SPEAKER_15

Good morning.

The Select Budget Committee will come to order.

It is 9.31 a.m.

September 25th.

I'm Dan Strauss, chair of the Select Committee.

Will the clerk please call the roll?

SPEAKER_05

Councilmember Kettle.

SPEAKER_15

Here.

SPEAKER_05

Councilmember Moore.

Councilmember Morales.

Here.

Councilmember Rivera.

Present.

Councilmember Saca.

Here.

Councilmember Wu.

Present.

And Chair Strauss?

SPEAKER_15

Present.

SPEAKER_05

Six present.

SPEAKER_15

Thank you, and thank you to Councilmember Wu and Councilmember Saka for being on time.

If there is no objection, the agenda will be adopted.

Hearing no objection, the agenda is adopted.

We are going to first move into the hybrid public comment period.

Councilmember Nelson is now present as well.

Public comments should relate to items on today's agenda or within the purview of this select committee.

Colleagues, as I've shared in the past, we will have public comment at the beginning of each section of our budget process.

So at the beginning of the CBO, at the beginning of the department presentations, at the beginning of the central staff presentations, and when the chair's package is presented.

There will also be two public hearings in the evening at 5 p.m.

As well, we accept written comments at any time.

For the purposes of the committee moving forward, I'm going to set some parameters regarding time for public comment.

If there are zero to 30 people, we will have two minutes.

If we have 31 to 120 people, we will have one minute.

If we have over 120 people, we will take one minute for the first 120 people and then 30 seconds thereafter.

I want to set this as a parameter early from the first committee meeting so that people who are spending their time to go out of their way to come and speak to us and share their opinion have a clear understanding of how much time they have from go.

And with that, we have opened the hybrid public comment period for today.

Clerk, how many speakers do we have signed up?

SPEAKER_05

We have five remote and none in person.

SPEAKER_15

Thank you.

Each speaker will have two minutes to speak, and if anyone in person wants to sign up, you are free to do so until the end of public comment.

Colleagues, a practice that changed during the, and Council Member Moore is also present, a practice that changed during the pandemic was that chairs used to call the public comment It did change to the clerks during the pandemic because of efficiencies and the difficulty of remote work in this manner.

I'm going to be returning to past practice.

Councilmember Hollingsworth is now present.

The public comment period will be moderated in the following manner.

The public comment period is up to 60 minutes.

Speakers will be called in the order in which they registered.

and we will alternate sets of in-person and remote speakers until the public comment period has completed.

Speakers will hear a chime when 10 seconds are left in their time.

Speakers' microphones will be muted if they do not end their comments within the allotted time to allow us to call on the next speaker.

We have one speaker now registered.

I'm gonna call on the remote first, and then we'll come right back to you.

And so for the remote speakers, I'm gonna let you know who all is here.

We have Lily Hayward, Noel Gomez, Alberto Alvarez, Julia Buck, and Clara Cantor.

Clara Cantor, you are showing not present at this time.

Speakers, we'll move first with Lily.

Welcome, Lily.

Good morning, Chair Strauss.

Good morning.

We can hear you.

SPEAKER_09

Can you hear me?

SPEAKER_15

Yes, we can.

SPEAKER_09

Good morning.

Thank you.

This is Lily Hayward speaking on behalf of the more than 2,500 members of the Seattle Metro Chamber of Commerce in support of Mayor Bruce Harrell's proposed budget.

We would like to thank First Chair Strauss for working with the executive throughout the year to analyze their city's current and past spending practices.

That important work laid the groundwork for a budget that invests in priorities that align with what voters want.

It delivers on public safety, supports downtown revitalization, recruits more first responders, continues to support the care team, and prepares the city to host the FIFA World Cup in 2026. It is a clear demonstration that when we align resources and priorities, we can deliver for our community.

The budget without raising taxes.

And the mayor's proposal honors that while still making historic investments in housing and preserving shelter beds for people experiencing homelessness.

As you analyze the budget in the coming months, we ask that you preserve funding for these essential voter priorities without raising taxes.

Thank you very much.

SPEAKER_15

Thank you, Lily.

Up next, we have Noel Gomez, followed by Alberto Alvarez.

And Claire, we do see you're present.

Noel, when you're ready.

I see you're there.

Star six to unmute.

Noel Gomez, we see you here.

If you could press star six to unmute.

It is not pound six.

Let's go on to Alberto and we'll come back to Noel.

Alberto, we see you're there and I see you're off mute.

Welcome.

SPEAKER_11

Thank you.

As per the mayor's budget overview for the Office of Economic Development, OED is mandated to build a diverse and inclusive economy, break down barriers to wealth equity, building the workforce while also supporting women and minority businesses, building BIPOC community wealth, and investing in neighborhood districts.

Make sure your priorities are for the people, all of us, people who are black and brown, along with the full spectrum of gender identities, are the true workforce of this city.

The city needed us to put our lives on the line during the pandemic.

We lost lives, while the mostly white business owners, at worst, lost some profits.

Keep this in mind.

We are telling you to fund our services.

We are watching you, and we are taking action if you fail us.

Thank you and have a good day.

SPEAKER_15

Thank you, Alberto.

I still see Noelle there.

Noelle, star six to unmute if you're able to.

I think we'll move on to Julia Buck, followed by Claire Cantor, and we'll come back to Noelle at the end.

Julia, you're here.

Star six, there you are, welcome.

SPEAKER_08

Thank you.

Good morning.

My name is Julia Buck.

I'm a resident of District 6 and had a look into the budget proposal yesterday.

I guess he said yes and he meant yes for SPD and 20% regrowth year on year and no to pretty much everything else.

I love to live in a city run by the same worthless technocratic morons and landlord parasites that have ruined San Francisco.

And now they're running the exact same playbook here.

It's remarkable.

They're saying it's the will of the voters after an election with the lowest turnout in a century for city positions.

I guess it's like the silent majority that stands with Trump.

Thank you.

SPEAKER_15

Thank you, Julia.

Up next is Claire Cantor.

Clara, welcome.

See you're here, star six to unmute.

Clara, at your convenience, star six to unmute and we'll happily take your public comment.

We're gonna hold on Clara and Noel and call up Elizabeth Dahl.

Welcome, Elizabeth is our one in-person public commenter.

either microphone and when you start speaking, we'll start the timer.

I would take the taller one.

There you are.

Welcome.

SPEAKER_02

Never needed the taller one before, thank you.

I'm Elizabeth Dahl-Helendi, Executive Director at Aurora Commons.

We started as a neighborhood response to the needs in our neighborhood on North Aurora Avenue with a mission to cultivate community and belonging among our neighbors experiencing poverty and homelessness.

Every day, we serve over 200 people with basic needs and community and have a case management list that fills up within the first one to two hours that we open.

Often up to half of those seeking resources for case management do not get to be seen.

Most of the women who access services are in the sex trade or are at extremely high risk.

Last week, the council passed a bill aimed at disrupting violence on Aurora.

It is essential that this bill is resourced.

for those experiencing the commercial sex trade on Aurora.

Service providers cannot currently meet the need for all who are asking, and it is critical that this bill is substantially funded by the city.

If the city wants to disrupt the sex trade and provide accessible pathways for women to get support, they not only need, but are consistently asking for.

The mayor's budget included such a significant investment.

Thank you, Mayor Harrell, and we ask the council to please maintain this level of funding in the budget, thank you.

SPEAKER_15

Thank you.

We will go back to remote public comment briefly here to, and Clara Cantor is off mute.

So we're going to go with Clara.

Welcome Clara.

SPEAKER_06

Hello.

Can you hear me?

SPEAKER_15

Yes, we can.

SPEAKER_06

Oh, good.

Okay.

Sorry.

Hi, my name is Clara Cantor and I'm a community organizer with Seattle neighborhood greenways.

I'm here speaking to push back on the mayor's austerity budgeting.

Um, fiscal responsibility means working to secure and deploy revenue that's necessary to make our city healthy and safe and housed and working and thriving and green and, um, Seattle, the people of Seattle need and deserve that new progressive revenue to help meet our city's commitments as soon as possible.

Um, the mayor's proposed budget acknowledges that, but instead of pursuing that new progressive revenue, it raised the jumpstart payroll expense tax funding by 55%, which is going back on.

funding allocations that the community fought for and agreed upon if this will cut new investments in affordable housing by over 200 million as our city continues to get wealthier the need for those community investments in affordable housing in small business systems in green new deal initiatives new edi items grows as well if not faster and we need those investments now more than ever Seattle Neighborhood Greenways, alongside 35 other community organizations and labor unions, sent a letter to council articulating just this and pushing back on the austerity budgeting, pushing for new progressive revenue.

All of our issues are interconnected.

A safe and efficient transportation system requires housing density and affordability so that we can live here.

Living wage jobs and supporting small businesses requires childcare so we could make it to work.

And we cannot be pitting, we cannot be pitted against each other to fight for scraps while the city refuses to look into new progressive revenue.

That's work that Mayor Harrell has already begun, but has not followed through on.

And I urge you as council to begin that work to approve new progressive revenue that will address this budget deficit and put our city on the path to financial health and stability as soon as possible, including by not

SPEAKER_15

Thank you, Clara.

And feel free to send in any additional written comments.

We'll circle one last time back to Noel Alvarez.

Noel is here.

And I see you're off mute.

Take it away.

Two minutes.

SPEAKER_07

Yes.

Sorry.

I don't know what was going on.

Hi.

My name is Noel Gomez.

And good morning.

And I'm here supporting the budget that you're proposing as a survivor of sex trafficking on Aurora and, um, somebody who's provided, I've provided services for decades in Seattle for human trafficking victims and with different organizations in Seattle.

Um, and I know how much money it costs to serve these, the clients and, um, We need a lot.

We need housing.

We need trauma healing services.

We need job readiness.

We need advocacy.

We need a lot of things to help this issue and to get to the root of it.

And I agree with the budget, and I think that's what's needed to get the job, to get this done, to get people help, to get people what they need, what they're asking for, and what they've deserved for years.

And I thank you for this.

And I really, really hope that this goes through and I will be here to support it all the way through.

Thank you.

SPEAKER_15

Thank you.

Thank you, Noel.

And that does conclude our registered public commenters remotely and physically present.

Last check out in the public here.

Anyone else want to speak?

Seeing none, there are no additional registered speakers.

We'll move on to the next item on our agenda.

Clerk, will you please read the short title into the record?

SPEAKER_05

Agenda item one, introduction and budget process overview for briefing and discussion.

SPEAKER_15

Thank you.

We are joined by Ben Noble, our director of council central staff.

Dan Eater is going to join us at the table as well, our interim director of our city budget office.

Please introduce yourself, gentlemen.

This first presentation is really about process, and then we will move into the proposed budget.

I'll have some comments to share before we move into the proposed budget.

But let's start with process.

Director Noble, please.

SPEAKER_12

Yeah, thank you.

Ben Noble, Central Staff Director.

And give me just a moment to get this set up.

SPEAKER_10

I'll take advantage of the pause to introduce myself, Dan Eder, Interim Budget Director.

SPEAKER_12

Perfect.

So I'm going to take just a few moments ahead of Dan's more, I got the wrong one up.

One sec here again.

SPEAKER_15

I'll take this moment.

Colleagues, thank you for, I know Council Member Wu and Saka were on time.

Most other people are only 30 seconds to a minute late.

I appreciate you letting me.

You'll notice I will always try to start right on time.

And Ed down in Seattle Channel, thank you for all you do and everyone that you work with to make sure that this program is recorded and available in a transparent process for all of Seattle.

All right.

Council Member Kettles, 15 seconds.

SPEAKER_12

And now I'm good to go.

Sorry about that.

Welcome.

Thanks.

So again, just real quick, I'm going to do a little bit of a kind of a process overview ahead of Dan's more substantive, Director Eater's more substantive presentation.

Much of this information you have all seen in one form or another.

or another over the last couple weeks or even couple months.

But as you engage with this in a kind of more public forum, I thought it would be worth reviewing for the viewing audience, if you will, and also perhaps for yourselves.

So just real quick here.

I did want to just tell you a little bit about the central staff team.

You'll see some names more frequently than others and potentially sort of different roles than you have in the past.

As indicated here, Yolanda Ho is deputy director currently, and she is going to be really the lead in terms of managing the budget process for central staff and in some ways for the council as a whole.

So she has already been updating you with emails in terms of materials that have arrived and schedules and the like, and you can expect that going forward.

Patty will be providing a great deal of support in terms of getting materials distributed and calendars and schedules and all that.

So they have a particularly important role in this, and I think your staff may be leaning on them repeatedly as we kind of dig out where information is and confirm schedules and the like.

We have done a little bit of reorganization of our teams.

And again, this shouldn't really be sort of be invisible to you at some level because you'll be working with individual analysts.

But just to highlight that infrastructure team, which ports through Yolanda, is now led by Calvin and includes Brian, Jen, Eric, and Tracy.

And note that Brian is part of our budget team, and I'll talk about that in just a sec.

Land use and labor, led by Lish, again reporting through Yolanda, you can see team members there.

Community safety and fiscal policy, I'm leading those teams and they are reporting through me as well.

I note on the fiscal policy side that Tom Mikesell and Eden Cizek are key players on the fiscal policy team, really working budget issues all year round.

but understandably particularly busy this time of year.

And they're really the lead on the technical side as we get to working through balancing and identifying.

We talk a lot about the budget being balanced, and when we say that, we generally mean the general fund, but the way the budgeting works, there's actually a series of funds, and every one of them has to be balanced.

So for instance, the transportation fund will have to be balanced.

And the Jumpstart Fund will have to be balanced.

And so there's a good deal of technical work on that side.

And then, so they are key players there.

So just a little bit on the team.

Again, just in terms of roles, and again, really more for the general public.

Per state law, the mayor was obligated and has fulfilled a...

90 days before the end of the fiscal year, which is the calendar year, so essentially by the end of September.

That is now in our hands.

You'll hear more about that from Director Eater and a little bit from Chair Strauss as well.

At this point, though, the budget is very much in Council's hands, so the mayor will ultimately have to sign the budget, but for the next few weeks, it is on your shoulders to review, to appropriate due diligence, we'll talk about this in a minute, and then ultimately approve a balanced budget yourselves.

And as we'll see that there are some things that could happen on election day, so in early November, that will change the financial dynamics for the city.

And there could be some actions we all have to take that you will have to take after that to adjust to those realities.

And we'll talk some more about that today and going forward.

high level on the rolls.

You have a legal obligation, I should point this out, to approve the budget 30 days before the end of the fiscal year, so the end of November.

I'm about to review the calendar.

Our plan is to have, actually, you take final votes before Thanksgiving, so we have a comfortable window before that legal obligation of the end.

Again, I've talked to each of you about this, but just, again, at a very high level, I think about the council engaging in various sort of levels of review in the budget, one of which is just your fundamental oversight and, if you will, due diligence of the executive's overall proposals.

Our strategy on balancing and then individual spending proposals and individual reductions as well.

I would note that we have 40 plus pieces of proposed budget legislation.

That's a little bit unusual, but maybe not as unusual as you might have otherwise thought.

The budget is itself an ordinance, but in addition, there are...

Several property tax ordinances that they track completely to the budget, but they are separate bills.

They provide the information that needs to go to the county assessor to collect revenues.

You'll see and hear from Dan, the mayor has proposed a number of pretty standard fee increases or inflationary adjustments for various fees that the city charges.

To the extent that those are set by ordinance, and many are, there are bills that will change those.

And again, we will review all of that with you.

So ultimately, there will be a large package of budget legislation.

And we will, again, consensual staff will help you review essentially all of those, identify those that are more substantively important and those that are in some ways more procedural and administrative.

Mentioned, noted here, both provisos, which are limitations on spending, and statements of legislative intent, which express the council's intent, often asking for additional information from the executive.

Those are just a couple of the tools you will have in addition to actually changing funding appropriations, and we will bring you proposals around those, and you will think of your own as well.

Another key issue will be to identify funding for your collective priorities, whatever those might ultimately prove to be.

So we expect to be looking for resources either by reducing some of the mayor's proposed spending, potentially through an upgrade in the revenue forecast, or some other strategies.

and then obviously um there are in addition to kind of your collective interests there are individual district level needs that um i anticipate some of you will be highlighting um and again i think all part of this process so look various levels of engagement and central staff assisting you in them um i think i thought it was worth providing a little bit of context um for the budget again i think dan will do some of this as well but in terms of economic conditions I think it's just worth understanding that the national economy is continuing to grow.

In fact, the Fed has just begun to lower interest rates, in part because it started to see the growth lagging, and that had been intentional.

There was an effort to bring down inflation and to moderate growth inherently as part of that effort.

The national economy is growing at a reasonable but not robust rate.

The local economy continues to trail the national economy in terms of growth.

And that's a very different experience for us.

Even through the pandemic, not just before the pandemic, but really through the pandemic, there was obviously an initial period of interruption for the first six to eight months.

But beyond that, really through 2022, the local economy was growing robustly, led in particular by the technology sector.

But the technology sector itself was spinning off growth in other sectors, particularly in construction, both commercial construction, so office buildings and lab space and the like, but also residential, so a number of condominiums and apartments.

And that has all slowed as the local economy has slowed.

And that's not a surprise, and there are things that the city can do to help sort of promote growth, but at some level, you know, it's a national scale issue that's being reflected here, and so there are limits to that.

In terms of the budget situation, obviously started this year with significant projected deficits for 2025 and 2026. The numbers, you know, 250 has been a number we kind of focused on.

That was a point in time.

Things have changed both to the good and to the bad, so that's sort of a high-level number, but obviously a very significant challenge.

If you include the jumpstart revenues, total expenditures in the general fund space, if you will, is north of $2 billion, but $250 million is a big chunk of that.

So this was a real challenge, and you'll hear more about how the executive has proposed to address it.

Looking forward, again, consistent with the relatively slow local economic growth, the revenue forecasts do show growth in our base general fund revenues, but again, at a slower rate than we have experienced in recent years.

A notable exception in terms of slow growth is the payroll expense tax, which has been robust and consistently now outperformed both initial forecasts and then even revised forecasts.

So that's good news.

One of the challenges there is that that revenue stream is paid by relatively few users, so it has the potential to be quite volatile.

not yet developed robust financial policies about how to manage that volatility, although you will hear again from Director Eder that there is a proposal to develop a reserve for that particular fund.

Other things, just in terms of the overall situation, as of December of this year, 2024, all the federal COVID-related funding will have expired.

So we'll have spent most of it, but to the extent that anything is unspent, it will no longer be available.

So there have been a number of things that in some ways are ongoing investments, things like homeless shelters, that have been supported by that money.

And the city is facing choices about whether to continue funding them from other resources or to allow that funding to lapse.

There is, again, some other good news.

There is additional funding coming from both the federal and the state level around some of our city priorities, particularly around climate change, as an example.

At the federal level, the Inflation Reduction Act included a number of investments towards green power and the Green New Deal.

Then at the state level, the Climate Commitment Act, which is one of the issues that is subject to the vote in November and could change as well.

THEN OTHER THINGS TO CONSIDER, AND YOU'LL HEAR MORE ABOUT THIS TOO, THE TRANSPORTATION LEVY IS UP FOR A VOTE IN DECEMBER PER COUNCIL ACTION IN JULY.

AND EXPECTATION THAT THE FAMILIES EDUCATION PRESCHOOL AND PROMISE LEVY WOULD BE PUT UP FOR RENEWAL A YEAR FROM NOW.

AND THE STATUS OF BOTH THOSE LEVEES IMPACT THE BUDGET AND HOW IT'S STRUCTURED.

And then just generally, and I just noted five particular policy challenges, you might have more or different ones or different emphasis, but obviously the sustainability of the budget in the context of the deficit, homelessness remaining a pressing issue, downtown recovery efforts underway but not complete, housing affordability remains a real challenge, and public safety generally.

And just real quick, on timeline, we reviewed this calendar, but there are kind of six big phases here, and we're about to begin the first, which is department presentations from the executive.

That'll be filed in the middle of the month with presentations from central staff on the policy considerations we've identified, and then also bringing to the surface issues that you all have identified, and we'll generally do those by department, but we'll also organize some around specific issues that are cross-departmental.

Key date is the revenue forecast.

You'll receive a revenue forecast update along with the forecast council on October 22nd.

With that additional information, whether it be to the positive or the negative, the chair will be working to put together a balancing package that will be released on October 30th.

THEN OPPORTUNITY FOR BUDGET AMENDMENTS IN THE MIDDLE OF NOVEMBER.

AGAIN, THAT WILL BE AFTER THE ELECTION, SO WE'LL HAVE A BETTER SENSE OF WHERE WE STAND ON A COUPLE OF KEY ISSUES, THE TRANSPORTATION LEVY AS AN EXAMPLE.

AND THEN, AGAIN, GO FOR FINAL COMMITTEE VOTES, ACTUALLY, AND THEN COUNCIL VOTE ON THE THURSDAY BEFORE THANKSGIVING.

SO HOPEFULLY WE CAN STICK TO THAT.

NOTE, TOO, THAT THERE ARE TWO PUBLIC HEARINGS IN ADDITION TO THE REGULAR PUBLIC COMMENT AT MEETINGS HERE.

THERE'LL BE PUBLIC HEARINGS ON OCTOBER 16TH AND NOVEMBER 12TH.

JUST TO GIVE YOU A LITTLE MORE DETAIL, WE'RE AGAIN DIVING INTO DEPARTMENT PRESENTATIONS.

WE'VE CIRCULATED THIS FOR YOU, BUT THIS IS THE CALENDAR THAT WE HAVE LINED UP IN TERMS OF DEPARTMENT PRESENTATIONS.

RELATIVELY LIGHT DAY TODAY, GETTING A WHOLE LOT BUSIER FRIDAY, AND THEN PRETTY HEAVY MONDAY, TUESDAY, AND AT LEAST THROUGH MIDDAY ON WEDNESDAY.

WE'VE HELD RESERVED TIME ON ALL THESE DAYS SO THAT WE DON'T, WE SHOULDN'T HAVE TO GO TOO LATE, BUT IT IS A PRETTY INTENSE SET OF PRESENTATIONS.

And then just highlight the phase after that will be the policy considerations in the middle of October.

That'll be central staff working closely with you to identify potential interest, both in terms of things that might want to be added to the budget, places where things could be reduced.

Ultimately, your council's actions will have to be balanced, so potential to need to consider both.

So any questions before I turn this over to Dan?

SPEAKER_15

Colleagues, any questions for Director Noble?

I know we've had a version of this a couple times over at this point, so I appreciate that.

Seeing no questions, I will share some remarks ahead of you, Interim Director Eder, about the budget overall.

First, I want to thank Mayor Bruce Harrell and his team for their work.

It is now time for the Council to roll up our sleeves to review, examine, amend, and pass a balanced 2025 budget.

As budget chair, I look forward to leading a transparent and collaborative process.

It's crucial that we center both fiscal responsibility and the investments the people of our city depend on, improving public safety, creating affordable housing, addressing homelessness, and delivering basic services.

We can and must do both.

Mayor Harrell was right about a lot of things yesterday, but not everything.

He was right that this is a great floor, the second floor of City Hall.

He was right that we could make history by being the first council not to amend the mayor's budget, and we're not gonna do that.

And he was right that I will be a strong advocate and some of the changes won't involve Ballard.

District six is larger than Ballard.

It is Magnolia, Fremont, Finney, Green Lake, Greenwood, parts of Crown Hill and many other micro neighborhoods.

And colleagues, I wanna center something for each of you that I center for myself is that I represent every Seattleite in our entire city of Seattle, even though I'm elected by a district.

Whenever I am introduced or introduce myself at speeches, I always say essentially what I just said, which is I'm elected by the people of Magnolia, Fremont, Finney, Green Lake, Greenwood, parts of Crown Hill, Ballard, and many other micro-neighborhoods, and I represent the entire city of Seattle.

It's really crucial that we keep our entire city in mind.

I know you all do because we are a team elected by districts and representing the whole city.

It gives us an insight into our own district while keeping the whole city on the horizon.

And each of us as team members specialize in the policy and issues within our own committees.

It is no secret that this year we'll have to make some hard decisions about this budget cycle.

The structural budget deficit Seattle faces was a decade in the making.

It was exacerbated by a once in a century public health crisis that was followed by a period of aggressively high inflation.

None of these issues were within this council's control and it is our responsibility to set Seattle on a sustainable course while delivering world-class services.

Let's be clear.

This is no time for us to retreat from our values.

The issues Seattle faces are serious.

They will require smart, common sense and data-driven solutions.

This is a time for us to find sustainable ways to continue the important investments and safeguard the services everyday Seattleites rely on.

It's a tough job and I know that we're up to the responsibility.

In a typical year, the Select Budget Committee begins in September.

This year, we started our work five months earlier in April.

That set us in a good place.

Since then, we've completed the most in-depth five-year review of the city's budget in recent memory.

We've reviewed department budgets, incoming revenue forecasts, and projections, which has left us well-positioned to address the structural budget deficit with best practices and budget reform.

The analysis clearly shows the structural deficit was again a decade in the making, beginning before the pandemic, and was a product of high growth with low inflation.

When the pandemic hit, so did the recession and the downstream economic impacts that have not yet fully been resolved.

I think we'll see the forecast next month in October, really see if the Fed has landed the plane on the downstream economic impacts to begin slow growth.

In 2020 and 2021, municipalities across the nation laid off staff and cut programs.

In Seattle, we passed the jumpstart payroll expense tax to jumpstart the economy in a moment of recession.

Jumpstart did just that.

And additionally, it jumpstarted our ability to retain services Seattleites rely on, to retain our staff who work for all Seattleites, and allowed us to use federal funding to expand services responding to the pandemic, whether it was the broken window fund, that had to use federal funding because of Seattle's gift of public fund rules, or when director of FAS at the time, Calvin Goings, set up one of the largest vaccination clinics, I believe in our region, I'm off the cuff here, so I don't want to overstate myself, but it may have been the largest in the region down there by T-Mobile Park.

Jumpstart gave us the stability through the worst of the pandemic and the recession.

It enabled us to, to be here today to make those hard, long-term decisions to solve our structural deficit in person, working together, reviewing past decisions, and charting the course for our future.

I'll take a moment just to share yesterday when the mayor was giving his speech who I saw in chambers.

I saw in our chambers the people of our information technology department who run our backend.

I saw the people who deliver clean water, who provide electricity that we're enjoying right now.

I saw folks in construction and inspections, planning and community development.

I saw folks from the Seattle Center, our gem of the Seattle Center, and our new gem, the waterfront.

I saw folks that make sure our roadways, our sidewalks, our paths, we're able to transport across them.

I saw folks that operate city buildings and make sure that paychecks happen.

You may or may not know, Director Carnell is currently moving through changing over our entire payroll system.

And their team has been working day and night for a number of weeks across weekends to make sure that people get paid.

And these are the silent heroes in our city.

I saw folks that make sure our parks are clean and operable.

I saw the people of our fire department, police department, care department, our public safety initiatives, and our accountability arms.

I saw the people in our mayor's office who work to prevent gun violence every day.

who work on economic development, who work in sustainability and environment, make sure our libraries are open, that we have our education and early learning deliverables going out to the schools.

We are one of the only cities in our state that has a department of education and early learning.

I saw the folks in the human services department and our neighborhood department.

I saw the people who increase our access to art and decrease our graffiti.

I saw the good folks in intergovernmental relations and our workers.

who do this work, who build the buildings, who deliver the services, and who meet with Seattleites on their worst days and celebrate with them on their best days.

I saw the people who schedule meetings and inspect buildings, who make sure our buildings are clean and the services every day and that the recycling is sorted for that matter.

And most of all, I saw Ms. Barbara.

Ms. Barbara, I hope you're watching.

But I say this because these are the people who, whether you can see them or not, are making sure everyday Seattleites are receiving the services that they need.

I will say, I think our charge here is that we make sure that the services we're providing are world-class.

In the mayor's budget, there are some cuts, or reductions, I should say, to programming.

Departments went through exercises earlier this year about cuts and reductions, and I know that this caused worry about the future of our city delivering for Seattleites within these departments.

Along the way, I heard many stories from our city family about what could happen, what programs could be cut or delayed, and what impact that would have on our city.

I am glad and relieved to see the mayor's team did not have to make as deep of cuts as were predicted in January of this year.

And I know council members will be reviewing the reductions that were made.

Regarding the layoffs that are, and I know Director Edel, you'll speak to this, and I know that you share some of what I will be saying.

While only half of the positions identified are filled, these are people.

These are people who have families, who have childcare and bills to pay, who have in the past and continue today to serve our city.

These are people who cannot just be viewed as positions within a budget.

They must be viewed as the people they are and the impacts these layoffs make in their daily lives.

I will be reviewing this section of the budget very closely.

Speaking about Jumpstart, noting that every single year since Jumpstart has been in effect, we have used Jumpstart funding to backfill the general fund.

This is not a new consideration this year, and I'll be carefully reviewing the proposal that we've received.

Regarding transportation, colleagues, Director Noble just kind of mentioned on this, and I know Director Eder will be getting into this.

We have received at this time a current law budget.

which means the budget does not assume that we have a transportation levy next year.

We will find the results of this levy midway through our budget process.

I've requested the CBO and the mayor's team to create a package of amendments should the levy pass.

And I know CBO central staff and the mayor's team are already working and we're technically still on day one.

So thank you to the mayor's team for receiving that request with open arms.

I will be setting timelines to, I just want to share with colleagues, you and the public, my north star regarding the transportation section here is that we hit the ground running in January should the transportation levy pass delivering these world-class services to our residents.

My north star is also that the budgeting process is a clear and transparent process for the public.

So I'll be working with CBO and the mayor's office to set timelines to ensure the process is clear and transparent.

And if we cannot meet these deadlines, we will explore other options to ensure we are budgeting in a clear and transparent process and that we hit the ground running in January should the levy pass.

Colleagues?

It's time for us to put our work, for us to get to work, to put our values into action, get things done for Seattle and deliver for Seattle.

With that, Director Eater, I'm gonna pass it over to you to walk us through the mayor's proposal.

Thank you.

SPEAKER_10

Excellent.

Thank you, Chair, and thank you to all of the council members for the opportunity to be here today and talk about the mayor's proposed budget.

As you heard from the mayor himself yesterday at his address to you, the mayor is proposing a fully balanced 2025 and 2026 budget for your consideration.

The mayor's proposal addresses what CBO had been projecting earlier this year as a more than $250 million deficit in the general fund, the most flexible source of revenues that supports services throughout the city.

The mayor's proposal does not include any new taxes in light of the fragile state of our recovering economy.

My presentation today is going to, if you could maybe go to the next slide, Ben, please.

SPEAKER_15

And Director Eater, I will realize that we did not read the second item into the, I don't need to continue.

SPEAKER_10

Okay, very good, thank you.

The presentation today will go over some of the same ground that Ben covered, so I'll do it lightly.

Then I will dive into a big picture overview of the mayor's proposed budget.

I'll include a dive into the approaches that the mayor used to address the projected deficit from earlier this year.

Those changes, those strategies include changes to the payroll expense tax and other changes and reductions to bring us into balance.

And finally, I'll highlight some of the priority investment areas that are included in the mayor's budget that are adds to last year's budget.

If we could skip ahead a couple of slides now, please.

SPEAKER_15

Director Eater, Council Member Moore has a question.

SPEAKER_17

Thank you chair.

I just wanted to ask you a question.

Are you asking and I apologize if I missed it being a few seconds late Are we asking questions as we go or are we holding our questions?

SPEAKER_15

I'd say let's ask questions as we go if we start running into Time considerations.

I'll let colleagues know that we need to limit our side because we can always meet with folks later we will plan to take at minimum an hour lunch from 1 to 2 p.m., but if we get done early, you know, we can kind of see as we go.

So back to you, Council Member Moore.

SPEAKER_17

That was my question.

SPEAKER_15

Back to you, Director Eater.

Thank you.

SPEAKER_10

Just before I dive into the next slide, I am not the subject matter expert on everything that's happening at the city, so I'll be very happy to get back to you with answers if there are questions that have technical information or details that I can't readily provide to you.

SPEAKER_12

Let me just add on that front that to the extent that there are questions that are posed either today or during any of the department presentations that aren't answered, we're keeping track of those and we will get those questions into our Q&A process.

We have a PowerPoint site where we're keeping track of everything in that way.

So never fear.

They are not being treated as rhetorical.

They're being duly noted and will be recorded and we'll get them into the mix.

SPEAKER_10

Great.

Next slide, please.

Just jump one ahead.

Closer in two years.

Is this better?

Yes.

Okay, very good.

Thank you.

So this slide just gives a high level overview.

What I wanted to communicate here is that we have been working on preparing the mayor's proposed budget and making decisions since January of this year.

So this has been a nine month process.

We have been at all stages of our process.

which I won't go into detail on unless there are questions looking at efficiencies, trying to determine whether every department can provide the same services at a lower cost.

We've looked at refining ideas for new investments.

How can the city get the most out of each dollar that we spend?

and looking strategically to partner with others.

And here we've looked at how the city's work intersects with the work of other governments, community-based organizations, and other groups.

Next slide, please.

Ben provided some of this overview.

Just make sure that folks who are listening online and watching on the Seattle channel know that State law does require that the council and city ultimately adopt a balanced budget.

And the mayor has proposed two balanced starting places, a 25 proposal and a 26 proposal.

Council action.

November 21 is what I think the target is, will be to adopt the 2025 one-year budget.

So you'll give up the executive appropriation authority, spending authority to move forward with the initiatives that are in the final adopted version of the budget.

And then you'll endorse a one-year second budget for 2026, which serves as effectively the starting place for the fall budget deliberations next year when we will get final and full appropriations authority for that second year.

The mayor's proposed budget is built on the August forecast that you heard from the Office of Revenue and Economic Forecasts.

The budget is balanced against that set of revenue forecasts.

And you'll, as Ben mentioned, you'll be, Dr. Noble mentioned, you'll be getting another forecast in October that will have either good news or bad news with respect to the balancing act that was done in the mayor's proposed budget.

We are all hoping for good news so that there'll be yet more revenues to spend.

I'm just pointing out that there is both an operating budget, which is a one-year budget, and appropriations, as I mentioned earlier, and a six-year capital budget, the capital improvement plan.

You provide appropriations authority for the first year of that, we call a CIP, and then there's five planning years where we have provided a longer-term expectation of how future appropriations will happen.

Again, you heard earlier a little bit about the context in which we are all operating, The local economy is part of the regional and the national and international economies.

The bottom line that I want to communicate on this slide is that there is some expected growth anticipated in general fund revenues.

The amount of growth isn't expected to be nearly enough to avoid some other strategies that will be needed, not limited to potential spending reductions in 25 and 26. I think in the interest of time, I'm not going to go into more detail.

I think I've covered much of this.

Happy to answer any questions though.

Wanted to highlight in this slide that racial equity impacts are considered as part of all of our budget deliberations throughout the year.

Every budget idea that we reviewed in considering whether to include it in the mayor's proposed budget included a racial, race and equity impact analysis.

Each individual proposal, we call them change requests, includes a note about an evaluation about how the change could affect the city's race and social justice initiative goals.

Departments reflected on their racial equity process in preparing their budget proposals, and CBO has partnered with the Office for Civil Rights to develop a rubric that we used to evaluate the impacts of those proposals.

We continue to learn from and refine this work each year, gathering feedback from departments and from the Office for Civil Rights.

And finally, the CBO's change team has led efforts along three main areas.

They've been a partner in assessing our collective growth in achieving racial equity focus when we do the budget development at each step.

The team is also partnering with departments to improve the use of data to measure equity impacts of city programs.

And finally, a subcommittee is reviewing and improving the CBO's internal workforce equity conditions in our own office.

We know this work is iterative and every department is starting in a different place.

SPEAKER_15

Director Eder, I had missed Council Member Saka's hand.

I believe it was on the previous slide.

SPEAKER_13

Yeah, thank you, Mr. Chair.

And thank you, Directors Eder and Noble here.

Really appreciate your time.

So I guess circling back to slides five and six.

So it sounds like October 22nd is a big date.

That's when we'll get the final forecasts.

And it was noted a couple of times that the Fed recently acted to, to lower the rate by half a point.

And just be curious to better understand, October 22nd is almost a full month away.

What is our initial assessment on what kind of impact that is likely to have on the October 22nd projections?

SPEAKER_12

It'll be speculation, but I'll make it.

That's all we can make.

Best guess based off the information we have in hand.

And I would say informed, in my case particularly, by having spent two years previous leading the forecast office, so I have a good idea of kind of...

Overall, the way I've been characterizing this in some individual briefings is that since late July, which is really when the data that were available in the revenue forecast was developed, the August forecast was developed, there have not been...

significant unanticipated changes in the economy.

So inflation has continued to cool.

That was good news.

The Fed has now acted.

The decision to go at a half point versus a quarter point, if you are a geek and track these things at that level, was a surprise to some, but actually the broader market priced in a full half percent drop.

So even that was not that much a surprise.

So overall, we've been tracking to the forecast.

So it's the nature of the forecast that it anticipates what the economy will look like in the coming months and the coming year.

And largely, that has been fulfilled.

And that is both good news and bad news.

It is good news in the sense that I wouldn't expect a downgrade because of broader economic conditions.

To the extent that falling inflation and the Fed acting are good news, they might not preview an increase.

In addition to the broader economic news, another key piece of information that is feeding the forecast will be a couple more months of actual realized revenues for the city.

We'll have a couple more months of real estate excise tax revenue, for example, that those data are reported monthly.

Sales tax data actually generally reported quarterly, and with enough delay, won't have additional information there of the most interesting sort.

But it is those kinds of things.

Bottom line, I wouldn't expect a significant change unless something happens between now and the 22nd.

SPEAKER_13

But we'll know when we get it.

Sure, yeah, no, that's very helpful.

And a follow-up question is...

And admittedly, it's a fairly technical question, but it also addresses my first question as well, is the payroll expense tax implications.

So as a direct consequence, I guess, of the Fed's recent decision, the stock market rallied.

And some of the prime beneficiaries of that were tech stocks.

We know that the tech sector plays a fairly significant role in contributing to our payroll expense tax revenues.

And so when are, and again, fairly technical, but when are those, When are those, because part of the calculation on compensation is based off of the individual awards and when they vest.

When are those calculated?

Because if, for example, they're calculated day of, October 22nd, or today, that's a different projection than the day before

SPEAKER_12

You're absolutely right.

So just to say more specifically, and again, I've seen the data analyses behind this, that in the technology sector, a fair share of compensation is made through stock grants.

So, in fact, compensation and that compensation then taxed under the payroll expense tax.

It varies with the market.

So the vestings vary by firms.

They vary by individuals and the like.

So the forecast data relies on actual data forecast themselves of future stock values and generally sort of considered as an average over the course of the year.

And so the data correlations have been done on that basis rather than sort of the specific timing because again, it varies too much for that to really be a meaningful input.

So generally good news in the stock market would imply good news on the payroll expense tax side.

One thing I do want to emphasize, though, and we'll come back to this point, is we have not been collecting the payroll expense tax for very long.

Revenues last year were north of $300 million, and I think as much as $45 million of that was a surprise relative to what had been the November forecast.

So, again, outperforming the models.

The forecast for this year is north of 400, so it was already expecting significant growth.

And the painful uncertainty we face is that we won't actually know what that realized number is for this year.

Again, we're counting on a significant number until mid-February, actually late February of next year.

The taxes are due on...

compensation for the calendar year and you get a month to sort of calculate that out and then pay us.

So we have limited information.

So again, it is good news, but the uncertainty about it is also a really significant issue.

SPEAKER_10

Just expanding upon that idea that the payroll expense tax is due with quarterly estimated payments for most taxpayers.

The true up or the final payments are not due until the end of February, which is beyond the close of our annual books.

So we sometimes, the cycle of the payroll expense taxes There has been, in fact, good news every year after the end of the close of our books that we don't find out about and haven't spent in the proposed budget.

You won't find out about that in October with the updated forecast.

None of us will know the true annual receipts for the payroll expense tax until, as Ben just mentioned, the end of February of next year.

SPEAKER_13

Thank you.

And thank you, Mr. Chair, no further questions.

SPEAKER_15

Thank you, Council Member Sacco.

I recall in our select committee in April, you asked the committee table what the worst case scenario was, and that gave me a lot of anxiety.

And so I'm happy to hear you asking in the opposite direction today.

We need a plan for all contingencies, Mr. Chair.

That's right.

Back to you, Director Eater.

Okay.

I've got Council Member Kettle.

Council Member Kettle.

SPEAKER_14

Actually, that's a great segue to my question, which seemed appropriate now to ask.

If I wasn't a council member, I may be in security risk management and analysis.

And what may be up may be down tomorrow.

We don't know in terms of the pandemic and the Great Recession.

So on that front, in terms of budget, developing the budget and considerations, I think it's important from that risk management point of view piggybacking on the discussion that we just had, that we do ensure that the stabilization and emergency funds are set, that we don't skimp on that, because we need to be ready.

Imagine where we would be with the pandemic if we didn't, as a council of previous additions, didn't, after the Great Recession, set us in a position to have that fund ready when the pandemic hit.

And I think it's important to have that consideration now.

for the next thing that may happen.

And I bring this up now, too, based on the PET discussion, because I note that funds were just within itself because of the fluctuation potential of that fund.

I think it's really important, and it's really in keeping with that risk management thought.

And I know the desire is to spend, but I think we also have to have this desire to be ready.

As I tell my team, be prepared, be mindful.

I mean, be present, be mindful.

And I think that is a consideration as we go through this and as we look to make sure that we're ready for the next step.

SPEAKER_12

I won't steal Dan's thunder.

You will hear specific points on that very issue, I think, today and then going forward as well.

SPEAKER_15

And as we turn it back to you, Director Adolphe, another piece of context.

During the recession, during the pandemic, Director Noble was leading the forecast office alongside our current director of the forecast office, Jan Duras.

During that time, Director Noble and Jan created more accurate forecasts than the state of Washington.

And that was something very impressive.

So while it's speculation, it's good speculation.

Back to you, Director Eater.

SPEAKER_10

Very good.

Thank you.

We're up to slide nine.

And this is the first kind of big picture overview of what was included in the mayor's 2025 proposed budget.

This is all funds, all purposes, what spending is included in the budget.

You'll see the banner shows that it adds up to $8.3 billion of spending.

The largest individual sort of category of spending shown in the green wedge of this pie chart is utilities, transportation, and environment.

And I call this out because I think it's important to...

As I'll talk about a bit more in the next slide, many of the revenue sources that are used to back this spending are restricted and can't be traded off for other purposes.

And so in this green wedge, one of the largest sources of money is rate payer dollars from our two municipal utilities.

And those rates can't be used for parks.

They can't be used for transportation or human services or anything else besides utility purposes.

The state law requires that.

And there are many other similar examples.

But I wanted to give you an overview of where the spending is happening and some of the background of the why.

Of course, I'll dive into more detail The next slide is looking at a revenue picture, not spending but revenue, and it's showing over time how the city's overall spending has changed from 2023 on through the adopted 24 and the proposed 25 and 26 budgets.

Again, you'll see $8.3 billion at the top of the stack which is the second from the right.

That's the 2025 proposed budget in a different view.

Each of the colors in the stacked bars are different funds, as we discussed in the context and setup slides.

Each of those funds needs to be balanced.

You can't spend more than the reasonably expected revenues included and foreseen in the budget.

So I'll call your attention in this slide to the lowest part of each of the columns.

In blue is the general fund that we've been discussing.

You'll see that both the blue portions of these columns increase each year So the 2025 proposed budget is a larger amount.

It's $1.9 billion compared to the 2024 adopted of 1.7 billion.

The growth is happening even though we were looking at a deficit, and that is because it costs more to provide even the same level of services.

You have taken action ratifying labor contracts and other policies that affect nonrepresented staff.

We provide an increase called a wage increase, an annual wage increase, to recognize that we operate inside a larger labor market, and in order to attract and retain the employees who provide the valuable municipal services that Chair Strauss gave an overview of in his speaking remarks, we need to pay people a fair and competitive wage.

And there are a variety of other reasons, but that's fully half of the increases in the rising blue bar.

The next slide dives into that $1.9 billion of the general fund.

This is back to a spending perspective, and it shows the broad categories that the general fund supports, including but not limited to public safety, which is fully half of what the general fund revenues are used to support spending for.

But it's also human services, arts and culture, and recreation, which is parks.

It's administration, which is a variety of things that are not, we could call that different things, but we call it administration because it's a general bucket.

I just want to emphasize that public safety is the biggest category of spending.

It covers all of police and fire and the care team and some other functions like the municipal court and the city attorney's office.

I think I'll leave it there and move on, but I'm going to refer back to this slide in coming portions of the presentation.

Next slide, please.

Okay, this is a slide that has not changed.

We've shown this to council and to the public for months now.

It's from earlier in 2024. It's a static look at a projection from a point in time that identified here on the slide a $251 million gap between anticipated, then anticipated spending, the green line that rises, versus the anticipated revenues that would be available to support that spending.

So the difference between the green line and the top, I mean, the 2025 projected at the time, the stacked bar is revenues.

So revenues are lower than expenses.

That's what we're talking about when we say there's a $250-plus million gap in the revenue.

SPEAKER_15

Director Eater, I see Council Member Nelson has a question, but I'll just note here, the 2020 bar here demonstrates the recession.

I think very clearly with that blue bar dropping down, if we had continued at the growth that we had been pre-pandemic, it would be closer to being slightly above the 2019 line.

Is that a correct understanding?

SPEAKER_10

Yes, I think that is.

SPEAKER_15

And then Council President Nelson.

SPEAKER_03

Thank you.

I make this point, I think, every year that this line does not reflect the is clear, but we also receive, if the line, I would love to see a third line or a second line which would represent revenues including the payroll expense tax revenues.

Even though that is a separate fund by law, it goes in there, it's supposed to fund certain things, I do think it's important to show that there are funding sources that, unlike levy dollars, which are bound to pay for only certain things, we are collecting from other sources, not just the payroll expense tax, but sweetened beverage, et cetera.

SPEAKER_10

That's exactly where I was going next, so thank you for that, teeing up that issue.

So I wanted to highlight for you the different colors of the bars, the elements of each of the bars.

The blue is showing the base general fund revenues.

Orange is showing one-time grants, including federal pandemic relief grants that were one-time in nature.

Purple shows the use of fund balance, and yellow is indeed showing the one-time uses of payroll expense tax.

You'll see that there was a large contribution to the general fund in 2021. Then there are continuing contributions to support the general fund that happened in 2022, 23, and 2024. There's probably three main reasons why we had at the time a projected gap in the general fund of upwards of $250 million.

One is that expenses have been rising at a faster rate than we have been collecting general purpose, general fund revenues.

And that is the reason why we had been making contributions from the payroll expense tax.

The payroll expense tax was in the laws up until today, or up until your consideration of this proposed budget, anticipates that the payroll expense tax will stop making contributions to the general fund beginning in 2025 and moving forward.

And as I'll describe in later slides, we are proposing a continuation, not stopping the payroll expense taxes support of the general fund.

But from the perspective of early 2024, we showed that it did stop because that's what the policies prescribed.

The other last reason is that the, it was called Clifford, the pandemic federal relief dollars came to us in a big chunk And this year, 2024, is the last year that we are allowed to spend those resources.

So we've still been supporting the general fund because of the economic slowdown attributable to the pandemic and our recovery.

But this is the last year that we can use those resources.

So those are the combined reasons why you see a gap.

Does that help provide some context?

SPEAKER_03

Yeah, my point was simply that there are sources of funding that are flexible in addition to the payroll expense tax that often does not ever get on a graph to show our overall financial picture.

And I'm always a plug for full transparency to show that how much money is in the overall pot that is not restricted by ballot measures.

SPEAKER_10

That's a very good point.

Thank you.

Council Member Rivera.

SPEAKER_04

Thank you, Chair, and thank you both for being here and answering questions.

I just want to confirm that on this graph, that $251 million for 2025 and the $498 million for 2026 are those deficits for those years.

SPEAKER_10

Yes.

The short answer is yes.

This is from the perspective of our financial plan.

And I would say that we have solved both of them in the proposed budget.

So 2025 is fully balanced and 2026 is fully balanced.

The 2026 looks like it's much bigger than 2025. And that's because from the perspective of the point in time and the financial plan, we didn't know how and whether we were going to resolve the 2025 deficit.

So that amount is effectively counted again and doubled in the 2026 perspective.

So long as we solve 25 in a sustainable way, we've also resolved most, if not all, of 2026.

SPEAKER_12

Another way of putting that is on a forecast basis, the annual shortfall was $250 million.

So it's over the biennium that you end up with essentially a $500 million shortfall.

And as Director Eaters described, and this is just for the emphasis, that if we find a sustainable way to solve the $250 million or even whatever portion of that you solve sustainably is then also solved for $26 million on the whole.

And that is the structure of the budget they have proposed and Dan will describe.

SPEAKER_04

Thank you, Dan and Ben.

Although this is not a static number because it assumes no rising in costs of anything, no changes to any other services that provide no change in costs, I mean.

So really, it is not a static figure.

And also, this assumes for 25 and 26, we're closing the gap with PET We've heard you say, Pet, the payroll expense tax is a bit volatile.

It's been doing great.

But if at a certain point it doesn't continue to do as well, these are the figures that we're trying to stop gap, if you will, with that.

So I just want to be clear that that's what I'm looking at.

SPEAKER_10

Yes, and I will go into more detail on our solution sets in later slides.

SPEAKER_04

Thank you.

SPEAKER_15

Thank you.

And I'll just, before we move on, just also share it has been both the practice to use jumpstart funds to backfill the general fund each year.

And it has also been the practice to only do it one year at a time so that we could continue the review until we saw the economic, the downstream economic impacts from the recession.

STABILIZE SO THAT WE COULD MAKE A DECISION IN AN ENVIRONMENT WITH STABLE INFORMATION.

SPEAKER_12

Just to connect some pieces of the conversation today, one of the pieces of budget legislation that the executive has sent is an ordinance that would review and change the allocations that are now set by city law in terms of the payable expense tax to align with the proposal they have made.

That is again one of the pieces of legislation and really one of the fundamental policy choices in the budget that we will bring to you as central staff and frame up again as well.

UNDER CURRENT LAW, YOU COULDN'T MAKE THE ALLOCATIONS THAT ARE PROPOSED IN THE BUDGET, BUT THAT'S WHY THE BUDGET PROPOSAL INCLUDES A REVISED ORDINANCE TO CHANGE THAT LAW TO MAKE IT POSSIBLE.

AND AGAIN, THAT'S ENTIRELY CONSISTENT WITH THE WAY, JUST FOR THOSE OF YOU WHO ARE NEW, WITH THE WAY BUDGETS ARE PROPOSED.

THEY ARE A PACKAGE OF THINGS, INCLUDING CHANGES THAT MAKE THE PROPOSAL POSSIBLE TO IMPLEMENT UNDER EXISTING LAW.

COUNCILMEMBER NELSON?

SPEAKER_03

I was going to ask a question, but I want to make sure I understood.

I heard something like set by state law.

You were not...

No, set by city law.

Okay, got it.

I understand that.

SPEAKER_12

Depending on the revenue source or different restrictions on the payroll expense tax, it's the city code.

SPEAKER_03

I remember that.

So my question, I just want to make sure that people, that I understand that this green line represents only general fund expenses.

So the things that OED spends money on, not represented in here.

Affordable housing...

that is funded by the, well, housing levy, MHA, et cetera, not represented here.

All Green New Deal expenses not represented here.

Just wanting to make sure that that is, that is,

SPEAKER_10

clear.

That is correct.

This is only the general fund and the larger budget, $8.3 billion.

Everything that isn't the general fund of that is not on this graph.

SPEAKER_03

Right.

That's largely utilities and our capital budget, et cetera, too.

SPEAKER_10

But also separate levy dollars that are attributable or may restricted to specific uses such as affordable housing.

That is not reflected in here.

SPEAKER_12

Only a minor modification of that.

I believe that both Office of Economic Development and the Office of Sustainability and Environment received some share of general funds.

So there is some portion of those activities that are included here, but it's not the only source of revenue for either of them.

So many departments receive funding from more than one source.

And again, as we do the individual department presentations, we will emphasize that point.

as appropriate.

SPEAKER_10

And I'll show that in some future slides what the mix of funding is.

SPEAKER_03

Yeah, it's unfortunate that some departments are more dependent on a volatile source of funding than others.

SPEAKER_10

Okay, very good.

So, with the chair's permission, I'll continue.

This slide shows, in light of what we started with, a $250 million deficit, some key programs that the mayor prioritized and wanted to ensure that we did not make significant reductions.

In fact, all of these have been maintained or have grown both in terms of dollars and or services.

So even though we were looking at a $250 million plus, we know shelter beds will close in January of 2025. There had been 300 beds that were funded with one-time funding.

Notably, the federal pandemic relief dollars that I mentioned have to be spent by the end of this year.

We have proposed that those 300 beds remain open and funded with general fund on an ongoing basis, so they are not subject to annual will we or won't we close kind of regulations.

question marks.

SPEAKER_15

Similarly...

Director Eater, we do have a question from Council Member Moore and then Council Member Wu.

SPEAKER_17

Thank you.

I think you just answered that question.

I just wanted to confirm that, and thank you for this, for making sure that these beds are maintained and not shut down, but confirming that this is not a one-time source.

This is ongoing, so we won't be re-engaging in this conversation next year.

SPEAKER_10

That is correct for the funding that we have provided in our proposed budget.

It is ongoing.

SPEAKER_17

Okay.

Thank you.

SPEAKER_10

Council Member Wu.

SPEAKER_01

Is the Navigation Center included in this budget?

SPEAKER_10

I will get to that in a future slide.

The short answer is that yes.

Back to you.

Okay, so our homelessness response, both in terms of the King County Regional Homelessness Authority, plus efforts that the city does in-house, if you will, within HSD, those are preserved.

Affordable Housing and Equitable Development Initiative, sometimes called EDI, both of those programs are at historic high levels of investment.

I have slides on each of those, so I'll dive into some detail, but I just wanted to capture that because it was a key priority, a must-have.

Public safety, the funding and functions are increased for police and fire and the care team in the mayor's proposed budget.

And the mayor prioritized in ensuring that public facing services are kept whole.

For instance, there are no changes to days or hours of operation for the libraries throughout the city.

Same for senior centers, community centers, community service centers, and core park services.

The last thing on this list, this is something we didn't make any changes to, and I just wanted to call attention to it because it's something which could be revisited, and we recommend that it stay as is, and that's the use of our emergency reserves.

There are a couple of different flavors of emergency reserve.

with well over $100 million in total.

The emergency fund supports disaster response if there is an earthquake or a tsunami, or as recently happened about five years ago now, four years I think, a worldwide pandemic.

And so we dipped into the emergency fund for that purpose.

We are not dipping into it for helping to balance the projected deficit in the general fund.

Similarly, the revenue stabilization fund is established by city financial policies.

to address significant and abrupt changes in revenues.

And we have not had that.

Our circumstance is different.

We have had slower growing revenues than our costs.

That does not an emergency make according to the existing financial policies, which of course could be changed.

We have not proposed to change them.

SPEAKER_15

Thank you, Director Eater.

It was four years and about six months ago, depending on, I mean, nobody's counting, though.

Council President, then Council Member Kettle, and then Council Member Moore.

SPEAKER_12

Just real quick before we get into questions.

Oh, yep.

Director Eater described it, nothing has changed here, but...

Nothing changed means that there are actually contributions to both.

Existing policies have us taking some share of revenues on a forecast basis and adding to these funds as our exposure grows on the revenue side.

And we have limits on the emergency subfund as well.

But just to clarify that point.

SPEAKER_10

Yeah, and that's a good clarification.

Thank you for pointing that out.

Because we followed the financial policies and didn't try to exempt ourselves, we are repaying the money that we took out from the emergency fund during the pandemic on the schedule that was established.

We gave ourselves, according to the policies, five years to fully repay the emergency fund.

We will do that in the biennium on the schedule that was anticipated.

We are not proposing any change to that.

We're also making contributions to the revenue stabilization fund.

That's a measure, the contributions is required by the increasing size of the general fund that I pointed out in an earlier slide.

And we are also making no changes to the financial policies and therefore making the contribution as required.

SPEAKER_15

Thank you.

Council Member Nelson.

SPEAKER_03

You call out the maintenance of funding for libraries, community centers, community service centers, core park services.

Those departments have levy funding.

So my question is, can we expect to see a greater percentage of the operating budgets of I won't go to transportation.

Those are just two examples, from levy dollars and less from general funds.

SPEAKER_10

There have been some shifts in the color of money that is used to support various activities, particularly in parks.

I think I'd prefer rather than wing it here to give it to...

I would like that information.

SPEAKER_03

That's what I think.

I don't like relying more on...

The local government is supposed to fund core essential services, police, fire, parks, transportation, and libraries.

So we always want to make sure that we're keeping the eye on the ball on that front.

SPEAKER_10

Noted as a follow-up item.

Thank you, Council Member.

Thank you.

SPEAKER_14

Council Member Kettle.

Thank you, Chair Strauss.

I appreciate the slide.

I appreciate the public safety piece has obviously been working closely on that front.

And I also appreciate the various public safety points made by the mayor yesterday in his speech.

On the public safety, public facing services, I note the importance of protecting libraries.

I did have a lot of discussions over the past year with the foundation and that, and, you know, that color of money, it's very important to the library piece, and we need to make sure that that mix is right, so for the stability of the library system.

My question on this front is, you know, maintain service at the community centers, but that also includes the plans for these community service centers, like Does that include the renovation of a community center, which is desperately needed in District 7 in Queen Anne, for example?

SPEAKER_10

I am not aware of any substantive changes to, um, to the capital project, uh, arc that was anticipated.

If there are any that I am not thinking of at the moment, I will let you know.

SPEAKER_14

I've not heard any, but I need to ask the question.

And the last point is on reserves.

Thank you.

This is a follow-up to my earlier point question.

And I really appreciate, and it's really important.

And I really, you know, thankful that we're maintaining that schedule and doing basically the right thing.

It's, It says what we call, Chair Strauss, good governance.

SPEAKER_15

It's another dollar for the good governance jar.

Council Member Moore and then Council Member Rivera.

SPEAKER_17

Thank you.

I have two questions.

I'll start with the reserves.

So I'm curious.

We have the reserves.

We have the emergency fund.

We have the revenue stabilization fund, both incredibly important.

But I'm interested in how that relates to the PET reserve fund and what the thinking was about that.

Thank you for the question.

SPEAKER_10

They are entirely separate.

The emergency fund and the revenue stabilization fund have been established by city policy.

We have requirements for the threshold and conditions under which we're allowed by the policy.

to dip into and use those funds.

And we have on the filling back up side requirements for when and how we will make contributions to keep those funds robust to be prepared for the kinds of negative events that would allow us to require us to use some of those funds.

The payroll expense tax is a brand-new idea.

It hasn't yet been memorialized in law.

It has been proposed.

So we have set aside $43 million that would...

and I'll get to this in later slides, but I'll just give you the preview of it, that would be made available in the event that there is a downturn in the forecast.

That could happen as early as October when you get the next OERF revenue forecast.

Just imagine, for instance, that instead of coming in at $430 million, that's what the current revenue forecast says for 2025, for the payroll expense tax.

If instead of coming in at $430 million, it came in at $429 million.

The $1 million difference without a reserve would mean that you're out of balance in the mayor's proposed budget.

in the budget that you need ultimately to adopt.

It would require, without a $43 million reserve, a reduction in spending.

We are proposing that there be a reserve so that there doesn't have to be a dollar-for-dollar reduction every time there's a change in the revenue forecast.

That's the purpose for which we have set aside money.

A more elaborate fund policy could eventually be adopted, even in this budget cycle.

We are making sure that there's money available for us to decide how to spend.

SPEAKER_17

Does that answer your question, Council Member?

How is that different, though, from the Revenue Stabilization Fund?

SPEAKER_10

It would be particular to the payroll expense tax, unlike the revenue stabilization fund, which is a backstop for all kinds of spending.

SPEAKER_12

Another way I might describe this is that there wasn't sort of magic or an absolute level, but the have been sized, if you will, to reflect the size of the general fund.

To the extent now that we're thinking about the payroll expense tax as effectively supporting a significant portion of the general fund and becoming a source of operational funding itself, we need to think about, given its scale and its potential volatility, what's the right size of a reserve for it That's reflective of both the revenue source of volatility and also in some ways the uses of the money.

For instance, if it was being used exclusively for capital, one might argue that it needs less of a reserve because you can better control the timing of your capital expenditures than your ongoing operation commitments.

So, and candidly, it was just an area we, maybe at the bureaucratic level, we hadn't got to in terms of thinking about the payroll expense tax.

But if it is not well past time, it is certainly the time to think about that.

And so again, that'll be part of the legislation that you will consider.

We'll be setting aside some money for that reserve.

We might specifically propose policies for that.

I don't know what has been proposed.

thinking on the fly here, might propose a statement of legislative intent for us to work more closely with CBO with a little bit more time to develop a more robust set of policies, reserve policies around the PET, but for early next year.

I mean, it's clearly something we need to address and nail down.

SPEAKER_10

Given the volatility, it's been upwards and upwards direction over the last several years, but unexpected upside changes.

There could be downside changes in the future as well.

We sized the PET reserve that we're proposing at 10% of the forecast such as we have.

So I mentioned $430 million is next year's forecast of PET revenues.

We sized it at $43 million, which is 10%.

That's what we set aside in a PET reserve.

SPEAKER_12

And to give you a flavor of what some of the policies might look like, on the general fund side, there's a policy that says at the year end, once we close the books and figure out how much revenue we took in, as much as half of any amount that is above the final forecast, so money we didn't expect, goes to...

I'm remembering it goes to the Rainy Day Fund, but it goes to one of them.

And it could be something like that as a way to sort of automatically feed up to some prescribed amount.

Again, just examples of things that we can consider.

But again, I do think it is appropriate to be developing such policies and nailing them down.

SPEAKER_17

So, I appreciate that.

I guess I would—we don't have to talk about it now, but I would like to know how you got to 43, because that is taking money away from other programs and looking at—I know you say you've maintained the affordable housing amount, but the way I look at the figures, the money's—there's actually less money being spent on affordable housing, which clearly we want to be spending more money.

And there's a desperate need in our community for rental assistance.

because we are now losing all of that COVID money.

And so I think that from my perspective, there are immediate needs in which we need to be, that we absolutely need to address.

And PET can do that through perhaps replacing some of the COVID dollars.

So I appreciate and support the idea of a reserve.

We need to talk about how much.

where the other money would go.

SPEAKER_12

I've been thinking along the same lines.

The idea that any amount received above a final forecast could be dedicated might be a way to help balance those things.

We won't know what that amount is until February in the way that we've described, but it does give a way to automatically direct that money towards a reserve.

That's proven a good strategy on the general fund side, but I do recognize and have thought about the same thing about the pressure.

That is always a challenge.

Again, I'm I don't need to tell you this, but as we're developing reserves and thinking about the uses of one-time money as well, there are needs on the ground, and it is very hard to leave money, whether it's one-time or money that's set aside for reserve unspent in that context, and that balance is really what you're all elected to do in the context of the budget, and it's tricky stuff, and we will help try to frame that for you and talk about trade-offs and the like.

SPEAKER_17

Great.

Thank you.

Thank you, Chair.

SPEAKER_15

Well said, Council Member Rivera and then Council Member Morales.

SPEAKER_04

Thank you, Chair.

Dan, can you talk a little bit about this maintain piece with the libraries, the senior centers, community centers, the service centers, and the park services?

Because, for instance, libraries this year had to make cuts in library hours.

So when we say maintain, is it maintained to what they currently have that might have already been cut?

Are we restoring the hours to what we would like them to be?

Same with some of these community centers that have been out of commission for a while because of capital improvements.

There's at least one community center I know about that got closed.

closed for capital improvements reopen and now it's closed again because they have to do one other thing folks are just waiting around to find out when are these services coming back and to council member Nelson council president Nelson's point these are at all I consider them to be essential services

SPEAKER_10

Thank you for the question, Councilmember.

We have not been able to expand the hours or days of service.

We have avoided further retractions that have happened over, there have been increases and decreases depending on the year.

When I talk about maintaining, I'm talking about maintaining the status quo as it lives today.

SPEAKER_15

Further councilmember.

SPEAKER_04

Well, I think I and Ben we can work on this but I'd love to know what we're currently doing in each of these buckets Today and what we were doing before.

SPEAKER_12

Yep.

I don't know this present I think some of those library issues have been around staffing So it's less been a budget thing and more about a personnel side of things But again all all the sorts of questions we are asking getting and collecting information about Thank you.

Thank you.

Councilmember Morales.

I

SPEAKER_16

Thank you.

I think what I am taking away from this proposal is sort of a tacit acknowledgement that we need more revenue to fund basic city services, especially as a growing city.

We have property taxes.

We know that those are certainly more stable than the payroll expense tax, but we also all hear from our constituents every time there's a new levy that they're frustrated that that is how we pay for basic city services.

So, I do think it's important that we acknowledge the importance of the payroll expense tax to supporting programs.

And that's what I see in this proposal, taking half of what has come in to fund parks and housing and public safety and all the rest.

So I do think it's time for us to have the conversation about what this means, because if the city is going to start relying on the payroll expense tax to backfill a hole in our general fund, then we also have to deal with the volatility issue.

And as one of you said, it's only something like 20 employers right now who are paying that tax.

So my question is, during this conversation, will be, How do we address that volatility?

Do we need to turn the dials on the payroll expense tax?

Do we need to not add to the spending?

There's, I think, another $100 million in spending in this budget, even though we know that there is already a deficit.

We're going to have to have some really hard conversations about priorities and whether—you know, we continue to add to the things that we are spending money on, whether we do what I think is responsible reserve policy, which is to set aside a certain percentage of it so that we are not in the situation that you described, Dan.

But all that to say, I think what this budget proposal demonstrates to me is that we are becoming reliant because we need more revenue to fund basic city services, and we're going to have to have some conversation about other potential sources of revenue if this one proves too volatile to rely on in the out years.

SPEAKER_15

Thank you.

Anything else?

Other colleagues?

Back to you, Director Eater.

SPEAKER_10

I just agree directionally, but just want a friendly amendment.

The payroll expense tax is actually paid for by several hundred, I don't know the exact number, taxpayers.

Most of the revenue comes from a concentrated group of a much smaller number of taxpayers.

Okay, this slide is a further contextual slide sort of demonstrating what the challenge was as we grappled with that were before us to address the projected general fund deficit.

$250-plus million, as we've discussed earlier, that would have been a 14% reduction to general fund spending across the board if we had spread that that reduction to every department that gets general fund.

If they just got a proportional share less, it would have been 14%, which would have been a terrible outcome.

And we did not choose to go this direction.

If we had another avenue that we could have considered is to keep public safety, one of the mayor's very top priorities, from taking any reduction and spread the same $250 million amongst the other half of that pie chart that I showed you earlier on to the other departments that get general fund.

That would have been roughly a 30% reduction devastating impacts to public-facing services.

We did not go that direction.

But I just wanted you to see the math of what we were dealing with.

It was really bad.

SPEAKER_15

Director Eater, we have Council Member Moore.

SPEAKER_17

Thank you.

Yes, I appreciate that closing the deficit would have been...

Catastrophic.

But I just want to ask, it seems to me that we are not unique as a city in having our public safety account for so much of our budget, correct?

I believe that's accurate.

Yeah, and I think that what accounts so much for the public safety budget is labor costs and pensions, because we, as local government, provide pensions, which is an important service and an important benefit, and why people come to public service, because we don't pay very well.

So I just think it's important to keep this in context, that Seattle is not an outlier in the struggles that it's...

It is significant.

And also note that even if we move to alternative responders, which is an important piece, and we civilianize our public safety approach, we're still going to be in a position of having to pay competitive wages and providing pensions and healthcare and things that are going to create a very high budget.

And we can always have a discussion about additional revenue sources.

There's nothing to prevent council members from bringing forth a proposal to perhaps have a capital gains tax or raise the PET tax.

That conversation can happen at any point.

Thank you.

SPEAKER_15

Thank you, Council Member Moore.

Colleagues, anything else?

Back to you, Director Eders.

SPEAKER_10

Okay, slide 16 begins the conversation about what the mayor's proposal did and how we got to a fully balanced budget.

So three separate categories of answer, and I'll dive into some more details in coming slides.

But this is a standalone one.

Early in 2024, the mayor saw the forecast and implemented an immediate hiring freeze, which meant that we didn't backfill most open positions when they became vacant.

Of course, we had a process for bypassing that hiring freeze for critical positions types of positions, so it wasn't a blanket never ever hire anybody, but we managed to save $19 million on an expected forecast basis at this point in the year, and that helped address the deficit.

We also partnered with labor to use unallocated healthcare fund balance, sometimes referred to as a healthcare holiday.

And I want to thank our labor partners for their cooperation and help in achieving significant savings for the general fund, which also helped with moving forward on a one-time basis.

And then something which I can't take credit for, I wouldn't want blame for, we did get good news in the August revenue forecast.

Very small good news on the general fund side, somewhat larger over the biennium for the payroll expense tax.

Speaking of the payroll expense tax, that's the second category.

I've alluded to structural changes.

Coming slides will discuss what those are.

But we made both ongoing, We have proposed both ongoing support for the general fund from the PET and use of one-time fund balance, significant buildup of surprise good news that was building up in the payroll expense tax fund balance that we are also proposing to apply on a one-time basis to the general fund.

to address the deficit.

And third, reluctantly, we still had to make reductions in programmatic investments and spending, and those include some layoffs.

We did that because it wasn't enough to do the early initiatives in 24, it wasn't enough to do the payroll expense tax changes that we proposed to become fully balanced, we had to also take some hard look at our programs and propose some reductions.

SPEAKER_15

Director Eder, before we move on, I see Council Member Saka and I've got a couple of things to share.

Under item one, early initiatives in 2024, the hiring freeze, the unallocated healthcare fund balance, the review of contracts over a million dollars, these were all policies that the mayor's office engaged in that at the same time that the very deep reduction analysis done by departments was occurring we did your office your team did both at the same time with assistance from director then director dingley and it if we had not gone through those exercises we would be in a worse position today i just want it's something that can be glossed over i know when those initiatives were underway without knowing the outcome there wasn't as much public conversation as there could have been because it was really, it was something that you were not being hard-nosed about.

The team wasn't being hard-nosed about.

It is one of the most porous hiring freezes I've ever seen in my life.

I'm not sure how many contracts were actually denied.

And it was through these exercises, along with the last bullet point, good news in August revenue forecast, that has set us into a position that is much better than we expected in January.

There's not a question there.

I just wanted to raise that up.

SPEAKER_10

Thank you for acknowledging that, Chair.

SPEAKER_15

Council Member Saka.

SPEAKER_13

Thank you, Mr. Chair.

And Director Eder, with reference to the third...

on this slide 16, reductions in programmatic investments and spending.

Can you talk a little bit more about the average reduction across all city departments?

So what was that reduction percentage, the average, and with the obvious understanding that not all city departments and programs receive the same level of reduction?

Public safety, for example, from my perspective, at least, makes sense.

You know, those are probably spared relative to others.

But what was the average reduction across the departments?

SPEAKER_10

Yeah, it wasn't 14%.

It wasn't 30%, as I discussed, were a couple of the options that we were forced to give actual consideration to.

It was about 5%.

We ended up reducing about $80 million of general fund spending out of $1.6 or $7 billion starting place.

So I put that at roughly 5%.

SPEAKER_13

So it was about roughly 5% per department.

And just curious, I know we're going to get a more fulsome briefing from SDOT, I think early next week.

But do you recall what the, because the initial proposed budget, as the Chair aptly alluded to, does not assume passage of the levy that voters are going to decide in November.

What was the reduction there?

Percentage.

SPEAKER_10

That's something I'm going to have to follow up with you.

I apologize.

I thought I had it written down, and I don't appear to have printed out that page, so I'm going to have to get back to you.

SPEAKER_13

Sure thing.

Yeah, definitely.

Thank you, Director Eater.

Definitely be curious to better understand that exact number.

And, you know, of course, learn more early next week as well.

But, you know, this is important stuff.

And just to echo on to the chair's earlier comment on, you know, like in working and collaborating with the executive to make sure we have an updated budget from SDOT that also assumes passage by, you know, that we can thought and plan for.

adopts, one way or the other, depending on where voters land.

But we need to prepare and have those thoughtful discussions right now.

Can't emphasize that enough.

We can't kick this down, kick the can down the road further until December or January.

You know, I know SDOT, for example, is really hard at work preparing, among others, to potentially implement this levy should voters pass it.

But, you know, one of their homework items—it is a very accountable levy.

One of their—but, you know, like, to make it accountable, there's a nontrivial amount of work and planning and prep and documentation required.

One of the work items there is SDOT's preparing a readiness report.

I think later this month or next month is the due date on that, if I recall correctly, to demonstrate, like, their plan and their readiness to implement.

And so there's a number of things going on.

We need to plan, colleagues, for any number of scenarios.

But I don't want one of the blockers to a successful rollout of the levy should voters pass.

to be us trying to figure out, oh, where should we reallocate these beans and this and that?

Let's have these conversations now.

Principles of good governance and transparency demand and require that we have these conversations now.

So I really appreciate the partnership and collaboration with the executive and SDOT and the chair's leadership on this and helping to ensure as much as well.

Thank you.

SPEAKER_04

Thank you, Council Member Saka.

Dan, my question is just a jumping off point from Council Member Saka.

The 5% reduction, did all departments take 5% reduction or some of them?

SPEAKER_10

I know it was a range, Council Member.

SPEAKER_04

So not all of them?

SPEAKER_10

Correct.

SPEAKER_04

Yes.

And the ones that didn't just stayed maintained?

what they had, so no reduction.

So it's not so just very clearly only some of the departments took a 5% reduction and some took none.

SPEAKER_10

I would say all departments took some reduction and some had some of that money restored in other ways, new spending that was happening.

Sometimes we applied the savings to do the things that we felt needed to happen in 2025, either because, as I'll discuss later, they were started in 2024 and we needed to fund those things or because they were top priorities for new spending.

SPEAKER_04

Understood.

I just want the public to be clear that not all departments actually took this 5% cut.

that some didn't at all, whether we backfilled with other.

At the end of the day, they didn't take any because this goes to services and the services we're providing.

And then some did take up to a 5% cut.

SPEAKER_10

Council Member Saka asked a very high-level question, which I tried to answer straight.

There are a number of reductions that happened in departments that were perfectly balanced by expenditures that happened in other departments.

So, for instance, The Graffiti Rangers in the Seattle Public Utilities Department are no longer employed at the Seattle Public Utilities Department.

They're now, in the proposed budget, employed at the same rate of pay, the same number of people, just organizationally, they're shifted to the parks budget.

So that's included in the $80 million because it's a reduction to SPU's general fund-supported budget, and it's an increase in parks budget

SPEAKER_04

budget so it's offsetting so i was giving you the highest level it's complicated is is the next level answer but you don't lose that service and i think at the end of the day that's what the public really cares about the this is back of the napkin um uh in the weeds that you're describing at the end of the day the service is here in one department or another the very same service at the same level that it's currently at.

And then speaking of the graffiti rangers, I appreciate Council Member Moore, your comments about the fact that our public safety budget is very similar to cities across the state.

the country, particularly of our size, and we've grown a lot over the last 20-something years.

I want to also just expand on the public safety.

What we mean by public safety, what is in the budget for this, includes My assumption is SPD, FIRE, the Care Department, and some programs out of the Human Services Department.

Am I correct in that, Dan?

Ben, if you have.

SPEAKER_12

In the crudest level, in the way that the pie charts are constructed, it doesn't include HSD, but it's not to say that there aren't programs in HSD that serve that function.

Some might argue whether some of the things under public safety are strictly ...

The civil side of the law department is in that piece of the pie.

It's a high-level pie chart.

I wouldn't read too far into it.

And the city attorney.

Yeah.

SPEAKER_04

again i just want the public to be aware because i think when you say public safety a lot of folks go to just spd naturally so but this also includes fire thank you for saying city attorney i forget i forgot about them sorry city attorney if you're listening um you're an important piece of the puzzle um and then the care department which is in your department

SPEAKER_12

Actually, to sort of answer a question Council Member Moore raised earlier, I haven't done this look recently, but I would actually expect in cities, in many other cities, a percentage going to public safety is actually higher, in that we as a city provide a richer set of services in other areas, like in parks and libraries and other places, than many other cities.

choose to or can't afford, so that actually the percentages of anything is low in our budget relative to other cities.

SPEAKER_10

Yeah.

That's absolutely correct.

In that pie chart, we just bucketed whole departments for simplicity's sake, but there's a whole bunch of programs and spending that happens out of HSD that is clearly helping with public safety violence intervention steps, and I'll talk about that in some coming slides.

SPEAKER_04

Thank you, Dan, and thank you, Ben, for level setting and correcting my, the 49% is actually lower than in some other cities.

Thank you.

You're back.

SPEAKER_15

Thank you.

Council President.

SPEAKER_03

What you're hearing is some questions from council members about change in funding by department.

And I think that there was a really helpful slide in maybe it was last year's CBO presentation or the year before that showed the change in funding by department.

It, for example, showed human services having the greatest share of increased funding, and then there are some departments that had decreases that was on the other side of the line.

So I don't know if that's possible to recreate, but there's probably a spreadsheet around here somewhere where new numbers could be filled in.

I would think that would be maybe helpful.

SPEAKER_12

I haven't fully fleshed out what it will look like, but we're planning to do sort of a high-level overview for you as well.

In addition...

We're currently actually populating a set of high-level papers for each department that will highlight budget changes and provide you some narrative on that.

So that would let you look department by department, but we can also pull together something that sort of shows that comparison across.

Another point just to make in the context of the 5% on average, it's important to recognize that to the extent that police, excuse me, that public safety were largely held harmless, and again, I haven't dug into all the details, that implies that the average for all the other departments is actually higher than that.

So just in terms of understanding what the challenge that was faced, and as you go looking into budgets, you might see, and do the calculations, you'll see percentage reductions were larger Again, if we needed to take 5% overall on average across the cities and the public safety departments, which are virtually half, were held harmless or roughly harmless, that would imply on average there were bigger cuts for the other departments.

But again, we will bring you the detail of all that.

We'll start with actually the departments showing you that analysis, and then we'll also follow up with additional looks.

SPEAKER_15

Thank you.

Council President, anything further?

SPEAKER_04

Yep, I took my hand down.

SPEAKER_15

Great.

Council Member Rivera, is that a new hand or an old hand?

SPEAKER_04

New hand, sorry.

Can I just confirm also, I don't want to forget our partners in the Seattle Municipal Court.

Are they included in that public safety bucket as well?

Yes, thank you.

SPEAKER_15

Fantastic.

Colleagues, any other questions at the moment?

Back to you, Director Eater.

SPEAKER_10

Next slide, please.

OK, so this slide is showing in green what the current act.

Yeah, sure.

The current actuals and current forecast are for the payroll expense tax.

Draw your attention in particular to 2025. I mentioned the $430 million number.

That is what OERF in August forecast would be coming in next year, and we have proposed to spend $430 million.

The green bars are the current forecast and some past actuals.

The blue bars are what the forecast was when the PET was enacted.

And you'll see that the green bars are towering over the blue bars.

There's a yellow line that just traces the top of where the blue bars are.

It gives you a trend line for what was expected.

And then piercing through that yellow line is the green bars.

The current forecast is above, every year, the expected amount when the PET was announced.

We are proposing to spend, I'm giving you broad brush, it's not exact dollars, but it gives you a flavor of the approach that we took.

We are proposing to spend all of the green bar that is above the original forecast on general fund support.

And that includes the amount in 2025 and 26, but it also includes the good news that we got.

I mentioned that After the close of our books, we find out what the actual amounts have been for past years.

We had a buildup of funds coming in from 2023 and 2024. Those are one-time revenues.

They're not expected to be ongoing, but they are just past amounts that were in our fund balance.

We have also applied on a one-time basis that money to help balance the general fund.

There's an inherent choice here.

We could have used the extra money that has come in the door to, for the first time, begin funding the four categories that I'll talk about in a minute that were included in the original enacting legislation.

That choice has not been made by city leaders in past years.

The extra money has gone to support the general fund in each year from 2021 through this year, 2024. If If we didn't make the choice to continue, and this is a proposal, you'll be considering whether that's the right choice or not.

But in our proposed budget, we made the choice to continue the practice of taking excess payroll expense tax and supporting the general fund.

If you didn't do that, every dollar you don't do that with means you need to take a reduction in the general fund because it's otherwise out of balance.

So that's just the tension that I'm queuing up as a choice that you'll be grappling with just as we grappled with.

SPEAKER_15

Thank you, Director.

Before we move on, Council Member Moore and then Council Member Saka.

SPEAKER_17

I'm sorry, I'm a little confused on that.

I thought that prior to last year that we were not taking all of the extra money.

We were taking up to what?

Can you explain again?

Because I don't think we were taking all of the extra money as being proposed now.

SPEAKER_10

Well, I reached my conclusion.

I think maybe it's a question of how I framed it, and I apologize if I didn't frame it the way you're thinking about it.

Current spending is roughly tracking the blue bars.

So practically speaking, the city has been spending...

the level of PET on the PET allocation categories, housing, Green New Deal, economic development, and EDI, at about 230-ish million dollars.

That's the level we have been funding those categories.

But we've been getting more money.

So some of it has been, I think you're accurate, that some of it has been used to support the general fund, still more has come in and has been put into fund balance and is now available to begin supporting the general fund.

SPEAKER_17

Right.

But the policy choice that you're asking us to make is basically to take all of the excess and to put it into the general fund rather than to take some of that and put it in the general fund and take the other remaining excess and put it back into the four categories.

Because we could certainly increase the amount that we're putting in each of those four buckets.

Is that correct?

SPEAKER_10

That is correct.

And if you do that, it's a choice that you will have to decide whether to make.

If you decide to do it, however, you'll need further reductions in the general fund that the proposed budget doesn't include because we decided that we didn't want to propose those reductions.

We preferred to have the excess amount above the yellow line that I'm showing in this graph come into the P.E.T. I'm sorry.

Thank you.

Come into the general fund.

SPEAKER_17

Yes and no.

Thank you.

SPEAKER_15

Thank you, Council Member Moore.

Up next is Council Member Saka.

And then again, Council President, is there a new hand again?

SPEAKER_99

Yeah.

SPEAKER_13

Great.

All right.

Thank you, Mr. Chair.

I guess first off, I'd like to note that...

So...

I guess going back to the graffiti rangers, graffiti remediation specialists, it sounds like that particular line of business was consolidated, can consolidate, cut, raise revenue, any number of things.

Sounds like that was a consolidation of personnel from SBU to Parks.

I would like a list of all the consolidations that are occurring under this proposed budget.

One of the canonical examples the Chair and I floated around earlier just for illustration purposes, all the arborists over here.

This is one example, park rangers, or excuse me, graffiti rangers, but yeah, we just love a list of what's all being consolidated here.

On to build upon the line of questioning from Council Member Moore with respect to the policy decision that we're being confronted with as part of this process, threshold gating issue.

So all the excess information So is this budget, proposed budget, is it pegged to the excess of the original 2020 estimates that assumed a linear 2.5% increase in inflation?

So the original, which is not the same thing as the actual, of course, and we've seen record inflation.

I'm seeing a head nod, yes?

SPEAKER_10

Yes, that's correct.

SPEAKER_13

Okay.

Any sense of what the actual inflation numbers were?

And what impact on this budget, if we adjusted for, based off the actual level of inflation, any sense of how much money we'd be talking about there?

SPEAKER_10

I haven't done the math, but I'm happy to get back to you on that.

As you'll see in future slides, this is looking at only the PET as one of the many sources that fund the categories that receive PET.

And you'll see that From our perspective, it makes more sense to look at the larger, all colors of money perspective and see whether we have decreased, maintained, or increased the overall amount of funding that is going to the four categories that I mentioned before.

SPEAKER_13

Yeah, thank you.

Those 2020 estimates were obviously very conservative, and we've seen, again, record inflation, so would definitely love to see the actual numbers there and what kind of potential impact that would have.

SPEAKER_12

Yeah, we can do that.

I'll take a moment to...

pull your argument out and speculate a little bit.

So given that we had a year of 9% inflation followed by another of six and some of, could easily be 15% more cumulative inflation than had otherwise.

And again, that is, I'm doing off the top of my head, right?

But just I want to illustrate this point.

15% off a base of a couple hundred million, that's about $30 million.

That could be as much as $30 million if you did an inflation-adjusted version of what the original PET forecast had been.

That would be $30 million more.

To the point that Director Eater has made before, given the structure of the budget before you, if you were to try to put $30 million back into what had been the initial PET categories, we either have to be blessed with $30 million more of revenue in the next month, or you will have to find $30 million of reductions essentially from the general fund to do that.

And that's not to say that that's impossible, just to be clear about what the frame is here.

Another possibility is to revisit the application to the reserves, something you mentioned before.

So those are, but again, I just, there's very zero-sum nature right now between the PET and the general fund.

That is a situation that...

that we face in in my mind i mean what's been proposed doesn't really surprise me we were looking back at these issues in february march just sort of internally and could see that it was going to be that this sort of approach was was at least one obvious way to to bring the budget into balance absolutely no that that

SPEAKER_13

impact and potential policy decisions is not lost upon me.

So, but I appreciate the level set and clarification there and what we're being directly confronted with.

So October 22nd looms large and, and, you know, like fingers crossed, hopefully we're going to be confronted with rosier than, than originally projected numbers and, or, You know, it might cut the other way.

We might have to figure out...

Or how we're going to close that gap, I'll say.

And so let me just signal now, if we are...

If it is rosier, if the actuals are rosier in October than originally projected, I'm thinking about three high-level opportunities.

One is...

I guess in line with Councilmember Kettle's earlier, earliest comments, just reserves, rainy day fund, emergency funds, revenue stabilization.

I'm also thinking about...

you know, PET reserves.

And potentially, along the lines of what Councilmember Moore was earlier suggesting, potentially better living up to and kind of restoring some of the investments.

And we can tweak around the edges or however much we so choose as a body what are the appropriate investment amounts for those four categories, but better funding those.

So that's a second item.

And do we do it on a, and how much do we contemplate?

That's why I want to know this data.

Do we do it based off of actual inflation?

Do we factor in a catch-up or a true-up amount?

What if we invested all that over time originally?

I don't think we're going to see anything rosy in the projections to allow us to do that, but there's a lot of factors.

And then the third thing is, Because you did mention Director Eder at the outset.

Well, if the October 22nd final numbers are rosier than projected, then we could potentially spend other things, right?

That's why I kind of anchored on reserves, whether it's PET and emergency funds, et cetera.

I don't want to just immediately start spending, but to the extent we do need to spend, I'm thinking about it through the lens of three things, three spending categories, public safety, public works, and public parks.

Public safety, well, we all ran on it.

That's what the public demands.

And it's really part of our core charter responsibility.

And public works.

And I'm setting aside utilities from public works because those are funded principally by rates.

Really, I'm just talking about SDOT for public works.

And that's why I'd also be curious to better understand to my earlier questions about the the number of reductions in because this budget assumes the levy does not pass.

What those are.

And then also public parks.

Those three items are the very most core, from my perspective, of our core essential services.

But at the end of the day, I think we're going to have to make some ruthless prioritization decisions.

It's all kind of a bit theoretical at this point at the principal level.

But that's kind of how I'm going to be approaching these conversations.

And then, heaven forbid, those projections go the other way, and we have to make some even more uncomfortable decisions, then those three things that I identified, those are gonna be the most sacrosanct.

And so anyways, just wanted to share that.

Thank you for that.

I would be curious to better understand some of those follow-up items that we discussed.

Thank you, Mr. Chair.

SPEAKER_15

Thank you, Council Member Saka.

And when you speak these potentialities into existence, can you please knock on wood?

All I'm asking.

Thank you.

Council President and then Council Member Kettle.

SPEAKER_03

So following on that, you talk about rosy or not rosy.

The numbers that I'm going to be looking at in the October forecast are the often sort of forgotten, because that is the B&O tax and the sales tax, because those two revenue sources indicate business activity.

And it's really important that we also keep in mind all the other businesses that are contributing to our to our general fund.

And a couple years ago, REIT tanked, and that was a huge thing.

So look at everything across the board.

Here's my question.

By my math, it looks like in 2025, the difference between 430 and 232 is 198. So is that what we can expect to see sprinkled throughout the budget is 100% of PET contributing to general fund expenses?

SPEAKER_10

I'll show you in a later slide that it is a larger number than 198, and I'll describe why.

SPEAKER_03

Okay, yeah, because I had heard another number previously in another briefing, which was 287, I think.

That's right.

I was wondering why the difference.

That's a big difference.

Okay, thanks.

That's probably underspend from last year.

That was going to be another question I had.

SPEAKER_10

So I may as well just dive in and answer the question.

Now, that is the answer.

It's not so much underspend as over-collection compared to the forecast.

So I mentioned that in 2023, when the books closed in spring of this year, we discovered that there was good news.

We had more money that had come in than was anticipated or forecast, and therefore more money than was spent in the 2023 budget.

That happened on a projected basis in 2024 with the August and also the April forecasts where we had more money coming in in 2024 now expected than was expected when you all adopted the budget.

So we have not spent all of the $404 million that is now expected.

So those two are the main sources for how we've been able to increase from, you mentioned, $198 million up to $287 million.

That's the amount that we are proposing to be used to support the general fund.

Okay.

SPEAKER_03

Thanks.

I look forward to that detail.

And where does the $20 million increased PET revenue that was voted on by council last year, where does that live?

Because some of that is going to expenses like organizations who are funded by the general fund.

So where can we see that $20 million or the $10 million?

I have an upcoming slide.

Okay, great.

SPEAKER_15

Director, before you continue, Council President, I'm going to ask if you can hold some of these questions until we get to the slides that they're demonstrating.

I think you've got a copy of the slide deck.

It's also on Legistar.

If you slide through it, you'll see that these questions will be answered shortly.

Council Member Kettle.

SPEAKER_14

Thank you, Chair Strauss.

You know, one of the things that I remember early on in one of our earlier select budget committee meetings is, you know, kind of comparisons, the changes that have occurred since like the PET came about.

And I bring this about, I ask this question because like on the public safety side of things, like with our recent bills, two that are going on the October 8th, the previous ones as well.

The arguments against those bills was really rooted in like 2012 and not thinking about all the reform, all the changes that we've had in public safety with the police department.

The fact that we have accountability partners now, the fact that even the council has changed with the districts and then we ran and we campaign and ran and now serve in those districts and have an understanding that is really focused on those districts.

And we bring this in terms of our understanding of our public safety challenges.

So a lot of changes.

I seem to remember in one of the earlier Select Budget Committee meetings, like particularly in these buckets with the PET, that we're going to have some graphics that show, like for housing and services, the changes that have occurred since 22. We now have a housing levy, for example.

And we need to have this kind of broader context.

And I thought there was going to be some type of graph or some type of product that showed this area of PET, but in the context of all the changes that have happened since its start.

And to get that familiarity, that understanding and have that context of PET, but within the greater context of what we're trying to do with housing and the like.

Am I misremembering that, Chair?

SPEAKER_15

No, you're not.

And I'm going to ask colleagues if we can hold our questions until we get through slide 23. Over to you, Director Eater.

SPEAKER_10

Okay, slide 18, just wanted to make sure that people were grounded in the actions that were taken in 2020 to enact the payroll expense tax.

There was a resolution that included an allocation methodology for how the money that was then anticipated to come in the door would be spread amongst four main categories, housing and services, equitable development initiative, economic revitalization, and Green New Deal.

This is a screen grab from that resolution.

We have tried to remain steady with these allocations in our proposed budget for the amount of money that is not going to either the PET Reserve or to the general fund in the proposed budget.

and I'll give you some more details about that coming up.

Next slide, please, Ben.

So this is a summary of the structural changes and answers the question that Council President was asking about.

You'll see three buckets of changes.

The first is that we are proposing that the PET continue to support the general fund, again, as it has for each of the last four years.

The level of support for the general fund from the PET in our proposed budget is $287 million, the number that you had remembered, Council President.

We also propose to fund a reserve for the PET hedging against future volatility at $43 million, which is 10% of the current forecast.

And then we propose to have $233 million that is spread to the four categories as described in the previous slide, as anticipated and called for in the enacting legislation.

Unless there are questions, I will proceed and dive into some of the

SPEAKER_15

We're gonna keep going, and colleagues, if you have questions, I have questions and statements that I'm gonna be making on some of these.

I'm taking notes with the slide number and what I wanna talk about.

So until we get through mental health funding, I'm gonna leave you in control.

SPEAKER_10

Very good, thank you.

So slide 20 is showing, I am now diving into each of those slides.

categories of spending that I described on the previous slide as being called for in the enacting legislation.

So the first is affordable housing, and that was the largest allocation.

It was called for at 62% of the forecasted revenues.

And what I want to highlight here is a lot of information, but I want to show you that over a 10-year period, overall, affordable housing Investments by the city have increased sevenfold.

We've gone from $50 million in 2014, we just went back nearly $340 million, $339 million in today's adopted budget, in the 2024 adopted budget.

And in the 25 and 26 proposed budget, if you agree with our proposal, affordable housing investments would be at a historic high.

We've never put any more money into affordable housing than what the mayor has proposed each year of the biennium.

I'm going to take you through the color of money here, and it'll apply in future slides, so I'll spend a little bit more time on this one, both because it's such a large amount of money and because it provides a map to how the future slides go.

You can see at the very bottom, there's different colors that are in the stacked bars.

The dark green is the levy that Councilmember Kettle was referring to.

It is substantially higher starting in 2024, and that's because the voters approved a new levy that is substantially higher than it had been in previous years.

In light green is the payroll expense tax, and you can see that there is a...

I think you can make out, it's a little bit small here, but there is a slight decline in the amount of payroll expense tax, which is going to support the affordable housing investments, which is more than made up for in the gray portion of the bar, which is use of fund balance and other sundry components of spending.

What remains is the orange bar or red bar, and that's the mandatory housing investment that comes to the city for us to put into affordable housing.

So when you add up all of those sources, PET is one of the contributors, but it is not the only one, and the other sources combined are more than the PET, in fact, so that there is a historic high in affordable housing investments in the mayor's proposed budget.

Are there questions about that?

I will not pause for questions following the chair's lead.

The next category is economic development.

This also shows a 10-year look, but we simplified things somewhat.

In dark green at the bottom is the general fund investments, and in light green again are the PET investments that came in.

through 2024 and then what's included in the 25 and 26 proposals.

You can see that we hit over the 10 years a significant high watermark in the 2024 adopted budget.

We are at the second and third highest levels of economic development ever.

in economic development in the mayor's proposed biennial budget, but it is not quite as high as it was in 2024. The next slide does double duty, and I haven't given you 10 years on each of these.

I just wanted to make the general point that both of these are on an overarching basis increasing year over year from this year, the adopted budget.

This is starting with Equitable Development Initiative.

We have increased the 2024 level of spending from all sources by a million dollars.

in the mayor's 2025 proposal, and an additional million dollars in the 2026 proposal.

The two colors of money here are the PET in this graph shown in dark green, and then I believe it's the short-term rental tax that makes up the balance in the yellow bars.

Turning to the Green New Deal investments and other climate action steps that are being taken in a variety of departments, the spending similarly increases from the 2024 adopted budget when you look at it from the perspective of all sources of money.

to high watermarks for the 25 proposed and 26 proposed.

In the interest of time, I'm going to move on to the last category, I don't remember who asked the question about money that was added for youth wellness.

The mayor's proposed budget includes $19.25 million for youth wellness, which includes student safety investments that are continuing from the mid-year supplemental, $4.25 million that the council approved a couple of months ago.

plus an additional $15 million for youth mental health.

When you add that up, it's $19.25 million.

It's not exactly the $20 million that was a ballpark estimate of what the change in the payroll expense tax would bring in, but it is the amount of money that we determined after working with public and nonprofit partners is needed to provide the services that are highlighted in a very summary form in this slide.

I wanted to draw your attention to the other ongoing student safety funding.

There's an additional $12.5 million of general fund dollars that is also I think very fairly captured in the overall spending, and it's in the same way of looking at overall spending, not just PET spending.

Student wellness investments up to close to $32 million each year of the biennium.

Did you want to pause for questions?

SPEAKER_15

Yes, thank you, Director Eater and colleagues.

Thank you for letting us just power through there.

I'm going to, if we could move back to slide 18, I see Council Member Morales has her hand up, but we'll just tick through some, I've got a question on slide 18 and a slide on 20. Once that slide is up.

SPEAKER_12

Sorry, one sec.

SPEAKER_15

You're totally fine.

Director Eder, it's helpful to have pulled this as a screen grab from where we were in 2020. As we get into some of these other slides, it's clear the impact that the jumpstart payroll expense taxes had on everyday Seattleites.

This, I just pulled this one up at the very bottom.

It says startup costs and ongoing administration.

I recall one of the, and in these other slides, you'll see we passed this with the jumpstart payroll expense tax in 2020. it really didn't make a meaningful impact in the city until 21, 22. I believe it was actually 2022 because we had to have a full year of implementation.

So the taxation started January 2021, and we didn't really have, we weren't able to fully budget for it until 2022. Is that a correct understanding?

SPEAKER_10

That is correct.

There was an Interfund loan that brought some of that money forward.

SPEAKER_15

And that was some of the ways that we were able to patch these gaps that we were having during the recession, during the pandemic, to make sure that Seattleites were retaining the services that they need.

We had allocated that 5% for startup costs because there were some significant startup costs.

Is that consistent with where we are going in the future?

Do we, and maybe Director Noble, work with you offline to just understand When we start a new thing, it costs a lot more than it takes to maintain a thing.

So that'll be the nature of my conversation with you offline.

But if you've got reflections.

SPEAKER_10

I can give you just a top line.

In recognition of exactly the phenomenon that you have identified, we did need more administrative staffing and expenses, associated costs to ramp up the imposition education and enforcement, et cetera, in the earliest years than we do now.

So we have decreased the amount of money that we are spending on administration lower than the 5% that you see here.

And that made more money available for the other categories.

SPEAKER_15

Fantastic.

And if we could go to slide 20 and then I'll pass it over to Council Member Morales as well.

This is just stunning.

And I think what stuns me the most is that in 2014, as we were in some of the fastest years of growth in our city, and we talk about displacement, but it really was between 2004 and 2014 that I saw District 6 change the most.

There are so many people that I grew up with that left the community because they can't afford the community.

But that change really...

had come to rest in the mid teens.

And that's why when we talk about the potentiality in other places of our city for displacement, it hits me at the core.

And at that time, we were only spending $50 million on housing.

It's wild.

I just also show, use this graph to demonstrate colleagues that the, again, the jumpstart payroll expense tax, I see people just calling it PET and payroll expense tax.

It is, we use a jumpstart fund.

This is the jumpstart payroll expense tax, putting that pretty firmly on the record here.

That those funds didn't come in until 2022, even though it was passed in 2021, just back to the previous comment.

Mandatory housing affordability, which was passed in 2017, started collecting those funds.

And I just demonstrate, if you look at just the mandatory housing affordability dollars, this is generated from development that's occurring.

And we see a delay in payment, for these projects when projects are delayed.

So when we're talking about the design review legislation that just came out of the Land Use Committee, when we're talking about streamlining, when we're talking about permit reform through the permit audit that I asked for and was completed, Those aspects are what contributes to the mandatory housing affordability payments.

If we're jamming our permit systems, if we're not being...

If we are creating systems that don't allow somebody to know that they can actually build a building, we're not getting those mandatory housing affordability dollars.

And you see that really drop off in 2024. We see this with...

real estate market slowing because these are usually about two-year delays from the project, right?

So the pipeline has shrunk incredibly.

And then I also look at pre-2017, we didn't have mandatory housing affordability And if, and Council Member Sacco, I'm knocking on wood when I say these things.

If we start slow growth and with the half point percentage interest rate drop, if we see the dry capital that's been sitting on the sidelines begin building our city, we're going to see that orange sector, that pink section of this graph take off.

I'll save some of my other remarks for later about permitting, et cetera.

But I share that because that's what stunned me about this chart.

I hadn't seen it like this before.

It's very helpful for me to understand where we've been and how we got to where we are today.

And back to that volatility, mandatory housing affordability is a bit more volatile.

Our jumpstart payroll expense tax is volatile.

Our housing levy is steady.

Sorry, Director Eder, I don't have a question.

I was just sitting up here talking.

SPEAKER_16

Go ahead.

SPEAKER_15

Council Member Morales.

SPEAKER_16

Thank you.

Can you go to slide 17, please?

And really, I wonder if you could just talk a little bit.

As I'm recalling, 2022, 23, our budget gap was about 140, 150 million.

if I'm remembering right.

So I guess my first question is, can you check me there?

But I'm also just trying to get a sense of how much, this back to what Council Member Moore was saying, how much of the excess revenue was used to help fill that hole?

And if it didn't fill the hole completely, what else did we use?

So if you could just talk a little bit about that trend, and then I have a follow-up question.

SPEAKER_12

Yeah, I'm done from memory, so I can't easily recall the deficit numbers.

I recall this year we're using $87 million, something like that.

That sounds right.

Yeah, $87 million of payroll expense tax is supporting general fund directly.

I think it's worth remembering that through 22 and into 23, there was significant federal relief dollars that were helping us, in my language, not bail out the general fund.

So that was another significant source as well.

And then it's also important to recognize that some of the difference in the increment showed up after the fact, so we didn't so that the final estimates, the final revenue results for 2023 delivered an extra $45 million that hadn't been budgeted at any point.

So, but...

The sort of bottom line is that we've been using a number of one-time sources, significantly the federal sources, to, again, my language, sort of prop up the general fund.

Right.

And also recognize that one of the dynamics that has set in in particular in the last couple years is that expenses are growing faster than the general fund is growing.

I say this a lot, but I always want to repeat it.

The property tax is becoming a shrinking share of the general fund.

It's a shrinking share because it only grows at 1%.

It's our steadiest source, but by state law, voter-approved things aside, but voter-approved things are not strictly going to the general fund.

So we've entered a phase where the growth in cities' revenues are at best keeping up with expenses and often less.

So the deficit grows itself and it puts more pressure on alternative funding sources either transferring in or raising new revenues.

SPEAKER_16

And thank you for that.

So this is a longstanding issue.

We know that there is a structural problem here.

I'm just trying to understand what our What are our options?

And I know that's the conversation we'll be having in the next several weeks.

Can you go to slide 19?

Just that simple chart that you did.

So I guess my question on this chart is, If we have right now a $250 million deficit, we're continuing $230-ish million in the existing spend plan.

We're putting some in reserve.

There's $287 million left.

Where is that other $37 million going if we have a $250 million deficit and $287 million available?

SPEAKER_10

There are reductions, as I described, and I'll get into some detail in coming slides.

There are also some additions, funding things that weren't anticipated when we did the original forecast, things like the settlement of labor contracts, the continuation of projects that were begun in, initiatives that were begun in 2024 and now have their first full year in 2025. So if I understand your question right, the math doesn't exactly add up if you're looking compared to $250 million because that was a static point in time estimate.

Okay, thank you.

SPEAKER_15

Colleagues, other questions on these last set of around jumpstart payroll expense tax.

Any other questions on these changes?

SPEAKER_17

Yes, I have a question.

SPEAKER_15

Council Member Moore.

SPEAKER_17

Yeah, thank you, Chair.

So I'm just a little confused.

I am trying to get my head wrapped around this.

So on slide 19, so you're saying we've got $430,000 from PET plus...

savings.

So we're starting at 520. You've taken 287 of that to the general fund, 19, 250 to student mental health, PET reserve, 43. So that leaves 170,000 not 170 million, 750, rather than the 233 that you've listed here.

So when you say 233 is being maintained to all the categories, are you including the money for the student mental health and the PET reserve?

SPEAKER_10

Yes, I should have mentioned that.

Thank you for bringing that up.

The $233 million pays for the four original categories and for the youth wellness investments.

That's exactly right.

It does not include the reserve.

It's separate from the reserve.

That's correct as well.

SPEAKER_17

Okay.

So with the original projection then for affordable housing, that would have been 135. And under the proposal, it's actually going to be 105. Is that correct?

SPEAKER_10

No, it's quite a bit higher than that.

I will find the exact number for you.

to say it's 133 because but that's from memory i mean that's correct it is 133 million dollars um in the 2025 proposed budget which i mentioned uh on this uh if you can show slide 20 please ben see the light green bar in the middle, that's the PET, from 2024 moving to 2025, goes down by a few million dollars, even though there's more money put in in the gray bar up above so that the total amount of all affordable housing spending goes from 339 to 342 million.

SPEAKER_17

Okay, but what I'm trying to get is clarity on how much is actually going to PET, to affordable housing, not how much total, not the total amount of dollars, but the PET dollars.

SPEAKER_10

That number is $133 million in 2025.

SPEAKER_12

And I'm doing this from memory, but I believe it's essentially 142 million this year, 2024. So it drops by that difference to 133. It's 140.

SPEAKER_99

140.

SPEAKER_12

Well, I stand corrected and thank you.

SPEAKER_10

And then in 2026, it goes back up closer to that 140 figure from 2024. Correct.

Okay.

SPEAKER_12

I think just this point has been made, but I'll just say one of the points of just sort of inherent confusion or complexity is that the original forecast, which we sort of have been thought of as a base in various conversations, didn't include the additional money for...

That's off a difference in the mass of essentially 20 million a year that you have to sort of figure out which side of, which column you want to put it in as you sort of do differences and the like.

So just to point out that as you do this math, don't forget that 20 million wasn't in the original forecast and is now part of the PET allocations, but again, wasn't part of the original set of percentages.

SPEAKER_15

Anything further?

No, thank you.

Thank you.

Colleagues, any other questions on Jumpstart?

I will share, colleagues, usually we have a set lunchtime of no later than 1 p.m.

because we have departments coming here or we have central staff analysts scheduling their day around when we break.

Today we have the benefit of just having Director Eder and Director Noble in front of us.

We have about 10 slides left, and they're very meaty slides.

So I'm just going to kind of take a poll right now to see if folks want to take 30 minutes right now and then work through the rest of the day, which I would suspect would be about another hour, hour and a half.

or if folks would just like to continue moving through right now.

But where I'm seeing us in the presentation is once we start the next slide, we're going to the end.

So that's why I wanted to take a poll, maybe thumbs down, thumbs up on taking a half an hour recess right now.

I'm seeing...

Am I the only one that wants to press?

Man.

You must be eating your Wheaties this morning.

SPEAKER_13

I guess I'm a machine then, Mr. Chair.

SPEAKER_15

So, colleagues, with that, the vote is overwhelming.

Not unanimous.

Darn it.

But I will, if there's no objection, the Select Budget Committee will be in recess until 12.45 p.m.

And at that point, we will...

be on the dais until we're done so just awareness and this is a this typical change in in lunch is not typical so i just also want to note that hearing no objection the select budget committee is in recess until 12 45 p.m thank you