecast council.

This is the opportunity for members to amend or add an item.

If you would like to, please raise your hand on Zoom so that we are able to see you pop up.

I'm seeing no amendments at this time.

If there are no objections, today's agenda will be adopted.

Hearing no objection, today's agenda is adopted.

Coming to our first item of business, which is selecting a chair and vice chair for the forecast council for 2026. Per the ordinance that created the forecast council, we need to elect a chair.

Electing vice chair is optional per bylaws, but I find it useful.

And since the chair might not always be able to attend the meeting, so at this point, I would entertain nominations from the floor.

Let's start with the chair.

I move to nominate Councilmember Dan Strauss.

Thank you.

Is there a second?

Second.

I will second.

Fantastic.

Moved and seconded to adopt Strauss as the chair.

Double checking my script.

Seeing none.

Will the clerk please call the roll?

Can you?

Nope.

All right.

I'm going to call the roll.

We're still working out who's clerking this.

Council President Hollingsworth, how do you vote?

Aye.

Operations Director Mark Ellerberg?

I'm sorry.

Did you not hear me?

How would you like to vote on Strauss as chair?

I voted aye.

Aye.

Wonderful.

And Dwight?

Aye.

Thank you.

And Strauss votes aye.

Four in favor, none opposed.

Motion carries.

Strauss is chair.

Appreciate everyone.

We'll now entertain nominations for vice chair of the forecast council, and I would like to nominate Mark Ellerbrook.

Is there a second?

Second.

Second.

Moved and seconded to adopt Mark Ellerbrook as vice chair.

I'll call the roll.

Council President?

Aye.

Mr. Ellerbrook?

Aye.

Mr. Dweible.

Aye.

Strauss votes aye.

Four in favor, none opposed.

Thank you.

First item of business has been addressed in short order.

Move on to the second item of business.

I'll read it into the record.

Approval of the minutes from the October 20th, 2025 meeting.

Copy of the minutes from the October 20th meeting of the forecast council has been circulated.

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

I move the approval of the minutes.

Is there a second?

Second.

Second.

Seconded.

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

Hearing no objections, the minutes are approved.

Moving right along to the meat of the agenda.

Item number three, presentation of the 2026 Economic and Revenue Forecasts.

and recommendation from the Office of Economic and Revenue Forecasts regarding the 2026, 2027, and 2028 revenue forecasts.

That was me reading it into the record, if there was any confusion there.

So moving on to this item, which is the presentation of the economic and revenue forecasts led by staff from the forecast office.

This April forecast is the first of three forecasts that occur this year.

We will return in August and then in October to receive the revised forecasts.

April revenue forecast takes into account 2025 year-end actual revenues, which is always an important data point for us because it's projections until we get the money in the door.

And it serves as an opportunity to check in regarding the revenue assumptions underlying the 2026 budget adopted by City Council last November.

Moreover, these forecasts for 27 and 28 which we will review today, provide the preliminary outlook for the years as we begin to plan for the city's biennial budget.

As we only needed to balance for one year last year, we will have to balance for two years in this upcoming year.

So today's 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 modeled based on similar independent forecasting offices operating in King County and Washington State.

The main purpose is to increase transparency and accountability.

And 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 within the purview of the city budget office.

The forecast office will present three economic and revenue scenarios, baseline, pessimistic, and optimistic, and then provide a recommendation of which of these scenarios should become the formal forecast for this year.

Again, then revised in August, revised in October, and before I turn it over to Director Duras, want to bring us back to where we were one year ago today.

And one year ago today was the first four months of the current federal administration in week two of the three-week tariff war.

And so I say that because last year's revenue forecast in April was very difficult to predict.

and I believe we adopted the pessimistic scenario at that time because the volatility index was higher than it was during the pandemic.

It's really quite incredible and not a positive way, all of the volatility that we've experienced over this last year.

We come back to April, and last April we were expecting slow, steady growth, but instead we got volatility.

This year, you've been unfortunately placed in a similar position with the war in Iran just starting a few weeks ago.

We're not sure if there's a ceasefire today or not.

And we recognize that you have to make these forecasts in short order.

And this is the second year in a row that you have been tasked with doing so amongst international instability.

And I just want to I want to share that for everyone because while we will receive your presentation today and you've done the best job I know you can do, there are just factors outside of any of our control that are unknown at this moment.

And so thank you for doing that tough job.

I'm sorry this is the second year in a row that the federal administration has caused so much disruption for us.

With that, as the preface, I'll turn it over to you unless Mark Ellerbrook is vice chair or other, wants to say anything before we jump in.

No, thank you very much, Chair Strauss.

I think you've encapsulated it well.

This is a challenging time to forecast anything, so I'm interested in seeing what we have before us.

Fantastic.

Over to you, Director Duras, and if everyone at the table wants to introduce themselves.

Thank you, Chair Strauss.

Good morning, forecast council members.

For the record, I'm Jan Duras, the interim director and chief economist at the Office of Economic and Revenue Forecasts.

Hello, everybody.

This is Sean Thompson, regional economist with Jan at the OERF.

Good morning.

Joseph Russell, manager of the economics and revenue team in the city's budget office.

And my apologies, just as we are getting in here, we'll do a little operations.

If you can pull the microphones as close to you as possible, and they also move up and down, it'll help everyone, including myself.

Thank you.

And good morning.

I'm Alex saying virtual today with the city budget office.

For the viewing public, we are just going to take a moment while we unshare and reshare the slides.

Yes, all right, thank you.

All right, so this is a April forecast update.

We'll present it in the usual fashion.

So first part is going to be devoted to the summary of economic conditions and the economic outlook for US and for the Seattle metro area.

And then in the second part, we'll move on to the revenue forecast itself.

First, look back at the actual revenues for 2025 and then present general fund revenues, non-general fund revenues, and we'll finish up with the summary of the forecast risks and the recommendation of the forecast scenario.

So as a reminder for, well, I think that we have three new people on the forecast council, so for those new forecast council members and for the public that's viewing the first time, the reason why we are presenting it this way is that the revenue forecasts are developed in two steps.

The first step is developing that regional economic forecast.

The main input there is the US forecast for the national economy.

And then the second step is taking the regional economy forecast together with the forecast for US economy and using those as inputs for a couple of revenue forecast models that we maintain and develop.

And we use those models to forecast the revenues.

While developing those forecasts, we are tasked to develop three forecast scenarios, the baseline, the optimistic one, and the pessimistic one.

and then with each forecast update in April, in August and in October, we make a recommendation which of those forecast scenarios should be adopted as the official forecast.

When we were forecasting in April, one thing to keep in mind here is that even though it's already the fourth month of the year, by this point in the year, Citigroup has collected very little revenue for the current year.

Most of the revenues that come in in the first two months are accrued to the previous year because they are payments for obligations for 2025. And that share of revenue that we collect out of the overall total grows up with each forecast update, so we'll have more and more information to inform the forecast itself.

But it's important to know that even by the time we get to the October forecast that we usually present in mid-October, we typically only have information only about half of what will eventually become overall general fund revenues.

So that chart here on the right side tries to summarize how much revenue is coming in and what it is that we see with each forecast.

As you can see, it varies quite a bit with revenue streams.

For some of them, receive those payments for obligations with very little delay.

Real estate excise tax is one of the revenue streams where we have most insight into already in April.

And we get close to 75% of the revenues by the time we are presenting the October forecast.

On the other end, business and occupation taxes and payroll expense taxes, we have pretty much no insight into the current year at this point.

and even by the time we get to the October forecast, there is usually less than half of overall revenues collected given that delay between the time when the economic activity takes place and when the payments are due and when they are processed.

So that's important to keep in mind again, because the April forecast is going to be mostly informed by the current economic conditions, the outlook for the economy, and then what we have collected in the previous year.

Those are the main things that will inform the April forecast.

Turning to the first one, and again, looking a little bit back at the previous year, how the Seattle area economy performed in 2025. The chart on the right shows the forecast and the actual values for a couple of main indicators summarizing that economic performance.

Starting with employment, that's our main indicator to assess the overall health of the regional economy.

Our forecast in October 2025, the slightly darker gray bar, that forecast predicted a decline in regional employment, roughly 0.6, roughly half of a percent decline in regional employment.

The actual outcome was slightly better at minus 0.1%.

The employment, the total employment declined, but slightly, only slightly.

The main reason here is that the Washington State Employment Security Department has revised regional employment estimate data.

They do that regularly, and occasionally there are quite significant changes.

In this particular forecast, they have revised employment estimates down for 2024 and slightly up for 2025. And so that means that the job growth last year, the 2025 job growth, came in slightly above our forecast.

That revision happened last month.

Before that revision, the estimates were that the employment declined by 0.8% in Seattle area economy.

So again, there are occasionally quite significant changes.

So that's going to be considered, in general, good news.

A little bit more good news on the inflation side.

2025 was very volatile here, a lot of uncertainty, a lot of moving parts.

In the end, inflation came in below expectations.

At 2.4%, it was actually also lower than the inflation that was seen on the national level.

And it was roughly where we were expecting it to be even back in October 2024 before all the tariffs and all the uncertainty they brought and all the changes and the different revisions in the forecasts.

Then moving on to the taxable sales, again, some good news there.

Our forecast for the previous year, the final one from October 25, was that taxable sales will grow by 1.2%, which would mean that they are declining in real terms, adjusted for inflation.

But the decline was only small, definitely smaller than we expected.

taxable sales in nominal terms grew 2.1%, even though the consumer spending in the city was weaker than in the national economy, and even though taxable sales in the construction sector have declined 4.4%, and we're weighing down on total sales tax revenues, we did see some strong performance in the last quarter of 2025. And then finally, for personal income, there's only two bars in that chart.

The reason here is that actual personal income for 2025 will be only released by BEA in December this year.

So we don't have any insight into personal income for Seattle metro area.

We do know that for Washington state as a whole, personal income and wages and salaries grew slightly above 5%.

So that gives us some confidence that for Seattle area we are going to be close to that 5% forecast for personal income once the data is eventually released at the end of this year.

Looking a little bit more closely at employment data and kind of trying to trying to see where the jobs are disappearing and which parts of the economy we are seeing employment declines.

The sort of bad news here is that it's pretty much across the board, with the exception for government and education and health services, and we are and transportation and utilities after the last revision.

We are seeing declines in all main parts of the regional economy, and there are a number of reasons for that, specific to different industries.

For construction, there is just low demand for office space.

The interest rates that are still high don't help either, so there is significant slowdown in construction activity, and we have seen that for a couple of years.

By now, manufacturing employment has declined because of some layoffs at Boeing in early 2025. Here I want to point out that this is Seattle metro division, so King and Snohomish counties.

This is not city of Seattle employment.

And then for tech sector, labor demand there is just weak.

There is little hiring.

Companies are expecting wider adoption of AI and are focusing on investment in AI.

and so they are expecting to need fewer employees.

They are holding on and on hiring and then due to attrition there is an occasional layoff.

There are declines in those sectors in information, professional and business services where the tech companies in Seattle area operate.

So moving on to more recent developments, and the chart here summarizes the impact of what's been going on since late February.

The war in Iran led to a large spike in oil prices and gas prices.

The chart on the right shows West Texas intermediate oil prices with that slightly lighter grey line, the one below, and the one above with valleys on the right-hand side, that one shows the Seattle area gas prices, which are reaching levels that we have last seen in 2022 when Russia attacked Ukraine.

So quite a significant increase in gas prices that are expected to lead to higher overall inflation and create headwinds for economic growth.

This, again, increase in uncertainty has also led to rising recession risks.

We have seeing some declines there, and we were certainly expecting less uncertainty this year, but here we are.

So in March, a survey of Wall Street Journal of Economists, that's a survey that the Wall Street Journal conducts every quarter, and they asked about 60 economists what they believe is the probability of a recession in the next 12 months.

In that survey, average of that probability was 32. It was up from 27% in January.

So again, risk of recession are rising.

They are not as high as last year, at least that's what the situation was in mid-March at the time of that survey.

Last year, after the tariffs were announced, the recession probability jumped to 45%.

So overall, right now, markets are behaving in an erratic way, but there is less volatility than last year.

Last year, S&P 500 index fell by more than 15%, I believe close to 18% between the peak and the bottom after the tariffs announcement.

This year, the decline was about 9%, but since on the bottom, the markets have recovered most of the losses.

Right now, the S&P 500 is only about 2.3% down.

So the expectation is here that this conflict is not going to last long.

The Strait of Hormuz is going to be reopened because it's in the best interest of the administration for this to not drag on for too long.

Now, moving on to the economic outlook first for the US.

The forecast that's presented here is a weighted average of the two forecasts that we have obtained from S&P Global and from Moody's Analytics.

We are constructing an average forecast of the two to kind of mitigate the risks.

Sometimes one of them might be more optimistic, sometimes the other one might be too optimistic, and so by averaging that we are trying to deal with that risk.

Those forecasts were released in early March and since then there has been quite a significant development.

The conflict in Iran lasted longer and the oil prices climbed higher than expected.

So while developing that forecast we did some adjustments that are slightly more technical and the detailed forecasts are available on our website.

The spreadsheet there also explains how exactly we construct that average for the baseline scenario and for the pessimistic scenario.

The bottom line here is that we are actually taking a combination of what SNP Global and Moody's call pessimistic scenario and we are constructing the thing that's called baseline here in that average forecast by actually incorporating some of those more pessimistic assumptions from early March.

Again, the point here, the main goal here is to take into account for the fact that the oil prices have continued to climb higher than what those initial expectations were, which really expected the Strait of Hormuz to reopen by early April.

That means completely reopen by early April.

So here is what that current March baseline scenario looks like.

Again, it's the average and it's a weighted average taking into account what Moody's and S&P Global refer to as baseline and pessimistic scenario.

The red line that shows the current baseline average forecast for the US, as you can see, is above the line from October.

Overall, US economy is still expected to grow at a solid pace.

There is lots of investment in AI.

There is some fiscal stimulus that was expected to boost the economy in the first half of 2026. And so even with those headwinds created by the war in Iran, the economy is still expected to grow at a solid roughly 2.0% pace in the baseline scenario.

Now, that might be revised down a little bit again, depending on how long the conflict in NRS lasts, but the baseline scenario does not expect a recession.

The pessimistic scenario does, and it would be a steep decline into a recession in the second half of 2026. If the oil prices stay high for a prolonged time, there is just nothing that can be really done to avoid that recession.

Household and businesses would face rising cost, an increase in certainty, there will be less spending, layoffs will follow, stock prices are expected to tumble, and really just overall economic downtrend and recession would ensue.

So that's the expectations regarding the economy growth, the real GDP growth.

The chart on the right, the right panel, shows the expectation regarding employment.

Again, going back slightly, just looking at what the expectations were back in October, in the baseline scenario, very little growth was expected below 0.5% year-over-year increases in employment.

That has been revised even further down.

So there is that asymmetry here between the changes in the real GDP and employment.

The outlook for job growth is very, very weak.

There is both less labor supply and less labor demand.

And so the overall picture is just very little hiring and very little firing.

The employment will stay roughly unchanged in the baseline scenario.

The pessimistic scenario with the recession, again, there will be significant widespread layoffs, and so employment would decline in that alternative scenario.

When it comes to the expectations for inflation, this is yet another supply shock.

The Fed was first facing a very challenging situation regarding the impact of tariffs and the or immigration restrictions.

Now with oil price shocks, they have yet another thing to deal with.

It seems unlikely at this point that there will be significant rate cuts.

Before the conflict, two or three interest rate cuts each quarter of a percentage point were expected throughout the year.

Right now, it seems more likely that the Fed will just wait and see how these things play out and will keep the interest rate unchanged in 3.5% to 3.75% range, trying to really get the inflation down to its target.

Now, for the baseline scenario, as you can see, there isn't a noticeable increase in the expected inflation for 2026. For the current year, at least for the first half, that darker red line is not really above the previous forecast from October.

The reason here is that the overall pass-through of tariffs was really much slower than expected and tariffs were only expected to really kick in and cause higher increases this year and bigger impact would be felt somewhere around summer and so previous year so inflation coming in below the previous forecast and that means that even with the additional impact of high oil prices the baseline scenario here is roughly where it would have been previously for again first half of 2026 now Again, depending on how long the conflict will last, how high the oil prices will go, and how long they will stay there, the outlook can be significantly worse, and inflation can potentially reach 4% in that pessimistic scenario from March.

Again, this one is constructed as the average of what the S&P Global and Moody's Analytics expect.

and that can be again revised upwards so it can exceed 4%.

We just got the read for March today and the inflation came in at 3.3%.

So again, some initial impacts are already seen in energy prices but it will take a little bit longer for the overall prices to react to higher oil prices and how much they will just have to wait and see.

Moving on to the outlook for Seattle metro area.

For inflation, we have very similar sort of a story, an upward revision depending on which scenario we are looking at.

The 4% in the baseline scenario or the 4.5% in the pessimistic scenario.

There are both significant increases relative to our predictions from October.

But as a reminder, back in 2022, the problem with the inflation was even worse and the inflation peaks around 9%.

So even with the current disruptions, as of now, the spike in overall inflation would not be anything like what we have seen a couple of years ago.

Fingers crossed.

Moving on to employment growth and looking at the baseline scenarios first.

Given what we have seen in the data and given the announced layoffs by Amazon, we have been compelled to revise the employment forecast down.

As you can see, the employment would not really grow over the next two years, There will be essentially no net job increases over the next two years, and we will be still at roughly the same position moving into 2028 in the baseline scenario.

Now, in a pessimistic scenario, things would get worse, and the recession would result in cumulatively about 2.7% employment losses by mid-2027, and the recovery would take until 2029. at which point we again would be where we are right now.

One thing that I would want to point out here is that the forecast here was developed before ESD released that new data that I was talking about earlier.

And so with the next forecast, there is some upside risk to the employment forecast.

potential will be revised slightly up just because of these technical things that the past historical data looks really different than what was previously reported when we were working on the forecast and that hill here will essentially be gone and employment in the next chart unless there are again big changes would roughly hover around the same certain level with no new jobs added since 2023, essentially.

Those low job growth prospects are important for revenues and important for all sorts of other things and indirectly through vacancy rates can again have quite meaningful impact on on the revenues that the city is receiving.

The chart here shows the office vacancy rates in the US, Seattle, and then in the rest of King County.

We have seen this chart a couple of times in previous presentations.

There was a significant increase in the vacancy rates in Seattle.

The demand for office space is really low due to those work arrangements, the low

employment growth and hybrid work arrangements.

There is an index that's released each quarter for how much demand there is for office space by real estate platform BTS, call it Office Demand Index.

They track a couple of cities and Seattle in recent years has been the lowest one.

Currently the demand for office space is roughly half of the pre-pandemic average in Seattle, whereas it's about 36% in the US.

And so, as you can see in this chart, the office vacancy rates are not really expected to decline really meaningfully even by 2030. We are still, or Gold Star is expecting those office vacancy rates to be above 20% in Seattle.

That has implications directly and indirectly for revenues.

Like I said, one of the things that we've been looking at, and Sean did some work here, was the impact on the assessed value.

Thank you, Jan.

Yes, with all the discussions around new levies recently, and then also how critical property tax is to Seattle budget, I'm going to take a moment to kind of discuss about the assessed value of Seattle property over the last few years.

To start, from this table to the right, we can see that total Seattle assessed value has grown about 25% since 2019, from $244 billion up to $306 billion.

That headline number can be kind of somewhat misleading about the underlying forces that are happening here.

So from the table to the right, we can see that residential is kind of the anchor for the entire assessed value for Seattle.

It was the majority back in 2019 at about 52% of total assessed value.

It's grown to 57.5%, a change of about 4.8%.

This is good from a budget stability standpoint.

Residential assessed value tends to be the stickiest during a downturn.

Likewise, though, or rather in juxtaposition, major office, the fourth from the left, That one has been kind of on a downturn the last six or so years.

In 2019, it was 27 billion value.

Now it's down to 20 billion, a change of about negative 24%.

We can also see on the right that the share of major office buildings for assessed value went from 11% down to about 6.8.

This is following along with the slide before, kind of showing all the struggles that the major's office has been dealing with.

But luckily for us, this isn't necessarily a worry for the forecast, That decline has already happened.

It's kind of baked into the numbers here.

Outside of those two groups, we can see that there are some highlights.

Industrial and medical buildings have grown 63%, 88% respectively from 2019 up to 2026. Apartments, they've grown more modest at 15%, but what's interesting is that their share of the total AV has actually gone down slightly at 1.3% negative from 2026 to 2019. This kind of shows you that the multifamily values versus value are not necessarily growing as strong as residential values.

But overall, you know, we can see that the bottom line is that the base is larger, but more reliant on residential than it was seven years ago, and that shift happened largely because commercial, particularly major office, didn't keep pace.

And that's pretty much that for assessed value.

Thanks, John.

Okay, before moving on to revenues, here's the last piece of information relevant to the...

relevant to the revenue forecast that I wanted to share with you.

We have presented the outlook for a number of international visitors and visitors in general last year.

There was a worry that with fewer international visitors coming in, in particular from Canada, 2025 will not be a particularly strong year.

given how much sales tax revenues in leisure and hospitality and admissions tax revenues depend on tourism.

That was certainly concerning.

The good news here is that Oxford economics and in particular their subsidiary tourism economics, they predict that after that large decline in 2025, 2026 will look much better.

The number of international overnight visitors coming to Seattle is expected to go up by 15% and the spending by international visitors is expected to grow 14% this year and spending by domestic visitors grow by roughly 18% this year.

So that's certainly good news, again, from a standpoint of sales tax, revenues, the admissions tax, revenues, and generally good news for the businesses that rely on those visitors and spending that they bring to the city.

So finally, now moving to the revenue part of today's presentation.

Looking back at 2025, Again, this is the reason why we are doing it, because that's what we know about revenue collection.

There is very little revenue that we have received for the current year.

And so the forecast is largely based on what happened in 2025 plus that economic outlook that we just went over.

So a quick summary for 2025. As you can see at the very bottom, if you Look at these two numbers at the very, very bottom.

They summarize the total general fund, excluding grants and fund balance transfers, and they provide the best sort of insight into the overall revenues collected for the general fund.

broadly.

Even with all that volatility that we've been through, and there certainly have been large revisions in the forecast last year, even with all that, the final revenues came very close to our October forecast, 7.1 million above the forecast to the good side, so roughly 0.4% variance from the October forecast.

We have seen an increase in about 3.5% year-over-year last year, so additionally about 55 million more in those revenues excluding grants and fund balance transfers.

The table here presents all the different revenues, but unless there's particular questions, I would not go too much into the details.

Just want to point out that the forecast office is forecasting those revenues highlighted with blue bars, highlighted in blue, those rows highlighted in blue.

The rest of the revenues, the CBO forecast or oversees the forecast for those revenue streams.

So again, in general, good news.

As you can see, sales tax and business occupation tax outperformed the expectations roughly by 1%.

So in general, again, quite close to the expectations and certainly good news given the volatility and uncertainty that we have faced last year.

For non-general fund revenues, again, mostly good news.

Payroll expense tax revenues came in more than $20 million above the forecast.

That's roughly 5% variance from the forecast.

Given how volatile this stream is and given how little history we have, I would personally consider this to be pretty accurate.

As a reminder, last year we had significant shortfall.

Revenues came in about 40 million below the forecast.

So again, certainly good news here.

One thing a little bit of a caveat here is that the 405.9 total revenues About 20 million of that are not really payments for 2025 obligations, but are late payments for previous years.

That's relevant because the change is the base that the forecast starts from and the growth that is expected is really applied to those tax obligations, not really the past payments.

Some late payments that we have received for, let's say, 2022 and three certainly improved the outcome for 25, but are less relevant for the outlook for the next couple of years.

Again, unless there is questions, I would move on to

Thank you, Director Duras.

I will take this opportunity to pause for just a moment so that folks can finally soak in all of what actually occurred in 2025. And I'll just repeat back some of the things that I heard you say, which is, again, last April, incredible amount of volatility, and you got this within one point with 1%.

You got this very accurate.

I really appreciate that.

And then also with jumpstart, the payroll expense tax.

It's a new tax.

We don't have a long history with it.

It's also volatile.

You came very close to that number as well.

What I'm seeing here is that total general fund without grants and transfers plus the payroll expense tax, we came into the positive at $27.2 million.

Is that across both funds?

Is that correct?

Yep.

Yep.

plus, as you can see, there is also a little bit more REIT and slightly more admissions tax.

So, yeah, overall.

I'll save my REIT questions for a couple slides down the presentation, but I just want to say that this is really good.

This is really accurate, and I appreciate that.

I think for the general public hearing plus $27 million, it is a lot of money.

However, in context of our six plus billion dollar budget, it is not.

And so I just, it's very good.

So I just wanted to take this moment to thank you and check in with my colleagues to see if there are any further questions about 2025 before we move into the 26 through 28 forecast.

I see a panelist with their hand raised.

However, I can't see whom it is.

Mark, take it away.

If you have your hand raised, just start talking.

I will just start talking.

Thank you very much, and thanks for the presentation.

Excellent and very easy to follow along.

On the prior slide to the one that is presently up, and I know you identified where the forecast council sort of has the forecasting purview, which are the blue lines.

I did notice, obviously, the discrepancy in the grants, and you may or may not be able to say what the reason behind sort of the $32 million difference there is.

I can jump in and speak to that.

So this is simply an indication that many of these grants have not been spent down yet.

So we get revenues reimbursed when spending happens, and a lot of these grant spending occurs over multiple years.

And so you'll see a very similar number in the 2026 forecast, but to the positive, because all of that appropriation has been carried forward from last year.

Thank you very much.

Appreciate it.

No further questions.

Thank you.

And you'll notice at the bottom of these tables we generally remove grants and transfers in that final line just to help you see the totals without those relatively technical lines included.

So nothing too alarming in that line about grants.

It's mostly the technicalities of how those grants are spent and the subsequent revenues come in for them.

And I will just add that there is going to be similarly sort of big changes when we see the tables for the forecast itself in a couple of slides.

Before that, there is one more thing I forgot.

For business and occupation tax, one reason why revenues came in higher above the forecast is that roughly 6 million in refunds that we expected to be finalized and processed and posted by the time the books close for 2025. Those refunds have not been finalized and so six million to the plus side will be then deducted from the next year because those refunds are still expected to be paid this year.

Again, roughly six million there that we have to take out here to kind of get the overall picture for the revenues.

But the main point holds, given all the volatility in the end, it has not been a bad year.

Revenues grew above the rate of inflation to 3.5%.

increase there even if you adjust it for the six million still going to be above the rate of the inflation and Certainly, there wasn't any big shortfall in revenues compared to our outlook in October Before you move on just to summarize that new information from you It sounds like that brings a total general fund without grants for grants or transfers down to an

a more accurate $1.1 million as a variance between the forecast and the actuals.

That's true, yeah.

So it's pretty much there on the mark.

And I want to thank all the members of not just my team, but also the CBO, because as you can see, there is lots of lines where they are providing input into the forecast.

And so I'm going to ask you to bring your microphone closer to your mouth, because just in this room, you can hear my voice booming, but yours is whispering.

So just Mick Jagger, pretend you're in the Rolling Stones, my friend.

And before we move on, last comment is that's really accurate.

If you got this down to a 1 $1.1 million difference when general fund without grants transfers and down to a $20 million variance on Jumpstart.

Really well done.

Now for the news everyone is pining for.

Over to you, Director Duras.

Right.

So finally getting to the most interesting part of the talk, the outlook for current year and the following two.

First really just focusing on the bottom line before we look at individual items in the table.

The bottom line, the first column here shows the 2025 actuals and then the next three are 26 revenues, 27 and 28 revenues.

Again, primarily focusing on the line with total general fund without grants and transfers because of the technicalities around grants and the fact that fund balance transfers are not really revenues per se, they're just money moved between different funds.

You can see here that the revenues are expected to grow significantly in 2026. 9.1% year-over-year growth is largely due to new revenues, new sales tax, public safety sales tax, and the ESSB 5814, which reclassified some activities is going to boost sales tax revenues further.

And then for business occupation tax, the restructure is expected to also generate additional revenues.

So that's another reason why there's a big jump in the growth rates of revenues in the current year.

But still, the next two years, the projected growth is 4.1% for each of those years.

And so above the rate of inflation, which is shown at the very, very bottom.

When it comes to the changes in the forecast at the next three columns, compared to the last forecast, the adopted budget 2026 and then the forecast for 2027 and 2028, which were really not part of the adopted budget, but we did forecast those years, the changes are minus 10 million for the current year and then additional 20.6 to the plus side for 2017, 17.4 million to the plus side for 2018. So those are the totals.

Now looking at those individual revenues and we'll go over them one by one to kind of explain what's going on here.

Again, the rows highlighted in blue are the ones that our forecast office is responsible for.

The remaining ones are in preview of the budget office, and so we'll start with the property tax.

Alex?

Yeah, I'm going to invite Alex to speak to that one if she's still with us remotely.

But then I will.

Alex and I are going to sort of ping pong back and forth on the white rows of this table.

Alex, take it away.

Yeah, so for property tax, This is essentially, we discovered a difference between our methodology and King County's methodology for calculating the allowable levy for our general expense.

And so we had to correct our methodology to align to theirs.

Unfortunately, that did lead to a reduction of about 2 million in our general expense for 2026. I'm happy to go into the mechanics of that, but it is a little bit in the weeds in terms of the calculations.

On the upside, the EMS levy, so this line includes both our general expense property tax and the MEDIC-1 levy.

The EMS levy was revised upward a little bit in 2026 because 2026 assessed value actually performed better than expectation.

All right, moving on to the couple of lines that our office is forecasting.

Sales and use tax first.

In general, upwards revisions.

We have tried to incorporate some estimates back in October, estimates for the additional revenue created by the three classification of activities from service to retail.

And we have seen some initial information that compelled us to revise the forecast up.

together with maybe slightly less pessimistic outlook for construction sector.

We have seen some large permits go through at the end of last year, which suggest more construction activity than previously expected.

And then that 2026, the 0.4 additional revenues that there's lots of cross currents there.

Current weaker economic outlook is again being partially offset by those slightly higher than expected revenues that we have seen in 2025, which suggests that the additional revenues generated by three classifications are now higher than what we previously estimated.

For business and occupation tax revenues, the downward revision reflects the 6 million in refunds that I mentioned.

So for 2026, 6 million there is really just that refund amount moved from 25 to 26. In addition to that, the layoffs in tax sector are expected to weigh down on revenues here.

and finally the construction sector forecast for business occupation tax, which is developed separately from the one in the sales tax and seemed to be slightly too optimistic, so that one was actually revised down.

asymmetry here between the direction for sales and use tax and business and occupation tax.

For private utility taxes, Sean can provide some additional information there.

Yes, thank you, Jan.

So for the taxes within this group, there are primarily two groups.

There's like telecommunications, which relies on telephone and television tax revenues.

And then we also have energy-related utilities for steam and natural gas.

For one, the Puget Sound Energy, which does the rate setting for natural gas, they raised rates last year.

So we actually incurred about 3 million year-over-year growth from initial expectations.

This raises the base level for the forecast, so we have some improvement from that.

Likewise, with the current conflict within the Middle East, Energy prices have kind of increased, or at least the expectations around them have increased for in the short term.

And likewise, with the telecommunication group utilities, forecasts before we always assumed where we saw rather a decline in year-over-year payments.

People are cutting cable, they're cutting the usual methods of communications.

But for 2025, we've actually seen that this decline has kind of evaporated.

So luckily for us, utilities, private utilities actually are improving now.

Telecommunications seems to be some modest growth, and a lot of the forecasts for the differences of totaling about 15 million over three years is primarily driven by those forces.

And that's pretty much it for private utility taxes.

All right, so we will now hand it over to Joe and his team.

Yeah, I'll quickly talk about public utility taxes.

So that includes City Light and SPU tax revenues.

In June 2026, the electric tax revenues were revised down slightly, mostly accounting for warmer weather at the start of the year.

And overall, their load forecast over the next few years has been revised down due to lower than expected EV adoption, as well as less commercial activity.

However, you can see in 27-28, that's more than offset by anticipated rate increases for City Light.

And then going into other city taxes, I'm not sure if you have...

A part to add here, Joe, but some of this is definitely driven by the leasehold excise tax.

So this is a fairly difficult tax to forecast because essentially this is revenues that we receive from entities that lease publicly owned property.

we have limited information on how long these leases are and how regularly the rents increase on these leases and so in 2025 we these revenues outperformed expectations by quite a bit so that's mostly what's driving the increase in this one yeah that that is the driving force under other city taxes for sure

Parking meters are relatively flat, not too much here.

This is a combination of the revenues we receive from folks paying meters when they park on the street, and also the fees paid for meter hooding, we call it, where you reserve spaces that would otherwise be paid parking.

The meter hooding is about 10% of this row.

We continue to see some declines in paid transactions for meters, but mostly we see a relatively flat outlook for that, and there is a slight downward revision hidden here for the meter hooding fees, likely due to slightly lower than expected construction activity on the streets.

Moving on to the court fines row here.

There is a lot under this row that are mostly citations processed by the Seattle Municipal Court.

The lion's share are parking tickets.

Also under here are 70% of red light cameras.

The real activity happening here in 2026, you can see a revision of 5.5 million downward, several factors underlie this.

One is much lower than expected parking tickets handed out in the fall and into the winter months.

some of that continuing into the spring, so volumes lower than we had anticipated.

There was also some expectation of increased hiring in the 2026 adopted budget for PEOs.

We have yet to see that materialize.

The hiring up has only kept pace with how many parking enforcement officers have been lost, and so we have lowered the expectation for additional hiring in this forecast as well.

The other factor that's happening under this row is that changes to state law in the most recent legislative session limited the ability to use automatic license plate readers around sensitive buildings.

And the parking enforcement officers have relied on what we call ALPR technology to a small extent.

It is not a huge portion of what they do, but their technology doesn't allow them to turn it on and off around these sensitive buildings and centers.

And so they have anticipated needing to turn that off unless their technology can be adjusted.

So this forecast, you can see in the out years, there's some ticks down in 27 and 28. That is anticipating that the ALPR technology will not be available to parking enforcement officers going forward.

And Joe, I'll jump in with my three times a year caveat to what you just said in addition to all of that.

In these past few years, we have adjusted parking rates to a higher level because people were choosing not to pay parking and rather the ticket price because it was cheaper than paying for parking.

And so that added volatility to your court fines.

It added volatility to the parking rates.

And then on top of that, we promised you that we would be rolling out the speeding cameras throughout the city.

SDOT and SPD have yet to get those deployed on our streets and so there are a number of other variables just legislatively and administratively within the City of Seattle that have made it difficult to predict these numbers.

Yeah, thank you.

There is a lot going on with traffic cameras.

I will speak to that actually in the next slide, because those speed cameras are allotted as a non-general fund.

They would go to the Automatic Traffic Safety Camera Fund, and so we call that a non-general fund.

And so I will speak to that on the next slide.

But yes, generally speaking, the parking ticket fines did go up in 2025. So we did see a marked increase in those revenues.

This downward $5.5 million is relative to the expectation of what we were going to bring in for 2026. And so, yes, overall the revenues are up, even if the relative to expectation, we've revised them downward.

I'm going to move on here, unless there's other questions on court fines.

The row labeled licenses, permits, interest income, and other has a lot going on under it as well.

The driving force here is interest income on the general funds cash balances.

We have anticipated a downward revision of $1.9 million in 2026, and then an upward revision of $3.2 million in 2027, and relatively flat in 2028. Our cash balances are invested in very low-risk Treasury notes.

Those notes are short-term, and so they generally fluctuate quite a bit, and so this is a challenging revenue stream to predict.

Right now, the anticipation is that we will see lower yields on those Treasury notes in 26, but then an increase in 27, anticipating that interest rates in general, the federal funds rate, that is, will stay higher than we had previously anticipated.

So we anticipate that means that yields generally go up for these short-term interest rates.

So in 2027, we've adjusted that forecast up a bit for that reason.

Let's see.

I'm moving on now to revenue from other public entities.

Not too much change here, 0.2 million adjustment in 2026. This line encompasses quite a few state-shared revenues.

So that includes transfers from the state for criminal justice purposes, as well as a liquor excise tax.

Slight adjustment here for overperformance of those revenues in 2025, and so the model has been adjusted upward, anticipating slightly higher in the out years.

I'm gonna pass it to Alex to talk about service charges and reimbursements.

service charges.

This category hasn't changed much.

It's pretty stable over the three years.

But just to refresh everyone, this category includes a lot of it is internal service charges and cost sharing between departments.

This also includes revenue that, for example, SPD gets from providing security at for example, sporting events and things like that.

And so this category is usually pretty stable.

Grants, like I said on the 2025 actual slide, so this mirrors more or less that number, which indicated that a lot of those grants were not spent down.

That appropriation has now been carried forward into 2026 and so is reflected here.

It's also mostly sort of a budget mechanics thing where we are reflecting the revenue in aggregate in this year in order to balance the fund given all of the appropriation as well.

And then fund balance transfers, they also have not changed much.

This is mostly driven by transfers from the payroll expense tax.

And as of this April forecast, those assumptions have not changed from the adopted.

So these are just marginal changes outside of payroll expense tax transfers.

All right, I think with that we can move on to the non-general fund revenues.

Parallel expense tax first.

As you can see, here is where the news is not so great.

There is a downward revision for current year and then also the following two.

The main reason here is that, well, there is two.

So Amazon has announced about 5,000, 4,000 plus layoffs that will be affecting the tax base.

And then in addition to that, the stock prices, given the recent developments, are not where they were expected to be when we were when we were generating the forecast back in October.

As a reminder, stock prices do matter for payroll expense tax because large part of the compensations that subject to this tax is in form of restricted stock units and so the value of that fluctuates with the current stock prices for those main taxpayers that do to compensate their employees in the form of restricted stock units.

And so with lower current stock prices and in general lower outlook for the rest of the year compared to the October forecast, there's that 17 million download revision for the current year and it kind of carries over into 27 and 28 as we are starting from a lower base.

for payrolls, expense tax, fund revenues, for the interest income part.

Yeah, I can speak to that.

Similar story here to the general fund cash balance interest income.

We see a downward division of about 0.3 million in 2026 and then a bump up in 2027. This is all driven by projections for yields on the short-term treasury notes, which is where we invest our cash balances for the most part.

I will just highlight that both here and in the general fund interest income on the previous slide, we do see a downward trend in these interest income.

So just because we're revising the forecast up I want to highlight, though, that in that sort of April forecast section, we do see these downward ticks in this forecast, and that's because overall interest rates are coming off of a very high period in 23-24 as the Fed attempted to keep inflation at bay.

And so we expect to see lower interest income in coming years, though we have revised the forecast up a bit.

Before we move on, this is my regular moment when we start talking about payroll expense tax to thank you again, Jan.

You've been tasked with trying to forecast a tax that's not been collected before.

We are in the fifth year of collections, sixth year of assessment.

I'll take the volatility of the tax in and of itself.

because it is dependent upon the stock market, it can be hard to predict even if you had the history to predict it with.

And so I appreciate the accuracy in which you are able to provide us with that volatility to the side of that, that held constant, The fact that we've only had six years of assessment and five years of collection means this is really the first time we're able to do a five-year smoothing analysis, which in my opinion is the baseline in which you need, it's the foundation in which you need to be able to move forward from there.

And with that, in the early years of the assessment and collection, there was not enough time for business, and it's just a common economic practice, you know, light foots move with your feet, which is to say that if there is a higher tax in one place, there's a way to avoid that tax by moving to another, right?

And that's the substitution effect of the larger the geographic boundary, the better for the tax, and in this case, because it is just with Seattle, is easier to avoid than if it was for the entire state.

And with that, in the early years of assessment and collection, there's a lack of ability to avoid the tax.

However, five years later, we're starting to see how that can actually be applied.

So there are three really distinct variables that are working against you being accurate, which is just time and history, tax avoidance, and then the volatility of this.

And so all of that to say, thank you, good work.

I just wanted to share that context because I would love to work with you and maybe Vice Chair Ellerbrook-Dwight and Council President should she desire, whether it's an open session or just to the side in work groups that doesn't break the Open Public Meeting Act in a way to better understand how we can use these last five to six years to create that foundation in which we are able to go from here.

Because until now, we've been lacking that critical data.

And so I just kind of make that note.

Any other comments from committee members?

Thank you for my regular public service announcement.

No, thank you, Chair Strauss.

It's very nice to hear that our work is appreciated.

So, moving on to REIT.

Again, this is where the news is not particularly great, given that the interest rates are now expected to stay higher for a longer period of time.

We have already seen an uptick in mortgage rates.

There are fewer homes expected to be sold this year.

And then, again, next year and the one after.

In addition to that, those high vacancy rates that we have presented and the declining assessed values also mean that whenever a large office building is sold or when some commercial building in general is sold, those lower assessed values in some extent also have implications for REIT, and that means less REIT revenues here.

So the overall downwards revision is in excess of 10 million over the three years, but it's heavily impacting 2026 in particular.

And then for the admission tax revenues, We have tried to incorporate that data on the number of visitors coming to Seattle as forecasted by tourism economics and recently there have been some news that maybe the hotel rooms are not really filling up as much as expected for World Cup.

That's certainly concerning news.

The revision here is not particularly large but again given with overall economic uncertainty It's hard to predict how the Middle East situation will evolve.

There is a possibility that there will be a further downward transition there, but for now it's, again, a relatively minor one.

Can we go back to REIT for a minute?

There's a very substantial growth projected between 2026 and 2027, and again a substantial growth into 2028. If you make the assumption that the office market isn't going to recover in that period, which is consistent with earlier, this, I assume, presumes a significant increase in residential transactions.

That growth makes me nervous.

It seems like a very high rate of growth in residential transactions.

Is there something underlying that that I'm missing?

No, yeah, that's a good point.

Yeah, so it relies heavily on the fact that there is lots of people who have postponed buying a house because the mortgage rates have been high.

And so there is that potentially pent-up demand.

And once the interest rates do come down, again, not likely this year.

It's not likely going to move.

long-term interest rates are again higher because of the uncertainty and the conflict in the Middle East.

But once those longer-term interest rates and the mortgage rates start to come down, there will be more people finally making the move, selling the home, and that's, I believe, what's underlying the forecast for the sales of existing homes.

We have some appreciation of home prices as well in the forecast.

with P times Q affecting the overall revenues and prices going up, that Q, the quantity sold going up, there's a substantial increase.

I do want to point out that this is coming from a very low point.

We have seen substantial decreases in REIT over a couple of years, so we are recovering, so that's also a contributing factor here.

But yeah, good point.

Yeah, and reason to be concerned.

Thank you.

I think we can move to the row labeled sweetened beverage tax on this table.

Since 2018, I believe, the city has had a tax on the distribution of sugar sweetened beverages.

This is a relatively mature revenue stream at this point, and so the revenues have stabilized around 21 million a year.

We have projected a slight bump in those in 2026 due to World Cup activity and tourism, but stabilizing thereafter in 27 and 28. Slight revision upward to the forecast of 0.4 million in 2026, really because 2025 revenues overperformed just a bit, and so we've carried that forward into the model in out years.

short-term rental tax.

I'll ask Alex to speak to that.

Yeah, so for short-term rental tax, which is essentially tax on Airbnb, this has been revised down a little bit in the next few years compared to the adopted.

Similar to admissions tax, this forecast depends on hotel outlook, particularly in downtown Seattle.

And that outlook does seem to be a little less rosy about tourism in the next couple of years.

and especially the rebound of visitations from Canada.

And so that's mostly what's driving this like downward revision.

I guess, Director Duras, the sales tax.

All right.

So moving on to the transportation benefit districts specific sales tax, there is only revenue in 26 and 27. There is no revenue projected in 28. That's because transportation benefit district sales tax ends on April 1st, 2027. So for the next year, there is only one quarter of revenues there.

The change compared to the previous forecast is negligible.

There is essentially very little change there.

That's why there is nothing in the part where the difference from the previous forecast is shown.

than moving on to vehicle license.

Yeah, so the other component of the Seattle Transit Benefit District is a flat $50 license tab fee.

And that is shown in this vehicle license fee line here.

We have revised these revenues down based on 2025 actuals.

Essentially, those came in about 6% lower than we had projected even in the October forecast.

So we have made some adjustments to the model anticipating lower revenues in the out years because of that.

Can I ask about that?

The pattern is a little odd.

Admittedly, the numbers are small, that it goes up in 27 and back down in 28. Is there something that's driving that?

Yeah.

Admittedly, this is a bit of a hard revenue stream to predict as we have seen some patterns in vehicle registrations in Seattle that have flatlined for the most part in terms of population does continue to increase, but the number of vehicles we have has more or less flatlined.

I think the bump in 27 is an anticipation of likely a vehicle purchases that have been pent up due to higher interest rates.

I would have to get back to you on exactly why we see that, but I expect that's what the model is predicting here.

Thank you.

then for commercial parking tax the upward revisions in these three years are essentially taking into account slightly higher than expected performance in 2025 of about a million dollars and you'll see that growth there's really not very much growth particularly between 26 and 27 and that is really generally reflecting the little growth we're expected to see in the regional economy.

And then finally, last but not least, the automated traffic safety cameras fund.

As Chair Strauss alluded to earlier, there is a lot going on here.

This bump and I do want to flag first and foremost that this line does not include revenues from anticipated speed cameras.

Council did approve in May of 2025 the addition of non-school zone speed cameras.

The timeline and exact location for those installations is still up in the air a bit.

And the variability of those revenues based on exactly where the cameras are is quite high.

And so we did not want to venture a forecast at this time.

We do commit to having something to a forecast in the August update.

So for now, this does not include those cameras.

What is happening under this row right now is an adjustment of 5.2 million upward in 2026 due to the increase in citations under two different camera types, and those are the block the box and bus lane cameras.

In that same legislation in May of 2025 that I just alluded to, council removed the first time warning requirement for these two camera types.

and that essentially increased the number of citations being given out.

If your first time you are caught by these cameras, either in a bus lane or blocking the box, you used to get a warning in the mail, and now you actually do get a citation.

And so those have driven an upward revision in the revenue stream under this line going forward.

This line also includes school zone cameras and 30% of red light cameras.

Some slight increase to the outlook for those cameras as well.

particularly as some of those cameras are repaired and some school construction completes until cameras are turned back on.

But otherwise, those are relatively stable.

And that concludes this table, I believe, unless there's questions.

Many.

I'll first see if Vice Chair Mark Ellerbrook has any questions or if Council President has any questions.

Go right ahead, Chair Strauss.

Thank you.

So there we go.

Council President.

No, Mr. Chair, I actually I don't have any questions.

I apologize.

Thank you.

problem, no problem.

I'm going to just dive into my familiar topics.

For Mark and Dwight, I bring up the same things every time we meet.

Talking about FIFA, I know that in the past we had discussed you were preparing to have the FIFA numbers included in this.

However, this is another place of volatility.

It sounds like you are holding constant with a slight downward revision from the last time you presented.

As far as your FIFA assumptions, is that accurate?

That is pretty accurate.

For a couple of forecasts, what we've been doing is essentially relying on tourism economics and on CoStar because they have some forecasts for hotel occupancy rates, average daily rates, revenue per per room in a hotel.

Those things are used as inputs in the sales tax forecast.

For leisure and hospitality component of the sales tax, those are important factors.

The travel spent chart, again, it's an input in the sales tax revenue forecast for leisure and hospitality.

There are some adjustments to those.

And again, recently there have been some concerns that maybe fewer international visitors might be coming with higher gas prices.

People will in general have less money to spend on travel, on leisure and hospitality.

They might be just less inclined to travel or more worried to travel.

And so that's certainly a concern.

So there is some assumption built into this forecast for sales tax revenue.

The city is not going to directly collect admissions tax on those games.

So it's those indirect effects again captured through how many people are expected to come in and how much they are expected to pay.

how many people want to come to the watch parties, want to come to Seattle Center, want to come to West Seattle, Columbia City, Lake City, and Ballard to experience the, or to even see some of the practice games.

I was talking to somebody that mentioned the tickets are prohibitively expensive for them as they are for me, but maybe a practice game is a better way to view because you have a closer, you're closer to the pitch, it's less expensive.

There are many different ways.

I'd like to have it both ways.

I'd like to have a pessimistic outlook at this moment and then to be surprised later this year when the actuals come in that we have, in fact, welcomed more people than we predicted.

It's always better to have it in that way than the opposite, so I appreciate that.

When we're looking at REIT, I appreciate questions here regarding interest rates and your follow-up.

REIT for me is always a telltale of, are we going towards or away from potential economic slowdown?

And I recall very distinctly, I believe it was 2021 when REIT almost just, it took a nosedive.

And that was a moment where I really paused.

Since then, we've seen slow growth, and what excited me last year was it seemed like that growth actually had changed from first gear to second gear.

What I'm hearing from you today is that we are still recovering.

However, we are just not recovering as quickly as we predicted last year.

correct?

We're still trending the right way, just not as fast, or have we started trending the wrong way?

We're stalling.

Yeah, that's a good question.

So if you look at the numbers itself, not the revision part, but those revenues for 26, 7, and 8, they do go up.

So there is that recovery expected.

There's a bump on the road because of higher interest rate in the current year and because of fewer homes being sold as a consequence.

But the general story is the same.

The underlying story is that there is a recovery.

Unfortunately, slower recovery.

Take this moment to just connect the dots between the area value with office space, or assessed value, sorry.

Assessed value with the office space in Seattle, it's negative, I think you said, 12%.

the REIT, which is our office space is really created.

We're being buoyed by our residential and other markets, apartments, et cetera.

But this office space is really starting to create a hole in our economy where if we were able to jumpstart or spin up something that can change the way that we're using our office space, it not only creates construction sales tax, it helps with some of the REIT and then it also improves our assessed value numbers.

I'm not expecting you to come up with that magic solution, but I'm just noting it for my colleagues that that's the importance of finding a use for that downtown office space because it could get us into the propulsion of the next boom down here.

I'm not saying it's going to be a boom where we're the fastest growing in the city and the nation again, but it would at least give a boom for where we're at right now.

Just kind of checking my numbers here, we had the overall between all funds removing grants and transfers were down 10 million or so in general fund, but that includes the $6 million of B&O that you were talking about.

We then have almost $17 million down in Jumpstart, another 5.8 in REIT, That brings me to about, I didn't write my math correctly, looks like $31 million down, but we came up with another $20 million above forecasted in our actuals for this year.

So it feels like between both of, with this updated forecast and the actuals coming in, The punchline here is that we're down $10 million in 2026 across all general use funds.

Is that accurate?

Am I getting this correct?

Okay, so I'll try to do the math on the fly, but I didn't actually write down the numbers.

And I might suggest that in the future we have a slide that does something to that degree.

Yeah, but there is 10 here for 26, 27, 33, but then there is plus 5 for 80SC cameras.

So about 27 down for 2026. Again, there is about same amount in addition to the revenue for 2025 revenues.

So 24 PET, about seven for general fund.

So 27 plus two for 25. about 27 down for 26. And then you have the 27, which is 13, but a couple of negative ones here.

So yes.

I guess we're all describing the point that I'm making, which is it's about a wash, right?

And I'd say the same comments that I've shared previously, Dwight and Mark, which is that while the nation has not been in a recession, our Seattle economy has absolutely been stagnating for a number of years.

We were really hoping to begin that slow growth at a faster pace this year.

We were hoping to start it last year.

All of the federal and international issues have contributed to this.

And so as I see, we have been in a, last year was a little bit more slow growth even with the volatility, this is feeling more like a second era of true stagnation.

And while we're not gonna call it a recession here because you have to, that's a technical term with other factors, et cetera, I just call out that having a wash is probably the best we could do and maybe even, and I'm not trying to steal other people's talking points, but might be even a little bit more optimistic than what could occur.

I don't think it's pessimistic enough that we adopt the pessimistic scenario.

But I guess here's the point, which is I'm glad that the forecast is about a wash because it's better than being negative.

And I think we as the city need to be acting as if this is a negative revenue forecast, just so that we do not get into a place of overspending or starting to take on more obligations than we can handle.

There's nothing to be read in between there.

I do think that we need to expand our shelter.

Sorry if I don't like this.

That's not what I'm talking about here, but beyond addressing homelessness and getting people off the streets, it's a time for us to start being really careful and tightening our belt where we can because While we're not losing a lot of money again in a $6 billion-plus budget, we're talking about $20 million, $30 million, and possibly only $10 million here.

But all of that to say we should act like this is a bad revenue forecast, please, and I'm glad that it's not worse.

Yeah, that's a very good summary.

Given the overall size of a budget, it's a relatively small revision.

It's slightly to the downside.

Please.

Dwight's got a question.

John, I know it's not in the timeframe that is presented here, but could you just briefly tell people how the millionaire's tax, assuming it actually survives, will adversely affect our revenues in 2029?

Yeah, so we are not presenting here the forecast for 29 and 30, but the millionaire's tax bill has some implications for sales tax revenues as well, because it undoes some of those changes to the classification of services into retail.

and that starts in January 29. So with that, There is less sales tax revenue because some of those services are no longer going to be subject to the sales tax.

On the plus side, however, that would also mean additional business and occupation tax revenues because that classification there follows the sales tax revenue classifications in general.

It's a little bit hard to tell how big of an impact it's going to be because we haven't collected that additional revenue for long enough.

So we did try to estimate the impact for 2029, but it's relatively small.

Again, there is a lot of uncertainty about that.

We'll definitely be trying to improve that forecast.

One thing, I guess, to keep in mind is that digital advertising is not going to be reclassified back, and that's a significant part of that additional revenues.

There is a legal challenge for that one, obviously, so that can go away.

Lots of moving parts in general here, yeah.

There was also an exemption for hygiene products under the bill, and so that does erode sales tax base just a little bit.

So I'd throw that in there as well.

In general, I think us as a jurisdiction, we are somewhat unique in our collection of B&O.

And so having that as a sort of offset, a sort of offset to the decline in sales tax because of this reclassification of services issue, so that sort of offsets our loss there and it bumps it up.

So there are other jurisdictions who are definitely gonna suffer more than what Seattle does.

Yeah, so we have tried to compare how we see the impact of the 5814 on the sales tax to the estimates for King County.

They are roughly in the same ballpark.

It's just that King County does not collect the business and occupation tax revenues, so there is a lot to the positive side for county, not that much for Seattle because of that offsetting force.

All right, so with that, there is a second scenario to go over.

And director, I don't mean to be this guy, but we've got about 13 minutes left before we need to get into the work plan.

I know.

So I'll try to be very quick here.

The main takeaway here is, as you can see, that pessimistic scenario really is a pessimistic one.

Just as a reminder, it's built on an economic forecast that assumes a recession starting in the second half of 2026 and going into 2027. And so that would have a significant impact on those revenues which are driven by economic activities.

And I'm talking about sales tax within the occupation tax here, but also parking meters and other revenues.

Higher gas prices would just generally impact the spending by households and businesses.

And again, the layoffs that would ensue and the recession would lead to significant revenue losses for the city.

Again, in the interest of time, I'll just quickly move to the second part of the pessimistic scenario forecast for non-general fund revenues, there is a large impact here on payroll expense tax.

Again, that recession would mean lower stock prices, lower valuation of companies, and additional layoffs, which would negatively affect the base here.

For REIT, that plummets.

And it really, you can see, it would decline significantly in 26. And there is additional decline in 2027 in absolute amounts, not just relative to October.

For admissions tax, similarly, negative downward revisions.

And Joe and Alex can provide some insight into, I guess, the remaining ones, at least quickly here.

Let me see what to speak to here.

I think that, generally speaking, the decline in some of these forecasts is a little bit less than the economically driven ones.

They all have some economic component, but many of them are a little more ...

The white rows that CBO forecasts are a little more operational in nature, generally speaking.

We don't see the declines quite as heavily as we would in, say, the REIT or the payroll expense tax.

So I don't, unless there's questions, I'll leave it at that.

All right.

So finally, a quick comparison.

So how much is the pessimistic scenario different from a baseline, and how much of an upside is there in the optimistic scenario that we did?

develop and it will be available on our website and we have shared it with the staff.

But in the interest of time, I did not really go over the details here.

You can see that the spread is quite large.

For 2026, pessimistic scenario would mean 90 million less in revenues.

The optimistic one would mean 30 million to the plus side.

So that's either 3.7% less in revenues or 1.3% more for the current year.

overall decline for a couple of next years would be about five percent of the overall revenues in the case of a recession the upside is to the tune of three to four percent depending on the year three for the average And so with that, we are now coming to the summary and the recommendation of the forecast scenario.

So overall, the outlook has become much less clear given the conflict in the Middle East.

It's been long months with lots of movements in the financial markets, lots of changes in the outlook.

We have tried to incorporate some of the information into the baseline scenario.

So we feel confident that we have mitigated some of those risks arising from the fact that The economic forecast by S&P Global and Moody's Analytics were developed at the early stages of the conflict.

We have essentially taken some parts of their pessimistic scenarios, weighted it with their baseline and created a baseline which is assuming some of those negative effects of higher oil prices and higher gas prices and less economic activity and less employment growth.

That said, we do believe that the baseline scenario is the most likely path forward, at least based on the information so far.

And given the recent ceasefire, there is some hope that that will certainly be the case.

There are still some other risks to the regional economy, in particular layoffs in the tech sector are not going to go away.

The AI and the wider adoption of the AI and less hiring in the tech sector is another risk which is not going to go away.

There are all these moving parts regarding the impact of the 5814, which is again that bill that reclassified some activities from service to sales, and there is limited data for that.

So lots of risk, lots of moving parts.

With all that in mind, again, we do believe that the baseline scenario is the one to be recommended, and we have accounted for some of those risks directly.

Nevertheless, and this is something that I've been saying a couple of times already and it's becoming a little bit repetitive.

There is a high amount of uncertainty still here and so there might be some large revisions coming in in the future and that should be taken into account here.

So with that, we have come to the end.

Happy to take any questions regarding the recommendations or the forecast in general.

Thank you, Director Duras.

Well done.

I'll check to see Vice Chair Ellerberg, please.

Yeah.

Well, thank you very much.

This is being my first time.

This is a lot of information, and I appreciate all the work that goes into it and, frankly, all the different considerations you have to put into the information to arrive at all three scenarios.

So thanks for the time.

It's very clear, very dense, obviously, but a lot of really good information.

So thanks for the presentation and the recommendation.

Fantastic.

Any other questions here?

Otherwise, we can move on to the adoption of the recommended forecast.

And so by just a little bit of background, if the forecast council is prepared to approve the recommendation, which is the baseline scenario, then no formal vote is required.

if we want, and so this is, I'm doing a little bit of intro since it's Mark and Dwight's first time back in this meeting, and this function has changed in the last number of years, right?

So again, this used to be an office that was held only within city budget office.

It's now a jointly overseen independent council.

And so Jan and his team as staff provide a recommendation It is our job as the Forecast Council to accept or override this recommendation.

It gives us the checks and balances.

So today, Jan has recommended that we take Director Duras's recommended that we take the baseline recommendation.

If that's how we want to take it, I'll read the script.

We'll go through that motion.

No formal vote is required.

If we, as the forecast council, thought that he or the team was incorrect or we wanted to be more optimistic or more pessimistic, this is where someone can bring a motion and override that recommendation.

So that's just kind of the functionality of where we are in this moment.

Want to double check any further questions?

I am prepared to accept the recommendation, so I'm not seeing any other objections.

While I instinctively think it's too optimistic, I will accept it as well.

With that, as you hear from the finance director, act.

And I know the CBO is watching.

Please act as if we are in a budget problem with this revenue forecast, please.

So with that, per the ordinance that created the forecast office and this forecast council, it is the role of forecast council to review and approve the forecast.

In terms of approving the forecast, if we concur with the recommendation of the forecast scenario, no formal vote is required.

The goal of the legislation was to remove any risk of political influence over the forecast.

Receiving recommendations from a staff of independent experts is the best way to achieve this aim.

That said, we represent the elected leadership of the legislative and executive branches, and it's also appropriate.

that we have the authority to override the recommendations of the Forecast Office should we judge that it makes sense.

Per establishing the ordinance, a decision would require a three-member vote of four approving an alternative scenario.

As you have heard, Director Doris has recommended that we has recommended the baseline scenario for the April 2026 forecast to be used as the official forecast.

Is there, in the case that there are no objections to this recommendation, I am simply going to request the meeting minutes reflect our concurrence regarding the recommended forecast per bylaws.

This is the formal step as the way to record our approval.

I'm gonna, and with that, any objections?

Seeing no objections, I'm going to direct the forecast office to record our concurrence with the recommended forecast in the meeting minutes.

Well done.

With that, we are going to move on to the final item of business with 13 minutes left.

And I'll read that item into the record.

Presentation of the 2026 work program for the Office of Economic and Revenue Forecasts.

Discussion and possible vote.

Per the ordinance that that created this office.

Each year, the council must approve the office's work plan.

Director Dorris will now present the office's work program, after which we will have the opportunity to discuss and approve or table the proposal.

With that, over to you, Director Dorris.

All right, so this should not take too long, but it's a short overview of what we are expected to do and what we plan to do this year.

The background, I don't think I have to spend too much time on that, this office is basically was established in 21 and follows similar structure, similar arrangements in King County and Washington State.

It oversees and forecasts a number of revenues, large economically driven revenues listed here.

In addition to that, assessed value forecast is prepared by Sean as input into property tax, which property tax forecast itself is developed by the CBO.

We do prepare three forecasts, so this is the first of those revenue forecasts.

It will be followed by August and October update.

To develop those revenue forecasts, as I mentioned, we rely on our in-house developed regional economic forecast and we actually prepare four of those.

There is an initial one in January which is used to inform the outlook for inflation for setting the central rates.

So there's those four economic forecasts in addition to the three revenue forecasts.

There is three presentations.

The next one is scheduled for August 7th and then the last one will be at some point in October, but the date has not been set.

We are monitoring the revenues as they come in and prepare quarterly revenue reports.

There is a dashboard on our website, which I'll plug in here, that Sean has developed that provides an easy access for both the staff and the public as a way to to see how the revenues are shaping up throughout the year.

Then time permitting, we would like to start an update of the forecast accuracy assessment, which we hadn't planned already for the last year, but then there has happened.

So that assessment would look back at last five years.

It would be an update to a similar assessment we did back in 2022, which looked at the revenues through 2021. So last five years, we would like to assess how good the forecast models are, where the space for improvement is.

That's, again, time permitting given all the other work.

And there will be a couple of things to do.

Given the restructure of the B&O tax, essentially a new way how to forecast these revenues has to be developed to account for reclassified activities, the increase in the threshold, the new deduction.

the modified tax rates on top of the changes due to the Senate Bill 5814. We are working to develop the social housing tax, which we did not present here, but we are developing a forecast for that, taking into account the recent revenues that the city has collected for 2025. It's again a new tax and potentially very volatile ones, so a lot of consideration has to go into developing the model and considering the data that it should rely on.

And then there is ongoing improvements throughout the year in between the forecast whenever we have time.

Sean has recently worked on significant improvements to the assessed value.

Payroll expense tax, again, with more data available, we are trying to spend more time looking at where we can improve the forecasts.

And then finally, there is some work that we do to support other departments.

We are here to help in any way we can.

Both the legislative and executive staff can request some analysis, either estimate of potential revenue stream or some economic analysis.

and given the available staffing and given the other workload, we are again happy to help as much as we can here.

In addition to that, our office assists the city finance in preparing and presenting The limited tax general obligation rating presentation that takes place in late May, so April and May is the time where we work on providing the inputs for that.

And then we are assisting the budget office in preparing the economic section of the budget books.

And essentially the parts that summarize the outlook for the revenues that we are in purview of forecasting.

So that's the general idea.

Continuing improvements to the forecasting models.

Any ad hoc analysis requested and continuing support to the other departments.

Thank you, Director DeRosa.

And I'd say in its fifth year of existence, the forecast council, it's about time that we might strengthen some of our bylaws, review them, as well as creating that foundation.

You were talking about the assessments.

And it stands out to me that our forecast meetings to receive the forecast always take two hours minimum.

And if we only meet when we receive the forecast, that leaves no time for us to meet in open public session to have some of these discussions.

And so my suggestion will be that we meet again maybe in June or July just to have a work meeting to attend to some of this business.

jointly together between the executive and the legislative branches because I think some of the, I think we need to have some further more robust conversations in which our regular cadence of meetings does not provide us the time to do so.

So I'd love to add a meeting in June or July.

I absolutely agree with that idea and just as an example, the social housing tax, which is new, is going to be a really complicated thing to forecast.

And having you come in and brief us on what you're thinking and what variables you're including, I would find very interesting.

Any other comments from the committee?

Mark?

Yeah, I agree.

I think it would be good to dig into sort of the balance of the work plan that you've laid out here.

And I think part of that also would be when we meet in June is to talk a little bit about just how that work has been going.

Are you able to get to pass work plans?

You know, just understand sort of capacity against what you are carrying.

So I think that should be one of the things we talk about.

Wonderful.

Anything from you, Council President?

No, Mr. Chair, thank you.

I support that plan and also that suggestion.

So great idea.

Thank you.

Wonderful.

Well, with that, we must, as the forecast council, approve the office's work program.

interim director, Director Duras, has presented it.

So I will move to adopt the 2026 work program.

Is there a second?

Second.

It has been moved and seconded.

Any last comments?

Seeing none, we'll just do a voice vote.

All in favor say aye.

Aye.

Aye.

Aye.

Motion carries.

2026 work plan has been adopted.

With that, my script says the next time we'll meet is Friday, August 7th.

I'll just note that August becomes a difficult month.

We might shift that forecast date, but within that week because that's within the ordinance.

And we will likely meet before then in June or July so that we can have a little bit more of a working meeting.

If there are no further questions, we will be adjourned.

hearing no further questions.

It is 1127. Thank you for your time and see you next time.

Thank you.