Seattle City Council Finance and Housing Committee 5/4/22

Good morning, everyone.

Thank you so much for joining the Finance and Housing Committee meeting of the Seattle City Council.

The date is May 4th and today it is 9.30am.

I'm Teresa Mosqueda, Chair of the Finance and Housing Committee.

Will the clerk please call the roll?

Council Member Herbold.

Council Member Peterson.

Present.

Council Member Nelson.

Present.

Council Member Lewis.

Madam Chair Mosqueda.

Present.

Madam Chair, that is five present, two absent.

Okay, thank you very much, Madam Clerk.

I know that we will probably have our other two council members join us here shortly, including Vice Chair Herbold.

Good morning, Vice Chair Herbold.

Thanks for joining us.

Appreciate you, and I can see you for the record.

I also know that Council Member Lewis will probably be joining us here in just a second.

Good morning, Council Member Lewis.

Council Member Lewis has joined us.

Madam Clerk, do you mind for the record reading how many Council Members we currently have present?

Madam Chair, we currently have five Council Members present, none absent.

Thank you very much.

Colleagues, thanks so much for joining us.

Apologies for that.

I had two different times on my end, so I think I got a little jumpstart for the meeting.

Excited to see that we have a full committee meeting today and we have a full council agenda, excuse me, a full committee agenda as well.

We're going to start with the presentation.

Originally, we had the Office of Housing coming to present on their staffing proposal.

Colleagues, I will be making a motion to hold this item in conversation with the Office of Housing.

Just a few additional tweaks are needed, and they would like to come and present on May 18th.

So we would be asking for your consideration to move agenda item to next meeting.

That's May 18th.

I want to thank the Office of Housing for the work on the legislation.

We've been excited about the conversation to come.

And so we know that that will be a robust discussion.

We will also have on our presentation today a summary of the American Rescue Plan Act implementation strategies.

I want to thank the departments as well who have been providing monthly reports to the city budget's office, and we as a council have been receiving those.

However, we'd like to have quarterly updates on how the implementation of those American Rescue Plan Act dollars are going.

All of this was included in our Seattle Rescue Plan passed in July of 2021, and then again, Tranche 2 embedded into our 2022 budget that we passed in November in 2021. So getting an update on a regular basis on those implementation efforts is going to be critical for members of the public in a quarterly fashion.

And we appreciate that they had delayed their presentation to today at our request as well.

And then finally, we will wrap up with the grand finale, which is part two of our conversation, looking at the budget forecast.

This is a really exciting day and I want to thank our council colleagues for all of the work that you've done in anticipation of this conversation today, and Central Staff's Interim Director, Ali Panucci, as well as Tom Mikesell, who provided a comprehensive memo, 15 pages in total with a number of tables that helps prepare us for the presentation that they'll walk through.

Again, I'll have a few more words about the six-year financial plan and outlook that we will be seeing in our committee today.

But this is somewhat historic and hopefully groundbreaking, a new pattern of transparency and accessibility for our budgeting for members of the public and for City Council members as we now have the opportunity to look at the six-year forecast well in advance of any budget deliberations.

This is something that I've been looking forward to having for the last two years after learning that it was not readily available in advance of our budget making.

looking forward to that.

Again, colleagues, those are the three items on our agenda today.

However, I do want to go ahead and get the agenda in front of us so I can make the motion to remove agenda item number one, if that's okay.

Colleagues, I move to adopt the agenda.

Is there a second?

Second.

Thank you very much.

It's been moved and seconded.

I do have the one amendment I mentioned.

I would like to remove agenda item number one and postpone Council Bill 120318 and the discussion and briefing until May 18th, our next meeting at 9.30 a.m.

Is there any objection to removing agenda item number one and postponing that discussion until May 18th?

Hearing no objection, thank you very much.

The agenda will be adopted with the amendment.

Hearing no objection, the amended agenda is adopted.

Fantastic, let's go into public comment.

We do make an effort to make sure that there is public comment available at the beginning of each of our meetings.

committee meetings.

We've done this through the Select Budget Committee and also through the Finance and Housing Committee, every committee meeting.

You can sign up before our committee meeting.

You can also sign up during and when the presentation is happening.

I just wanted to explain to folks that if you didn't get a chance to dial in today, you can always email us at council at seattle.gov.

At this time, I am not seeing anybody signed up for public comment, and we do appreciate all the folks who called in on a regular basis.

But again, if you're watching and wanted to provide a public comment, you are welcome to do so at council at Seattle dot gov or at our next committee meeting, 930 on May 18th.

At this time, since there's no one signed up for public comment, our public comment period will be closed.

And again, we encourage people to go ahead and send in their public comment to council at seattle.gov.

Wonderful.

Okay, Madam Chair, let's move on to agenda item number two, as listed on our committee agenda.

And item number 2, Seattle rescue plan quarterly update on Seattle American rescue plan spending for briefing and discussion.

Thank you again.

I'm excited that we have with us the city budget office director Julie Dingley.

Thanks for being here along with your team.

From your team we have William Chen and excited to have Tanya Kim, director of the Human Services Department along with Joseph Casper.

Ski Kaspersky from the Department of Human Human Services Department.

And again, Interim Director Allie Panucci and Tom Meisel from central staff.

Thanks for your flexibility and being able to join us today instead of at our last committee meeting.

I am very excited that we have the opportunity to walk through the Seattle Rescue Plan Act funds with you today and Julie, in your previous role as I believe deputy before being the director at the city budgets office it was a pleasure to have worked with you on the Seattle rescue plan creation in early 2021, and to have worked with you as well.

as we develop the 2022 budget, which includes tranche two of the Seattle Rescue Plan.

Very thankful for the monthly updates that we receive.

And in those monthly updates, we've been able to track progress on not only what funds have been allocated by the council and the mayor, but then how the spending is going, probably more important area for folks who are impacted by the effects of COVID.

And we have been able to see in those monthly reports funding that's gone out the door and money that's also encumbered.

I will note that since you have been the director and under the new administration with the Mayor Harrell, we've seen more of those dollars go out the door and more dollars become encumbered, which is very exciting.

And I think that we will take the rest of today to hear an update from you for first quarter of 2022. and also get a chance to ask some questions about where things may stand if they're currently encumbered and not yet spent or if not all the funds are yet encumbered because we know that the need is incredibly great out there.

Just as a reminder, these investments are really critical to supporting our community members who have tremendous need, and not just because of the pandemic, but also because of needs that have been compounded due to the pandemic, especially thinking about women, folks of color, members of the LGBTQ community, our smallest businesses, low-wage workers who were in many ways suffering due to the economic inequalities that we saw in our community and disparate access to health services.

And so the pandemic we know has disproportionately affected folks of color and lower wage workers and smallest businesses harder.

I'll let you dig into the details.

And I want to thank you for being here to help walk us through how it's going with getting these dollars out.

And again, a huge note of appreciation for our congressional partners who made the American Rescue Plan Act possible.

And we will continue to call for more through Build Back Better and so much more.

But that'll turn over to Director Dingling.

Thanks again for being here.

Good morning.

Thank you so much for the warm introduction and share the gratitude for the partnership that we have had in forming all the Seattle Rescue Plan investments.

This show is now being run by William Chen.

So I am actually just here to introduce him and step into the background and appreciate his incredible hard work in leading the federal funds team.

within the city budget office that's really coordinating citywide to make sure that we're staying on top of these investments, we're doing our performance reporting, we're really just keeping all the trains moving.

So really just incredible work to William and team and excited to be here as he presents the latest work to you.

Wonderful.

Thanks so much and welcome William.

Thanks again to you for all of the work you're doing.

William, would you like us to share the screen?

We can do that if you prefer.

I've got it.

Thank you.

Okay, wonderful.

Thanks so much.

And is that showing up for you?

That looks great.

OK.

Great, thank you.

Well, good morning, Chairman Skater and council members, and thanks for the opportunity to give an update on our implementation of these COVID relief funds, and in particular, the ARPA funds, which we appropriated under the branding of Seattle Rescue Plan, and also be giving an update briefly on where FEMA reimbursements are at in the pipeline.

So just briefly, the key takeaways from this presentation are that we are continuing to make progress on building necessary capacity and contracting with our providers and on spending the funds.

But I also want to share that at the same time, we've also kicked off a new phase of Seattle Rescue Plan implementation, and that's of performance valuation.

So with this, not only are we fulfilling the U.S.

Treasury's expectation that recipients evaluate the programs, but we're also advancing our own interest in better understanding and learning lessons from what we do to do better.

And we can share that with the city and with the public.

a look at the various federal funds that we have in play.

Mostly the funding we're talking about today is the $300 million of funding that Seattle has received from the ARPA bill.

The state and the county have also received millions of ARPA dollars, and that may still pass through to or affect the city, notably on food assistance, but more on this is to come in HSD's response to slide HSD-026A-001.

We're also continuing to work through the FEMA reimbursement pipeline on eligible expenses.

And on the infrastructure bill, federal granting agencies will be finalizing rules and announcing deadlines throughout the rest of the year.

And city departments are underway analyzing the bill for opportunities and preparing to apply.

On FEMA, of the $27 million of potentially eligible emergency costs, for FEMA reimbursement.

They have statuses ranging from pre-submission to our Office of Emergency Management, to under review by OEM, to state review and FEMA review.

We've had over $12 million worth approved by FEMA and $5.5 million that has been received so far.

Separately, another $13 million of invoices for the city's vaccine work was also submitted to Public Health Seattle King County.

And of that $13 million, we received over $12 million in reimbursements.

All of these reimbursement revenues are already factored into the city's revenue projections.

Now, an update on our implementation The Clifford funds are really complicated to administer, and that's thanks to extensive rules and reporting requirements that continue to expand.

But at the same time, as we're continuing to implement these programs and track spending and gather the more and newly required information from departments to report to Treasury, we've also launched required evaluation work around the CLIFR programs.

So for this, we've onboarded two new evaluation advisors.

They're excited.

And work is underway with them collaborating with departments.

And that will enable us to understand and share the impacts that our investments have had and will have.

So this slide describes the various reports that we're producing.

And last week, end of April, the city successfully submitted its second quarterly project and expenditure report to Treasury.

And I just want to take a moment to congratulate and thank Citywide Accounting and Payroll, Clifford Apartments, and the Seattle Rescue Plan team for their teamwork and their hard work pulling that together starting over a month ago.

And in fact, one of our colleagues at Citywide Accounting and Payroll, Doug Holmog Crane has been invited to share Seattle's expertise to help other jurisdictions with managing the challenging internal logistics of accounting and coordinating and reporting on Clifford Funds at this year's National Conference of the Government Finance Officers Association.

These funds are difficult to administer and Seattle is seen as a leading city in our implementation.

So that's great.

That's really exciting.

Please pass on our congratulations and appreciation as well.

And look forward to highlighting that.

And if there's the possibility of tuning in, I'd love to do that.

We've been invited to a number of national forums to talk about the appropriations and where they're going and the importance of those and how those dollars get out the door is probably the most important part.

So thanks so much for the work that you've done and please pass on our congratulations to them as well.

Great, thank you.

And we will do that.

The other of the two required regular reports to Treasury is the annual recovery plan performance report.

And that provides a high-level look at our entire plan for QLIFR, including spending, but really focused on metrics and results of our performance.

And the next report will be due at the end of July, July 31st.

And we're looking forward to having more to share from that at our August update to this committee.

We're also working on creating a public spending and performance portal.

This is going to be a layperson-friendly web portal to share progress on Seattle Rescue Plan spending and performance results.

And we're going to launch in phases.

So the first phase is spending progress.

And we've got a launch target at the beginning of June.

And then the second phase, we're going to add performance to the portal with the launch target at the beginning of August, lining up with the end after we get that July report out.

These next two slides are a reminder of the Council Member Herbold has a question.

Thanks so much.

Thank you so much.

I missed the instructions at the beginning.

I do have a couple of questions on slide three and four.

First, just as it relates to the food assistance, I appreciate the reference to Councilor Slye trying to find out what we know about how much ARPA funds may still pass through to Seattle.

And just wondering if you have a preview of what you might know about that.

And then secondly, just interested to know What we've learned about FEMA reimbursement addressed on slide four, have we experienced a change as it relates to timeliness of receiving approval and reimbursements from FEMA from our early experiences?

Those are great questions.

I can give a little bit on both.

Certainly more detail to come in HSD's actual response, but in their budget this year, the state appropriated an additional for a program called We Feed Washington that sends support to local food assistance organizations around the state.

So there's a lot of money that they're putting out to organizations around the state, and previous rounds of it have reached organizations serving Seattle area.

As for the FEMA question, what we're starting to see now are these big programs, big reimbursement requests that we had put in for 2020 projects coming through now.

So it's a pretty long timeline still, but they're starting to show results.

Thank you.

Okay.

And William, I just want to take a quick second to thank you for that.

And if folks do have burning questions through the presentation, please go ahead and raise your hand.

Thank you, Council Member Herbold, Vice Chair, for the reminder.

The presentation is 24 slides, so we want to make sure to get through all of them.

We do have an hour for this now, so we will make sure to walk through each slide.

But if you do have a burning question, It's probably best to ask during so that that doesn't get lost towards the end.

And I also want to thank the department directors who are with us here today.

I know I had a few questions, and if there's other questions that need to be taken back to various departments, we'll make sure to keep a running list of those as well.

OK, let's go ahead.

These next two slides are a reminder of the various Seattle Rescue Plan You've seen these before.

And then this slide, the column chart shows the change in the status of Seattle Rescue Plan 1 spending since our January update to this committee.

And since January on SRP1 programs, there's been an additional $2.5 million in further activity between spending and encumbrances and other contracts or agreements that are in process that aren't in PeopleSoft, our accounting system yet.

$8.3 million of this change is in more spending recorded.

And you can see in this change from that yellow slice in the January column, Reducing and turning into more blue and green, that's a change moving from in-process contracts to being now encumbered or spent.

This table is just the numbers behind that column chart.

And this is a table showing...

Can you go back one slide for me?

So I'm looking at slide 10 here.

Just to confirm, this means we have about 40 million of appropriated Seattle Rescue Plan dollars that are still not in progress, is that correct?

That's right.

OK, and can you confirm that that dollar amount is updated as of this presentation and what it might mean to not be in progress?

So what's the range of work that needs to get done in order for it to be in progress and on its way out the door?

Yeah, so this is updated as of shortly after two weeks ago, back when we were preparing for the last committee.

It varies by, so it includes a large chunk, one piece is the home grant, you'll see it on a later slide, which was for affordable housing, and that's pending housing and urban development, federal agencies approval of Seattle's plan, and that's over 12 million, so it's a large chunk of it.

Some of these things are programs that are in progress or planning with departments.

We may not see that in our system yet, and the departments may not yet have communicated to us that, oh, actually, we've already gotten super quickly communicated in our system or in our regular monthly updates.

So they try to share with us as much as they can about, okay, we've, you know, the system shows the spending, the system shows contracts that have been put into that system.

We've also got these verbal or otherwise negotiated agreements with departments, but they may not share every last bit that's shown up that has happened there.

And I'll mention a few of these things later on in the economic recovery section.

Very helpful.

Thank you so much.

Council Member Nelson.

And this can wait.

Thank you very much.

You just said that you were going to talk about economic recovery section later.

I'm zeroing in on the 45 percent, which is which is better than the 38% which was in the slide that was on the agenda last time.

So I know that progress is being made and it's a challenge to get money out and encumber.

So I just wanted maybe later in the presentation to talk about that number 45% and what we can expect in the next quarter or so.

Thanks.

Thank you.

I'll keep moving then.

Seattle Rescue Plan 3, so as Chair Mosqueda noted, it's part of the 2022 budget and appropriated the second tranche of QIPRA funding.

This shows the status in a similar way to SRP1, but a couple of things to note about what's different here.

Much of the second tranche is allocated to pay for city staff over the next several years, carrying out things like the Queen City Initiative, administering the QIPRA funds, doing evaluation, and implementing CIVIFORM.

So we've marked that as in progress because that's city staff and we know that where that's going.

The other big thing here is that 66 million of the second tranche of Clifford was used for a one-time bolster to the general fund paying for government services.

So that's a large chunk that is accounted for and you can see that in a lower number also in our grand total of the allocation amount.

Just a note there, it harkens back to the conversation that we had at the beginning of this when we invited national partners in to talk about what they saw from the last recession and the jurisdictions that invested in core government services saw faster recovery for both the private sector and continued employment and prosperity for the entire jurisdiction was more possible when those government services didn't see dramatic cuts.

So, you know, I wanted to bring that up because it was two years ago now that we had some of those national presentations.

And the data was really clear from that first, that recession that we saw about 10 years ago.

So I just wanted to tie in the nexus to the private market as well and our overall health of the local economy.

That's a great point.

And, you know, it is paying also for our work administering these funds, which gets us Certainly.

The remainder of this presentation, I'll be giving updates on some spending areas.

On this slide is the cash assistance program, which previously you knew already had completed.

What's showing up here is that the NGO that OIRA and HSD worked with to implement that program, previously known as Scholarship Junkies, now rebranded as Scholar Fund, has provided their final report on the results of this program, including information about who received assistance, And these pie charts show the share of phase one recipients by race and ethnicity and by language of application.

Phase one was about reaching out to recipients of the 2020 cash assistance program, focused on people who weren't eligible to benefit from federal cash assistance programs.

So as such, it makes sense that this phase reached overwhelmingly Latin American and Spanish speaking people along with other immigrant populations.

On the other hand, phase two was an open application to eligible low-income households in Seattle.

And you can see in the pie chart on the left, there's a much wider distribution of recipients among all ethnic groups.

The bar chart on the right shows the percentage of recipients who were experiencing various challenges.

And most notably, you can see that unstable housing and lost jobs or lost income afflicted the great majority of recipients.

We're going to have more to come like this on other SRP programs in our August update.

We're gathering and analyzing program data about the programs, and we'll have much more to share about what our programs have accomplished by then.

Thank you.

Council Member Burton.

Thank you.

I know I often return to this theme when we talk about this program.

I appreciate knowing that there's going to be a deeper dive on the program.

I want to just flag that.

My office has been working with central staff to see if it's possible to dig deeper into the data to determine how well the fund reached all of the priority populations.

I've expressed a concern in the past that one of the priority populations intended to receive this direct cash assistance was arts and cultural workers, who as we all know, have been among the hardest hit by the pandemic and sort of the initial review of the data thus far does not demonstrate that the model used to get these dollars out the door was a model that ensured that beyond working with arts organizations to do the outreach to tell people that you could go to OIRA and go to Scholarship Junkies to apply for this.

It doesn't appear from our first look at the data that many arts and cultural workers were actually recipients of this funding.

There's a couple different cuts of analysis, I think that needs to be done, but I'm just wanting to flag my hope that we can work with the executive in doing this deeper dive that it sounds like you're already working on.

Thanks, Council Member Hurdle.

We would hope to.

I understand that Scholar Fund the application process that they took didn't necessarily ask about the industry.

So it's hard to know how many or how few of the bulk of the recipients were or weren't arts and culture workers.

And for the few that were working in Seattle but were living outside, then they did ask.

And then you could see it, but it was a relatively small slice of the overall group.

Director Kim, I see on the screen as well.

Did you have anything else you'd like to add at this point?

And thank you, Council Member Herbold, Madam Vice Chair, for flagging your ongoing work in this area.

Yeah, the only thing that I'll add is that while the Office of Immigrant and Refugee Affairs had the contract with the organization scholarship companies is that we did partner with Arts and Culture and we also had community engagement contracts with arts associated organizations.

And so I'm seeing from from some of my folks that there is data available that we can help provide.

And it's around the creative space or the creative sector.

And so we'll be sure to follow up and make sure that we can provide that information in partnership with Office of Arts and Culture.

Great, thank you.

I know that there's a lot of interest in that, making sure that folks in the creative economy get these dollars as directed.

So we look forward to that update.

And thanks for flagging that again, Vice Chair.

Let's continue.

Okay, and the next slide shows some food assistance programs.

The first item is from Seattle Rescue Plan 1, Good Food Kitchens.

It is entirely obligated and about a third of its budget has been spent, and that's ongoing.

The next two items are from Seattle Rescue Plan 3. And Seattle Rescue Plan 3 allocated funding to continue 2021 COVID-related food programs into 2022. And $2.5 million has been encumbered so far for the continuation of those programs, and spending is underway.

And that last program on the slide is for support to low-income American Indian and Alaska Native people.

And a contract is out for signature with the provider, and project activity is expected to begin in the late summer.

On housing affordability.

affordable housing rapid acquisitions had a couple of different grants here.

The Clifford funds are all completely allocated and spent or small pieces encumbered and on its way to being spent to purchase four new multifamily buildings and total of 198 units among them with occupancy, open for occupancy this year.

That home grant I mentioned earlier in the presentation is currently awaiting HUD approval for the plan.

Emergency rental assistance, one funds have been nearly completely spent, and emergency ERA 2 funds are about half spent, with United Way of King County having completed their spending.

And lastly, all 3 million of CLFR funds for affordable housing provider capacity building are now under contract.

So just a few questions on this slide.

And thanks for flagging the home grant being in HUD's approval.

We know that they've changed their application process sort of midway.

So look forward to getting final approval from them for the good work that Office of Housing is doing.

And this is an area that's caught a lot of attention across the nation as we've talked to partners from local progress or the National League of Cities.

People are very impressed by the rapid acquisition that's embedded in the use of these dollars.

And I just wanted to flag for folks within the last year alone and in a combination between federal dollars and state dollars we've been able to take seven.

properties off the private market and convert those seven properties into 400 units of housing using rapid acquisition dollars.

So it's a great, great effort partnership with these federal dollars and more to come hopefully once we get the home dollars approved.

Is there anything that you need from us on the HUD approval?

Are we just in wait mode right now?

As I understand it, we're in wait mode and you know, just hoping that they get everything that they need to approve our plan.

OK, great.

I do have a question for the emergency rental assistance for ERA 2. What percentage of the applicants for Seattle's rent assistance will the funds serve and when will we know that the entire funds have been spent?

I don't have information off the top of my head, so we'll need to get back to you on that.

Okay, colleagues, I'll be following up as well.

I think maybe we all inquire with the Office of Housing.

We haven't, I'm interested as well in knowing if we have an anticipated amount we can expect Seattle renters to receive from the 45 million in rental assistance from the state budget and how that's going to be partnering here.

Council Member Herbold, anything to add to that?

CLFR, and you may have already covered this, I'm sorry.

reference here is to four new multifamily buildings with 198 units.

And then it goes on to say units and shelter beds will be open for occupancy in 2022. Can you talk a little bit more how how many of those units will be for for shelter and how many for permanent housing and What do we know more specifically around their open dates?

Great questions.

The shelter that's mentioned there is related to the Cairo building, which is operating as a shelter for now, but then eventually after it phases out, it'll be transitioned to affordable housing.

I don't know the precise splits in the units between the other buildings and Cairo building, but can get back to you on that.

Thank you.

And speaking of shelters, this slide is about homelessness and the city's investments in KCRHA.

This is the update that we can share.

DRHA has started operating and has assumed oversight of the city's homelessness contracts.

And this table shows the Clifford funded pieces.

Now, the SOTO shelters service and operating contract for this year has been signed while the CARO contract is pending the agency's response.

And just a reminder, SOTO and CARO are budgeted for multiple years.

COVID mitigation and shelters has eight contracts executed and three more under review.

And then rapid rehousing has about a million under contract with the remainder for NOFA in May.

Capacity Building and Diversion NOFA releases are expected in May.

Safe Flats NOFA was released in April, and they're expected to sign a contract in May.

And then Tiny Home Villages was expected to be under contract by the end of April, at the time the slides were updated last.

All right, folks, Council Member, let's, yeah, let's stay on slide 16 for a second.

Any questions from our representatives on the RHA board?

Council Member Herbold or Lewis?

Okay, I do have a quick question here.

So there's roughly $9 million in unspent ESG dollars that we had allocated for the Executive Pacific Hotel.

We also allocated capital and operating funds for tiny house villages that have not been spent.

I believe that was $2.4 million for both the capital and operating for this year that are over at RHA as well.

We all are very interested, as has been noted by my colleagues, of making sure that we're able to sustain just care through the end of the year.

I see Joseph, who's joined us as well on screen.

And so looking forward to hearing an update on how the King County Regional Homelessness Authority is planning to use the ESG dollars.

I know I've had a few conversations with folks over there.

I know folks here probably on the phone have as well some interest in using part of the underspend to do some COVID related enhancements to contracts, which is clearly needed to make sure as more folks come into shelter.

that we continue to maintain non-congregate shelter and make sure that they're still healthy environments so that people do not continue to contract COVID.

But we appreciate that the COVID mitigation efforts are being put into place.

I think that there is real interest in making sure that any remaining funds for this year are directed towards Just Care.

And I believe that that's a shared priority as well with RHA.

So I'm wondering if there's any update on what the shortfall is in the NCS RFP due to the changes that are being made with the commerce funds and what the plan is, if any folks might know, I know we can't speak on behalf of RHA, but what the plan might be for being able to move forward to support Just Cares with any underspend.

Thanks for that question.

On ESG funds and those other funds, I'll need to defer to Joe first.

Good morning, Madam Chair.

This is a top priority between HSD and, of course, Regional Housing Authority, but I don't have the specific details at this time, and I will have to provide that detailed information back to you at a subsequent, later this, at a later time.

Okay, wonderful.

Thank you very much.

the regional homelessness authority I know is continuing to try to identify what to do with those underspend dollars.

I think that they've expressed interest in Just Cares.

We have, the executive's office has as well.

So it seems like there should be a path to making sure that they receive funding and perhaps in partnership with some additional federal funds that come later this year.

But we all I think have the same interests and funds available.

So looking forward to getting that resolved.

Director Panucci, did you have anything you'd like to add to that?

Thank you, good morning, chairman skater committee members I just wanted to note that I believe Mark Jones will be presenting later today at the public assets and homelessness committee and so there may be an opportunity for council members also to check in with them at that at that time.

Great, and we have the chair of that committee with us.

So I look forward to having those items discussed in greater detail there.

I know folks are not able to speak on behalf of a third entity, the Regional Homelessness Authority, but since there's so much shared interest and the opportunity to use these federal dollars, it seems prudent of us to have asked the question today and look forward to hearing more about that this afternoon.

Any additional questions for slide 16 here?

Seeing none, let's go ahead and move on.

Childcare, in particular childcare facilities, HSD and DEEL are coordinating on outreach and recruitment to childcare providers and on their facilities RFPs.

HSD has posted 2 positions for project facilities coordinators, and those postings have closed now, to increase capacity for this program.

And on this slide is also a timeline of what's to come for child care facilities.

A survey of child care providers completed its period on April 22nd.

And that survey is going to be used to inform DEALS RFI, which will be released in May, and HSD's RFP, which has a target release of May 16th.

In mid-June, HSD will also release an RFQ for architectural support to assist providers with their capital improvement plans.

and providers can contact HSD directly with questions or to learn more at the email that's on this slide.

Thank you.

And Director Kim, thanks for being here with us today and to your team.

I know that you've been working hard with the HSD team and in collaboration with DEEL as well.

Is there anything that you'd like to add to that summary or timeline?

I think the only thing I'd like to add is that we are on target for the May 16th.

And we have, you know, I wish we could have expedited this faster, but here we are, and we're really excited to have this opportunity available.

And we're gearing up to have full staffing capacity to support the various providers, some who are new to this arena to have access to the funds to expand, and as you say, seats for kiddos.

And so we're really happy to partner with you on this.

Great, let's get more of those belly buttons into child care.

You know what I am excited about is also this mid May release of the RFP for broader child care providers.

Will you?

Will your team be able to send to Council the RFP information so we can push that out widely so people know we've gotten a lot of inquiries about how to access these capital dollars?

And I'll remind folks you know it was 5,000,000 originally.

I think we added another 1,000,000 to that, $6 million in total for building out additional space, the facilities for the kiddos and those belly buttons to have a place to get high quality child care.

So that's going out in mid-May.

And then when will the providers know that they've received funds for building out additional spaces or retrofits that need to be made to house more kiddos, house more kiddos in classrooms?

And this is where I hand it over to Joe.

OK, great.

Hey, thanks.

Thanks again for being with us.

The current timeline for the RFP, of course, as Director Kim stated, May 16th will be the first, will be when the RFP is issued.

May 24th will be the information session.

June 28th is the plan closure date.

July we'll look for the awarding or the awarding of the recipients and award notification should be sent on August 4th and the contract should be signed by August 19th.

Okay, thank you for that.

And that is the set time frame that's as fast as they can get out the door.

Okay, could you send a summary of those dates that we can send out to the folks who've been inquiring so that they can keep track of those potential dates and any links that you have that might have the RFP when it goes live?

Absolutely.

Okay, thank you very much.

Yeah, I too wish it could get out the door sooner.

But do want to thank you for the progress that you've made on this topic.

I know that I've asked about this the last few times we've had the item in front of us.

So I do see that there has been progress made on this and appreciate that.

And that we're also looking at expanding the capital, you know, facilities in terms of brick and mortar to really try to get more kiddos into childcare across Seattle.

Appreciate it.

Let's continue.

Right, and on this slide are some updates about a few of the community well-being programs that were funded with QFER.

The states appropriated their matching funds for the Older Americans Act grant and we're expecting to receive those funds in July.

And for the gender-based violence and mental health services items that were in SRP1, funding is 100% obligated and spending is underway.

also an area where I'm sure Vice Chair Herbold is happy to see progress being made.

That was an area of concern for us.

I appreciate it, thanks.

And now on economic recovery, as noted, departments continue to move forward with planning and contracting and spending.

Some of the progress that's been made just isn't in the accounting system yet and isn't showing up in our monthly report.

And one big example of that is the Neighborhood Economic Recovery Grants Program.

Our system shows, you know, it's maybe two-thirds encumbered in spend, but it's actually entirely accounted for in OED's agreements with providers.

And so that's committed, but we didn't get the verbal update from them in our monthly report to explain that we've already made these agreements.

And ARTS is another example here with their cultural organization reopening grants.

It's closed its RFP, it's scored all its applicants, and it's now screening applicants for eligibility before awards are announced.

So we expect to show more progress on these things by the August update.

And another more technical reason why things may not be showing up is that it can take time between when a program is encumbered and then that provider invoices the city and the city makes a payment and that hits our books.

So more to come as always.

Okay, a few follow-up questions.

Council Member Nelson, please go ahead.

So I think what I heard you just say is that the 45% on the previous slide is not really up to date, that the money for economic recovery and community well-being is getting out the door and there's not the disconnect that I had maybe perceived earlier, basically, because I was wondering if that was a staffing issue in OED, why that wasn't getting out the door.

So is that what you were basically saying?

I am saying that's definitely a part of it.

Okay.

But I don't want to gloss over any real issues here too.

But OAD has had turnover.

They've got a new director and things are ramping back up.

But it is also true that there's more progress that has been made than is showing up in our monthly reports.

Great, yeah, because they basically turned into a grant processing body and it was really hard to keep up.

I just wanted to make sure that that money was getting out the door.

And then the on this slide, let's see, it says I just want to make sure I have the number right for downtown recovery one point four.

And but I thought there was two million for downtown.

So is there am I referring to two million was allocated per Council Bill 12093. So I'm just wondering, is the number 2 million or 1.4?

I may have to get back to you about which items are being included in which total.

All right, thank you.

I'm wondering, thank you very much, Council Member, I'm wondering, Interim Director Panucci, if you have anything that you'd like to add On the downtown recovery efforts, my memory is that there was more like 7.5 million for downtown recovery and.

22, excuse me, for economic recovery with 2 million allocated specifically for downtown and 5.5 across neighborhoods.

The rest of the 22 million was used for commercial affordability, technical assistance, support to arts and orgs workers, and didn't have a specific breakdown.

So is it possible that there was overlap between specific downtown dollars and other dollars that were also allocated as part of Seattle Rescue Plan tranches?

So you can see the $5.5 million for the neighborhood grants on the slide here.

There was also $500,000 that was not included in that 5.5.

That was for downtown, but similar use, so a total of $6 million for that particular use.

And then there were other, you know, the empty storefronts and workforce development and technical assistance pieces.

That could be part of what Councilmember Nelson is referring to in downtown funding that may not be in that $1.4 million total,

I'll just, I think, maybe re summarize what you said so the original proposal was $22 million in the economic and recovery space that included both funding for small businesses arts and cultural organizations.

and workers.

The final bill included $19 million to the Office of Economic Development and $3 million to arts and cultural organizations.

Of the $19 million allocated to the Office of Economic Development, $7.5 million was specific to those recovery grants, of which $2 million was dedicated specifically for downtown and $5.5 million was dedicated specifically for other neighborhood business districts.

The other funds in this economic recovery category were not designated for specific geographies.

They were, in some cases, for specific types of programs, technical assistance, capital investments, arts and cultural organizations, that sort of thing, but the geography was not specified.

But in the council's deliberations, it was determined to ensure that there were some amount of funds that were available to support businesses throughout the city, and that was that allocation of the $7.5 million between downtown and neighborhood business districts.

Great thanks and then my last question I'll come back to Councilmember Nelson.

I'm specific to the concept about how do we get these dollars out faster.

I'm also interested in that and Mr. Chen, if it's not for you if we need to take this back to the department happy to do so but I think we're all interested in how we can help maybe get these dollars out the door faster.

And to the degree that the number, the percentage isn't reflective of the total amount that still has to be out the door because of that delay in terms of when invoices come in.

That's good news, but also still interested in very much helping to get those dollars out.

And I see Director Dingley come on screen.

And if you have any thoughts about that as well, I'm sure we'd all be interested in helping out.

Absolutely, Council Member.

I just wanted to also add that Part of this is the groups that we're investing in may not be ready to receive those funds.

And so we're working out with them.

And sometimes that process, that contracting process can take longer.

So many of these funds are sort of are spoken for, if you will, but they're not technically encumbered in our system because we don't have a contract that is signed.

So they're still working throughout that process.

So that's just another element that's at play here.

Any additional comments or questions on this slide?

OK, well, we'll look forward to hearing more.

And if there's anything we can do from your subsequent conversations, please, please let us know.

Thank you.

Just briefly on outdoor recreation, several of these programs have already been completed.

So on those that haven't, Parks is developing a program for the Parks Activation Program that will be implemented this summer.

And the Stay Healthy Streets program activity is ongoing.

This is a matter of the department working on the accounting side of applying Quick Refunds to those costs.

And then finally, CIVIFORM continues to grow.

This program has now received over 5,000 applicants and over 600 of those have applied to two or more programs.

And as a reminder, this is a program that is meant to simplify and streamline resident applications for aid by making it so they only have to input information once and use it over multiple applications.

CIVIFORM recently added a new program to its roster, the Emergency Bill Assistance Program from City Light.

And it tracks valuable data that we can use to improve the system, things like applicant zip codes or the average time it takes to complete different applications, which helps us see where we might need to streamline things more.

So we're looking forward to sharing more about what we learned about this program and also other Seattle Rescue Plan programs in August after we publish that panel report.

Is this?

I'm sorry.

That's it.

Thank you.

That is great.

Um, can you also tell me though is this the same portal that we had been waiting for that was creating a single point of application for people who might be eligible for certain, you know, a host of various.

Yeah, so it's been, it was in pilot in the latter part of last year and has started taking applications more broadly now.

So it now has five city programs in its roster, and then they're in the process of testing an expansion to one of those that I think it's the Parks Child Care Scholarships Program, and they're working on expansion to include So it is a portal that is active, but also in progress, growing and adding more programs to it.

Great.

Director Panucci, anything to add to that?

Thank you.

I just, I just wanted to add that yes, for several years, many years, you and your colleagues have been discussing and requesting the development of a single point of access the executive has been interested in supportive of that day as well but I think the federal funds have allowed the city to sort of really launch this program and as William described it is it is growing.

With each update, we see more programs being added to it.

So I think this is the implementation of that idea that has been discussed for several years.

Great, thanks.

And the dark blue is communities that have accessed the services at higher rates.

That's right.

Great.

Okay, we have about five more minutes for this presentation.

Council Member Nelson, please go ahead.

So back to slide four, you don't know it's on slide 11. It's the the asterisk says SRP three also included sixty six point three million in revenue replacement to the general fund.

So offline, can you just tell me where that went or what that is backfilling?

That can be just offline.

But but but the form raises the question that is I really applaud this effort.

So is there are there funds that communities can access through this site that are not accounted for in the programs that we just went over?

So there's still some or is that so is this in addition to or is our are those buckets of money that we just discussed in this presentation?

separate from other funds that could be accessed through this portal?

So it is separate as far as the programs that have been onboarded.

This is a system that helps residents access.

Ultimately, it will be as many city aid programs as we can get onto the system.

Not specific just to these emergency funds.

Right.

Got it.

Thank you very much.

I have a question about hygiene stations and the restrooms that we included.

We did include funding, and I'm not remembering off the top of my head, funding for portable bathrooms and hygiene stations.

I know that as part of the budget exercise to potentially hold back some funding this year as we wait for the revenue forecast to sort of pencil out a little bit more, that is part of the area that's being held back.

I'm sorry, I didn't bring this up in the context of the presentation earlier because it may have fit in with the clean city initiative comments that were made.

But I did see online that there are portable restrooms being purchased for parks.

I think parks personnel who are involved in sweeps.

And I'm wondering if you can comment a little bit about whether or not any of the new American Rescue Act funds have been used to purchase portable restrooms.

And if those are only for city workers or are we able to identify hygiene facilities that have been purchased for folks in the community that generally need them.

We talked a lot about this over the last few years, but that's tourists, that's folks who are out for a run or a walk, and that could be housed or unhoused folks.

Any of the funds go to purchasing the hygiene facilities as originally envisioned?

I'm not actually familiar with this particular use of Clifford dollars.

we would need to look into that.

I think maybe you mentioned it being considered for a hold, so it might be among the revenue replacement uses, but.

Okay.

I know among the hundreds of programs that we are excited about, this was one that got a lot of attention on council, and I know it's deeply needed over the years, not just COVID related, but clearly COVID and a communicable disease highlighted the need for more hygiene facilities.

Director Panucci, I see you off mute, please go ahead.

Yes, I just wanted to so the the funding appropriated in the 2022 adopted budget was general fund, which is probably why William isn't specifically tracking tracking that program and we can follow up offline with Director Dingley on on that on those investments.

Great advice for herbal, please go ahead.

Report that the camp second chance.

trailer was purchased and the plumbing is being put in.

And the trailer, I think, opened up for use weekend before last.

So that's good news.

That's a great, great positive point to end on.

And overall, very much appreciate the direction that's been taken, especially the urgency to get the dollars out in this first I know I've been honing in specifically on like the RV safe lot, RV storage, the tiny house villages, the funding that we wanted to see for things like direct cash assistance and child care support.

So I'm really excited about some of the progress that's been made.

And we'll look forward to following up this afternoon in Councilmember Lewis's committee on homelessness and and public assets this afternoon on additional spending from RHA.

Before we close out, are there any additional questions from our colleagues?

Okay, seeing none, I think that the next time we're hopefully going to be able to hear you is maybe late August after the revenue forecast is presented.

I think our hope was to do an implementation update after we get the revenue forecast so we can both look at spending strategies with federal dollars as well as looking forward for our current city revenues.

And I'm seeing Director Dingley nod, so.

Thanks again, thanks for all your work.

Please pass on our appreciation to the departments and congratulations again on the national recognition that you've received for tracking and holding our city accountable for spending those dollars.

I know our congressional partners will be really excited about that too.

So let's ping OIR so that they are aware of that award that you've received as well.

Thank you, Chairman Skiddew.

Okay, thanks so much.

We look forward to seeing you next time.

Thanks again.

And Julie, I believe you're sticking around with us, Director Dingley, so look forward to continuing the conversation.

Colleagues, without further ado, we are right on track.

Madam Clerk, would you please read into the record item number three?

Agenda item number three, general fund financial planning for briefing and discussion.

Wonderful.

And with us today, we have Director Dingley from the City Budget Office.

We also have with us Interim Director Ali Panucci from Central Staff and Tom Meisel, a lead with us who works on all things budget and revenue.

Colleagues, I'm really excited about this conversation as we teed up in the last presentation from the Finance and Housing Committee.

This is really part two of the conversation that rounds out the fuller picture I'm not only revenue for 2022 23 and 24, but really looking ahead six years ahead is what I really am excited about.

If folks haven't had the chance to read the budget memo please do it is 15 pages.

of very important information that's been provided from Tom Mikesell and Ali Panucci.

And it provides, I think, a transparent accounting of what to expect throughout 2022 as we look at the current budget situation.

Most folks have heard us in the last four months talk about what the current budget situation is and the gap between long-term needs and investments that we have prioritized and the amount of revenue that we have to meet those needs.

So today as we walk through this presentation I think you'll hear a little bit more to round out what that gap currently means, how it came to be.

and some possible ways that we as a collective, the city family, I should say, since we have the executive on the line here as well, as we as a city family look to address some of these needs.

I really want to applaud central staff for the work that they've done in this memo, and in doing so, also thank the city budget's office.

Julie Dingley and your team, especially in the last four months, have been really working in deep collaboration and in partnership with our central staff team.

And I know that's been appreciated.

I appreciate it.

And I just want you to all hear that directly from us as well.

On page two and three of the memo, there are some key points that I want to highlight to note the importance of this presentation here today.

On page two, the second paragraph, it really talks about the importance of having these conversations about a six-year financial plan in public in a transparent and accountable way.

early prior to a budget being transmitted to the legislative branch for consideration and finalization.

And in the memo it notes that rather than a one-off ad hoc process periodically reviewing the financial plan, it's optimal when a regular exercise can be embedded into the budget process.

And that's exactly what I've asked central staff to do since becoming budget chair in 2020 and realizing that these six year financial plans or the six year outlook were really embedded into our budgets as appendices.

You'll note here in the central staff memo that on paragraph three said.

Rather than using the plan as a guide for financial stability and discussions, which is what we will be doing going forward today, in the past, these financial plans were included as appendices in the budget.

And the assumptions were used to generate these plans, and they were not really disclosed or discussed in a public way like they will be today and going forward.

So this is a really fundamental conversation to make sure that there's good budgeting practice, that we have accountable and transparent conversations between branches, of government and that we're having a discussion with the public as well about how we look forward to good budgeting with you all in the future.

I want to take a minute to again thank the transparency that has come from the city budget's office again under the leadership of Director Dingley.

Also want to applaud Mayor Harreld for the commitment to that transparency and partnership as well.

And colleagues, this is just the beginning of the conversation there.

This is not for action or a vote here today.

In fact, you know I think many of us are used to on the legislative branch side having options presented to us, we will talk about you know options and various scenarios but that's not actually option in terms of an issue identification proposal that we're used to.

This is really to tee up a discussion about how we can get to solid budgeting in the future that doesn't look at carryover dollars to sustain budgeting, that doesn't look at salary savings as a way to plug budget gaps, and looks at how we can create a really strong budget outlook for our city as we seek to recover from COVID.

So again, thank you very much for the work that's been done.

No longer are you seeing a financial plan being sent down to us on page 665 quite literally of last year's budget or page 760 of the previous budget.

This is really an opportunity for us to pull out that six year plan.

have a detailed discussion and to then allow for that to really feed into creating a stable budget proposal that the mayor is currently working on in collaboration with the city budget office that will then serve as the base for the legislative branches deliberations later.

So I'm excited about this.

I'm nerding out just a little bit over a six year financial plan, but I hope you see why.

And I think that the central staff budget memo has really articulated the importance of the ask that we made of central staff and the hard work that's gone in over the last two years to to dissect this information and have a complete analysis here for us today.

So again, thank you, Director Dingley for your partnership and collaboration.

And thank you very much, Tom and Allie, for the hard work that you've done to provide this.

This is just the beginning of the discussion.

And as a reminder, as noted on the last page of the memo, this six-year financial plan will be updated every time we receive a revenue forecast.

So the next one you will receive as an updated six-year financial plan analysis will be in August, and then after that again in November, but will be in the heart of budget deliberations at that time.

So with that, And there should be a drumroll here.

I will turn it over to Director Dingley and Director Panucci, along with Tom Meixsell, who I think Tom is going to be really leading us through this presentation today.

And look forward to hearing your questions.

But really great, great amount of work has gone into this.

And this, again, is just the beginning of a longer conversation to come.

Thank you, Director Panucci.

Please go ahead.

Thank you, Chair Mosqueda, committee members.

Is my screen share okay?

Are you seeing the presentation on the screen?

So we too are excited to be here this morning to begin what we hope to be an ongoing exercise of engaging in discussions with all of you on the financial plan for the city's general fund.

Just say it fills this budget manager's heart with joy when I hear people talking with such enthusiasm about a financial plan.

So thank you for that.

So I'm just going to provide some intro remarks and then turn it over to Tom and then Director Dingley and myself will be here along the way to add additional context and to help answer questions.

So since at least 2019, the general fund financial plan has projected that general fund expenditures are outpacing general fund revenues.

You've heard us talking about this in various central staff memos this year, in presentations with the city budget office and presentations to this committee as the projected gap between expenditures and revenues.

For clarity, because this is a term more commonly used in fiscal policy discussions, our memo and presentation used the term deficit, but you'll hear us use gap or deficit interchangeably.

I just wanted to highlight that.

The projected gap or deficit, if you will, has become more pronounced in recent years as the impacts of to city revenues from the pandemic have been met with one-time funding solutions as well as that structural problem that existed pre-pandemic.

Providing more consistent and ongoing review of these financial plans will really help us place your current budget decisions in the context of how those decisions impact the long-term sustainability, excuse me, of the general fund.

With this in mind, as Chair Mosqueda noted too, under her leadership, the Council in 2022 adopted Resolution 31954 that, among other things, requested that the City Budget Office or CBO provides the six-year financial forecast annually, including Disclosure of all the embedded assumptions and agreements to share that data.

This is another step in implementing that request.

We are continuing to work closely with CBO to enhance how and when we receive this data.

This presentation today would not have been possible without the partnership from that office.

So I also want to personally thank Director Dingley, Deputy Director Blankenship, Zach Kuntz, Dave Hennes, and Caitlin Berger from CBO.

for really working collaboratively with us, providing information and offering critical feedback on the analysis.

I also want to take a moment to highlight the incredible work of Tom Mikesell.

His experience in fiscal policy and municipal budgeting, his commitment to public service, and really his just impressive intellectual curiosity has really helped us on central staff continuously enhance and expand the analysis we were able to bring to our budget work and help support the council's decision making and ultimately the budget that provides critical services and programs to the people who live and work in Seattle.

So today, let's see if I can manage my screens here.

We are going to provide some background information on financial planning, review prior and current version of the general fund six-year financial plan.

We will look at how pre-pandemic plans projected this gap in the general fund.

We'll show how based on the 2022 adopted budget financial plan, the pandemic's impacts on revenues made that gap worse and how recent financial and economic updates have partially reduced that gap.

Looking ahead to the council's budget process coming this fall, we offer a few scenarios that illustrate how certain optional measures or changes in the economic situation could impact the sustainability of the general fund.

As Chairman Skater noted, this is really the first time the council will look comprehensively at this financial plan.

It's intended to provide information on the balancing situation as the economy emerges from the pandemic.

and provide context as committee members deliberate on appropriation bills and engage with the executive on these policy issues.

Again, we will do this again in August and in November as the council engages in the budget discussions.

So we hope to have this be a continual update and discussion that we engage in with all of you and with the executive.

And with that, I will turn it over to Tom to lead the presentation today.

Thank you, Acting Director Panucci.

Good morning, Madam Chair, members of the Finance and Housing Committee.

Just before I go on, I just wanted to share and echo all the comments made by the various voices in this morning's committee about appreciation, because none of this could happen without that collaboration.

So just not going to belabor the point, but just to echo it and lift that up.

So if we could look at the next slide, we'll dive into the analysis of the general fund financial plan.

So in the upcoming slides, we'll be talking about some more complex topics that deal with financial planning in general.

Some of these will be familiar based on work in prior year budgets, though it's important to to review them before we look at more detailed information that we'll talk about this morning.

And by way of terms, one thing that will be discussed frequently is ongoing.

And so in the context of the budget and a financial plan, that essentially is something that shows up in the budget each and every year.

So a good example of that is the salary costs for a regular, so non-temporary position that provides services in the budget.

Each year in the financial plan will account for paying for the salary of that individual in the future.

In contrast, there is the concept of a one-time item.

And so these are more discrete and time-limited in nature.

Best way to think about this is a capital project, so something that you begin you build the project, and then when the project is complete, you are done, and it no longer is in the budget as a significant item.

Another example more in the operating budget is, say, a one-time program focused on providing a service in a specific year, sometimes given resource constraints, but sometimes with other considerations in mind, that is not anticipated to continue into future year budgets.

And so this matters because another term is growth assumptions.

And so these are the the ways that the amounts that are in the current year budget are are growing or grown in the future years.

So the kind of one that comes to mind first is inflation.

So as prices go up, the cost of what government is purchasing increase because of inflation.

And so in order to accurately measure the revenues that we're expecting to receive against the expenditures, we need to build in some level of growth to account for that expectation in the future.

Next term, and Interim Director Pernucci discussed this, it's the kind of the pure financial concept of operating surplus or deficit.

And so this is really in simple terms, the difference between the the resources that we expect to get in the year by way of annual revenues and the expenditures on government services that we plan to make.

So sometimes that gap can be negative, where the expenditures are higher than the revenues we plan to receive.

And other times, the gap can be positive in the other direction, meaning revenues are higher than the expenditures we're going to make.

Another concept is one of reserves and so in the in the context of the general fund financial plan, these are amounts that are Are items that the executive has had can generally expect to be include including in the budget or in future budgets, but yet there is not Exactly a specific legal obligation to do that.

And if they did not account for this in some way.

When the time comes to incur that obligation, the money would not be there to make the payment.

So these oftentimes will include legal and contractual items that are under negotiation.

So their final amounts are not quite known at this time.

But there is an estimate that is available, and that estimate is used to account for that future obligation.

And then the final term is fund balance.

The fund balance, the best way to think of this is this is the bookend of the city's finances for the year.

So we start a fiscal year.

We start a year with an amount in the fund, in the general fund.

We receive revenue, which adds resources that are available.

The council makes appropriations and the departments spend money against those appropriations, which reduce the level of resources, we account for the reserves, those future potential obligations, and then at the end is what's left.

So there's a beginning fund balance, the operations of government take place, and then there's an ending fund balance.

And then that ending fund balance carries into the next year, and then we go through the cycle again.

And you'll see this, that pattern in the tables that we'll look at in a few slides.

It might be helpful to have our colleagues keep page three of the memo open just in case you want that glossary of terms with you the whole time.

Thank you.

And then the some acronyms that I will possibly refer to throughout our GF so that's general fund CBO is the city budget office.

I'll just use financial plan instead of saying six-year financial plan, though that is technically how many years are included.

And then IRF is the Office of Economic and Revenue Forecasts.

OK, now we can go to the next slide.

Thank you.

So some of this has already been covered in prior commentary, but what is a financial plan?

So it is essentially a table or a set of numbers that applies assumptions that we make to project what future revenues and expenditures will look like.

And in determining, making the decisions about what numbers to use, we also can reveal what the economic trends that are projected, what the impact those trends have on both budgets and revenues in the plan.

When you look in the longer term, you can identify looming challenges or potential opportunities that give you more insight into the decisions that you're making in the current in the current year.

And so next, why do a financial plan?

And again, it's that.

It's to recognize that there are future implications of the decisions that are being made in the now and how to recognize that those challenges or opportunities exist and strategize and have a better way to strategize the current year decisions with sight on the longer term.

And also, it's kind of a process.

I mean, to me, this is also of equal importance is the regular review and kind of this is the first step on what is going to be a regular process of reviewing the plan, seeing how things change, seeing how the decisions impact the results, and just kind of informing for the public and for the council how those decisions impact, how that various factors that impact the plan affect the decisions that are being made and how the decisions impact the plan.

So it's kind of a feedback loop, but it's also, you know, it's not just the document, but it's also the process of putting the document together and reviewing it.

I'll also flag this is, you know, one of many efforts that central staff has been working on in partnership with our office and some of the conversations I've had with Director Dingley as well about, you know, overall the desire to move from a 12-month We would like to move towards something that looks more like adopted budget and then subsequent 12-month endorsed budget.

We would love to move towards something that looks more like biannual budgeting.

I would love to make sure that our fiscal notes, I know there's been some updates to the fiscal notes, thank you very much Councilmember Peterson for your past work on that.

I'm still interested in how we move towards fiscal notes that have a six-year outlook.

going to take some time and work to see how we can work in partnership with the departments and CPO, as we develop legislation to really have that six year outlook as part of legislation as well.

But this is one component of a broader conversation that we've been having over the last two years as I've been budget chair.

about how to get the six-year look, not just for our budgeting discussions in the fall, but how we can do this on a routine basis with legislation as well.

So those are some of the things that are still in the works, but that type of work on individual legislation in combination with a regular review of a six-year budgeting outlook I think will help provide a more complete analysis as we do the important work of governing for the City of Seattle.

Director Dingley, please go ahead.

Thank you, Chair.

I just wanted to highlight something that Tom said that that financial plans are a point in time.

And so these numbers will naturally shift over time.

They're built on the best available information at the time they are created.

So in some ways, that can be unsatisfactory because not all the answers are available when it's being provided.

But Just something to keep in mind as you're working through this and then real quick if I may, I just wanted to go back to the comments at the top around how where this shows up in the budget CPO has used financial plans to govern how we work with departments for as many years as I've been here and long before my time.

And we obviously, this is a product that is for the public and for the council to help us, to help you understand what it is that we wanna do and accomplish.

And so we would be happy to continue to partner with you on how that information is presented.

As you know, it's very clear previous agreements are not serving you very well.

So we wanna make sure that those are represented in a way that's useful to both you and the public.

So thank you for that.

I'm, thank you.

So now we'll start looking at the actual, some of the financial plans, both historical and the revised.

There will be about, there will be three of these tables.

This first one is the, is the financial plan that was included with the 2020 adopted budget.

So this is essentially work that was completed in late 2019, prior to the pandemic.

I just kind of to provide context or how to read the table, I'll just walk through a couple of columns to show how it works.

Because again, this will be the first of three of this type of table, though, We will highlight during the presentation the most important rows from our perspective to look at from the purposes of a balanced budget and also longer-term fiscal sustainability.

In future slides or in fact, probably in this slide, we'll hone in on the key details.

But I just wanted to go real quick on how this works.

Again, Going back to some of the terms I defined earlier, we start with a fund balance in 2020 in this case, add in $1.4 billion of revenues.

There was $1.5 billion of adopted expenditures, which was a gap of negative $19 million, bringing that original starting fund balance down to $59.6 million.

There were 59.6 or so million dollars worth of reserves that were accounted for, but yet not specifically budgeted, bringing the under unreserved fund balance or the final ending fund balance to to $13,000.

So that represents the balanced budget for 2020. And then moving into 2021, the starting fund balance is the ending budgetary fund balance, so not including the reserves, and then adds $1.46 billion of revenue against $1.5 billion of expenditures.

And so this is kind of the initial key takeaway of this slide, is that based on the projections at that time, so winter of 2019, the 2021 projection was showing a gap of negative $41 million.

And based on the various assumptions that were being applied at that time, that gap was shown to persist in future years, showing about a $36 million gap in 2023. And then, so that's the sort of longer term sustainability.

And each one of those gaps, then brings the projected ending fund balance down in the plan.

So given those negative operating gaps per year, the ending balance would have been negative 41, and then growing to negative 79, and then finally at the end of 2023. So at the end of this financial plan, it would have been showing a negative, or it did show a negative $116 million in the general fund.

So this is just to show that, again, based on a lot of, as Director Dingley noted, a lot of imperfect but best available information at the time, when the 2020 budget was adopted, it was projecting an operating gap of around $39 million and a final ending fund balance of $116 million.

That's important context to start off because, as we know, we, you know, we'll see what happened after, you know, not after, but based on changes from the pandemic.

So whether or not these projections came true or not, it's uncertain because a lot of the assumptions changed and what we have to plan against has changed.

Thanks, Tom, and in the memo, it says that there was a known potential deficit or gap in revenue, known at least in 2019. And so your slide here talks about the 2020 adopted budget.

And just for way of reminder to the public as well, the 2020 adopted budget is actually deliberated in the the fall prior.

So this is the 2019 actions that were taken before I was also budget chair as well.

But I think as the next six months would then show us after the budget was then adopted, then the pandemic hit.

So I think having this as a baseline understanding for the situation we were headed into prior to any of the upheaval in the market, in health for individuals and our population health, and the health of the local economy is really important to show.

This was the starting point pre-pandemic, and then we have some factors to account for as we look at the upcoming years.

So when you see the adopted budget that was deliberated and discussed in 2019 and going forward.

Okay.

Thank you.

to go back, that was referencing page four, largely of the memo, and I'll do better in referencing back to a lot of the underlying detail, because I have notes of faith to do that.

So this, moving to the next slide, if we could, will show, and this is kind of, you know, following on what I just said, this is page five of the detailed memo.

This financial plan shows the, the most recent financial plan included in the 2022 adopted budget book.

So these are the numbers that you'll see looking in the appendix references from the chair.

And it shows how things have changed.

And we'll go into those takeaways in some further comments.

I just want to point out some important consideration when looking at some of these numbers, because I'll reference points in this table.

And there's a reason why I'm referencing those.

And first is, I believe the chair mentioned, our budget process.

So RCW 3532A requires that the city adopt a budget for the next fiscal year that balances available resources with adopted and appropriated expenditures.

And so that's the state law.

So that requires that at the end of the projection or the budget adopted for 2023, we'll balance to the bottom number in the table.

We'll basically make the bottom number in 2023 essentially zero.

So the unreferred reserve fund balance.

That is the state legal requirement.

Resolution 28828885, passed in 1994, puts in place a modified biannual budget process that the City of Seattle has traditionally budgeted according to.

There was a temporary stay or a hold on that process during the pandemic, given the uncertainty, though current process for the upcoming fall would not only adopt under the legal state requirement and adopted budget for 2023, but also endorse a financial plan or a budget for 2024 that provides that same level of balance.

So I just wanted to point that out because the numbers that I will reference will be largely the 2023 and 2024 numbers with regards to the ending balance because those are the ones that we that the executive and city council will be considering as balanced for the upcoming budget.

So I just want to focus now.

So again, as I mentioned, we're going to focus and key in on the really most important numbers on these tables.

And this is a key one, which is the projected operating gap based on the adopted budget and the assumptions that are applied in the plan at this time.

And this will be a familiar number.

Right now, there is approximately a 100, well, at the time of the budget adoption, there was approximately $146 million projected gap in 2023, and a similar number projected for 2024. Meaning, once again, that the projected revenues were $146 million less than the projected expenditures in each of those years.

Then drawing from the starting balance, accounting for that gap in each one of those years means that the ending fund balance would have been projected to be $144 million negative in 23 growing to negative $290 million in 2024. And again, those are the numbers that the budget would be expected to balance to.

And that should be probably a familiar number at an earlier stage in the year in terms of the financial situation for the general fund looking at the next budget cycle.

Largely, the reason why this gap exists is a combination of three factors.

One, as the 2020 adopted budget financial plan that we just looked at showed, there was a pre-existing condition of a $39 or so million operating gap.

The COVID-19 pandemic hit the world and the city And the struggles and challenges with revenues, some of which have recovered, but not all of which have recovered to pre-pandemic levels, means that we don't even have that same level of projection that we were seeing in 2020. And that in recent budgets, those gaps have been solved by, or in the most recent budget, those gaps have been solved by use of one-time revenues.

And in the future, those one-time revenues are not available for use.

And so now I'll go to the third table, so the third financial plan.

Actually, I'll talk about some of the changes because it's important, because the numbers, as you'll see, have shifted in a good direction, and there's a number of reasons for that.

So really, I'm focusing on what happened the 2021. So originally there was a projection about what 2021 would look like.

Finance and administrative department of finance and administrative services staff and city budget office staff have done the work to assess how much is left over from 2021. So how expenditures compared to estimates, how revenues compared to estimates, and how much money is carried forward in the future years.

and have reassessed what resources kind of increase the fund balance starting for 2022. So as heard by the Finance and Housing Committee in its April 20th presentation, actual revenues to the general fund came in $33.5 million above revised estimates.

So that's a good thing.

That adds one-time resources available for 2022. an even larger number of $231 million of difference between budgeted expenditures and actuals.

This means the city spent $231 million less than was projected in 2021. Now, there are a number of reasons for that.

Part of it is that prior obligations, commitments that are either legal or contractual in nature or or council priorities were not fully completed in 2021, though the intent is to complete those.

And so these will be covered in an upcoming council bill, council bill 120316, which will actually be with the finance and housing committee at the next meeting on May 17th.

We'll detail this information for you, but for the purposes of the plan, what we have done is said a portion of the money that is available at the end of 2021 is going to be carried over into 2022. And there's a few different types of carry forwards, automatic ones that have specifically prior approval by council to carry into future years, and then legislative ones, which are ones that are part of that bill I referenced that will be submitted as a request to carry forward.

And then there's some additional grant revenue that is anticipated that it offsets a portion of that money.

But at the end of the day, $144 million of that money nets out the money, the resources that would transfer from 2021 to 2022. But the good news is there's still a positive gain in the starting fund balance of $120 million based on 2021 financial results.

In the next slide I believe I will cover how some portion of that.

Thank you, will be used or is proposed to be used to replenish replenish the city's red revenue stabilization.

So just a quick recap.

On the revenue stabilization fund.

Sorry.

need to turn my lights back on.

Okay.

Um, so at the end of 2021, uh, the, uh, and again, this is pages six through seven of the memo, um, where there's a more detailed discussion of this.

Um, but at the end of 2021 due to uses, um, of the emergency fund and the revenue stabilization fund, there was a combined balance of about $39 million.

And, and this is due to, um, uses of those fiscal reserves to address challenges from the COVID-19 pandemic.

Prior to the start, so essentially in the 2020 process, there was about $127 million that fully funded both of those reserves.

However, given the uses, the adopted budget included some paybacks.

So it was in recognition of that the need for using those reserves no longer existed, and now the city could begin the process of replenishing those reserves to their policy levels.

The adopted financial plan for 2022 included basically the assumptions that are included in the 2022 adopted budget.

The resolution 32024 permanently changed the emergency fund replenishment prior to that change.

It would have been anticipated that the city would have fully replenished the emergency fund, which was on the order of $60 million to its original levels after the use.

The change through that resolution 32024 instead put in place a five-year replenishment timeline.

It did not specifically imply what the timing of the amounts were for each particular year.

However, the financial plan and the adopted budget Um, reasonably included $10 million per year, which continues the amount that's in the 2022 adopted budget into future years.

So there would be an adopted financial plan, a total of $40 million added back to the emergency fund.

Revenue stabilization fund has, has a different policy.

Um, it's, uh, it's, it's based on annual projected revenue collections.

However, the adopted budget included an amount of $15.4 million, which was actually higher than what was strictly required by the policy.

However, it was the council's decision to put more in the Revenue Stabilization Fund than was strictly required.

The adopted budget financial plan continued that assumption, $15.4 million per year, which would have put $61.2 million into the Revenue Stabilization Fund through 2025. The memo on page six talks about how these planned contributions would have replenished each of these fiscal reserves back to their policy levels as stated in the fiscal policy.

The emergency fund would have been on the order of 93% of what its policy level would have been by 2025. and the Revenue Stabilization Fund would have been at 97% based on this plan replenishment.

Okay, with that, things have changed.

And a key and notable change is that given the level of resources available at the end of 2021, there is in the existing fiscal policy for the Revenue Stabilization Fund, a requirement that 50% of unreserved balances at year end be deposited to the Revenue Stabilization Fund, which, based on calculations from CBO, would be about $55.7 million.

There's different layers of good news in the presentation, but by way of really good news, this deposit would fully replenish the Revenue Stabilization Fund in 2022, so essentially many years ahead of the plan.

At that time, future contributions to the Revenue Stabilization Fund would be solely based on the percentage, which I think is a half a percent of tax revenues in each projected year to be deposited to the Revenue Stabilization Fund to kind of keep up with growth in revenues.

That actual change in the fiscal policy requires an appropriation from the city council.

We made the assumption in the revised plan that we'll share with you shortly that that decision, which we anticipate will be part of the mid-year supplemental, which we have not yet received but plan to receive in the coming months, would include a transfer of that amount of money to the Revenue Stabilization Fund to fully replenish it according to the fiscal policy.

Another, so this is more in the vein of projection changes, so changes in assumptions for the future.

This specifically is inflation.

So if you will harken back to the presentation from CBO and the IRF about revenue, the revenue forecast update at April 20th, there was also mention of the significant impacts that cost increases.

through inflation have had and are projected to have on city expenditure lines.

So this information, which draws, and it's more detailed on pages 10 and 11 of the memo, show how those inflation expectations have changed in the financial plan.

So these are coming from the forecast office, and they've updated what their numbers are.

And these show that in 2023 and 2024, 0.8% and 1.3% higher inflation in each of those years than was anticipated when the adopted budget financial plan was generated.

So that's fairly moderate, but still an increase in the inflation assumption in those years.

What's more acute is that, as you read in the press and see in the numbers, is that Inflation is really much higher in the current year.

So right now, then, then it was originally anticipated to be that the table at the lower paid part of this slide shows that the inflation expectation at the time of the adopted budget was on the order of 3.2%.

The April forecast numbers suggested that inflation is, in fact, closer to 7%, which is a 3.8% increase.

So for the purposes of building that into the plan to allow for the fact that costs are higher.

That 3.8% has actually been added to the 2023 projection the 2022 number is the current adopted budget number with some specific legislative revisions included.

So I didn't feel comfortable adding it to 2022 to kind of inflate what the 2022 expectation in this plan would be, though that number, if the cost increases are higher, there could certainly be a supplemental change that's requested.

I mean, it's entirely possible.

For the purposes of the planning projections that we're discussing today, that higher inflation has been built into 2023. And to go a bit into the weeds about inflation, it largely affects labor costs, IT costs, facilities and fleet costs in the model and just in the economy in general.

Those are the areas where we're buying services from external providers, and so we're kind of at the whims of how those cost increases are funneling through the economy.

And also to point out that the inflation is not a an equivalent adjustment to both the revenues and expenditures in the model.

It's something that underlies and permeates through projections of both, but it is not just as easy as saying, you know, we add 1.3, for example, in 2024 to both lines, to both revenues and expenditures.

It's more complicated than that.

And if you think about revenues, just looking at something like sales taxes, there are some some goods and services in the economy that are not subject to the sales tax, like gas, gasoline, and food.

And if the costs are going up on those items, that leaves less discretionary income for people to buy those items that would be subject to the tax.

So just even, I mean, there's certainly many more examples of how inflation differs and impacts the economy in different ways, though in general, It's not viewed as a positive, given the high levels that are forecasted for 2022.

Dr. Panucci?

Thank you.

I would just add in here, so what Tom is going over are some of the assumptions and information that informs the development of the financial plan.

I also just want to point back to comments that I think both Director Dingley, Chair Mosqueda, and Tom have made about the dynamic nature of these numbers and that CBO is right now in the process of looking at baseline expenditures and what the projected increases may be due to inflation and other operational needs.

I just want to say again, as we're about to show the revised financial plan is that this is a point in time.

We may be underestimating the growth in baseline expenditures in the financial plan.

Tom did include some adjustments to try to account for some of that anticipated growth.

But because CDO is in the middle of that process, we don't yet know what the actuals will be.

And so just flagging that these numbers will continue to evolve and we may come back in August and show even greater increases in projected expenditures to continue to deliver base city services.

Good reminder, thank you so much.

Director Dingley, please.

Thank you so much, Interim Director Panucci.

I, and Chair, for recognizing the question, or the comment.

In addition to inflation costs, there are a number of pressures, and we can get into this on the next slide too, but there are a number of pressures on expenditures, not the least of which, of course, inflation, but also disruption to supply chain, impact of the war in Ukraine, delays due to the concrete strike, a very tight labor market, all that put pressure on the costs that the city bears and change the timing of the outlays and et cetera.

So we'll get into more on the following slide, but just wanted to put that out there as well.

Thank you so much.

And I'm going to read from page 10 here, because I think it underscores all of those points.

Other considerations outside of inflation this is midway on page 10 second paragraph include but not limited to employment and population trends wage growth business sector composition and consumer preferences that will impact revenue growth, and each will be differently impacted by inflationary forces.

That's true on the city expenditure side.

And then that is also true for like our spending.

And it's also true for what we are trying to deliver to the city as well.

I'm trying to emphasize your point, Director Dingley, that this is going to have maybe a compounding effect once we see what inflation is as a standalone and then how these other factors come on board.

Any additional comments or questions on that before we move to the big sort of forward-looking slides?

All right.

Just to conclude and thank you all for the added comments because the key point is that this is a projection and it's the best available data and it will certainly change.

in ways we look at these numbers in the future.

And so let's look at how this, at least based on these assumptions, how the numbers have changed.

So this is the most recent work that has been done in collaboration with CBO about looking at how the projections have changed given a number of the factors that I discussed in the previous slide, both the added benefit of higher fund balance in The 2022 revised projection.

So if you look in the 22 revised column, you see now that the adopted budget thought or projected we'd have $8 million of balance.

And now given the positive financial results, there's $273 million of starting balances.

And then also the revenue forecast update has added, the received in April has added about $35 million of resources per year to the projection.

Also, the planned or the potential change in how the reserves are replenished given the amount available to replenish the Revenue Stabilization Fund reduces the planned transfer amount in future years.

But really, to just focus on, if we could, on the bottom line numbers, the key numbers of this table, is to focus on the operating gap come now.

And so, so the 22 number, I'll just say right off the bat is, is including the, the decisions I discussed previously, which are the, or the potential decisions, which is essentially the, the legislative carry forwards, and the replenishment of the fiscal reserves, and that uses the large portion or all, you know, it's all funded from starting balance.

So it's, It's just it's kind of shows up as a deficit in the table, but there is, I assure you, not a deficit in the 22 budget plan.

However, for 2023 and beyond.

These are all projections based on on the kind of non one time, but more of the ongoing items.

Again, a sliver of good news is that the operating gap has, based on these projections, declined to $117 million in 2023 and $107 million in 2024. And then further, the ending fund balance at the end of 2023, which is the legally adopted budget year, that ending fund balance projection is now declining to $35 million.

and at the end of 2024, which would be the endorsed year, it's declined.

It's basically gone down by more than half.

So it went from $290 million negative in the adopted financial plan to $142 million negative in this revised plan.

And again, this is based on a whole layered set of assumptions that we're making, which are certain to change both with new revenue forecast information and and updates to the baseline process that Director Dingley discussed.

Let me take an additional clarifying comment from Director And then we'll take questions from council members.

Please go ahead, Director Panucci.

Thank you.

I just wanted to point out, so it is modestly good news to see the projected number in 2023, sort of the ending fund balance, a negative $35 million versus closer to $150 million.

But I just want to highlight that this is relying on one-time funds.

to support base city services ongoing expenditures.

It is also assuming that in 2023 and beyond that there is no new spending.

So any of the sort of one-time expenditures that are regularly included in the proposed and adopted budgets, as well as any new or expanded programs or services could not be accommodated or not assumed to be accommodated in the expenditures in 2023 and beyond.

I just wanted to highlight that point as it restricts options available to the city in terms of resources available to address issues in the community.

Great.

Additional clarifying comment and then we'll go to Council Member Nelson.

Thank you, Chair Mosqueda.

And just to add on Director Panucci's point, this this doesn't assume any new room for new programming.

It also doesn't assume any room for unexpected needs.

So think that IT project that for whatever reason is running over time not to pick on IT or some judgment and claims item that comes sort of out of the blue.

Those those are not Those are not accounted for here either.

And so there's no buffer here to absorb those unexpected in addition to those new items.

Thank you.

And I'll just add, it assumes the same level of spending on certain items that we perceive to be ongoing.

So perhaps there's a conversation to be had there.

And it also, as you can tell, does not yet assume additional revenue streams.

So that is for conversation.

But just want to make sure that folks understand the base that's being shown there is existing expenditures without any additional new revenue.

And both of which I think we'll have more conversation about.

Director Panucci, before I go to Council Member Nelson, is there anything carrying over with the hand?

Okay, great.

Council Member Nelson, thanks for your patience.

Please go ahead.

Thank you.

Can you highlight the revenues line, please?

That's fine.

Sorry, sorry.

I don't have a highlight on that row, but that's fine, just like it is.

So on April 20th, the revised 2022 Revenues were $1,671,000,000.

And now here it is $1,708,000,000, which is the revised 2022 which doesn't, it's not a lot compared with all the zeros, but that looks like about 30 million.

So did something happen in the past couple of weeks?

And can we, first let me, I shouldn't stop prefacing.

I really do appreciate Chair Mosqueda this approach, the planning approach, but as we continue, can we just expect that the projected revenues for 2022 will keep changing as we go forward?

I'll make a quick comment and then ask for Tom to provide clarification on the number.

Throughout 2020 and 2021, my effort has been to move to making sure that both the executive and the legislative branch got real time information on any revenue projections at the same moment so that we collectively We're seeing information together, just like they do in the state legislature with the lead forecast and projections there.

And that is still my commitment the first time I saw the revenue projections for April was at the same time that they were transmitted and posted on the economic revenue forecast.

website and the latter information came to us collectively from CBO's office.

So in terms of what council can expect from us, you can expect us to get quarterly updates that will be presented in the same months of the economic and revenue forecast followed by a presentation in our committee from the city budget's office to round out the revenue projections.

Just want to make sure that we're still on the same page and still on the same plan for having that shared information.

Then I'll turn to Tom to address the question of whether or not there's been any new information provided as we know that there was a slight update from some of the slides presented in the last committee meeting, so that may be accounting for some of that.

Thank you, Chair Mosqueda.

Thank you for the question, Council Member Nelson.

That is actually an amount that is actually footnoted on the table.

And this is an additional $37 million of grants.

So these are grants associated with decisions made in prior years.

So basically, we're carrying forward an expenditure assumption.

And there's, in some cases, an additional grant revenue that we have not received but we expect to receive.

So the April 20th forecast update did not include That's $37 million of grant, but it is money that we expect to receive.

So for the purposes of this financial plan, we've added it.

And we're actually working with the budget office and the forecast office to enhance how the budget monitoring of revenues is done so that this type of thing gets built into the forecast so that there's a one-to-one comparison between the two.

But keen eye on that number and the discrepancy.

any additional comments or questions on this.

Okay, let's continue.

Great.

And I believe we can now move to.

So these are just some, some options.

So looking at these, these projected gaps and, and changes in the ending fund balance in the future.

There are just a kind of a few just kind of thought experiments that we have gone through to how, how a council could think about these strategies to address these deficits or gaps.

There are probably more that we have not thought of, but the ones we've included for today are reducing or right-sizing the general fund budgets to match expenditures.

Also, and this is kind of more as a sensitivity analysis, the forecast council endorsed the the forecast office director's recommendation to use the baseline revenue forecast for the current projections.

But there are other scenarios that are available based on the national data that we use for modeling that are both optimistic and pessimistic.

So we've shown how using those two looks at what the future could hold, how that impacts these numbers.

And then, you know, also there is ways that Restricted fund policies could be changed, so to change how much the general fund is sending to other funds, or looking the other way, how much other restricted funds could send to the general fund.

So we model these as both longer term and shorter term approaches, given that if we could actually look back, Interim Director Panucci at the table, a key point of this So again, if we look at the operating gap row, and this is kind of the, I mentioned not only the challenges, but also the opportunities.

If you look at the gap, it's $117 million in 2023, but it actually decreases to $69 million in 25 and $37 million in 36. And one thought that I've had about that is that There are some revenues in the general fund projection that have recovered to the pre pandemic projections that are in fact exceeding what we would have expected them to be.

However, there are other categories that are still lagging behind, and I think this trend shows that as those other categories recover more slowly.

They start to impact the general fund financial plan and mean that the gap in the future is smaller than the gap or experience in the near term so.

So this kind of underlies the concept that there may be some shorter-term strategies that can bridge the gap with a smaller structural change and then some targeted one-time approaches.

Great.

Clarification in addition, please go ahead, Director Dingley.

Thank you, Chair Mosqueda.

I wanted to also add in that what we don't see Councilmember Herbold at the April 20 meeting raised a good question about how do we see inflation showing up in these expenditures like where are those pressures coming in I think we've detailed some of that one area as well that we haven't talked about is our labor costs.

And as you all well know, we have multiple labor contracts that are open this year for negotiation and those are on the outcome of those are uncertain.

And so, you know, as there's a it's sort of a zero sum game at the end of the day.

And so those add additional pressures, especially with the likes of inflation and other things.

coming in.

And I also just wanted to highlight that what Tom has shown you so far is, this is why I came to all of you very early this year to start this conversation.

And so I just wanted to once again say thank you for being so engaged and excited to have this conversation.

As Ali mentioned at the top, this is warming my little wonk heart that we're engaging at this level on this information because This is the problem to solve this line that is highlighted, as Tom just mentioned, we are buoyed temporarily by that understand for the result of, you know, hiring freeze under the pandemic departments trying to ramp back up, etc, etc.

But this is the real this is the real problem to solve before us.

Vice Chair Herbold, please go ahead.

Thank you so much.

As it relates to the slide that identifies long-term and near-term sustainability strategies.

The concept of temporary changes to restricted fund policies and use of fund balance, do we have a sort of a catalog of all of the existing restricted fund policies that we could take a look at and see whether or not there are some that we do want to consider a temporary change and others that we don't.

I'll take that, Tom.

Thank you, Council Member Herbold.

I don't have readily a catalog, but we could look at all of the funds that we often refer to as general fund adjacent, which is policies that the council has the authority to modify and provide that to the committee.

but it includes things like the point Tom brought up in terms of there is a policy around transferring funds to the Revenue Stabilization Fund.

That is one example.

I encourage you all to replenish that fund for future challenges the city may face down the road, but that is the type of policy that we would be included as well as looking at things like the short-term rental fund or a swing beverage tax and those types of policies.

So happy to put that together for your review.

Great, that's appreciated.

Please go ahead Council Member Peterson.

Thank you, Chair Mosqueda, and I'm really happy that, Chair Mosqueda, you've asked for this level of detail to be presented to us so early in the budgeting process.

And, you know, anytime we can lift up an appendix and daylight it like this, I love, I've got my, I love spreadsheets mug ready to go here.

I just wanted to, and I appreciate budget director Dingley mentioning the labor cost issue.

A lot of us are on the labor relations policy committee.

So having these numbers now is really vital information for us to have in terms of where the gaps are.

I just wanted to say, we worked really hard on the 2022 budget that we're in right now.

And so I don't favor cutting things that we already promised to our constituents for this calendar year.

I do support replenishing our emergency fund and revenue stabilization fund as you know based on our current policy and it looks like that that will be possible to do.

I recognize that there is still a gap of that 35 million dollars at the end of the day for 2023, and then gaps in 2024 and 2025. So I really appreciate these strategies being put forward to consider options.

And I'll mention an option that might not be popular with everybody, but wanted to get more information about that.

When I look at the adopted 2022 budget document that was put online recently, there is in the appendix on page 783, it does talk about the payroll tax, the jumpstart tax that Council Member Muskane and others were champions of that tax.

And thankfully that has helped us to deal with a gap last year.

and it's coming in at higher than expected numbers.

And in that appendix, page 783, it says for 2023, the jumpstart tax was projected at $250 million.

And now it's projected about $296 million.

And so I just wanted to see what it might look like with different strategies.

We obviously all approved the investment plan for jumpstart.

It has things that we really need, things that we support.

I'm wondering, however, if that could be on the table as an option.

So, you know, asking central staff if they could sort of look into what would different scenarios look like so that you're still investing the vast majority of the jumpstart funds, for example, on what was, you know, the percentages that were agreed to, but also investing some of the greater than anticipated revenue from that source to help deal with the general fund gap.

Of course, that's all subject to whether we're able to manage our costs elsewhere, or whether that's labor contracts, or which I believe make up, you know, comprise between 60 and 70% of the general fund is personnel costs, I believe.

So, but anyway, just asking center staff could get, they've already given us so much information, and it would just be helpful to look at what options might be available, looking at the The jumpstart revenue again just portions of it on a temporary basis, and I know that may not there might not be consensus for that but just sort of getting that information going would be helpful to me at least.

Thank you, Councilmember Peterson.

And you're right, that's not an easy topic to broach, and obviously one that I feel a lot of excitement that we had, unanimous support for the spend plan, unanimous passage.

But appreciate you asking the question of central staff.

And I think similar to Councilmember Herbold's request for a menu of various sources, that was a general fund adjacent source as well.

So I assume that it will be I think that's a really important part of that analysis.

And also appreciate that there's a broad coalition who had worked really hard with all of us on what those details of the spend plan were.

So more conversation to come about that, but appreciate you raising that.

And I do have one question, Council Member Herbold, that maybe I'll throw out, and then we'll come to add your comment as well.

Tom, I'm wondering if you could spend a little bit more time as well talking about the right sizing concept here.

Obviously, I think the word choice is important, right sizing versus cuts, because we all want to make sure that we are avoiding austerity budgeting, especially given the data and the experience that I noted at the beginning of this meeting.

which showed that jurisdictions who invested in core government services saw a faster rebound in economies that benefited both the public and private sector.

Wondering though, if you could talk a little bit about the analysis in the last few pages of your memo that talks about how you saw a 3.6% under use of spends and how that right sizing could potentially be calculated.

Yeah, happy to do so, Chair Mosqueda.

Just first, I will confirm Council Member Peterson had an estimate of the personnel cost as a percent of the plan, and I can confirm it's 59% of the projection in future years is for personnel-related costs.

And then to Chair Mosqueda's question, actually, it would probably be useful to look at the next slide, because we'll actually see the numbers.

On page eight of the memo, there is the calculation that the chair referenced.

And this looks at 2021 actual results, which I discussed in the earlier slide, which resulted in revenues above budget and significant amounts of expenditures below budget.

Of course, some of those are carry forwards.

You can see the calculation on page eight, but the punchline is that even after accounting for carry forwards, general fund expenditure actuals in 2021 were 3.15% lower than what was budgeted, which was about $50 million in the year.

And so just by way of a thought experiment, and again, this is kind of taking a broad metric and applying it to the plan, the underlying process by which these numbers would result would require a more targeted and surgical approach, looking at vacancies and the various ways in which those savings were generated But if we assumed a 3% reduction in expenditures in each year of the plan, that would carve out about $50 million per year from the projections, which would revise the gap to $67 million in 23 and $56 million in 24, which would then balance the unreserved ending fund balance for 2023. So there'd be a net $14 million remaining However, the 2024 projection would still be $42 million negative for the ending balance.

Again, this is just a thought experiment, just that one approach, one piece of an approach that could be taken, and just showing how a 3% reduction would look.

Additional clarification, Director Dingley?

Yes, thank you.

One of the things that I wanted to point out is, you know, Tom's done a herculean job of taking in information from our office and largely recreating things that, you know, we have systems that feed into this and, you know, many linked spreadsheets, and he had to do this based on, you know, several different incoming points.

So job well done, Tom.

As Tom noted, the base revised financial plan that he's sharing inflates IT fleets and facilities costs.

It doesn't inflate necessarily all costs.

So the number here on the expenditures is likely, based on what I've been seeing over the last month in reviewing department, preliminary submittals for the budget is likely undercounting by about half on the expenditure side.

So instead of a 3%, what we've been seeing is needing to close a gap of around 6% in order to account for those increases in costs overall.

That is the unexpected hits, that is the just increase in supply chain impact.

the, you know, sorry again, Director Loader, if you're listening, that, you know, over budget or over timeline IT project, those items that were unexpected that are coming in at much higher than anticipated.

So that's one thing I wanted to mention here.

The other thing I wanted to mention is in thinking about, you know, if we think about underspend in the budget, holding vacancies As a way of generating savings is an excellent one time tool where departments can make agreements you know to hold or defer certain work for a year or, or maybe it's two years over the biennium, or maybe they shift that work on to other staff.

But it's not an ongoing balancing tool.

And I think what's really hard for all of us is that at one point, every position in this city was a vital so vital that, you know, likely the executive proposed it and the council approved it otherwise it wouldn't exist.

So what we haven't been able to do and what's a much harder conversation is talking about not doing that body of work, long term, and that's what's going to get you on that operate operating line to ongoing savings.

And so that's where I just want to caution over reliance on those kind of one time tools.

If that didn't make any sense, you can feel free to ask me clarifying questions, but I wanted to try to convey that it's a good one-time tool.

It's not necessarily a great ongoing tool without accompanying changes and expectations of department performance and programs and services.

Okay, thank you.

And I'm going to turn to Council Member Herbold to ask her question in just a second.

I just want to make sure, though, that I understood as well an important point of, I think, the analysis in the memo in front of us, which is underspend for 2022 may help us for a 2023 budget, but it doesn't help us for the outgoing years.

And I think that to that point, what we're looking at when we talk about right sizing is not having a budget that every year over invest into positions where you see a hundred plus million dollars carrying over every year.

I don't think that it's solid budgeting practice as well to have budgets pass year over year that are constantly at an elevated rate where then you see an average amount of being transferred back into the general fund because of chronic underspending.

If there is a right sizing of that initial investment in a budget, hopefully a biannual budget, not just a 12-year calendar budget, but when there's the right sizing of a budget, then we know what the actual universe of dollars is for programs and services.

I saw Tom come off of mute as well.

I see your hand, Director Dingley, but I want to make sure that both are true, right?

We don't want to have chronic use of underspend, and one potential way to get away from that is to look at right sizing.

Tom?

Thank you, Chair Mosqueda.

And this is just purely from the technical perspective of having these plans be useful.

And I appreciate Director Dingley's comments about the work performed, and I echo that back to your staff for all that help.

We've tried to use, or not tried, have used the same modeling approach that CBO uses.

We inflate the same things that CBO's plans inflate.

So this is a signal to me that we need to regroup and perhaps have a detailed technical conversation about, you know, using the feedback and iterative process, how to improve those future projections, perhaps in other categories that the current models that are used by both the executive and now that we have been discussing today include those more thorough inflationary projections.

So that, again, if the plan is useful.

I see, that makes sense.

Director Dingley, anything else?

Thank you.

I appreciate that, Tom, as well.

We're still in our deliberative process of figuring out how this is all gonna look.

And so it is, in no way would I expect what Tom puts in front of you today to capture every single nuance.

And I think what you're hearing me signal to you is that I am already seeing pressures, increased pressures on those costs.

And so I want you to just have that in the back of your minds that there is it's not a finding $30 million and we're done walk away kind of a situation, and so I just I don't want you to be caught surprised when I come back to you to say actually.

it's quite, it's a bit more.

One other point I just wanted to make, Chair, you raised a really great point and I had meant to bring it up earlier, but in working with Glenn Lee's office, Director Lee's office, we're doing really exciting work about starting up enhanced monitoring, budget to actual monitoring throughout the city.

So I, I share that frustration of having empty budget, sitting around and not going out there to be used for the highest and best priority and and you know best laid plans, a lot of you know there's a lot of circumstance that can happen in a department change administration certainly has a big impact and in changing leadership and there's just a lot of personnel changes that could come with that as well.

But nonetheless, we're influencing enhanced monitoring citywide.

And so we are going to be having accountants meeting with CBO analysts, meeting with department directors to really have, sorry, finance directors, to really be having those critical conversations about, hey, we're seeing this trend, what's going on here?

And we've had those conversations in the past, but we haven't had the tools to back them up.

And we now have that technical capability with our new financial management system.

and this great partnership with Director Lee's office.

So that is one area that I'm really excited about.

And it's not going to be a one-year fix.

This is going to be something that's going to take us a while to get right.

But I wanted you all to know that I am hot on the trail of getting that right-sized.

Thank you.

Thanks for your patience.

Vice Chair Herbold, please go ahead.

My question was originally around payroll tax surplus above projected, but I'm not gonna go back to that since the time has come and gone for that topic and I can ask my questions offline.

I do wanna just flag that I am struggling with, Madam Chair, your distinction of a cuts budget and not wanting to do austerity budgeting from this exercise, which it has an expenditure reduction, it sounds like we're trying to make some sort of a distinction here that an expenditure reduction is somehow different than a cut.

And I think what I hear you saying is that the expenditure reduction is attempting to maybe not model, but sort of spitball what the underspend is for departments.

And I hear Director Dingley saying that that may not be a solution that carries forward sort of the sustainability that we're seeking for future budgets in this ongoing planning exercise that hopefully is going to become routine.

But I guess I'm in this spirit of spitballing, and I think maybe this is the same thing that you are striving to do, Madam Chair.

I remember as it relates to, and Council Member Peterson will remember this because I've talked about it a lot, as it relates to our efforts to reduce Seattle Public Utilities rate increases, we went through an exercise of their capital projects and identified a annual likely completion date, completion rate for their projects.

Because again, these very, very large balances for capital projects were transferring over year after year after year.

And that was then becoming the rationale for a much larger rate increase.

when you looked at really what they were spending on those projects, you could have a smaller rate increase to sustain what was actually being spent on those capital projects.

And so on the operating side, it sounds to me like what we should be looking at is whether or not we can assume some sort of underspend rate for departments based on past practices or past real-time or past analysis of prior years.

Because that's basically how they set the SPU.

They looked at prior years and said, well, how many of these dollars are we actually delivering year after year after year?

And they set their completion rate based on those actual past practices.

And I'm just wondering if we looked at past years operating budgets underspends in transferring over to future years, whether or not we could come to some similar conclusions upon which to base future budgeting.

Thank you very much vice chair and yeah I think that's exactly my desire as well.

I think, and I'll, and I'll turn to directors Michi and Dingley here in just a second but, you know, as part of the analysis from the central staff memo that we're routinely seeing a certain percentage across departments be carried over into the next year is there a routine.

underspend analysis that we can or is there a routine underspend and is there an analysis that we can help extrapolate to saying perhaps there is a way to look at higher than needed amounts going into each budget year over year.

I hear both the caution to say you know that may solve for a near-term issue for the next budgeting cycle but maybe even if we look at doing that year over year, the dollar amounts from past analyses might not help us as much with future analyses, given some of those unknowns that have been described.

But that's exactly what I would like to do, and then try to apply some sort of forecast to what we can potentially anticipate.

And so I'm going to add to my list of takeaways here, in addition to the catalog of general fund adjacent revenue that we can look at, we're looking at a year-over-year analysis of the underspend for past practices, so we can try to extrapolate some way to apply that if we were to go to a right-sizing option as well in the future, still recognizing the caveat of additional increase in cost overall.

Director Panucci, then Director Dingley, and then we'll see if there's any additional questions.

Thank you.

You, more or less, made my point, which was going to be that we are interested in talking with CBO and the forecast office to look do a longer look back at the historic variance in these projections, but also we'll just know as what Director Dingley highlighted, which this would just, it would help us one time, the more efficient that the, or closer to actuals that budgets are adopted, the less sort of opportunity there is, especially when your central staff is looking for ways to find one-time strategies to support council budget proposals during the budget process, it just sort of squeezes that out.

So the better we get at projecting annual expenditures, that will just be like a one-time option, which is a worthy exercise.

And I'm looking forward to partnering more with Julie as they move into their deeper, their work on enhancing their oversight of actuals.

But just noting just, you know, sort of highlighting that we are working on that exercise and look forward to reporting to you all on that in the future.

Thank you so much.

I just wanted to let you all know that we we do actually assume and understand target, not in every year and not in every department most departments assume an underspend or a vacancy rate.

Sometimes it's as much as 3%.

Sometimes it's as high as five, depending on what that department happens to know about their operations in any given year.

So a lot of times we are already baking a lot of that in.

Occasionally we have built in overall general fund underspend targets, just looking at past practice.

I don't believe we have one in the 22 adopted budget, but I know that we have done that in the past.

So absolutely, it's a tool at our disposal.

I wanted to, highlight that the slide Tom previously had up of all of the different options, and apologize, Tom, that we're still on option one here of things to explore, but the answer lies in a combination of these things, right?

No one of these items is sort of the salvation overall, and there's no path Too many double negatives.

In order to avoid an austerity budget, we're going to have to employ all of these tools.

And there's no path to balancing that relies on only one tool.

And so I just want to flag that for you as well.

Well, that might be a good segue because Tom I don't see a fourth bullet on this slide and I think another important one is revenue.

We talked a lot about looking at existing revenue streams, but I think that there is still the situation, even with the passage of jumpstart that we are in a very regressive tax state, and looking at potential progressive options as a longer-term solution is going to be important.

And I really appreciate that Council Member Peterson, in asking for the catalog of options, also noted any use of revenue, general fund adjacent revenue, would need to be short term in nature and potential temporary solutions.

So I look forward to filling out our presentation here a little bit more.

I know we're already over time and I see two hands.

So I want to make sure that we get a chance to go through the last slides here.

Director Panucci, did you have additional context?

Yeah, just, just quickly because I was going to note your point as well as that not explicitly stated on this slide is assumptions about new sources of revenue but you could look at any of these options and assume that if there was a new source of revenue that in the amount shown like instead of a 3% expenditure reduction if it was a 3% you know that amount of money was increasing the revenue, it would, it would also help balance so I think you should be thinking of these options as a, you know, a improvement like the optimistic forecast show what would happen if there was an improvement in the economic condition.

Or if there if we had a new line of a source of funds to support the general fund to increase revenues accordingly.

So to your point, Council Member Mosqueda, you can think of any of these options as also being a presentation of what would be assumed if there was additional revenues, except for the pessimistic forecast.

Thank you.

And I do want to thank Mayor Harrell and the CBO and the executive team for the work to implement one of the statements of legislative intent and last year's budget that we included related to creating a revenue task force and a revenue task force of course can also look at ways that we offset some of the revenue streams that might be harder.

I think it's important for us to look at what we can do to make sure that we're not impacting communities of color or low-wage workers or small businesses harder.

Maybe there's a way to offset some of those revenue streams if we look at more progressive options as well.

Part of that task force is going to be looking at various strategies.

Thank you to Director Dingley, Senior Deputy Mayor Harrell and Mayor Harrell for their work on

Thank you if we're looking for a policy direction here.

I don't know, I wasn't here when the panel of experts talked about the benefits of progressive spending over austerity spending, and the difference.

I mean the the semantic difference between right sizing and austerity.

Some of the nuances lost on me, but basically rightsizing part of the memo here is rightsizing general fund budgets to better align actual expenditures with appropriations and or reductions in services.

That sounds reasonable to me.

What I think that we should be doing.

I appreciate the the option of using alternative revenue forecast assumptions, which which Director Panucci just touched on.

Yes, we should always be considering alternatives to to the knowledge that we have in a point of time.

I will note that the central staff memo does when comparing optimistic forecast assumptions versus pessimistic assumptions.

The probability of these.

Optimistic is 15 percent Probability of coming true compared to the pessimistic scenario probability is 35%.

I think that gets to that brown line that was basically indicating what's going on with the war.

Anyway, the point is that it seems as though we have a duty every year to make sure that our assumptions on what we'll have to spend the following year are as correct as possible and then just proceed forward.

I'm not really I don't understand this.

We can I always thought that the operating directive from CBO was assumed six percent potential reduction.

Now this has three.

So maybe offline I can get a better sense of the difference in those numbers.

But I just wanted to Lay all this out before we before we continue, since it seems that that will definitely impact whether or not we do consider additional revenue sources going forward.

Thanks.

Director Dingley very quickly and then let's try to round out the discussion here.

of course, thank you.

And thank you Council Member Nelson for that question.

Two things, one, we developed the target reductions before the April revenue forecast came out.

So we did actually really good guessing and good modeling because as I mentioned, what we're seeing in terms of additional costs that are mandatory that we have to find funding to cover is more in the 6% realm.

So we have sort of 3% that you're seeing as ongoing as a, that Tom is modeling as showing here as a known.

And then you have an additional 3% that's an unknown that has come into view in the deliberative phase that I'm in right now.

And so that additional reduction is needed in order to bring us to balance, if that helps.

Great, thank you.

All right, Tom, let's finish up the presentation if there's anything else you'd like to share.

And then we will talk about some next steps that are listed on page 15.

Thank you, Madam Chair.

So again, continuing the analysis of different possibilities and building off of Council Member Nelson's comments about the different forecasts.

Indeed, these projections are using the baseline forecast, though there are other lower probability scenarios that could come to pass based on the imperfect information.

Um, we just went ahead by way of sensitivity of the projections and included scenarios that include the different options.

Um, first one we're looking at here on this slide is, um, what if we, um, we're using the optimistic forecast, which is the 50, 15% probability compared to 50% for the baseline, um, what would happen?

So that would bring the projected operating gap down to $82 million.

in 23 and $71 million in 24, it would actually by 2026, it would be nearly zero.

The 2023 ending balance would be a positive $14 million.

So that would be balanced by state law.

And the 2024 projected for the endorsed budget would be still a negative $57 million.

And again, this is not a recommendation, not an endorsement the forecast council has endorsed and spoken with regards to the baseline forecast.

So that is what we are sticking with for the purposes of the projection.

But that's the bright side scenario.

The other, in giving due consideration of alternatives, the more dour, pessimistic scenario, which is actually a 35% probability, and that's sort of in line with if you read the financial and economic literature and news as much as I do, generally consistent with what economists are predicting for a chance of a recession, would greatly impact negatively the operating gap, bringing the projection down to, in fact, higher gap in the current year by $31 million more of less revenue.

Though it's not, again, not a gap, per se, but just wanted to point that out because that would be current year impacts.

But moreover, looking at the future budget, it would be a $173 million gap in 23 and $192 million gap in 24. And again, this is just a scenario, not the most likely one.

But in looking at these numbers and kind of building off of the this is still a work in progress commentary from from Director Dingley.

The revenue situation is also a similar work in progress.

The April numbers that were presented to this committee on April 20 of last month were the first of six looks at revenue and reasonably expected to have the largest variances in terms of making uncertain projections.

So just pointing that out, there will be two additional looks this year that will form the reality about how much revenue there is to spend in the next few years.

And that will be used for purposes of balancing the budget.

So, you know, it could trend either way, but I just wanted to point that out that we are still in the early innings with regards to the revenue forecast for next year's budget.

And then if we could move to, if there aren't any questions about that, move to the next slide.

And this is building from a, PB, David Ensign — He-Him, He-Hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he-hims, he is a way of saying, doing a $70 million long-term measure, whatever that may be, revenue or expenditure, and then balancing the higher gap in the near term with temporary measures.

And for just the purposes of this analysis, looked at the 2025 projection, because that's when the deficit starts to decrease, and then basically imputed how much short-term support would be necessary to balance things out.

So as you can see, the revised balance is actually a positive $82 million at the end of 23 and grows to $93 million at the end of 24. So that's actually, you know, that's significant extra one-time resource.

using this type of approach.

So it kind of triggered the thought of, well, what if we instead model an approach that relied on this balance going into 23 and sort of mitigated and delayed the need for a longer-term measure?

And so that's how this looks.

We added a long-term measure.

So again, this is the concept of a revenue option, perhaps, that takes some time to ramp up.

that doesn't start until 2024 of $65 million, just for the purposes of make the numbers work.

And then plugging in the same temporary measures, $48 million per year, again, brings the ending balance to a positive number.

So this approach uses a combination of fund balance, ongoing structural measures, which could be revenue or expenditure in nature in the second year, and temporary measures in 2023 and 2024 To again make make the numbers all balance out based on these projections, which of course are in development and will change in the next book, but hope that's helpful and kind of forming thoughts about different approaches and decisions that can be made.

I will just also emphasize this is a thought exercise as has been noted by CBO and central staff.

So I don't want folks to necessarily think that these are two options.

These are various scenarios that could be mixed and matched in multiple ways and various levers could be pulled or another way to say it, as I think Director Dingley noted, is that all options on that options list, if deployed together, could be mixed and matched in various ways to try to get to a black get us into the black.

So the ending on next steps is really important here.

And I think also summarize on page 15 of the memo.

This is really for context as committee members.

We're very interested in sort of what's the bottom line?

And what does this mean for us in 2022?

Yes, in terms of the adopted budget.

but also how do we begin preparing for 2023 and beyond and looking at the financial health of the city's budget for the next six years is something that I know after today we are all committed to.

Additional comments and I saw Director Panucci you came off mute so anything else that you'd like to add?

Nope thank you I think you covered it.

Okay and Director Dainley anything you'd like to add?

No just to say thank you for having me here today.

of course, yes, and thank you, and please pass on our appreciation to your team as well.

So in sort of final comments and next steps here, and Tom, you're welcome to keep that last slide up if you'd like, or Allie, we again will have the six-year financial plan presented to the Finance and Housing Committee meeting in August after we receive additional information from the Revenue Forecast Office and from the City Budgets Office in the August presentations.

We anticipate at the end of September, as per usual, the mayor's proposed budget will be coming down.

We are coming back to a biannual budget of sorts.

So a 2023 adopted and excuse me, 2023 adopted, 2024 endorsed.

And this will hopefully be one of the last times we do a semi a semi-biennial budget because we're all really looking forward to biennial budgeting.

Then again, colleagues, I think that there will be many more conversations that all of us will be having about ways to address these issues leading into August, and if not before.

Again, thanks to the executive team for pulling together the revenue task force.

Thanks to the city budget's office for continuing to work in such I'm looking forward to the follow-up on the catalog concept.

The longer look back at the historic unspent trends.

to be able to meet those needs.

Really good news on the monitoring and the real-time tracking of budget expenditures by departments.

Thank you very much Director Dingley for the update there.

And colleagues I know will also be closely tracking what's going on in Congress as well about any additional relief that may be coming but absent additional federal relief we know what the existing budget is from the state which provided tremendous relief, especially in the areas of food assistance and rental assistance, things like that, but we have a long term need that will continue to look at.

So this has been very illuminating.

And I just want to thank everybody for the hard work that it's taken to get to this place of providing this sort of detailed analysis of the six year outlook.

And there will be more conversations to come, colleagues, as we get the information that you requested from central staff and obviously have more conversation with the executive and members of the community as well.

So with that, not seeing any additional hands, just thank you both both both teams, the central staff team and the executives city budget's office team for all of this work.

Really helpful presentation.

Thanks for the central staff memo and walking us through the materials here today.

We have reached the end of our agenda and our finance and housing committee meeting will be on May 18th at 930 a.m.

We are finalizing the agenda, but you can expect to see the 2021 budget exceptions ordinance and carry forward ordinance, both items.

We are hoping to make less of a budgeting tool and really truly exceptional.

So more to come on that conversation.

We'll also have the annual housing levy report, and we will have the item that we carry forward from today, which is the office of housing staffing plan.

With that, thanks for your engagement and participation, colleagues.

Our committee meeting is adjourned.

Have a great rest of your week.

Take care, everyone.