Seattle City Council Finance and Housing Committee 8/17/22

Good morning, everyone.

Today is August 17th, 2022. The time is 9.35 AM.

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

Will the clerk please call the roll?

Council Member Herbold.

Here.

Council Member Peterson.

Present.

Council Member Nelson.

Present.

Council Member Lewis.

Present.

Madam Chair Mosqueda.

Present.

Madam Chair, that is five present, none absent.

Okay, wonderful.

Well, good morning, everyone.

Thanks again for joining us.

I'm happy to have all of you here with us today.

We do have a full agenda.

Colleagues in front of us today, we have the three bills related to cannabis equity for briefing discussion and possible vote.

I wanna pause to make sure that we don't have any background noise.

Everything going well on the Projection Seattle channel?

Looks like we have a little bit of background.

Okay, I'll try that again.

We have on our agenda today, three bills related to cannabis equity legislation for briefing discussion and possible vote.

Thanks to all the colleagues who have submitted their amendments and have worked with central staff to include those in the publication.

For today's material, as I noted to my colleagues, we will have at least one walk-on amendment.

Thanks to Council Member Nelson in partnership with me and on our office, we will have a joint walk-on amendment for your consideration as well.

We will then have at least three items related to our budgeting and forecasting.

We'll have an economic and revenue forecast August update.

This is a presentation from last Monday's office of economic and revenue forecast projections that was presented to the forecast council.

We'll have a general fund finance financial plan update from central staff.

and we'll have a quarterly Seattle rescue plan spending update if we have time, time permitting.

I want to thank in advance the folks from the city's budgets office, the economic revenue forecast office and our own central staff for the incredible work that they've done on these items.

I will note that there is an additional two materials that are linked under meeting details on today's finance and housing committee materials.

These are related to agenda item number five.

And unfortunately we're inadvertently left off of today's materials in the agenda.

So you can find the link to both a central staff memo and a PowerPoint presentation for agenda item number five linked under meeting details.

And for colleagues on the committee, you have also received an email from our office to link you directly to those materials.

So it's a packed agenda.

We did ask if folks could please hold the time until 1230 today to get through all these items.

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

Seeing no objection, today's agenda is adopted.

Colleagues, I wanna thank you again for continuing to participate as much as possible remotely and to members of the public as well for continuing to wear a mask if you are in public.

And to all of those who continue to call in via remote public comment, we do encourage people to call in remotely to limit the number of people who are in the chambers, as we are also asking all the presenters from central staff, the mayor's office, community partners who would normally be at the table with us to also participate remotely.

So thank you for continuing to do that as we seek to try to bring down these COVID rates even further.

Madam Clerk, will you please tee up the public comment and we'll head right into public comment.

Yeah.

Okay, if the video is not available, I'll go ahead and read the script.

Okay, I'll read the script.

Colleagues, we do have folks who signed up remotely and in chambers.

We will have the folks who've signed up remotely to present first.

There's about five people present to present remotely.

And we have a handful of people in the audience as well, about eight individuals who've signed up to provide public testimony.

As a reminder, you will have one and a half minutes to provide your public comment.

That will allow for us to get through the full public comment and get to the items on the agenda today.

You will hear a chime at 10 seconds or you have 10 seconds remaining.

Please do wrap up your comments.

And if you have any additional comments, you are welcome to send those into council at seattle.gov.

That's council at seattle.gov.

Okay, wonderful.

So let's go ahead and get started with the three folks who are listed first to sign up for public comment online.

That's Adan Espinoza, Jr.

Cody Funk of Thunderbunk, and Zion Gray-El.

Good morning, Alan.

Just star six to unmute yourself and make sure your own phone is off mute too.

Yes, I believe so.

Can you hear me?

Yes, I can.

Go ahead.

Okay, thank you.

Good morning, Chair Mosqueda and committee members.

I am Aiden Espino Jr.

The executive director of the craft cannabis coalition and association of family owned cannabis retailers, including over half of retailers in Seattle.

I would like to provide comments regarding continued concerns we have proposed amendment language to the cannabis needs assessment, the criteria continues to be very specific.

and directing the executive toward selecting an organization with close ties to UFCW, a stakeholder in the process.

That organization being We Train Washington, and the connection being the president of UFCW 3000 is also the president of We Train Washington.

We have asked if there are any other credible nonprofit entities that Dr. Khatir has written, and so far no one has been able to offer up any.

We appreciate Language putting a college at the helm, but they still have to partner with an organization like We Train Washington.

This is a significant enough issue that it could potentially make it difficult, if not impossible, for the CCC and its members to participate in the needs assessment going forward.

The CCC supports a fair and neutral assessment to identify real and pressing social equity needs, but putting a stakeholder into a controlling role would not be that.

We hope you will agree that giving one stakeholder more control of the process or greater representation within it would be inappropriate.

Thank you for your time.

Thank you.

Cody Funderburg, followed by Zion Gray-El.

Good morning, Cody.

Star six, unmute.

Hi, good morning, everyone.

My name is Cody Funderburg.

I've worked in the central district as a bud tender and medical cannabis consultant for Ponder since 2018. I'm calling today in support of the proposed amendments by Council Member Teresa Mosqueda.

As an industry worker, I can't understate the importance of having high standards for conducting cannabis needs assessments to the benefit of limiting bias.

If these assessments are conducted by a nonprofit entity with expertise in training and development, we can better assure accuracy and impartiality, which will benefit the overall intent of the proposal that we have here.

In addition to that I feel that the advisory committee would be better served by the presence of representatives of labor who stand to leverage the interests of cannabis workers beside owners.

I'm also calling in support of the proposed amendments to section 3. I think it's crucial that expungement involved the collaborative efforts of those with lived experience in the criminal justice system.

However subtle these nuances you have dramatic effect on the intent of the proposed amendment.

Explicitly naming and including labor rights, communities negatively affected by the war on drugs, and those with lived experience in the criminal justice system actively defines intentional elements of inclusion and justice within this proposal.

Thank you.

Thank you very much.

And then the next person is Zion Grayill, followed by James Adams and Paula Sardinia.

Good morning, Zion.

Can you hear me?

Yes.

All right.

My name is Zion Gray-Eel.

I want to say good morning first off to Chairman Mosqueda and the committee members.

I've spoken at these meetings a couple of times in the past.

Again, I'm here to support the legislation.

I also voice my support for Councilwoman Mosqueda's proposed amendment.

I fully support Cody's statement that was just made earlier, especially in regards to having the specific groups involved in the works.

I also would like to acknowledge the Freedom Project for being on the forefront of this expungement initiative.

I think We Train Washington is an absolutely amazing organization and would be ideal regardless of their association, their capabilities, and what it is they can provide to the vision is pivotal, in my opinion.

I agree that it's very important to appoint workers, industry members, and key community members to support the cannabis needs assessment.

I believe Ms. Nelson's amendment proposal was, in my opinion, too owner-investor specific in regards to its composition.

I personally feel that there are other groups that are involved in the cannabis community that will lose the opportunity to be considered under Ms. Nelson's specific proposal.

Again, I'd really like to be on this advisory committee that will help do the research and provide assessment and analysis on this ordinance.

I just want to end it by saying the legislation is off to a good start.

You heard me advocating for cannabis.

I'm going to keep doing it and we have a lot of work ahead of us.

I'm confident that we can get it done.

Thank you so much.

Thanks, James, followed by Paulina Sardinia.

And I want to know Gabrielle Prowl is listed to speak, but not present.

Gabrielle, you can still call in.

James, good morning.

Star six on you.

Good morning.

Thank you so much for letting me talk here today.

My name is James Adams and I am a lead bartender at Mr. Green's Cannabis in North Seattle.

and a union steward for UFC W3000 and I strongly support the workers protection piece.

When Mr. Green broke off from its parent company, a few of us employees were fired.

A majority of us were retained by the company.

It was extremely stressful because we all felt like we were on the chopping block and we were very replaceable and treated as such.

We need to protect cannabis workers' rights Businesses are bought and sold regularly, and the workers have little to no rights when that happens, and we are replaced.

This act would protect workers when a business is sold and make it so that the new owner can't fire and replace the workers that built the company beforehand.

Cannabis is still federally legal.

Workers in the industry have little right and are exploited on a daily basis.

And I think that these amendments would have a great effect on the workers in the city of Seattle.

Thank you very much for dialing in.

Last person who's present online is Paula Sardinas.

And Gabriel, if you're still listening, you are eligible to dial in.

Good morning, Paula.

Good morning.

My name is Paula Sardinas.

I'm the president and CEO of FMS Global Strategies, the founder of the Washington Build That Black Alliance.

And we support 714 African-Americans left out of I-502.

We passed cannabis banking bill, Senate Bill 5928. We were the drafters of Senate of House Bill 2870, creating the social equity program and worked on HB 1443. We are the largest, most unified voice representing African-Americans in the BIPOC community in cannabis.

and we do not support certain provisions of this amendment.

We support worker protections and commend Chairman Scato and the city of Seattle for having the strongest worker protections probably in the state of the country.

We're in support of the amendment put forward by Sarah Nelson simply because we understand this issue having defeated House Bill 2361 and Senate Bill 6393 that UFC brought on the table.

And talking to members of the community We cannot build this program on the backs of social equity applicants.

We think that there is a better way to do this.

If we move forward with a needs assessment, we have worked on Black banking, state banking, and social equity issues with UW, WSU, and the state universities.

They are well qualified to do this work.

They are nonpartisan and will bring the lens of equity to the work.

I think having a provision and an amendment funded by taxpayer dollars that gives money to a particular entity is neither equity or equality.

Thank you.

Thank you.

And I still don't see Gabrielle listed as present.

So we're going to move on to folks in the room.

Good morning, Marguerite Rashad, Peter Manning, and Sikani Perkins.

Good morning, Marguerite.

Yes, good morning.

My name is Marguerite Richard and I'm from Seattle.

And my concern here, I circled it, it's called an ordinance relating to employment in Seattle.

That's deep, because when you talk about the indigenous population, black, indigenous black people, homeless out on the street in the drone man or whatever his name is, homeless authority man is coming up in here on the day.

This stuff is not a joke.

It never has been funny.

And I don't know what this means when you're relating to employment when a lot of people aren't employed.

I mean, deliberate actions to keep them unemployed.

I know folks that lost their home here in Seattle for no reason at all.

It was just indigenous black people and somebody came out the woodworks to assault them and take everything from them and make them crippled.

And so I want the payment right now.

I'm not waiting for Congress to wait for nothing, no.

We just gonna do that, because we true to that.

That's what we're gonna do.

We're gonna demand what we need to make our people survive in this country.

Right now, not tomorrow, but now.

Bye.

Thank you.

All right, guys, we're gonna ask folks to hold their applause.

You can do this.

if you'd agree.

But please, yeah, exactly.

We gotta keep going.

The sister says something very powerful, man.

I get moved when I hear reparations, and that's accountability.

I mean, that's what we really need in this country is reparations, I believe.

Right, guys?

We can go ahead and start your time again.

And good morning, Mr. Peter Manning.

Hi, my name is Peter Manning.

I'm with Black Excellence in Cannabis.

We at Black Excellence in Cannabis, we are opposed to certain things with unions and this uncertainty, how that's all going to play out, the non-profit organizations, we're not really feeling that.

We actually are leaning towards what Nelson, Council Member Nelson, is talking about.

This amendment is where it specifies independent academic institutions.

We're completely with this being done with schools because if a school is involved in this, there's going to be no ulterior motive.

If anyone else is involved in it, it could be an ulterior motive that's gaining influence over an industry that is in King County void of black and brown.

We don't need anything that might impede or prevent us from getting somewhere in cannabis, but we're not even there yet.

So Black X in cannabis is in support of what the amendment that Council Member Nielsen is putting forward.

Thank you.

Thank you so much.

The next person is Sikani Perkins, followed by Alex Zimmerman.

Good morning, and please correct me on the pronunciation.

Excuse me, good morning.

My name is Sakani Perkins.

I'm with the CLI, the Community Leadership Institute, as well as PLC, the Political Leadership Council, all under Puget Sound Sage.

My twin brother and I, Sakai Perkins, initially opened up the Green Thumb Collective, which is Therapeutic Herbal United Medicinal Branch in 2011. We were here from 2013. Subsequently, we were targeted and sent a letter stating the reason we were told to shut down was due to a preschool located in the basement of a church in West Seattle.

So I feel that we have been exploited, and I feel that I need to get the information out, although they already been advocating for the African Americans and the BIPOC community affected by this.

I just felt it was imperative for my voice to be heard.

So that's all.

Well, thank you.

Thanks for presenting today.

Nice to meet you.

All right, I see some hands.

And I know people can see those online too.

So Sekai Perkins?

Excuse me, there was two, Sekani and Sakai, and then Alex Zimmerman.

Yeah, there you go.

Good morning.

Good morning.

As my brother stated, my name is Sakai Perkins.

I'm a former owner and co-founder of the Green Time Collective.

Like he said, we opened in 2011, we're forced to close in 2013. Based on technicalities, being restricted to boundaries or whatnot.

I believe we were intentionally targeted based on other collectives in the industry located within the same vicinity, still being able to operate.

As individuals who are considered Black or ADLS, share similar experiences regarding systematic racism, I feel that it is not only a need for us to be heard and not silenced.

Our voices are very important, especially when it deals with our community.

Nobody should be able to police what we do and stand for based on the history of what America has shown.

People of my Okay.

You're welcome to conclude.

You can keep going.

Thank you.

Okay, thank you so much.

The next person is Alex Zimmerman, Gianni Corbano, and Matt Edgerton followed by Mike Asai.

Good morning.

Your time is running.

Sieg Heil, my lovely damn Nazi fascist bandit and psychopath who speak to us from the heaven.

My name is Alex Zimmerman, and I want to speak about agenda number four, about local August forecast.

Thank you, Consul Mosquito, for a good job, as you did in all consuls.

for the last time.

You know what I mean?

Gas, for example, falling by 5 cents.

It's very good.

You know what I mean?

Homeless are most disappearing in Seattle.

I don't see more homeless in Seattle.

It's very good job too.

Price for apartment, for example, falling by 20 percentage.

So right now all black and poor can come back.

It's very important, too.

We have 25,000 apartments empty, so everybody can rent this apartment now.

It's very big progress, what we have this.

A very good progress.

Nothing, nobody killed for last few months, so people don't stop and use gun right now in Seattle.

It's very important.

We have not enough policemen.

It's good, too.

Less policemen, more freedom.

I understand this, absolutely.

Yeah, so what is next step?

Oh, what is we have next?

What is we have next?

Ah, food price.

Food price falling down dramatically because inflation right now is zero.

It's exactly what is you talking to people right now.

So right now, stand up America will have a very good life.

Thank you.

The next person is Drioni.

Good morning.

Yeah, it's Brionne Cobray.

I'm so sorry.

It's all good.

Brionne, that's a B.

Got you.

Good morning, my name is Breon Cobray, and I was the owner of The Game Collective, and I was also the first African American man to, or person, period, to open up a medical marijuana collective here in Seattle.

And then, of course, because of the color of my skin, I was victimized by the system.

My store was taken away.

In fact, the exact same places where my store was located, there are white people running marijuana stores out of it.

It was a crying shame what you guys did to us as African Americans in this state of Washington.

Again, it's supposed to be a progressive state, but the actions say otherwise.

If it wasn't for the hard work of Black Excellence in Cannabis, we wouldn't be here today talking.

You guys would have just walked away and left us with nothing.

The hard work that we had put into our businesses, the amount of money and time that we put into our businesses to make them what they were at that time seemed to not make a difference.

And we were, again, locked out of an industry that seems to be repeating itself throughout history where lucrative industries that open up aren't open up to people of color.

And so we wanna make sure that the city of Seattle understands the importance of giving us back our stores.

Thank you.

Thank you.

Lots of hands.

Matt Edgerton followed by Mike Asai.

And the last person I have signed up is Amira Zida.

And if there's anybody else who'd like to speak, you still have time to sign up.

Please go ahead.

And good morning, Matt.

Hey, good morning.

So I'm Matt from UFCW, cannabis division.

And I just wanted to, yeah, we came about two years ago, started a process.

with a lot of stakeholders, people from over 42 organizations, surveyed a ton of cannabis workers about potential public policy changes to be done at local level because we know the state's kind of not moving and we need to move stuff locally.

We proposed a lot of stuff to the city, a lot of stuff that's not here, like funded training, social equity fund, but this is a good start.

And I am very glad and appreciate the mayor's office and the council for getting some foundation going.

I do wanna address this needs assessment stuff.

and We Train Washington.

And We Train Washington is an intermediary that sits besides, it's a labor management organization.

Our interest as a union and what we hear from workers is that we really want worker voices and needs to be really a part of that assessment.

And that's part of implementation.

That's running surveys, that's doing focus groups, that's something that is actually a function as opposed to the publishing of this.

this is gonna be a deliverable back to the city that's gonna need to be reviewed.

And the results are not gonna be like, when you take worker needs, employer needs, they're gonna be different results in a survey, but where they align, that is like where there could be focus on this.

And this is something that I'm out of time.

So thanks.

Thank you very much.

Mike Asai followed by Amira.

Good morning.

Good morning, Mr. Asai.

Good morning, Council Member Mosqueda, and good morning, Council Members and the public.

My name is Mike Asai with MOC Collective.

We were the first Downtown Seattle Collective 2010-2011.

There should be no question if Emory City Collective and Black Excellence in Cannabis are in support, are in full support of social equity and cannabis.

Of course we are.

We appreciate the support from the mayor and city council regarding cannabis social equity.

We are in full support of cannabis employees' rights and protection.

We stand here this morning in support of Sarah Nelson's amendment regarding the independent academic institution to help with the worker training and worker protection.

We're not here to fight.

We just are have the concerns when it comes to union being attached to social equity.

I find the recent comments from local and national media regarding social equity applicants being drug traffickers and selling to kids is racist.

This is an example of white supremacy causing more trauma to the black and brown community.

Emerald City Collective never sold to kids.

We never had any city or state violations.

We stopped allowing under 21 year old patients to be members of Emerald City Collective.

We black and brown pioneers helped create a thriving cannabis we see today in CDC.

We are sons, daughters, fathers, mothers, uncles, aunties, businessmen and women, American citizens.

We are not drug traffickers.

We are cannabis pioneers wanting our business back to start the recovery of trauma done and millions lost while including in new black and brown cannabis businesses owners.

If you have the rest of your sentence that you'd like to finish, you're welcome to.

Yeah, that's fine.

Okay, I was pretty much done.

What I wanted to say is that, as you can see here this morning, we have a handful of former pioneers here that were black, and there's many more out there that black excellence in cannabis, Emerald City Collective is bringing to the forefront.

We are in the pioneers and we just want to be heard.

We don't, we feel like as if the city has kind of drowned out the pioneers.

Uh, we appreciate everything that's going forward, but we just want to make sure that people know that, uh, there were blacks that were thriving and had the model that you see today.

Thank you.

Thank you very much.

Uh, and, um, I mean, uh, good morning.

Welcome.

Thank you.

Hello, okay, can you hear me?

My name is Amira Ziada, and I work at UFCW 3000 in the Cannabis Division.

And I just kind of wanted to address this sort of, I don't know, fear mongering that I'm hearing around UFCW.

We are a union.

What unions do is make sure that, you know, businesses thrive for the workers and for the owners and make sure that working conditions work well.

And one thing that I keep not hearing from most of these people is Yes, we need equity for ownership, we need equity for marginalized communities, but we need equity in the workplace too.

A lot of the people that work in these cannabis stores are black and brown people, are from marginalized communities, and a lot are women of color.

And so the reason I support Council Member Mosqueda's needs assessment is because a lot of times workers' voices are left out.

And you can't have a thriving company if you have high turnover, if workers are not knowing what they're doing, making bad sales or bad products.

So I really think that we're not scary.

I would love to come and have you guys talk to us and we can work together and talk about what your concerns are over having a nonprofit that is experienced.

This is their expertise.

This is what they do and do it very successfully.

So I think we're not some big scary person.

We're also people of color.

My brother was arrested for marijuana charges in the early 2000s.

So I mean, all of this stuff is really important, but we cannot forget the voice of the workers.

Thanks.

Thank you all so very much.

I really appreciate the public comment today, and I'm hearing a lot of common ground.

And before we close public comment, I also wanna echo and underscore the comments that were made today and yesterday during public comment to fully condemn the racist comments about black and brown owned businesses.

cannabis owners and shops as well, absolutely unacceptable.

And if anything, I hope that our conversation in Seattle, the various individuals who've come to provide public testimony in the history just here in our Pacific Northwest region helps to correct that narrative and push back against those racist attacks.

So thank you for continuing to bring that up.

With that, we still do not have Gabrielle Pawn with us, so we're gonna go ahead and close out public comment for today and move on into items of business.

Madam Clerk, could you please read items one, two, and three into the record?

Agenda item number one, Council Bill 120391, an ordinance establishing the city's commitments and plans for supporting cannabis workers and supporting communities disproportionately harmed by the federal war on drugs.

Agenda item number two, Council Bill 120392, an ordinance relating to licensing cannabis businesses in Seattle, and agenda number three, Council Bill 120393, an ordinance relating to employment in Seattle.

For briefing, discussion, and possible vote.

Thank you very much.

And I also want to thank the mayor's office, as you know, they have been at every one of our committee meetings, January, February, March, April, and then in the last two meetings as well, they were listed on the agenda today, just inadvertently because we're so used to having them, but I want to thank them because they are not necessary to, they were not intending to come and just wanted to, take a second to recognize them and appreciate the work they've done to send us the draft legislation and all of the work that's gone into this effort.

So with us today will be presenters from central staff.

These include Lisa Kay, Amy Gore, and Jasmine Malaha.

And as we get to each of the bills in front of us, each of the central staff leaders on those pieces of legislation will be speaking up.

As we get started here today, I do want to take a moment before we dive in to consider the amendments in front of us to really pause and reflect, reflect on how we got here.

Yes, this is a conversation that our office and this committee has been engaged in throughout this year, but this is an opportunity for us to pause and process and really reflect on how many organizations individuals, business owners, workers, as you've heard over the last few meetings and public testimony, have been pushing back against harmful policies.

Policies, yes, caused by the federal war on drugs, but also harmful policies that came right out of city hall, not even 10 years ago.

We're here today to look at ways that the city of Seattle in the state of Washington can push back on these federal policies, these harmful policies, also within the city of Seattle to improve labor standards to support black and brown business owners and to make sure that within the cannabis industry there's strong training and worker support, small business support, technical assistance and ways for us over time through the advice from the advisory board to incorporate additional policies.

As you also heard in public comment, this is a small step, a small step in the right direction towards undoing some of those past harms.

I wanna specifically thank some of the folks who've laid the ground for this small step that we're taking today.

The groundwork that has been led by Black Excellence and Cannabis Coalition, the Emerald City Collective, African American Affairs Commission, organizations working on this issue across our region, including UFCW 3000, who has been working in partnership with Black-led community organizations over the last few years.

And I specifically want to thank our city staff, largely people of color-led from the Finance and Administrative Services Department, Office of Civil Rights, who have been working diligently in community over the last three to four years, as you saw from the central staff memo, initiating the racial equity toolkit analysis in 2018, and directly having conversation on behalf of the city on how things could be done differently.

And today, years later, that hard work is beginning to see the daylight and beginning to get put into statute.

Again, thank you to our largely people of color led city staff from Finance and Administrative Services, Office of Civil Rights as well, who've worked on this racial equity toolkit and have been asking, yearning, and in some cases demanding action on the advice that they got from community over the last few years.

While we acknowledge that this is a step forward today, we know that there's a lot of work to do.

So I wanna thank again, Breonna Thomas and Dan Eater from the mayor's office, along with Devin and Gerald Hankerson from the mayor's office as well, who really helped initiate this conversation at the beginning of this year.

And the mayor's office, we know because of the strong leadership they've had on this legislation and drafting it and sending it to council for our consideration, We know there's much work to be done and that they are committed to the next steps to make sure that these ideas come to fruition.

And that in partnership with the state as well, we continue to push for more.

In particular, I wanna also acknowledge that we have strong interest in making sure that year over year, we're looking at opportunities for us to continue to invest in creating more equity.

And that will require budget conversations with our, city budget office with the mayor's office as we collectively work to recover from the deficit we're facing, but continue to plan for deep investments in this community.

It's clear that our government policies have caused harm, as you've heard from public testimony directly from individuals caused by the public policies that caused harm.

And we should be centering much of our policy strategies to address harm on those who've experienced harm directly.

Black cannabis owners, workers, Owners displaced when the state gave Canada's licenses away and took them away from black owned businesses and workers.

So with that, I want to thank you all for this process.

And again, reiterate, this is just a first step.

And with that, I'd like to turn it over to Amy Gore, Lisa Kaye, and Jasmine Mwaha, who will go with us sequentially through the legislation in front of us and walk us through various amendments.

Unfortunately, there are some situations where we have competing amendments.

So we'll have a chance to walk through those as well with central staff.

So each council member understands which items might be in competition so that when we take a vote on one, you understand the implications for the other.

Okay, with that, we're gonna go ahead and consider Council Bill 120319 first.

And I guess in order to have the legislation in front of us officially so that we can then consider amendments, I'll go ahead and move it.

I move the committee recommends passage of Council Bill 120319. This is the ordinance establishing the city's commitments and plans for supporting cannabis workers and supporting communities disproportionately harmed by the federal war on drugs.

1203, I'm sorry, 91. I transposed those numbers.

I heard a second.

Thank you, Council Member Herbold.

Council Bill 120391 has been moved and it's been seconded.

So let's go ahead and turn it over to Central Staff to give us a quick reminder of the legislation and walk us through the amendments.

And if anybody from IT hears any feedback, please let me know.

I'm getting a little bit of feedback up here.

Thank you, Chair Mosqueda.

Good morning, Council Members.

My name is Amy Gore and I'm with Council Central Staff.

First I'll give you a very brief reminder of Council bill one 2, 0, 3, 9, 1, As you recall, it would detail actions the city intends to take to address racial disparities in the cannabis industry.

Some of the actions are including cannabis equity issues in the city's 2023 state and federal legislative agendas.

It includes advocating with King County for the expungement of cannabis convictions, partnering with organizations that represent negatively impacted communities to mitigate the damage of the federal war on drugs, includes pursuing funds from the state and federal government cannabis equity work.

As well as funding a cannabis needs assessment and appointing an advisory committee comprised of workers industry members and community members to support the cannabis needs assessment.

Unless there are any questions on the bill will go ahead and dive into the amendments.

I don't see any hands on the bill.

Okay, let's go ahead and dive into the amendments.

And as Amy will see up here, the first two amendments, amendment number one and amendment number two look to be in competition.

So we will go ahead and walk through both of those.

Is that correct, Amy?

Yes, that is.

And I have the table that is in the memo.

I can share that.

We aren't bringing forward all of the amendments, but that might be helpful to walk, to help us walk through if you would prefer me to share my screen.

That'd be great.

Thanks.

Just one moment.

Okay, can everybody see the table?

you know, thank you for bringing it up.

We have a small screens in the room here today.

So we will do our best.

And I know folks can also find it in the central staff memo.

So thanks for sharing that for folks watching also electronically, please go ahead.

So first up for discussion is amendment one.

It is sponsored by council member Mosqueda.

The amendment would add a new section with more detail about who should do the cannabis needs assessment.

It would specify that the needs assessment should be conducted by a Seattle based educational institution in partnership with a nonprofit organization with experience in curriculum development, administering retail training and apprenticeship programs.

and is not primarily funded by cannabis business or employer associations.

As you mentioned, Council Member Mosqueda, Amendment 1 and Amendment 2, which is sponsored by Council Member Nelson, are mutually exclusive.

Would you like me to go ahead and describe Amendment 2 at this point so that they can be discussed together?

I think that'd be fine.

Thank you, Amy.

Please go ahead.

Great.

Amendment 2, as I mentioned, sponsored by Council Member Nelson, would also add specificity to the bill and clarify that the needs assessment shall be conducted by an independent academic institution with local experience, identifying training needs for workers, developing industry and job-specific training curriculum, and delivering job skills programs.

And like I mentioned, those two are mutually exclusive, and therefore the committee needs to vote on one or the other.

Thank you so much.

So colleagues, I think what I'm gonna do is I will make some comments about amendment number one.

I'll then allow Council Member Nelson to make some comments about amendment number two.

We'll have folks ask any questions that they may have, and then we will go ahead and move to put the amendments in front of us.

If amendment one passes, obviously, then amendment two would not be needed.

And if amendment one does not pass, then amendment two would be considered.

So with that, I will go ahead and share some comments.

I want to thank folks who have provided feedback on amendment number one.

We did hear, including from some of my colleagues as well, that there was a need to make sure that we were updating some of the language in amendment number one.

According to that feedback, we worked diligently to make sure that we were in conversation with the mayor's office as well, who in committee also expressed an interest in contracting with a Seattle-based educational institution.

And I took the opportunity to work in partnership with my council colleagues who I knew were interested in this, who had reached out on it, and also with the mayor's office to find some common ground here.

Unfortunately, I didn't know that there was a proposed amendment that would be in competition.

So I was working in good faith to try to find that common ground here.

So I'm gonna summarize what the amendment does.

And I want to actually read from what the needs assessment is intending to do.

The needs assessment says the city will find a cannabis needs, the city will fund a cannabis needs assessment to further clarify what investments and improvements are needed in this industry to support the city in moving forward.

At a minimum, the city will provide demographic information about workers, workers currently employed in Seattle's cannabis industry.

In addition to evaluating the training needs of the incumbent workforce, The study will evaluate and determine the highest training needs for workers who wish to advance in the industry beyond entry-level positions, and also those seeking to become new owners.

The study will include recommendations about whether and how to fund such training.

I read this because it's important that we remember the needs assessment is really centered on what the workforce needs.

It does talk about how workers can become new owners, but the intention here is to develop an assessment for how we can provide the needed support for workforce development.

Workforce development across this nation is something that's embraced by both parties, it's embraced by both business and labor, and this is absolutely in the same vein as workforce development.

When we talk about workforce development, when we talk about improved training, when we talk about what we need to create safer environments for frontline workers or allow for upward mobility, it's always included workers and employers at the table.

When we talk about improving labor laws, we know that labor laws are strongest when they have workers at the table, folks who represent workers and business.

There is no difference here in what we're talking about in amendment number one.

It includes working with a nonprofit through a partnership with the local schools to make sure that we bring both business and workers to the table.

Our labor laws in Washington State are some of the strongest around the country.

Our labor laws in Seattle are some of the strongest around the country.

And our local economies in Washington State and Seattle are some of the strongest around the country because we have brought workers.

union representatives, associations, and employers to the table.

There is nothing to be feared here by putting forward a proposal that is universal when we talk about how we create workforce standard development and what we have done in this region to create strong apprenticeship programs that again are applauded by business and labor.

So I wanna be clear what this legislation is intending to do.

It's intending to help workers create safer environments, also help create upward mobility and ensure that we are looking at workforce development, which is largely embraced by the employer community in other arenas.

The comments that I've seen submitted via letters and some of the public testimony earlier today, brought up a lot of concerns around unions and the anti-union comments are actually anti-worker.

That's harmful rhetoric in a place like Seattle in Washington State where we've stood by workers because when we know when we stand by workers, it actually improves the stability of local employers and it actually improves our local economy.

We may have other places around this country that are largely anti-union and that kind of rhetoric could fly, but not here, not in our state, not in this city, where we've seen the benefits of bringing workers and businesses to the table.

So I wanna put this forward truly with the intent of making sure that we have an entity that is knowledgeable about this sector, knowledgeable about the growth and the flexibility that's needed for us to respond to both state regulations that are changing and the opportunity for employers as well as business, excuse me, employers, as well as workers to be able to evolve in this industry with a knowledgeable partner that can work in partnership with our local Seattle school institutions.

I'm proud of the work that we've done in partnership with the mayor's office on this legislation.

And I think that the amendment here as amended, which gives deference to the mayor's office in partnership with the Seattle based entity in partnership with an entity who truly knows how to bring together workers and businesses can help us identify ways to make sure that this assessment is needed.

I really want to make sure that the, like workforce development and apprenticeship, those are not conceived as dirty words, nor should the terms union or nonprofit.

To have concern around nonprofits being raised really signals to me that this is not about the intent of the assessment.

This is just a concern about work unions in general.

And this is not the place for that kind of discussion.

This is an opportunity for us to identify how we can best pull together workers and nonprofits businesses to move forward on what the needs assessment is intending to do.

So with that, I really appreciate the opportunity to have worked with some of my colleagues who had reached out on this amendment.

And in addition to that with the mayor's office for the help in thinking through a school based or educational institution based approach here.

And I do hope that I can earn your support for amendment number one.

With that, my colleague, excuse me, my colleague, Council Member Nelson, would you like to walk through amendment number two?

And for the folks in the room, if you'd like to make Council Member Nelson's screen a little bit larger so we can see her, that'd be great.

Thank you.

Oh, perfect, that looks better.

Oh, Council Member Nelson, we can't hear you.

You might be on mute still.

Finding that mute button, that's the universal look.

Okay, well, thank you.

All right, so I appreciate everyone who came out for public comment and the energy that's going into this legislation.

It's important work and there has been a lot of work already done at the state level to advance social equity in cannabis.

I just want to focus on what's happened at the city so far.

In 2018, FAS began work along with OED, SDCI, OCR to eliminate racial disparities in cannabis, held two dozen stakeholder engagements, convened the Cannabis Community Forum in February 2020, and conducted a survey in 2019, which has been referenced in the past.

Let me just remind people this this survey was was, you know, one of the purposes was to figure out ways to redistribute wealth within the cannabis industry.

And they went into looking at three different models, ownership centric, workforce centric, community investment framework.

So there has been already a lot of work that's been done on this front.

And one of the products of that work was the racial equity toolkit that came out of this interdepartmental effort.

They also produced five key policy change recommendations.

And the stakeholders also put forward some additional recommendations, including align with the state's social equity task force recommendations.

And in the end, there was a lot of agreement on the path going forward.

This was all presented in the committee meeting, I believe it was on March 22nd.

So it's clear that the city supports the cannabis industry as a whole and really does want to see it thrive.

And so I would just say that if this legislation is really about advancing cannabis equity, we need to listen to the community that has spoken, the black community members who have come today and have asked that their needs be centered in this discussion.

In going forward, because otherwise where it seems as though it could just be simply a vehicle for advancing the interests of of you know, an outside or a special interest so.

All of that said, this needs assessment is a way, even though there have been already a lot of needs that have been forwarded, and we've also talked about public safety and training, I agree that there is much more that can be done.

And so this needs assessment is intended, I believe, to surface additional ways that we can advance equity.

And if that's the case, we need an entity that's going to be doing that, that has expertise and that can put out a product that will be useful.

And there were a couple of academic institutions that were mentioned by Paula Sardinus in her comment, WASU and UW.

There's also another academic institution right here in town, Seattle Central.

They actually have the Cannabis Institute, and it is It's designed to help workers progress in the industry.

So I am saying that we have a lot of academic institutions that are well equipped to do this work and why is that important.

It's important because this whole process has to have the trust of everybody involved and needs to bring everybody to the table, both workers and actual the cannabis community, the retail owners, because we're talking about going forward in a way that helps the industry as a whole.

So they need to have the trust of the participants and they have to be independent, neutral, not coming in with an agenda that's already been pretty clear in discussions that have happened with my office and as I've mentioned before.

Unless all the parties have confidence that the party conducting the needs assessment is fair and unbiased, the assessment will lack credibility, won't be useful, it will lose the trust.

As we saw this morning, the letter, we want to keep everyone at the table.

We don't want the retail owners to leave the table because they will be implementing the measures that come out of this needs assessment.

So I'm asking for an honest, and transparent needs assessment to be conducted.

Not one that stacks the deck for a particular interest.

I'm asking for one that respects the expertise of the people that have been working in the cannabis industry as employers and employees.

And just to go forward with some impartial work that will end up helping the whole community and the industry thrive in Seattle.

And so I don't really know.

So that's, you know, my some of the opening statements, but I think that it would be fruitful to talk about what nonprofits is your your amendment contemplating.

Thank you, councilmember Nielsen.

Councilmember Herbert, please go ahead.

Thank you.

I want to thank you, Councilmember Esqueda, for making changes to your amendment since our last committee meeting, making clear, one, that there isn't a specific nonprofit we've had a lot of conversations with the mayor's office.

We heard from the mayor's office that they'll be in the driver's seat in in.

The process to the independent academic institution at the lead but partnering with a non-profit is simply to make sure that everybody who needs to be at the table is at the table and is part the non-profit works with, much like a lot of our academic worker needs surveys, academic work about the outcomes of our labor laws, the academic works we're going to continue to work with with a nonprofit to do as as we heard in public comment, some of the surveying and focus focus group work again to make sure everybody is at the table.

We want workers at the table.

The organization that some people are concerned about is a to make sure that everybody is at the table moving forward as part of

With that, I think it's helpful to go ahead and move in to considering the amendments.

I move to amend Council Bill 120391 as presented on amendment number one.

Is there a second?

Thank you, it's been moved and seconded.

I will not rehash some of the conversation we just had to tee up these amendments.

I do really appreciate Council Member Herbold's succinct summary of the value of a labor management entity, but also again, underscoring a non-profit.

The word non-profit should not be a scary thing as we hear folks raise concern.

I want to make sure that it is important for us to know that this is really an effort to make sure that we're working with an academic institution.

We know that this is important.

This is what we had originally hoped for.

But as when we initially introduced the amendment, we were incredibly neutral as on the organization and the amendment that we sent to law.

The feedback that we got from law was that we needed to actually have some examples, be specific, say such as where possible.

And so we tried to do that, but want to make sure that we are incorporating the feedback and really making this a difference to the mayor's office in partnership with a city organization.

Seattle based educational institution, and that we're working to lift up the value of bringing both employers and employees to the table.

Thanks so much for considering this amendment and Council Member, excuse me, Council Member Nelson for the purposes of debate.

So I don't think that nonprofit is a bad name.

I was just simply wondering what nonprofits, but that's not my point for raising my hand.

Your amendment just says educational institution and makes no mention of independent or academic.

So I believe that that is really crucial to spell that out, which is why I put it into my amendment.

Thank you, Council Member Nelson.

The good news, folks, is that Council Member Nelson and I have a very harmonious piece of amendment language to consider after all of this.

So we will talk a little bit more about the neutrality and the balance as well that we've been both speaking to in our next amendment.

The amendment is in front of us, amendment number one.

Is there any additional comments?

Hearing none, Madam Clerk, will you please call the roll on the adoption of amendment number one?

I have an additional comment.

Oh, excuse me.

I'm sorry, Council Member Nelson.

I thought that was an old hand.

Please go ahead.

So you just made me realize that we will have representation.

I mean, depending on how this goes down, the advisory committee is a place where we can have a specific role for labor.

And so that is so that will be represented in the people in the body that defines the scope of work of this needs assessment.

And so that so I'm asking for this to be a to be a solely neutral body that does not have people that will then be part of the advisory committee.

Thank you so much.

And again, I would reiterate, neutral means bringing people to the table, which is what an entity does when they bring in both workers and employers to figure out training strategies to move forward.

I think it's important for us also to consider that the needs assessment brings in the best practices.

and looks at ways to enhance training and opportunity within the industry.

And so having subject matter experts on the industry is really the goal here.

And then we'll talk about that balance table in just a second.

Okay, it's been moved and seconded.

All those in favor, excuse me, Madam Clerk, could you please call the roll on the adoption of amendment number one?

Council Member Herbold.

Yes.

Council Member Peterson.

No.

I'm sorry, was that a no?

No.

Council Member Nelson?

No.

Council Member Lewis?

Yes.

Madam Chair Mosqueda.

Aye.

Madam Chair, that is three in favor, two opposed.

Thank you very much.

The motion carries and amendment number one is adopted.

Amy, I assume that means that amendment number two is not up for consideration.

Should we move to amendment number three as amended?

Can a parliamentarian please step in here?

can two amendments not proceed to a full council discussion and vote?

Yeah, Amelia, would you like to weigh in on that?

Yes, Councilor Mosqueda.

Yeah, so at this point, amendment number two cannot be considered because amendment one was adopted.

That does not prohibit the sponsor to bring back or bring forward amendment number two to the city council meeting on September 6th.

Thank you so much.

Okay, we will go ahead and again, talk about where we have common ground.

We have distributed electronically to the council members.

I believe that it's going to be included in the minutes, but we have also hard copies here at the desk for folks in person.

Council Member Nelson and myself did have the opportunity to talk about amendments three and four.

and really work to find common ground and balance.

Council Member Nelson, we have this joint amendment.

I'm gonna defer to you for opening comments on this, but first I'd like to put the amendment in front of us if that sounds okay.

Oh, great.

I move to amend Council Bill 120391 as presented on walk-on amendment three, version two.

Is there a second?

second thank you very much it's been moved and seconded uh walk on amendment version three excuse me amendment three version two is in front of us councilwoman nelson would you like to speak to the intent behind the amendment

Yes, the intent is to get a representation of people that are involved in and have a stake in the cannabis industry.

And so the first category here is representatives from organizations that advocate for the cannabis industry and its workers.

And I believe that there are two clear standouts here.

It would most likely come down to UFCW and Craft Cannabis Collective.

But we have to have fair and even representation.

And so that is why that that number is two.

And these people are important because they represent the industry as a whole.

They're not owners or workers.

They represent the interests of the industry.

They know what's happening at a national level.

They can identify best practices, come with some ideas for the needs assessment.

And so that is why an industry representation category is important, and that's why the number is two.

I also felt strongly and we agree that that the people who will be benefiting from and implementing whatever recommendations come out of the needs assessment be represented.

And I'm talking about employees and owners.

They're the ones that will be living day to day with the improvements that come forward.

And also they are the ones that stand to gain from the benefits that are provided in the other two pieces of legislation.

So this category is to, as you can read it, to industry workers, to business owners or their designees.

And that also is an even split.

And then finally, the last category is three representatives from the communities that have been historically harmed by the war on drugs or who have advocated for cannabis equity in King County.

And with a priority for those that meet the social equity criteria already put forward by the by the by the state.

So clearly we're trying to have alignment with what what has already been done at the state level around identifying.

equity partners.

The people in this category do not have to be someone who is trying to get a license, but they do have to hew pretty closely to the criteria that we've identified we're trying to help.

So that number is three.

I think that this is a good representation of the industry in general.

They can put forward a work scope that will be robust and fair.

Excellent, thank you very much Council Member Nelson.

I'll just add to that and then we'll see if there's any additional questions.

I really do wanna thank Council Member Nelson for the feedback that we've had over the last, or the back and forth that we've had over the last week to be able to find balance in this amendment, I think is what are both of us really intended to do.

So this has really three categories, right?

This has business representatives, this has labor representatives, and it has community representatives equally balanced.

The important note that Council Member Nelson put in the first section there in the amendment language is that ideally this would include one person from the industry association and one person representing Those two categories then are complemented by two worker representatives and two employee or their designee representatives, making three in each of those columns, then complemented by the third category of three community organizations who've directly been harmed by the pandemic.

and I would also note by the past policies here in Seattle within the last 10 years.

So putting a nod to our colleagues in the audience who have been calling for a direct call out for representation on the assessment, excuse me, advisory board here as well.

And I think again, Council Member Nelson for her work to strike this right balance and for the mayor's office for continuing to echo the importance of having the right balance from the get go.

That was their intention.

And I think that this amendment just really brings more of that to light so that we're all emphasizing to our community partners, we're all on the same page here.

Council Member Nelson, follow up.

And then I think I don't see any additional hands, so we would go to a vote.

I just wanted to underscore the point you made that I forgot to make, which is precisely that it was public comment, the first go round, and that really did hone our interest in this category.

Thank you.

And thanks to our staff as well.

I know Stasia Parikh had a big role in this along with community, getting community feedback.

So thanks so much.

Okay, it has been moved and seconded.

Any additional comments in front of us?

Hearing none, Madam Clerk, will you please call the roll on the adoption of Amendment 3, Version 2?

Council Member Herbold?

Yes.

Council Member Peterson?

Yes.

Council Member Peters?

I'm sorry, was that a yes?

Yes.

Council Member Nelson.

Aye.

Council Member Lewis.

Yes.

Madam Chair Mosqueda.

Aye.

Madam Chair, that is five in favor, none opposed.

Wonderful, the motion carries and the amendment is adopted.

Okay, Council Member Herbold, I believe that brings us to your amendment that I'm happy to co-sponsor here today.

Would you like me to put it in front of us for the purposes of discussion?

Okay, I move to amend Council Bill 120391 as presented in amendment number five.

Is there a second?

One more time.

I heard a second.

Council Member Herbold, I heard a second.

Our audio is just struggling to catch up, gotcha.

It has been moved and seconded.

Council Member Herbold, as the prime sponsor of this amendment, would you like to speak to it?

Perfect, thank you so much.

The amendment simply, again, recognizes that the language as originally proposed did not have everybody at the table who needs to be at the table in these discussions.

We have community organizations that are doing amazing work around helping folks who have lived experiences in the war on drugs that are doing, again, amazing work helping people navigate their disentanglement with the criminal legal system.

And they really must be at the table when we are looking how to move this work further, specifically as it relates to the expungement of records.

So, again, this is This is an amendment that, again, is intended to specify that the city will partner with King County, as well as communities negatively impacted by the war on drugs and those with lived experience in the criminal justice system.

Excellent, thank you very much.

I will jump in.

I don't see any additional hands.

I just wanna thank you Council Member Herbold for including some of the language here to really focusing your language to make sure that we're centering those with lived experience being harmed by the criminal justice system so that we're ensuring folks.

are able to be centered in these discussions as we ensure a true expungement occurs.

So thank you so much for all the work that you've done on this, and I'm just honored to be able to be listed as a co-sponsor.

Any additional comments?

Okay, I think that will serve as closing and starting.

And Madam Clerk, could you please call the roll on the adoption of amendment number five?

Council Member Herbold?

Yes.

Council Member Peterson?

Abstain.

Council Member Nelson?

I second that motion.

Madam Chair, that is three in favor and two abstain.

Thank you very much.

With that, the motion carries and amendment number five is adopted.

Okay, Council Member Nelson, I am going to turn it to you.

You did have amendments number six and seven up next.

Would you like to provide us with an update on the amendments that you had suggested?

I have withdrawn the amendments for now.

And I emailed staff and the mayor's office and your staff as well.

Okay, excellent.

Thank you very much.

For the record, Council Member Nelson has withdrawn amendments number six and amendments number seven.

Okay, Amy, how are we doing?

Did we get through all of our amendments for this first piece of legislation?

That is everything that I had for amendments, so I think it's ready for a vote on the amended legislation now.

Okay, wonderful.

So colleagues, I do wanna thank you again for the collective work on the legislation that we have in front of us and really again, underscore our support for the community driven process that the mayor's office had embarked upon, including centering the legislation on the feedback that FAS began receiving from community.

in 2018. I really appreciate that we have found a pathway forward on some of these items.

And I think that the legislation is stronger because of it.

So thank you for the work that you've done on this legislation.

And I do want to thank the broad array of community partners who've continued to testify in support.

We do have Council Bill 1203, 9-1 as amended in front of us.

Is there any additional comments?

Council Member Peterson, please go ahead.

Thank you, Chair Mosqueda.

I support the equitable goals of these three pieces of legislation.

That's really a full package here for equity.

And I plan to support the other two pieces of legislation before us today.

While I support numerous sections of this Council Bill 120391, I'm concerned about how the bill was substantially modified, concerned about the neutrality in the needs assessment.

The legislation from the mayor's office has now been substantially changed, and I don't think the amendment has made it better for the needs assessment.

I believe a competitive request for proposals process should select an objective neutral academic institution that would conduct the needs assessment, period.

So due to the substantial change made at committee, I need to vote no on the amended bill today.

Perhaps it can be further modified before the full council vote.

And while I'll be voting no on this bill, I'll be voting yes for the other two pieces of the legislation.

Thank you.

Okay, Council Member Nelson, please go ahead.

Well, if I could say, Council Member Peterson, I would.

But basically, I believe that, yes, there are many good measures.

And I'm really sorry for having worked so diligently and in such good faith with you on the makeup of the Advisory Council.

I do believe that the voices of community were not heard in the formation of, in the needs assessment amendment.

And so I will be voting no on process grounds and perhaps that we can work together over the next month or so to to work toward a needs assessment that will be truly reflective of community needs and also neutral, independent and academic entity that will be doing this work.

Council Member Herbold, please go ahead.

Thanks.

I just want to state for the record that we were told by the executive, I believe Brianna Thomas and Dan Eater were with us at the last meeting, and they confirmed that the process that they would be using for the needs assessment would not be a sole source contract and that it would be the result of a competitive RFP.

I think that's important to note for the record.

That was the commitment that was made to us in the last meeting.

Thank you very much Council Member Herbold.

And that's correct, I wanna lift that up.

I specifically asked on the record, even with the last amendment that we had, if this would be a competitive process that would be deferential to an RFP through the mayor's office.

And the answer was yes from Dan Eder.

So let the record show that this is going to be a neutral assessment of who gets to participate in the needs assessment.

I also think that centering this with academic institutions ensure that organizations who have the work in this arena is very relevant.

It's incredibly important to make sure that a needs assessment does include workers at the table as well as businesses.

So there's no hiding of the ball here.

We are incredibly excited about the opportunity to bring people to the table to provide an assessment of what we need to do in this category.

And I think the rhetoric is frankly divisive.

not helpful, and it is already trying to pull communities apart that are already disproportionately harmed by the war on drugs, yes, but also by being pulled apart within already diverse and complex a situation where many business licenses have been removed from folks, many workers are in harm's way, and we wanna do everything that we can to bring people together.

That's what it's all about.

So with that, I think that we are ready to vote.

We have Council Bill 120391 as amended in front of us.

Any additional comments?

Oh, please go ahead Council Member Nelson and then Council Member Peterson.

Ms. Council Member Peterson had his hand up first, go ahead.

Sure.

Thank you.

Yes.

Glad that the competitive request for proposal was put on the record.

I was saying competitive requests for proposals for academic institutions only.

That's what I meant.

And also the advisory committee is where everybody will be at the table.

So I'm glad to see that the advisory committee amendment was included.

Thank you.

Thank you.

Thanks for your support for that amendment.

Council Member Nelson.

This is a follow-up from Councilmember Herbold's point that yes, there will be an RFP, but continuing with my line of questioning, what nonprofits are we talking about?

If there aren't more than one nonprofit that is going to do this work, that is not competitive, and I don't see how you do an RFP for one organization the way that organization or that nonprofit is described in this amendment.

I appreciate the effort, but we really do have to be honest about the fact that when we talk about partnering with a non-profit, I think that we need to be transparent from the get-go.

If we're going to say that, what non-profits are we talking about and are there enough to choose from?

Thank you very much.

Okay, let's go ahead and vote on the final bill as amended.

Madam Clerk, could you please call the roll on the adoption of Council Bill 120391 as amended?

Council Member Herbold?

Yes.

Council Member Peterson?

No.

Council Member Nielsen?

No.

Council Member Lewis?

Yes.

Madam Chair Mosqueda?

Aye.

Madam Chair, that is five in favor, two oppose.

Thank you.

The motion carries and Council Bill 120391 as amended will be transmitted to the full Seattle City Council for a vote on September 6th, I believe.

Just looking for that date in my notes.

September 6th.

Thank you so much.

Okay, let's go ahead and move on to agenda item number two.

It's already been read into the record, and I believe this is Lisa Kay.

Good morning, Lisa.

Good morning, Madam Chair.

Council Member Garza.

Yeah, I apologize, Chair.

Point of inquiry, what was the final vote count?

I heard five to two, but wasn't it three to two?

The final vote is three to two.

Thank you for clarifying that for the record.

Thank you.

Go ahead, Lisa, good morning.

Good morning, Madam Chair.

Council Bill 12392 is before you today.

This would create a city social equity cannabis license and establish eligibility criteria for that license consistent with the draft rules from the State Liquor and Cannabis Board.

Under this proposal, the social equity license from the city would not require an annual fee.

The proposed bill would also eliminate all city cannabis fees for reinspections and license reinstatement.

And the bill would expand the types of activities that could be covered by the license should the state enable these in the future, for example, on-premises consumption, delivery, or special event consumption.

Finally, the bill changes terminology in the municipal code from marijuana to cannabis.

There is one amendment today for the committee's consideration.

And if there are no questions on the substance of the bill, I could share my screen and to post the amendment if that would be helpful.

That would be great.

Thank you very much.

OK.

Bear with me.

Okay.

That's showing up now.

Amendment one.

It's not showing.

I have to hit share.

There we go.

You'd think I'd have this by now.

I'm so sorry.

That's okay.

No, no problem.

This amendment is sponsored by Council Member Herbold, and it would reduce the fees for small cannabis production businesses and for cannabis transport businesses in Seattle.

Thank you, Council Member Herbold, would you like to move your amendment?

I move amendment one, Council Bill 1203-92, thank you.

Wonderful, it's been moved and seconded.

Council Member Herbold, would you like to speak to your amendment?

I would, I'm really delighted that this bill is providing a vehicle for me to forward some fees to the business license fee that I committed to.

the budget process.

I think it was a couple of years ago considering after then Councilmember Burgess and I together sponsored during the budget process some increases to business license fees, but did not At the time, we asked FAS to consider a stepped approach.

And I've been in touch with FAS over the last several years about the possibility of reducing some of the business license costs.

required by the state.

So I'm really pleased that the bill, as introduced, includes a removal of both the $250 fee for premises inspections and the $250 fee for the license requirement fee.

But my amendment is based on a proposal that FAS developed back in 2020 I'm sorry.

I'm sorry.

I'm sorry.

of marijuana business.

for regulatory fee setting allow consideration of a licensee's ability to pay, and that FAS's legislative proposal was motivated by that perspective, that these best practices allow a regulatory agency to consider its own administrative burden into account when setting fees.

FAS finally noted that because of the amount of time required to inspect marijuana transporter businesses is significantly less than necessary for any other type of licensed marijuana business, FAS proposes to also apply the reduced fee to the transporter classification.

There are only two tier one licensees in Seattle.

There is currently no transporter business, but then the lighter regulatory load of any fewer businesses I think to reduce fee for classification as recommended by FAS is a smart pain.

So in some, it establishes the fee to be $2,000 for these smaller businesses as compared to 3,500.

And the impact is very slight because of the small number of businesses that fall into this category.

Thank you.

Thank you very much, Councilmember Herbold.

I am definitely going to support this amendment.

I think it takes another step towards meeting our equity goals and encourage our colleagues to do the same as well.

Are there any additional questions or comments?

Seeing none, Madam Clerk, please call the roll on the adoption of amendment number one.

Councilmember Herbold?

Yes.

Councilmember Peterson?

Yes.

Councilmember Nielsen?

Councilmember Nielsen?

Wonderful.

Councilmember Lewis?

Yes.

Madam Chair Mosqueda?

Aye.

Madam Chair, that is five in favor, none opposed.

Thank you so much.

Amendment number one carries and the amendment is adopted.

The bill as amended is now before us.

Are there any additional comments?

Seeing none, Madam Clerk, will you please call the, oh, please go ahead.

Did somebody say something?

Yeah, I did.

So originally I had an amendment that would have given priority for holders of medical marijuana licenses in the past, but lost them in the transition to recreational marijuana and the licensing thereof.

And I included that, I was running with that amendment because I believe that this was a piece of legislation that would be complimentary to, but build on the social equity criteria put forward by the state.

So that is why I had that amendment in there.

I have, when Council Member Herbold said, well, how would that be operationalized?

Those licenses come from the state.

It became clear that there really wasn't a way for this priority to be included in this package.

So when I realized that this package is mostly about the changes that we're making to the cost of licenses, that is the reason why that was pulled.

Thank you very much.

Will the clerk please call the roll on the passage of Council Bill 120392 as amended.

Council Member Herbold.

Yes.

Council Member Peterson.

Yes.

Council Member Nelson.

Aye.

Council Member Lewis.

Yes.

Madam Chair Mosqueda.

Aye.

Madam Chair, that is five in favor, none opposed.

Thank you so much.

The motion carries and the committee recommendation that the bill pass as amended will be sent to the September 6th Seattle City Council meeting for a final vote.

Okay, last item, we have Jasmine Malaja with us.

I don't believe this piece of legislation has any amendments to it.

Council Bill 120393. Jasmine, would you like to give us a quick briefing to orient us?

Thank you.

Again, my name is Jasmine Marwaha, central staff analyst staffing Council Bill 120393, also known as a cannabis employee job retention ordinance.

This bill would require cannabis business employers to take certain actions to increase transparency and reduce job insecurity caused by changes in ownership.

First, to address transparency concerns, the bill would require cannabis employers and their integrated enterprises to provide written notice to their employees of the names used by any of their associated integrated enterprises.

This notice would be incorporated into the current notice of employment information obligations that employers already provide to their employees.

To address job insecurity caused by changes in ownership of a cannabis business, the bill would require outgoing cannabis businesses being sold to provide a preferential hiring list to the incoming cannabis business and post a notice of change in ownership at the job site.

An incoming employer would then be required to hire from that preferential hiring list for 180 days after the change in control and must retain employees for at least 90 days unless there's a just cause to discharge them.

They would also be required to post a notice of change in ownership at the job site for 180 days after the change in control.

So that concludes my brief summary of Council Bill 121393. To date, I've received no requests for amendments on this bill, as you mentioned, Chair Mosqueda, but I'm happy to answer any questions from the committee.

Okay, excellent, thank you so much.

I do again wanna thank the mayor's office for working diligently to sort of share some initial ideas around this legislation in advance, and we really are supportive of the legislation.

Glad to hear there's no amendments.

I think it's a reflection of a job well done on the initial draft.

If there's no amendments, I move the committee recommends passage of Council Bill 120393. Is there a second?

Second.

Thank you, it's been moved and seconded.

Are there any additional comments?

hearing none, Madam Clerk, will you please call the roll on the passage of Council Bill 120393?

Council Member Herbold?

Yes.

Council Member Peterson?

Yes.

Council Member Nelson?

Aye.

Council Member Lewis?

Yes.

Madam Chair Mosqueda.

Madam Chair, that is five in favor, none opposed.

All right, that great.

Thank you.

Five in favor, none opposed.

I'm sorry, Madam Clerk, I think I spoke over you excited because the motion carries.

That is our third and final piece of legislation related to cannabis equity.

The committee recommendation that this and the other two bills be sent to the September 6th Seattle City Council meeting for final vote will be passed on.

Congratulations to all who have worked on this and we'll see you on September 6th for a final vote.

Yay.

With that, let's move on to agenda item number four.

agenda item number four, economic and revenue forecast for August update for briefing and discussion.

Thank you very much.

And I am so thankful that we have with us the, the folks here with us from the office of the economic and revenue forecast council, excuse me, office of economic revenue forecast.

This is an independent office along with the team from the city budgets office.

So we'll have with us director Ben Noble, John Dross, Sean Thompson, all from the Office of Economic and Revenue Forecast.

And we'll have with us Julia Dingley, Dave Hayness, and Alex Zain, excuse me, Zen, from the City Budgets Office.

We do also have with us central staff, if there's any additional questions.

Today, I would like to ask the team here from CBO and, or if we need a new acronym, but Office of Economic and Revenue Forecast, If you could try to abbreviate your presentation, I know we originally intended for a much longer presentation here today, but as a reminder for everyone, the full presentation from the Office of Economic and Remedy Forecasts can be found from last Monday's presentation.

It is all available on Seattle Channel.

So to the extent you want more details that are not able to get into the full weeds today, we do encourage you to watch that full presentation from last Monday.

With that, I'm excited that we have the opportunity, as we've committed to every quarter, to be able to provide a report out in the Finance Committee from the Office of Economic and Revenue Forecast in their presentation to the Forecast Council.

Again, their presentation took place on August 8th.

The presentation today is going to be an abbreviated version of that presentation and it will show that we continue to receive shaky news at best on how the revenue projections for the city will continue to come in and how that will impact impact our overall health for the general fund.

This will be a preview of what the mayor's office is considering for their deliberations in crafting their fall budget that will be transmitted to us at the end of next month.

With that, thanks again, Director Noble for the abbreviated version here today and you are up first.

Thank you.

My pleasure.

I'm going to lead the presentation.

As we move through it, we'll move to actual revenue discussions.

I'll also invite Dave Henderson, Alex Zhang to join in and talk about some of the revenues that the Budget Office is still responsible for forecasting.

And with that, I'm just going to dive in and share the screen with a PowerPoint presentation.

Going to move relatively quickly given the time.

I'm happy to be flagged to stop if there are questions.

But here we go.

So real quick, we're going to start with a brief update on how the economy has changed since April when we did our initial forecast for this year.

And we'll talk about what the national and regional economic forecasts are looking like.

So it's sort of a look forward.

And then lastly, what are the implications of those forecasts on our specific predictions for revenues here in the city, both for this year, 2022, but then also for 2023 and 2024, the upcoming biennium.

Headline news, in terms of economy, isn't a surprise to you.

It's been a lot about inflation and also the Federal Reserve's response to inflation and the potential impact that raising interest rates, which has been the Fed's response, will have on the economy.

Currently, we're in sort of an odd spot.

We've actually seen the GDP, the total productivity of the US economy, decline for two quarters.

And at the same time, the employment market remains strong.

We just saw 500,000 jobs created nationwide in July.

So they're kind of mixed messages about what's going on here, all a product of an economy emerging out of a pandemic on the face of it.

So looking forward, key question is gonna be, how does that balance strike?

As the Fed moves to cool things off by raising rates, are they able to do that, bring down inflation without having a negative impact on jobs and on job growth?

At one point, I wanna make, as I move on here, is in the forecast that you'll see, the baseline forecast, which ultimately is the basis for our revenue numbers, it had anticipated much of the recent news about the economy.

It had anticipated that the second quarter GDP would decline.

So that, although that was not good news, it wasn't a surprise relative to the forecast that we are working with.

Similarly, the Fed responded with a second in a row, three quarter percent interest rate increase.

significant increases in the Fed rate.

And those were also anticipated.

So some of the recent bad news is baked in, if you will.

Just to illustrate how inflation has taken off and how it's become a dominant force, this graphic shows you, at least initially here, this was the expected path of inflation when we gave you a revenue forecast last November with the adopted budget.

Anticipation is that inflation would peak at about 5% and would already be well in decline.

That was revised when we did the April forecast.

At that point, if you recall, inflation had spiked, particularly in January and February.

But still, the expectation is that it would come down quickly.

And that was really a universal expectation at that time.

As we deliver the current forecast, the expectations around inflation and the reality around inflation has shifted out and up again.

So we now have national rates above 9%.

But notice that the continued expectation is that the Fed's actions will work, if you will, and that inflation will drop relatively quickly.

We may have seen the first data point of that.

So the inflation number for July was below that for June.

But the expectation is the Fed's actions will be effective and that by the middle of next year, inflation will be back below 4% and onto a kind of a long-term trend closer to 2%.

So, and that's, again, that's consistent with the Fed's approach.

So the expectation is the Fed will raise interest rates in some ways to make this so, with potential implications for employment.

But that is the expectation, and that's what's reflected in the forecast.

In terms of employment, Locally, we haven't reached full recovery from the pandemic.

The red line here in this graphic shows you the total number of jobs that remain lost, if you will, relative to the pre-pandemic levels.

It's about 20,000 jobs.

It's about 1% of the regional employment levels.

But the other thing that this graphic shows you, and this is a really important point, is that the job recovery has been very uneven.

If you look down to the bottom and to the right, professional services, information, trade, which is a lot of the online retail trade is represented there.

Those sectors have actually increased their total employment since the beginning of the pandemic.

So we have been growing in those areas strongly, and it's been booing the local economy.

At the same time, leisure and hospitality and manufacturing, which for us is principally Boeing, continue to lag.

So the hotel, restaurant, and other aspects of leisure and hospitality have not fully recovered.

Good news on that front is that the summer tourist season appears quite strong.

We have data showing the number of visitors into the downtown area.

And again, it's not back to pre-pandemic levels, but looking strong.

We do have some concern going forward about the role of the tech sector and whether it will continue to be as strong a force.

So this graphic, the red line is showing employment growth in the trade information and professional business sectors.

which really capture the technology employment.

And what they show is that since 2011, so the last 10 years plus, we've seen essentially five to six to even 7% annual growth in employment in those sectors, high paying jobs in those sectors.

The blue line is the region's growth in those same jobs.

And it's also been very strong.

And Seattle is included in that blue line.

So what's apparent is that we have been leading, the city has been leading that regional growth in employment.

And that's consistent, we've seen this.

We've seen Amazon, Facebook, Apple, the like, increasing their presence here in the city.

But there's an open question about whether that level of growth is gonna be sustained into the future.

And there's at least some initial data and some anecdotes that suggest otherwise.

So in particular, this chart from the PSRC, the Puget Sound Regional Council, tracks employment down to a municipal level.

And what it shows for 2021 is the first evidence that employment growth in these sectors has dropped off in the city.

And with it, it's pulled the region down as well.

Now, currently, because of the work from home issues and the like, tracking employment by location is a tricky thing to do.

So I describe these as preliminary data.

but they are consistent with the anecdotal information we've heard from large tech employers about hiring slowdowns or freezes, and also their investments in facilities on the east side of the lake.

So as we think about the Seattle economy going forward specific to the city, this information has certainly influenced our thinking about long-term growth, and as you'll see, growth in the payroll expense tax revenues.

So a piece of the overall picture here.

Shifting, let's talk about the national and regional forecasts looking forward.

So what are the folks predicting about the economy and how are those predictions changed in recent months?

So again, this is a graphic that's designed to kind of track the national economy.

It focused specifically on employment.

There are other metrics you could use, but if you do, you'd see similar patterns.

So what you see here, again, and this is the expectation is in the forecast from October when we were developing the forecast that the budget, this year's budget were based on.

You can see there had been a dramatic drop in employment because of the pandemic.

The expectation was of growth continuing and then modestly into the future.

Excuse me, that was revised slightly and only slightly when we brought you the April forecast.

Principally, what happened there is that things were going a little better in the near term.

So you'll see the employment forecast went up.

at a national level in the near term, and that was approximately the same in the longer term.

So things on the employment front had been looking up.

The more recent forecasts indicate that a slower recovery is what's expected into next year and beyond.

So near-term, again, we're still seeing strong employment growth.

Again, I just mentioned those strong numbers from July.

But given that the Fed is working hard now to raise interest rates and cool things down in an effort to bring down inflation, the expectation is that job growth will be much more sedate into 2024 and into 2025. And that, again, will affect, and you'll see this affect in our revenue forecast.

Again, on average, expectation of slower growth going forward.

The other issue that's emerged in the national economy and in those forecasts is an increasing risk of a recession.

So the national forecast firm gives us three scenarios, a baseline, an optimistic, and a pessimistic.

The darker line here is that forecast, again, from July, of what the pessimistic scenario would look like.

And rather than seeing kind of the relatively weak but present job growth in the baseline forecast, in the pessimistic forecast, we'd actually see job losses as the economy would enter a recession.

And an important point is that relative to our last forecast, the probability that's assigned to this possible scenario has increased.

So they went from thinking that this could be a 35% probability to a 45% probability.

So in some sense, you know, they're showing us two scenarios and only putting a slightly higher probability on the baseline.

Now, again, since then, we've had strong job numbers and some other things.

And actually, recently, as actually earlier this week, got a slightly revised forecast.

And the pessimistic scenario isn't quite as bleak.

But nonetheless, its probability still holds at 45%.

So there is still a concern that as the Fed takes its actions, that we could tip into a recessionary environment.

And if you look to the region, you see a similar story.

So these are the same graphs at a regional level.

That's employment, as we saw back in October.

It looked better in April.

Again, near term, we were seeing stronger job growth, same expectation for the long run.

But now more recently, the things have cooled some.

So we've seen slower job growth near term, and then again for the long run.

I think it is important to note that the slope of this line, that the rate of job growth relative to the nation, again, this is a regional forecast, is still strong.

We're still expecting the region to return to a period of growth, and our growth has generally outpaced the national economy.

So two or three years out, expecting a return to a pattern more similar to what we've seen pre-pandemic.

But again, this is a graphic showing on a regional level what the pessimistic scenario looks like.

And it too, would represent a significant recession and a drop in employment.

So we're just now almost to pre-pandemic levels in employment.

This chart is measuring relative to the pre-pandemic levels.

And if the pessimistic scenario were to emerge, we would see layoffs again and regional employment drop.

certainly not as badly as in the pandemic, but notably as well.

We also, and then we take several years to recover.

I see there's a question and I'm happy to take it or to wait to further the chair.

I'm happy to wait, I'm sorry.

Okay, no problem.

So I want to stop a moment to talk about the recommendation we made among the scenarios and the actions that the forecast council took.

So one of the key things we do is to make a recommendation about which scenarios should form the basis for the forecast.

And as I've described, it's a difficult choice now because the probabilities assigned to each of the pessimistic and the baseline are essentially the same.

That said, and it's the reason I made the point earlier, the baseline forecast does actually incorporate a lot of the concerns that we have.

So it anticipated that second quarterly decline in GDP.

It anticipated the current actions of the Fed, which were really remarkable.

Two three-quarter point increases back-to-back is something we hadn't seen in decades.

But the baseline forecast anticipates yet further increases from the Fed.

So it anticipated the current ones and is expecting things going forward.

And then also, there has been some good news both on the jobs front, so strong employment numbers for July.

And the inflation figure did drop relative to June, it, it's only one month and dangerous to assume a trend from that.

Those factors led us to be more comfortable with the baseline scenario, and that was our recommendation to the forecast council, and they concurred on that recommendation at their August 8th meeting.

So, as I move now to talk about the revenues themselves, these are the consistent with that baseline forecast that we showed you, which again is continued, but more modest growth in both the regional and national economy.

Before I do the specifics of the revenue figures, I do want to make one more general point about inflation and its impact, particularly on general fund revenues.

One might generally assume that as prices are going up, as inflation takes effect, if you will, that our revenues would grow with it.

You know, many of our taxes, like sales tax and B&O tax, apply to the value of activity, and therefore our revenues would be going up with them.

What's tricky is that that's not generally true of all of our revenue streams.

And this pie chart is designed to illustrate that point.

So the things in yellow and shades of yellow are, in fact, revenues that do generally grow with inflation.

So I just mentioned sales and B&O.

Those are percentage taxes on sales and general business activity.

Inflation itself may have an impact on the total activities in those areas, but our our taxes will grow as the level of activity grows.

And private utilities generally are increasing their rates to cover their costs.

So reasonable to expect that our taxes on those services would also grow as inflation.

But it's really critically important to understand that that's not true of all of our revenue sources.

And in particular, property tax, which represents almost 25% of our revenues, are constrained to grow at well less than current inflation.

So property tax by state law can grow by 1% plus the value of new construction.

For us in recent years, that has amounted to about 2, maybe in a good year, 2.5%.

When inflation was running at about 2 or 2.5%, that was OK.

We weren't losing ground.

But as inflation has spiked, that share of our revenue stream is losing ground.

And it will continue to lose ground as long as inflation stays high.

The things that are in shades of green are areas and portions of our revenue stream in total about a quarter again, where there's a mix here.

Some of these things do generally go up with inflation, but it'll depend in part on actions of the City Council, among others.

So in particular, the taxes on City Light and SPU will increase as their rates and as demand increases.

But if efforts are taken to protect rate payers by keeping rate increases below inflation, the net effect of that could be to reduce general fund revenues.

That's not a reason to increase those rates, but rather for you to understand what the implications are in terms of our overall revenue growth.

Similarly, the lighter green permit fees, service charges, those again are areas where the city is charging folks for one service or another.

And those rates are set by policy.

And again, you may want to be protecting folks from the impact of inflation by keeping increases there low.

The effect of that, though, will be to reduce the revenues that we are earning to a degree.

And they may not be then keeping up with inflation.

So the general point here is that as inflation goes up, there's a structural issue.

And the general fund won't inherently keep up.

And the purchasing power of the general fund will be declining.

The current forecasts are that inflation will come down quickly, and hopefully that's the case.

If not, this could become a bigger issue.

It is, by the way, the underlying challenge for King County.

They've faced a series of budget challenges over the years, and that's because a greater share of their revenue is coming from property tax and are not keeping up generally with inflation, a structural challenge for them.

So I want to move now to actually talk about the revenue forecast and how things have changed.

This is a chart that focuses just on this year, on 2022. The highlighting the blue versus not blue is a distinction between the revenue streams that are forecast by the forecast office versus the budget office.

So I'm going to speak to the things in blue and then turn it over to Dave and Alex to talk a little bit about things that are in white, if you will.

Just in terms of reading the chart, the first column of numbers is the 21 actuals, put there as a reference point so you can see how things are changing relative to that.

Second column is the 22 adopted budgets.

So those are the forecasts that were made in October and November.

April then are the revised forecasts from last time.

The 22 August forecasts are the most current.

So those are the new numbers we're showing you today.

And then the final column is showing you the change between August and April.

So what's changed since we were last here with you.

And I'm just going to work my way down this chart to give you a highlight of this.

The next slide will show you 22 and 23. Property taxes are generally very predictable, so no real change here.

These are in thousands, so that's 30 here in that final column represents a $30,000 change, so minor, minor change in property taxes.

Retail sales forecast is up, both reflecting the impact of inflation just in terms of prices being higher overall.

And also, I think, as we showed you, the local economy did somewhat better in the near term that we had anticipated.

The decline in business and occupation tax is less a reflection of anything changing the economy and more that there have been changes in the way certain taxpayers pay their B&O taxes, shifting from annual to quarterly payments.

It's made it a little challenging for us to track the baseline.

So this is really us getting a better handle on the baseline revenues for B&O.

And you'll see that that does ripple into the future.

Private utility side, small change, natural gas prices being up have pushed that up somewhat.

The cable forecast up slightly as well.

I'm going to shift now, turn this over to Dave and Alex to talk a little bit about some of these other revenue streams.

And then I'll return at the end to talk about the final line, which is a significant one in this table.

Great.

Thank you, Ben.

Good morning.

Still morning.

Carrying on then.

So utility taxes, the public utility taxes at Seattle City Light, Seattle Public Utilities, water, sewage, and solid waste, you see a slight decline.

The decline is really a combination and netting of effects from the various utility funds.

But the big movers are Seattle City Light is up a bit.

They're selling more retail electricity than previously thought in April.

And the big mover is water down because we've had such a cool, although it may not feel like it recently, but we've had a cool spring and therefore water usage was less.

And so they've revised that forecast down.

that net change of about a million dollars down.

Other city taxes, these are things like leasehold excise tax, the tonnage taxes paid by transferring solid waste at our transfer stations, gambling tax, heating oil, things like this.

You can see that there is a decline of about $2 million.

That is largely comprised of reductions in tonnage tax, And the heating oil tax in April, we had the heating oil taxes carrying on, but it was, you all had changed it so that it was not effective until 1-1-2023.

So we've removed about $780,000 for that from 2022. And then, yeah, I think I said leasehold excise taxes, they were up a bit.

And so the net effect there is about a $2 million decline overall.

parking meters is up 1.5 million.

This is largely due to the rates still climbing, still being moved forward by SDOT's slow but steady process of evaluating paid occupancy and raising rates in those areas and neighborhoods where it's warranted.

They have a few of those rate evaluations scheduled for this year.

And this forecast includes those rate potential increases But paid occupancy right now is, this is not projection so much, it's an actual fact, paid occupancy right now is at or near pre-pandemic levels.

So there's a lot of areas that will be increased because they're already at those levels and they'll go from there.

Court fines is an interesting and somewhat complicated story.

Citation volumes for parking citations, are maintaining.

So those are the ones written by parking enforcement officers.

And those are sort of at pre-pandemic levels of about 550,000.

But other citations for driving while intoxicated or moving violations, those are down largely due to, they are generated by patrol officers.

And as you are aware, there's staffing and priority prioritization questions going on there.

So those revenues are down from those types of citations And then we had the situation with the voiding of 200,000 citations and the refunds being given for those.

And so the court fines number here in 2022 reflects that reduction.

And then there's some other forecasting type adjustments that we've made to reflect slightly slower payment expectations.

And then there is a, an accounting adjustment of sorts of about $3.3 million here that is accounting rules was incorporating into the revenues an amount that reflected a portion of unpaid citations that would be in collections.

And so we've determined that's not actually a cash revenue, and so we're removing that from the forecast.

It's not dollars available to spend, it's a projection for accounting purposes, It'll affect the balance sheet, but not the cash available.

Moving on, grants, I think a large change, $39.9 million change there.

This is largely due to us including the carry-forwards and things like that into the grant category.

And I don't know, Ben, if you wanted to say more about that in your remarks or what have you, You'll see a line down below that's carry forward grants and legislated changes of about 40.7 million in April.

Those are being added to April because we failed to include those carry forward grants in the April number.

But they are included in the August numbers.

And so to try and present an apples to apples comparison here, we've got that sort of presented on two different lines.

The bottom line right above the shaded blue line and then in the grants category.

Fund balance transfers, this is largely due to a $4.3 million change in where we are posting a transfer.

This is CRF money, and it was scheduled to be booked into the general fund, but instead it's being booked directly into the HSD fund.

Licenses, permits, and other, not much change there.

And then I just explained the carry forward and grant line item.

So Ben, do you wanna talk about payroll expense tax?

Yeah, last item is perhaps unusual entry for payroll tax, late 2021 payroll tax payments.

So what's happened here is that again, the payroll tax was first came into effect for last year for 2021 and payments were due in January of this year.

So a one-time annual payment.

This year folks are making quarterly estimated payments.

But it's apparent that a number of firms were struggling with how to come into compliance and understand whether they were affected by the tax.

And we've continued to get payments for 2021 obligations through this year, actually, and as recently as last month.

So actually, I think even this month.

So in total, we've collected an additional almost $42 million in 2021 payments.

As a technical matter, we can't, in an accounting matter, they have to be recorded as 2022 revenues because they've come in as late as they have.

City ordinance dictates that the 2021 payroll expense tax revenues go into the general fund.

So these are, as shown here, general fund revenues.

Going forward, the payroll expense tax for 2022 and beyond, the payroll expense tax revenues are in their own separate fund.

But since these are 21 obligations, they're being directed into the general fund.

And I think it's important to recognize that from that perspective, they're a one-time general fund resource.

The payroll expense act will show you the forecast going forward, but going forward, it won't be into the general fund.

This does imply in April, we told you that the final numbers for payroll expense tax in 2021 was about 248 million.

With this, It turns out that the actual total payments for 2021 are closer to 200 or just above $290 million.

And understanding that that's the base has, again, affected our forecast.

You'll see that we have significant concern and actually at this point don't expect that we'll match that figure in 2022 and we'll explain why.

But for this year, this is a very significant increase in revenues one time.

And as you'll see in adding up the total here in the far right column, it's helped us significantly offset some of the reductions that we're seeing relative to the April forecast.

So that's 2022. Looking ahead to 2023 and 2024, and again, let me orient you in this table.

The first column here of figures is the 22 is the revised forecast for 2022 for this year, put there as reference so you can see how things change year to year.

Next, in the center section here, we're looking at the 2023 forecasts.

The initial forecasts from April are this first, the middle columns.

The second is the revised, so the new numbers for 2023. And then again, the difference here on the right within that center portion.

And then on the right side of the table, the same information for 2024, the April forecast, the revised August forecast, and the difference.

And again, at a relatively high clip, I will go through and talk about the changes From the forecast office perspective, and then turn to Dave on the others.

Again, property tax, only small changes, grows at 1% plus the value of new construction.

So those things are not a pretty stable forecast.

We're seeing some evidence of somewhat higher new construction value than we anticipated, in part because the concrete strike did not have as much of a downward effect as we thought it might.

Retail sales up, again, in nominal terms for 2023. 2024, a reduction relative to April, which, again, as we saw, the longer-term forecasts show that the economy grows less than we anticipated back in April.

Business and occupation tax, again, we've come to a better understanding about what the base is, so this downward adjustment is consistent with what we saw before, and the lower growth, again, consistent with the revised regional forecast that shows an overall cooling.

Private utility taxes, again, up somewhat.

Natural gas, a big piece of that.

Also, cable is holding up a little better than we had thought.

Telephone continues to decline somewhat faster than we had thought.

But again, basically, the overall patterns that we see in 22 continue into 23 and 24, acknowledging an anticipation of slower overall growth.

Dave?

Thank you.

And I would reiterate that point for the CBO forecasted amounts, too.

A lot of those amounts are just we've adjusted the base in 2022. A lot of the same factors apply, and so that's carrying across The one I would like to point out is where there is a change is licenses, permits and interest income and other.

And that's a drop of about $3.3 million in each year.

And that is largely due to changes in business license expectations.

And then there's a reduction in emergency services E911 reimbursements coming to the What's the police department now?

I'm blanking on the name, I'm sorry.

CSCC, I think is what it's called.

That's a decision they're making about how to use those resources, and so there's a reduction there.

Then there's some lesser adjustments as well, assumed commercial parking licenses, and then a slight decline in interest earnings based on expectations of lowering cash balances.

for the general fund.

Okay, I'm going to encourage us to get to pages 18 and 19 so that we can get into questions.

That will leave us with about 45 minutes for the last presentation as well.

I wanna thank in advance the folks from the City Budgets Office as well, who have offered to come to our next meeting on September 7th to do a report out on our quarterly American Rescue Plan, Seattle Rescue Plan expenses.

So we will add that item to our agenda for September 7th, which just leaves us with concluding this item, agenda item number four, and then we'll spend the last 45 minutes on agenda item number five.

I'll move very quickly here.

So net effect here is a reduction of about six and a half million for the 23 forecast and just over 11 million for the 2024 forecast.

The only other point I would make about this graphic is the percentage changes at the very bottom here, annual growth, just highlighting that that relative to 2022, 2023 is actually a reduction in the resources available in general fund.

And the reason for that is principally this one, the fund balance transfers.

And the 2022 budget relies significantly on transfers that's not going to continue necessarily into 2023. And that's among the things that's creating some of the challenges.

Shift real quick here to talk about the other revenues that we forecast that are not in the general fund, but which are very significant.

The largest of those is the payroll expense tax.

And I'm going to spend a little bit of time here.

So as I indicated, the 2021 actuals, as we understood them at the time, was $248 million.

As we just indicated, there's been about an additional $40 million, $42 million paid in.

So the base for the payroll tax, as we understand it for 2021, is $290 million.

The budget, the forecast that we had for 2022 was less than that.

It was $277 million, but that was a forecast that was at the time based on almost no information.

As of April, we knew the 21 numbers.

We hadn't seen any payments for 2022. We have now seen quarterly payments from the first and second quarter.

And those are just not keeping pace with the 2021 figures.

So we have the forecast that we have for 2022 is actually somewhat higher than the revised forecast is somewhat higher than we have in April.

But we've got there in a very different way.

We now understand that the base is bigger than we thought, but we also think that payments for 2022 will be less than they were in 2021. And in a minute, we'll talk about why that's the case.

Otherwise, admissions tax, only a very small change.

Real estate excise tax, good performance in the first half, so upping that forecast for the rest of this year.

And then the sales tax for the Transportation Benefit District just follows the overall sales tax forecast.

I think otherwise, Dave, I'm going to do these just real quick.

Minor changes in both suite and beverage and short-term rental just based on current performance.

Looking to 22 and 23, again, the payroll expense tax, you'll see that the forecast is somewhat lower than we showed you in April.

The reason here is that in addition to us thinking we're not going to hit the same level of activity in 2021, given the forecast we've seen, we're expecting less job growth in the sectors that are principally responsible.

So we're expecting somewhat slower growth.

Net effect here is relatively small, but that's what's driving it.

Real estate excise tax, just jumping ahead to an area where there was significant change.

Again, we've seen really strong performance in 2022. We expect less net revenue in 2023 and 2024 as interest rates start to cool the real estate market.

But those, we're still not anticipating to reach the current levels.

I think commercial parking tax is probably worth a comment, Dave, in terms of other changes.

Go ahead, Alex.

Good morning.

Commercial parking tax is primarily reflecting what's going on in the new regional economic outlook, which has been revised down from April, particularly starting in 2023. We're expecting that activity to still return to pre-pandemic levels just at a slower pace.

And just as a last point, some further comments about the payroll expense tax and why it is we're forecasting less revenue in 2022 than we saw in 2021. So again, on net 21, as we understand it now, is a base of $290 million.

We're forecasting about $278 million for next year.

And one of the reasons for that is, again, we're seeing lower payments, excuse me, for this year.

We're seeing lower payments for the first two quarters this year.

We think a significant explanation for that is the stock values of the large tech companies declining.

A lot of the compensation that's paid to folks in these companies is based on stock grants, and the value of those grants on the face of it is declining.

Another issue that we're monitoring is the way people assign workers to offices and the impacts of work from home, which may also have the effect of reducing tax obligations.

So we spent a lot of time thinking about this.

We don't have a ton of data.

So this forecast is one that's more a judgment call than it is based on hard data.

But the results through the middle of this year indicate that we're not likely to see the performance of 2021. And again, we think these are the explanations.

So that wraps up.

Our presentation, I know there are questions, so I'm going to think I'll maybe leave slides up anticipating there may be a question about a specific slide.

Thank you.

Okay, let me try that again.

Let me try that again.

Are we working?

Okay, sorry, old habits to hit the unmute button on the Zoom here.

Apologies for the feedback.

Council Member Herbold, you had your hand raised, please go ahead.

Thank you.

I have a question about the continued use of the baseline economic scenario.

As we heard in your report, the probability of the pessimistic forecast has increased from a 35% probability in April to a 45% probability just a few short months later in August.

And so despite that shift, the forecast continues to use the baseline forecast.

You guys are the experts in this work, and I know I've pursued this line of questioning in the past, and your forecasting has been on the mark.

But I'm just wondering, from sort of a matter of practice, is there a percentage of probability that forecasting experts use to shift from a baseline to a pessimistic?

Is it 1% over 50%?

That's a really good question.

It's important to understand the way the national forecasts work.

Actually, the pessimistic forecast will never be above 51. It would then become the baseline by construct.

I didn't understand that.

That's helpful.

We have employed the pessimistic forecast in the past, in particular, most recently when beginning of 2020 when the pandemic hit.

And at the time, there were two particular reasons for that.

One is we were hit first, if you recall.

So we had significant concern that a national forecast, which is really where these probabilities come from, weren't reflecting our risks, because we were in a different situation.

In retrospect, I think, as it turned out, we also responded more aggressively.

And that was another reason to use a pessimistic forecast aggressively from a public health perspective that was hard to know then.

The other concern was that our economy, the components of our economy were potentially going to be more impacted by the pandemic than the nation as a whole.

So again, the idea was that the national baseline probably wasn't reflective of our then risks.

Looking now, we don't have that sense.

We're feeling that our exposure is not unlike that of the nation.

And the story that I harped on it earlier is that the baseline forecast is also not a terribly rosy one.

And it has anticipated a lot of, you know, if they hadn't anticipated the GDP decline, if they hadn't been anticipating the rate increases, and so the baseline wasn't reflective of current conditions, that would have been a reason to shift away.

But it is reflective on the face of it.

But a discussion related to this that we had with the forecast council is that we are going to continue to watch this.

We are for sure going to bring you an update at the beginning of November.

late October, beginning November.

But if things were to change dramatically, and the implication was a downward revision in the forecast, that's something that we might want to bring to you earlier, so that as a as a deliberative body at the City Council, and engage in discussion with the executive, could potentially respond as you engage in the budget process, and not have to make changes at the very last, if you will.

So we're going to continue to keep an eye on that, and if things Again, to deteriorate further, we'd reach back before November.

And again, we worked out some timelines about when we could begin some of that work in late September or early October if that proved appropriate.

But again, responding to exactly the question and the scenario that you're concerned about.

Thank you.

Thank you very much.

I'm not seeing additional questions and I know this is just the precursor, the grounding for the next item on the agenda.

So I wanna thank Director Noble and I wanna thank my colleagues as well.

This is the conversation that's really focused on the revenue projections.

The next item on our agenda is the overall health of the general fund and a preview for our fall budget where we will have the general fund financial plan item on our agenda.

and we will continue to do that.

So please keep your questions for director noble focused on the revenue projections only.

I see one more question from councilmember Peterson before we move on.

Thank you.

Thank you for this presentation.

I appreciate you breaking out the recent history of the new the payroll tax, in terms of what will be the baseline for that payroll tax, I guess what I'm looking to is what were the expectations.

And it looks like, I just want to confirm my numbers here.

So 2022 adopted budget, so we adopted this in November, estimated what we would receive in 2022, that was about $233 million.

was what we adopted last November as our estimate for the 2022 jumpstart revenues.

Is that correct?

233 million?

Yeah, almost 234. I can put that slide up if you want or not.

No, I was just trying to ground myself on what were the expectations of how much we would be getting.

It sounds like we're exceeding that.

We're exceeding it for different reasons, but just There's good news on that front, at least with that payroll tax.

Yes, it's certainly 2021. I performed our forecast, it's very difficult in defense, it's very difficult to forecast revenue stream without any experience and with limited data, certainly was good news.

made it sort of extra effort was to explain why we're not convinced that all that good news will continue into the future.

And then actually that last year, even this year's revenues won't match last year's.

And the key data point for that is that halfway through the year, we're seeing that payments aren't at a pace to match the payments from last year.

And we're trying to understand why that is the case.

And what we see is the stock value change, and we also see some shifts Um, to a model where people are only reporting the hours worked in the city and not assuming that the full, full, uh, employment, if you will, was happening in the city.

But your estimate for 2023 is higher than 233 million adopted.

Yeah.

Okay.

Great.

We were, we were off on the base.

So we had expected 200 million and we were expecting to grow to 230 million this year.

As it turns out, we got $290 million, but we're actually now expecting it to fall slightly in this year and then modestly grow after that.

But we also know that we don't have a good handle on this revenue stream.

And for instance, to the extent that stock value is driving compensation, if I was really good at predicting stock values, I might have a different job.

So that's going to be a challenge going forward.

But again, with every year and every quarter, we'll gain a better understanding of how this works.

I think this is a really good segue council member Peterson and their points well taken.

I think it will be a good segue into the upcoming presentation from central staff as well.

So I want to encourage folks, if they'd like additional details, we did walk through this in about two and a half hours in our, in our, in our, revenue forecast council meeting last Monday.

So that information is also archived on Seattle channel from the 8th of August.

Thank you very much to the office of economic revenue forecast and the city budget's office for this walkthrough.

This is helpful ground setting as we move into the next agenda item.

Madam clerk, could you please read item number five into the record?

Agenda item number five, general finance.

general fund financial plan update for briefing and discussion.

Thank you so much, Madam Clerk.

Okay, colleagues, we do have the last half of the meeting here.

We are going, the last part of the meeting here, we're going to put together the rest of the puzzle pieces.

Council Member Peterson started to see some questions about possible revenue and the Office of Economic and Revenue Forecast painted a pretty grim picture from our April and August forecast.

The changes in the forecast are going to have a significant impact on the available revenue to the city.

As the mayor considers drafting his budget and transmitting that to council, we are very interested in working together to make sure that we have a solid financial plan to address the growing needs in the city and also to make sure that we have the revenue to fulfill those needs.

Colleagues, we're about to see an overall picture of how our budget over the course of the next several years will work with the assumptions from the revenue forecast information that was presented last week.

Again, I wanna thank not only Office of Revenue Forecasts, but also the City Budgets Office and our own central staff who've been diligently working over the last week and a half to look at the forecast information factor in our expenses from the city and look towards how we're creating a more sustainable, stable, and transparent budget.

So today's conversation, we'll have an opportunity to ask questions at the end of the presentation, and I'm going to also save my comments about how I am looking at various solutions to addressing the budget deficit that is going to be outlined here in the central staff's presentation after they conclude their comments.

We know that the looming budget discussion that we will have in just over a month from now is the biggest issue many of us are working on collectively addressing to make sure that we close this gap and provide critical services to our community residents, small businesses, workers and to ensure that we're investing in the growth of our local economy as well.

Because the legislative branch holds the purse, we have the final say on the proposed budget for the upcoming years.

We will also be very interested in not only the presentation in front of us today, But I want to make sure that we are setting an important course for how we continue to try to address this in the most humane and humanitarian way possible to make sure that we not only prevent against austerity, but make key investments into our economy, our workers and our smallest businesses.

So with that, If I could turn it over to central staff to walk us through the financial plan.

This is a general fund revenue update and the financial plan as presented by our city budget office and central staff.

So Ali Panucci and Tom Mikesell from central staff are here.

And I believe we also have with us director Julie Dingley for maybe some input as well and any questions folks have.

Okay, please go ahead, Tom and Ali.

Thank you.

I'm just going to share my screen.

Are you seeing my presentation?

We are.

Great.

So good morning, Chair Mosqueda and committee members.

I'm Ali Panucci from the central staff team, and I'm joined by my colleague Tom Mikesell and Director Dingley from the city budget office.

I'm just going to go ahead and jump in in the interest of time and ensure we have time for discussion.

So I'll let them introduce themselves when we turn to them in the presentation.

So I will briefly walk through what we're going to cover today, then we'll turn it over to Tom Mikesell for more details, and then to Director Dingley, who will provide additional updates and context for the committee's consideration before returning to a discussion of some potential strategy.

Great, thank you very much.

And just as a reminder, I mentioned this at the top of the meeting today.

For this item, agenda number five, you can find both the PowerPoint presentation and the central staff memo by going to the finance and housing committee agenda link, click on meeting details in Legistar, and there you will be able to find the meeting details that will link to agenda item number fives.

support documents when you click on that agenda item.

So if any members of the community are interested in finding that, please do email us and we will try to send you the direct link, but you can also find it under meeting details and click on agenda item number five.

Please go ahead, Allie.

Thank you, Chairman Skada.

So today, as you described, we will present an updated financial plan for the general fund as context in advance of transmittal of the mayor's proposed 23 and 24 budget.

that will be sent to the council on September 27th.

This update reflects the August revenue forecast for the general fund that was just presented by the forecast office and the city budget office and updated expenditure information that includes what is estimated to be increased general fund expenditures based on the future estimated cost of continuing the ongoing programs that were funded in the 2022 adopted budget as well as changes to the planning reserve assumptions provided by the city budget office and any supplemental budget adjustments made since the May 4th discussion.

As the chair just described and you heard in the previous agenda item and we'll see in the subsequent slides, both the mayor and the council are faced with preparing a balanced budget under less than ideal conditions and uncertainty about the future.

As noted, the plan presented today serves as the starting point for the mayor, and we look forward on central staff to working with the council after transmittal of that proposal to determine if it is consistent with the policy direction set by the legislative body, and if not, work with you all to develop a final city budget for 2023 that reflects your priorities.

With that, I'll turn it over to Tom to walk through this in more detail.

Thank you, Deputy Director Panucci.

I'm Tom Mikesell with your central staff.

And good morning to Finance and Housing Committee members as well.

So Ali fairly well touched on this initial outline screen, kind of give the broad context.

So I'll just dive into some important caveats for the committee to keep in mind as we talk through the updated numbers.

So the plan that we'll share today includes expenditure growth in 23 through 26 to reflect the impact of inflation on continuing 2022 adopted budget services.

The presentation shows this information differently than how CBO casts it in their financial plans that they include in the budget.

However, the underlying data and the inflation assumptions are the same as what CBO is currently using.

It does include baseline growth expenditures to continue 2022 services.

But it's really just the starting point for any policy proposals that may be considered in the mayor's proposed balanced budget coming in September.

Next slide please.

So I guess to reiterate the number do not include any policies or programs that were adopted as one time in 2022 so they were only expected to begin and end in the current year.

They don't include any policy-related additions, but they also do not represent a foregone conclusion.

Council has the jurisdiction over all elements of the city budget, including the baseline.

While we'll cast these as a projection of a base, it's just important to note as a caveat that that all elements, including those elements that we're discussing today, are part of the balancing picture and part of the budget that will be presented in the fall.

But with that being said, this is the final update of kind of the ongoing 2022 service cost projection that we will present prior to receiving the mayor's proposed budget in September.

So next slide, please.

So these next couple of slides are a graphical representation of information that was discussed in May when we first looked at the general fund financial plan.

So now we're including graphs, kind of catching up with the 20th century.

So this shows in these basic lines showing in red the expenditure projection and in green the revenue projection that we looked at in May.

The key piece of detail here is the operating gap.

So that's the difference between the expenditure projection and the revenues that are projected to be available to support them next year and in future years in the plan.

So back in May, one of the headline numbers of this operating gap was the $117 million difference between revenues and expenditures in 2023. Also based on that May information, the gap was projected to narrow in the future, as you can see by these kind of converging lines by 2026, where the $117 million shrinks to a lower number.

Unfortunately, updates that we'll talk about in upcoming slides will show that that gap widens.

But that's what we were looking at with those main numbers.

Next slide.

So the general fund ending unreserved fund balance is kind of the next critical metric in considering an adopted budget.

Essentially, this is the number that determines whether a budget is balanced or not.

So the ending unreserved balance for a legally adopted budget has to be zero or higher.

So back in May, the projection for 2023 was a $35 million negative ending unreserved general fund balance.

And that number grew to $249 million negative by 2026. And this is entirely because of what was happening with projected revenues and expenditures as shown in the prior slide.

So in other words, the ending unreserved fund balance got worse in future years because there was an ongoing gap between revenues and expenditures.

So that's just the recap of May.

Next couple of slides, I'm just going to include some of the new data that we have received from various partners to update these projections with more recent data.

So this slide is really just recapturing all the work in detail that was just presented to you in the prior agenda item from the forecast office in the city budget office.

And it just layers in and shows graphically the changes from the May forecast in the lighter blue line and the now August forecast in the darker blue line.

Actually, if we could go back to that one slide.

I just want to highlight a few points that are not really embedded, but they can continue on the discussion from the forecast office in the prior agenda item.

And that is with regards to the baseline and the pessimistic scenario.

Again, it's an important point that the probability of the pessimistic scenario is higher, albeit somewhat lower than the baseline.

But there's some useful information that I would offer for the committee to keep in mind when considering that.

One is due to recent action by the council, particularly in the supplemental budget legislation, the city's revenue stabilization fund, which is which is sole purpose is to be in place in the event of an economic news that results in a revenue reduction, it's now fully funded.

So that is an approximately $62 million of available resource that helps mitigate some of the risk of an economic shock.

So that's good news.

Also some news to consider or some information is that on average in the past, city revenue forecasts have generally come in have been lower than actuals.

So of course, a recession is a surprise and that would challenge the baseline assumption.

But on average, the forecasts have resulted in actual revenues that come in higher than forecast.

So it's very important to notice and to keep in mind the risk, but there also are some physical tools in the toolkit that are in place to help mitigate that.

And Tom, I just want to also note the appreciation for central staff and to highlight that it was this council, it was the previous budget committee in 2020 and 2021 that really pushed back on trying to draw down those reserves even further than the comfort level that Seattle City Council had.

The previous administration at one point had suggested drawing down the reserves to near $3 million.

We really held the line on trying to preserve as much as possible and a really aggressive timeline to build back funding into the reserves and to replenish that largely with Jump Start investments.

But we held true to those commitments, and as you noted, have succeeded in replenishing.

And I really think that that's an important thing to highlight.

I'm glad you did, and it shows strong fiscal stewardship over our budget.

I want to take this opportunity as well to thank our current administration and also the leadership of the city budget's office, Julie Dingley, for your partnership ongoing as we've continued to try to address these issues collaboratively and glad that we have these tools in our toolkit as you noted.

Ali, if we could move to the next slide.

So these are the high-level expenditure changes.

So again, comparing May, so in this case, the May 4th plan with the new information in the baseline update, provided by CBO shows that there is some fairly significant growth in the expenditure projections.

So back in May, we actually were applying inflation adjustments to various categories.

And in large part, those inflation categories were fairly successful in accommodating some of the cost growth.

So then the next question is, why are these numbers higher?

And the reason is generally two things, one, as noted in the review of the baseline data, there was included additional cost for human services contracts.

So in 2019, council adopted an ordinance that codified a requirement that human services contract would be inflated by CPI in future years.

So notably in May, in the May update, It did not appear that human service contracts had been inflated according to the SMC requirements for the Seattle Municipal Code requirement.

So including those in the baseline and also in future years adds to a somewhat sizable increase in the cost above the projections that were provided in May.

Another piece of the kind of unanticipated growth since May is increases in planning reserves.

So these are the kind of below the line not appropriate reserves that that in this in the central staff analysis we include as future costs because they are essentially.

I'm out help or future cost items but they're held below the line because there are some sometimes not fully formed or you know include some legal or contractual nature that is not right to be included in the budget on the adopted budget.

So those two elements really are what is leading to this increase in expenditures in future years.

And in 2022, the cost growth is higher, but that's because of adopted legislation.

And frankly, if you look at the sizable differences between the 2022 bar and the 2023 bar, a lot of that is one-time stuff dealing with carry forward.

So in prior presentations to committee, we've talked about the automatic carry forwards, the legislative carry forwards, things of that nature that are essentially just 2021 spending that rolls into the next year.

So that's why that bar is higher.

In general, the plan in the baseline level includes growth in all years from 2022 and forward.

So I just want to point that out, particularly for the viewing public who may not be exactly tuned in to all the elements of the budget changes that we've discussed in committee this year.

So if we can move to this slide.

So this is kind of the more tabular format of the financial plan.

It shows in the top line the starting balance for each year, and then runs through revenue changes, expenditures, to get to the operating surplus deficit.

So this blue row in the center here is essentially the operating gap that we showed in the line chart in a prior slide.

Then you get to an ending budgetary fund balance.

There are some planning reserves that are held below the line to accommodate those kind of planning elements that are not yet included in the appropriation.

And then you get to the bottom line, the ending unreserved fund balance.

So a lot of detail on this chart, but the key takeaway is that the operating surplus deficit is higher than was originally projected in May.

And then the ending unreserved fund balance, which is the metric that determines a balanced budget, is actually somewhat better in 2023, largely because there are balances carrying over from the current year in the projection.

But on balance, it generally leads to a growing negative unreserved fund balance by 2026. So this is the table form to look at this data.

And then again, we can go through in the next couple slides the graphs.

So this is updating those graph presentations of the May data, using now the new information to show you the projected operating gap for August.

So as you can see, compared to the May graph, the average operating gap has grown.

So it's about, on average, $142 million in each year.

And then notably, how in the May plan, those two lines were getting closer by 2026. now largely due to kind of lower revenue projections in the future combined with the increased costs for human services contract inflation that's required for code and plan to reserve assumptions.

The lines are fairly consistent, about $142 million between the two.

So that's just basically saying that the fiscal sustainability of the general fund has deteriorated somewhat from the May presentation, given the recent revenue and expenditure updates.

And then the impact on the unreserved ending fund balance is shown on the next slide, which shows essentially the comparison in this bottom line balance budget indicator comparing the May plan, which is in red, and the August financial plan, the updated numbers, which is in blue.

You can see, actually, in the current year, it's projected to be slightly better.

And that's because the revenue forecast for the current year is higher, primarily due to the 2021 payroll expense tax liabilities that were received in 2022 and are credited to the general fund.

So for 2023, the projected unreserved ending fund balance improves from negative 35 to negative $17 million.

However, that assumes essentially balancing the budget using starting, completely relying on starting balances in 2023. Over the long term, given the growing and larger average operating gap, the projected end-to-end reserve fund balance by 2026 goes from negative $249 to negative $444 million.

And I just want to make an important note on this, because that's a very large number.

And it can be somewhat frightening when looking at a financial plan that has that size of a number on it.

However, this is just a planning document, and it will be updated.

It'll be updated again in the fall, and then it'll be updated numerous times before we get to 2026. And furthermore, there is no legal requirement that the out year of the financial plan be balanced.

What is truly required is that the only thing that is required to be balanced is the legally adopted budget that is being considered by the council.

This financial plan, particularly in the out years, is a planning guide and it's not intended to indicate that the council needs to balance a $444 million ending unreserved balance by 2022. It projected for 2026 in this year.

So just want to add that context because of the size of the number and the challenges that it represents, though that it is several years in the future.

And it's a useful metric, but it's not the sole governing metric in this analysis.

And if we go to the next slide.

So just to refresh, and I've I've intentionally tried to go at a fairly fast clip.

There is a backup memo, as Chair Mosqueda mentioned, that includes additional details for this presentation.

But I just wanted to refresh on the key takeaways.

And that it's basically, I lost the chart, the slide.

Yeah, so that's essentially that the projected annual operating deficit and the general fund has worsened.

The unreserved fund balance has slightly improved for 2023, but over the long term, it's projected to get worse.

The magnitude of the challenge increased.

However, there will be some changes, including new revenues, reducing right-sizing expenditures, and changes to restricted fund policies over both the long-term and the temporary basis.

that we discussed in May, those factors will still apply in looking at this plan.

Next is that the executive is still looking at decisions around balancing their proposed balanced budget, which will result in plans and changes to this financial plan.

And that will be transmitted to the proposed budget, transmitted with the proposed budget, and staff will do this recurring analysis based on that data.

And then at a high level, both the mayor and council are faced with this challenge.

And given increasing costs in core services and the higher risk of further declines in city revenues.

And so this is just the starting point that puts us in a good position for considering those different options that will be considered in the coming months.

And that concludes my comments.

I believe I am turning over to Director Dingley for some additional slides.

Thank you, Tom.

Welcome, Director Dingley.

Thank you so much.

Thank you, Chair.

Thank you, Tom.

First, I wanna start by saying thank you.

First, thank you for having me here today, but I also a deep appreciation and gratitude for the partnership with central staff and with the chair.

I have been very encouraged by this relationship and I think it's really great that we've been able to translate really technical information into hopefully more accessible terms for folks and deepen people's understanding of why we are in this position and where do we go from here.

transitioning to what I came here to just sort of emphasize a lot of what has been said today.

But, you know, from a technical perspective, CBO city budget office now has the inputs we need to produce and deliver the mayor's 23, 2023 and 2024 proposed budget.

However, we are obviously closely monitoring the forecast and available revenues.

So as a reminder that of course, in conjunction with the aforementioned partners, we are looking at every labor, every lever available to balancing this budget.

This includes reviewing vacant positions and underspend in general, asking each city department to identify areas for reductions, looking at areas where there are increased cost pressures to deliver core services and meet the needs of the community, exploring progressive revenue options through an upcoming task force in partnership with Chair Mosqueda.

Of course, those are longer term solutions that are not available to us in the near term to help close this gap or bend that curve.

And then of course, not listed here because of an author error, which is my own, examining general fund adjacent revenue streams for additional flexibility.

And those are areas like short-term rental tax, sweetened beverage, jumpstart payroll tax, things that we've discussed previously.

I've also been able to meet with most of you in the last few weeks, council members, to talk about the structural challenges that we collectively face and address council member priorities for this budget and beyond.

And I think I'm happy to report that the good news is I have heard broad agreement and alignment between council members and then between the council and the mayor as a whole.

And those priorities, and I don't think I'm telling tales out of school to share that those priorities include continuing to provide existing services while avoiding layoffs in the city family, focusing on our most vulnerable community members, especially, particularly recovering from the pandemic and the resulting economic conditions, and then continued investment in housing, addressing homelessness So now that we have those inputs, now we're looking at the challenges to meet.

So if we can go back just one slide, please.

Thank you.

So now we need to still determine what the number is that we'll collectively budget to for 2023. And as you heard from central staff and Director Noble previously, there is still significant certainty about the forecast and available revenues.

So I'm going to run through these challenges that we're grappling with.

as we're looking to come up with our proposed budget for 2023 and 2024. So as we heard, pandemic-related behaviors are continuing to negatively affect city revenues, and now general economic conditions might lead to slowing revenue growth in an ongoing way.

Forecasters, I do not envy the work of Director Noble and Dave Hennis.

They face extremely mixed signals currently and consequently are uncertain, you know, obviously between that baseline and pessimistic forecast of what will happen to economic growth over the next biennium.

So we are really going to be in a situation where we're living forecast to forecast until direction becomes clear, which suggests to Council Member Herbold's earlier point during Director Noble's presentation, that perhaps budget planning reserves might be appropriate to be managing that uncertainty.

You know, you heard from Tom that we've refilled significant reserves, but we'll be looking for areas to be conservative throughout the budget to hedge against.

that potential downside risk.

Further, year-over-year CPI growth has exceeded 5% since June of 2021, affecting both city revenues and expenditures.

The forecast is suggesting that it will take 12-18 months to fall back into the 2-3% range.

Go to the next slide, please.

Again, this is a little bit of bears repeating, so just bear with me here.

that rising prices boost percentage-based taxes such as sales tax, but there are city revenues, as you heard from Director Noble, that do not automatically move with price changes, like property taxes, even as high general price inflation puts continuous pressure on buying power and budgets for wages and commodities.

Ultimately, that high inflation conditions will result in those structural deficits in the general fund and other funds, even as we contend with existing balancing challenges.

So our buying power is going to go down.

And of course, new progressive revenue options, as I mentioned previously, are not readily available.

Those are longer-term strategies.

So this updated financial plan that you saw from Tom is the starting point, but it also doesn't assume growth outside of expenses in the baseline, and it also assumes no continuation of one-time items from 2022, of which there were many.

And then, of course, an ongoing challenge is that we have open labor contracts for a significant number of our city unions and those negotiations are ongoing.

So ultimately, at the end of the day, this forecast is not significantly mitigated, has not significantly mitigated the challenge we have all discussed and acknowledged.

But I do hope to engage with all of you more in the coming weeks as we craft the mayor's 23 and 24 proposed budget so that we can collectively meet our goals in an environment with, admittedly, extremely challenging circumstances.

So I will turn it back to Deputy Director Panucci and Tom to close us out with some next steps.

Thank you very much.

Thank you, Director Dingley.

So I'll just kind of finish this up.

The mayor will submit his proposed 23-24 budget on September 27, which will include policy proposals on top of the baseline numbers that we reviewed today.

And the Council, of course, will then consider that proposal and make changes to adopt a balanced budget for 2023 and then endorse a balanced budget for 2024 with a date targeted for November 22nd.

And as I mentioned earlier, this is the final review of this information prior to receiving the budget.

There will also be, during the Council's budget deliberative process, there will be a final revenue forecast from both CBO and the Office of Economic Revenue Forecasts.

that we will receive in November, which will continue to keep the pulse on what's happening in the economy.

And then finally, this is just an assurance that using this framework that we started in May and are continuing today, central staff will continue to provide how the budget proposals that are being considered have an impact on the financial planning projections at each stage in the process.

So that concludes our presentation and they'll go to to help with the questions that committee have.

Okay, colleagues, I do wanna tee up a few items as well that I think are a follow up to this presentation before getting into more of a discussion or questions.

I think hopefully this will help round out our discussion about where do we go from here.

As the budget chair faced with a significant budget deficits, as you've heard, we've been in deep conversation with central staff and really appreciate the collaboration with the city budget's office.

But after we received the news on Monday last week from the Office of Economic and Revenue Forecast, I have asked central staff to work to calculate a scenario in which we are able to fully preserve the commitments of the 2020 Jumpstart Spend Plan.

as codified in statutes with the amounts assumed in 2020 based on the revenue that we understood to be available.

We want to maintain the amounts and the spending categories as directed in the jumpstart spend plan.

For example, that would still allow for us to see a near 42% increase in the investments in the spend plan as codified by this council as it related to jumpstart spending.

That's a 42% increase for things like affordable housing, free new deal, equitable investment, equitable recovery.

These are our commitments that we made to a broad coalition and it's the commitments that we as council members universally, unanimously approved and codified into statute.

The ability to move forward with those commitments is something that I really want to be able to stand by.

As we also recognize there are some potential short-term solutions for 2023 and 2024. that could use the balance of the jumpstart revenues that are projected to come in above the levels estimated from 2022 and use that difference to help us address the general fund current deficit in the short term, just for those two years to prevent significant reductions in city services.

And I would also say that when we as a council passed jumpstart in 2020, We had intended for jumpstart to also help prevent against austerity at the beginning of the pandemic.

So it is very much in line with the commitment to making sure that we protect significant and critical city services, as well as moving forward with the commitment that we codified in statute in 2020. that would allow for us in 2022 and beyond to make sure that there was direct investments to the categories as directed in our spend plan.

As everyone knows, as we've talked about this budget situation over the last eight months, thanks in large part to the transparency that has been made available because central staff took the directive from two years ago to dig into the footnote that was included in the last two years projections and really daylight the six year financial plan.

We began having a conversation in a collaborative way with our new director of the city budgets office, Julie Dingley with central staff at the table.

starting this year to say how do we collectively as a city family address this shortfall that was buried in I think page 700 and something and then page 600 and something in our last two budgets and bring that to the forefront so that we collectively could address the underspend that had been used chronically to fill in future years budget.

As I've said repeatedly since we began this conversation this year, that jumpstart progressive revenue could not be the only solution to addressing the potential shortfall that was identified in the six year fiscal plan outlook.

I have asked central staff at this point to go forth with helping us as a council and in collaboration with the city budget's office and the executive, look at this scenario that would allow for the modest estimates from the 2022 underspend to be built into the baseline expenditures.

Assume very little growth in new expenditures in 2023. That will help hold our budget steady, but to address the shortfall that we will face in 2023 and 2024, as I noted, stay true to the 2020 spend plan as codified in Jump Start's expenditure plan.

stay true to those amounts and use that difference the higher than anticipated dollar amounts to help us with the general fund underspend.

This is very much in line with what this committee has looked at has asked for in the past to look at general fund revenue adjacent revenue streams but it is even those additional revenue streams are not significant enough in the near term to help us close this gap.

So this short term solution that I'm suggesting, and I will ask central staff in a moment to walk us through the scenario for our council colleagues here.

This short term solution with very clear sideboards to only be used for two years and to maintain our commitments to the jumpstart spend plan as codified in statute with the amounts that we assumed in 2020, this would need to be coupled with those longer term strategies that Director Daley noted.

Investing in progressive revenue sources that would be available to us starting for the 2025-2026 budget cycles.

So that would mean revenue would need to be implemented and we would need to start collecting in 2024. And I'm very excited that in partnership with the mayor's office, we are continuing to move forward with establishing a progressive revenue work group that will be able to identify solutions for us throughout next year that I hope will be able to be implemented in 2024, that would allow for the longer term stability.

The Seattle Revenue Stability Work Group, for example, as a name, could then be used in 2025 and beyond so that this short term approach to jumpstarts higher than anticipated revenue will be very short term in nature.

The second thing is we want to continue to seek state and federal funds, county partnership in every place possible, and we are continually inspired by the progressive revenue options and policies that are coming from Congress right now.

This follows up on the American Rescue Plan, the coronavirus local relief funds, the bipartisan infrastructure bill, and now the Inflation Adjustment Act, We are going to continue to see possible revenue streams coming to our state, our region, and we want to work in partnership with those state, county, and federal partners to bring in additional revenue to offset where the city may have stepped up, where dollars were not available from those partners in the past.

And third, as you heard it, as you heard Director Dingley note in this meeting and in previous meeting, there are systemic issues that the city budget office is committed to addressing to make sure that we're improving our baseline budget assumptions so that every year we do not have dollars going to departments for positions that are vacant.

We cannot rely on using underspend from one calendar year to, be paid forward to the next calendar year's budget.

That is not sustainable budgeting.

And Director Dingley has really taken that issue head on and is working on policies to address that in the city so that each department has real time budgeting information going forward after this year.

So I appreciate that.

And colleagues, lastly, I'd like to signal that the scenario that I'm asking the city central staff to walk through is a policy path that we're exploring again, exploring for the 2023 and 2024 budget shortfall only.

It is short-term, one-time solution in nature, allowing for us to maintain our spending as originally intended in the 2020 spend plan as codified, and allows for us to maintain the full amounts into those categories.

It still allows for an increase of 42%, for example, in housing.

And it does not rely only on Jumpstart to solve this systemic issue and allows for us to build in progressive revenue in the future.

And if we over relied, frankly, on Jumpstart now, we would have an unstable budget, unsustainable budget if the revenue forecast continued to decrease in the November forecast that we will receive this year or in future years.

So this is not only the smart thing to do, to be able to maintain the integrity of Jumpstart, to be able to ward off austerity, to be able to make the investments, to literally jumpstarting our economy in housing, Green New Deal, equitable development and equitable recovery.

But it also allows for us to move forward with investments in our core city services and vulnerable populations.

that jumpstart initially intended to protect as well by preventing against austerity.

So as you know, I don't do anything out here on the dais in development on policy without talking to key stakeholders and we had a large number of organizations that were part of building the tax proposal in Jumpstart along with my council colleagues who co-sponsored the legislation.

I have reached back out to some of those stakeholders that were part of our initial conceptual tax discussion and talked about the opportunity to maintain the 2020 spend plan as codified into statute, short-term solution for the next two years, reliance on progressive revenue going forward, and clear sideboards on how Jump Start's integrity would be maintained.

And I really appreciate that I've received a positive message back from the Washington State Budget and Policy Center.

Working Washington, 350 Seattle.

The Seattle King County Coalition on Homelessness, SEIU 925, Teamsters 117, and a number of individuals who are still having conversations in community, but very much strongly support the approach of maintaining Jumpstart's integrity.

They wrote me a comment that said, We worked tirelessly in 2020 with the Council Member Mosqueda and other colleagues sponsoring Jump Start to build this robust community support for progressive revenue to address the challenges during COVID, but also the chronic need for more progressive We developed the spend plan and consultation with community business and nonprofit organizations and service providers and residents of Seattle.

And they said, given that jumpstart is projected to raise above what was estimated in 2020, we support the requests made of central staff for central staff to look at temporarily a scenario that allows for us to temporarily address the Seattle budget shortfall in 2023 and 2024 only.

with excess jumpstart revenue going to core government services to create a more equitable Seattle.

They said, let's be clear.

This means we want the full promise of funding and the commitments as outlined in the spending categories to be maintained and adhered to as envisioned in 2020. It's unacceptable that communities have waited for affordable housing, climate investments for so long, and we recognize that Jumpstart's higher than anticipated returns and its success is a way to temporarily support existing programs while maintaining the commitment that Jumpstart originally envisioned for its spend plan as codified.

So I really appreciate the support from some of the folks who are core to developing the spend plan, and we will maintain the integrity of that spend plan while looking at ways to provide some initial relief to the budget.

Council Member Herbold, I believe there's just three slides.

If central staff could walk through those briefly and then we can take all questions together.

Okay.

Central staff, please go ahead and walk us through those initial slides to outline that scenario that I just commented on.

I'm going to share my screen again and try to leave it on the screen this time.

So thank you for that introduction.

As Chair Mosqueda described, We were asked to prepare a scenario that avoids austerity and preserves the commitments made in 2020 and affirmed in 2021 by the council on how the jumpstart tax revenues should be allocated.

So what we prepared for your consideration today as guidance for the executive and Director Dingley as they prepare the proposed budget and consider the decisions ahead is a proposal that would we would be able to use that to allow some amount of jump start fund to continue to provide continuity of city services in 2023 and 2024, and the amount would be calculated based on taking the revenue estimates we were using when developing the 2020 spending plan for jump start, and then comparing that to the current forecast.

to maintain city services.

It would be a short-term allowance, and it would be important in this proposal that the policies are crafted in a way that would only allow that transfer if general fund revenues are continued to be projected to be less than expected, or excuse me, projected expenditures, and then also require that as we get future revenue updates, if conditions improve and general fund in the current year the general fund expenditures.

As shown in this chart at the time, the jump start plan and spending plan and tax was authorized by the revenues are currently about 30% higher, or 30% or more higher than original estimates.

So that this means the city could invest the full amount, the $223 million as originally committed in 23 and 71 million would be transferred to the general fund for 2023. This next slide is an example of how that would play out for the jumpstart spending plan.

So as shown on this In this table, in 2023, you could invest that full $223 million in jumpstart fund categories and transfer $71 million to the general fund.

This would allow for a significant increase in the jumpstart spending categories.

For 2023, about almost 40% or over 40%, as well as providing that support to the general fund.

In addition, you'll see that we're showing some fund balance in this table.

That is reflecting the amount of jumpstart revenue that is projected to come in in 2022. That is higher than what we budgeted in the adopt in the 2022 adopted budget.

And per Director Noble's presentation, given some of the uncertainty about payroll tax revenues and the newness of that tax, Central staff will be providing some options to create a reserve to ensure some stability in the jumpstart fund as well as providing that stability to the general fund.

And this final slide shows the full scenario.

So the, or what it could mean for general fund balancing.

So along with the jumpstart assumptions, we modeled the scenario that included modest assumptions about 2022 underspend.

of about $20 million.

And as this committee has been engaged in conversations, we know that currently the executive is looking for, is currently holding certain expenditures in 2022, understanding the projected shortfall in 23 and reserving some of those resources to mitigate any reductions that need to be made to base expenditures.

It does also model a modest assumption about certain baseline budget reductions, less than 1%, a half a percent.

In 2023 and beyond to help balance the budget and then to address the structural deficit in the out years, of course, as the chair noted, we would need to rely on other solutions.

And we are currently engaged in ongoing conversations with CBO and other executive staff on new progressive revenues, as well as really looking at our baseline budget expenditures and how to reprioritize city spending to meet the most critical needs.

So in this table, these three purple rows show the sort of difference between the financial plan that Tom described and how this scenario would affect it.

So the first line shows that $20 million underspend in 2022 and then the assumption about a half a percent baseline reduction in expenditures.

It shows a maximum transfer from the jumpstart fund to the general fund of 71 million and 23 and 84 million in 24 and it assumes that some new spending will have to occur in 23 this could be spread out over 23 and 24. acknowledging that there are going to be some cost increases that are unavoidable, that are not yet reflected in the baseline budget.

And again, this is just a scenario.

We don't have complete information.

The budget office is still working through proposals from departments and decisions from the mayor.

But as shown in this scenario, this would mean that the Jumpstart Fund could maintain those 2020 commitments, contribute to the general fund picture and show a balanced budget at the end of 2020. and it would improve the conditions for 2026, and as Tom noted in his presentation, it is not required that the financial plan show a balanced budget in the out years.

It's just important that we continue working together to identify longer-term strategies so we don't continue to face this deficit and coming up with one-time solutions year over year.

And with that, I'll turn it back to the chair.

Okay, great.

So I, thanks for sharing.

Um, and I think you can take down those numbers because it's all still in development.

And one big caveat that I would note is we still want to see what the impact of the inflationary adjustment would be.

So that is a critical piece, um, in plugging into these, these final, um, scenario slides here.

But with that, it is one way for us to signal that I think that we are all interested in avoiding austerity, maintaining the integrity of Jumpstart and continuing to look at these longer term solutions.

Council Member Herbold, you have been very patient, so I will turn it over to you.

I appreciate learning about your proposal, Madam Chair.

I do have just two quick questions about the prior presentation, but before I move to them, I do want to take this opportunity to signal my support for providing some flexibility for I think that's a good point.

I think that's a good point.

we have to be cognizant of the fact that we're facing a long-term structural problem that must be served new progressive revenue.

That we don't have an And I'm hoping that letter that you referenced, Madam Chair, is in all of our inboxes.

And if not, if you don't mind sending it, that'd be great.

questions from the public.

I have 2 quick questions one about slide 9 and the about slide 8. And I'm sorry I know I asked this I guess I should say that the we're not going to be able to get that information until we have a projected starting balance on slide 9, it's my recollection that neither of these numbers include underspend nor any of the planned spending holds from 2022. The reporting on the projected revenues, I think so far has not talked a lot about the work that the council has been doing with CBO to do some planned spending holds for 2022, and what that does is it we're going to do is we're going to reduce the baseline by holding some spending for 2022 that allows us both to reduce the baseline for 2023 as well as to carry over more funds from 2022 and so I just want to for

Thanks for the question, Vice Chair Herbold.

So these numbers do not include any assumption about underspend in the current year, so 2022's budget, neither from natural underspend or from some spending holds that are currently in place.

With regards to the impact of that in future years, my initial assumption would be that those items are only being held on a one-time basis, and if there are any ongoing implications of that, they would not be built into the baseline.

So if there's a spending hold on something that we'd normally consider ongoing, in the future years, we are considering that as fully part of the projection and growing in future years.

But I don't know the detail on specifically what those holds are, so I can't answer any further.

When you say future years, you mean beyond 2023?

We are sort of behind the scenes considering them, but not reflected here.

for 2023?

Correct.

Yeah, Council Member Herbold, if I might just add in, if we assumed that for 2022, if we reduced expenditures by $20 million, you would show 23 is slightly in the black in this scenario, but it wouldn't improve the out years as Tom described for any ongoing expenditures.

I will just note that there are still 2022 issues that the Budget Office is hearing about from departments with some increased costs.

And so there are a lot of moving pieces, which is why they are not yet projecting that sort of underspend in the expenditure information they've given to us.

And Director Dingley, please correct me if I'm wrong there.

And also, but which is why we included the $20 million assumption in Chair Mosqueda's scenario, that based on previous years' underspending may be a bit conservative, but it is hard to predict that now, and so we are trying to show a conservative estimate that shows you could balance, and as Director Dingley and the executive team collect more information from departments in the next couple of weeks to finalize the budget, It is, I am assuming that the proposed budget will likely have some underspend assumption unless they decide to release the holds on any of that spending.

Helpful.

Thank you.

My second question.

Just real quick on that one.

Director Dingwood, did you have something you want to add to the council member's question?

I just wanted to confirm what Ali said.

We're in the midst of a lot of these decisions.

we're learning a lot about what updating this plan looks like at this time of year.

And part of that is imperfect information, frankly.

And so we still just, we don't have enough information to project out for 2022 just yet.

But yeah, just putting an exclamation point on Ali's comments.

And I completely understand that about the sort of the natural underspend and new things that have been arisen.

I'm just sort of expressing an interest in sort of I think it's important to have more transparency around the holds.

Again, we've made some tough decisions together this year about those holds.

and it focuses on the deficit, which is an important thing that we have to wrestle with, not just for this year, but for the long term, without reflecting that difficult work that we did this year to not stand in the way of the executive holding almost $20 million in spending that the council planned.

I just, it makes me want to make sure that that is also reflected in this planning work.

Again, I understand that there's definitely more to come.

My second question, it might be another example of me being the proverbial dead horse.

On slide 14, the vacant position exercise, really appreciate that this work is underway.

I have expressed in the past how important it is for us all to get real-time insight into positions that are budgeted, but not filled, and therefore another likely area for underspend.

And this is even more important, I think, during the great resignation, where it's more difficult to fill funded positions.

I understand the picture that we have here is not quite as clear.

as we have aspirationally expressed our hopes for and that by design we want to keep some positions that are vacant but funded, we want to hold them.

We don't want to, but it's again, we still want the information about them because without suggesting we want to cut them because we do recognize that the funding in some of these positions is necessary to support more than average workforce in a particular division.

But I just want to express my hope that having more information about vacant positions will be forthcoming because it's really valuable to council as we begin our deliberations on budget.

And just wondering if you could say more about I'm going to turn it back over to you.

I just wanted to make sure that your insights or information that you expect be available as it relates to the review of vacant positions.

And our bring the budget conversation and sort of what the next step that will not will need to be taken to make this

Those are great.

They're the right questions, Council Member Kerpel.

Thank you very much for them.

I would say a couple of things.

First, we have a full position-by-position review underway with the departments.

They are providing us context on why those vacancies exist and what the plan is going forward for those positions.

I would say holds on positions and holding vacancy assumptions is really tricky from a budgeting perspective.

It's a great one-time or near-term tool But unless it's coupled with a conversation around actually changing the lines of business and expectations around what a department is doing in service to the community, it's not something that can be done sustainably in an ongoing way.

So it's definitely something that we are absolutely using through this upcoming proposed budget.

That's not telling tales out of school.

I think you would be surprised if I wasn't using that as a tool.

Um, but it's, it is really important that we, that we keep an eye toward our expectations around service delivery overall.

So that's one piece.

The other piece I would say is that, um, you know, vacancies isn't the only story.

Um, we are, have been working really closely with the city finance division on tools to enhance monitoring across departments.

So we have now with the introduction with our new finance, well, I guess it's new ish financial management system.

It's about four years old.

but with the pandemic, it still feels new.

We have a lot more data now than we've ever had access to in terms of more like closer to real time department spending.

And so rolling out monitoring tools to help build that accountability and frankly, active management of resource for departments so that they have a resource to use that's easy for anyone at any level of financial literacy throughout the organization, managers all the way up to executives to be able to track how they're doing in real time.

And we can have those accountability conversations with finance and budget with the departments together to say, hey, this pattern doesn't match our expectations.

What's going on here?

And provide some more information sooner so that we're in less of a reactive posture.

That's the goal.

That's a big time change management effort.

So it's gonna take us time to get there.

But I wanted to share that we are putting the tools in place now and starting those trainings throughout the city so that we can start that utilization, then start robust monitoring moving forward.

And hopefully the goal is over time, as you heard from central staff, we're going to right the ship.

It's just going to, it is going to take us some time to get there, but, you know, appreciate the grace and patience that everyone has shown and, and the support, frankly, for rolling out those tools.

Looks like Tom has an answer as well.

Go ahead, Tom.

Thank you, Madam Chair.

And just to kind of build on Director Dingley's response and to provide some insight for the committee.

The vacancy question is important to the central staff analysis.

And one of the budget questions that we are envisioning at this point in time is something that compares the cost of supporting the currently filled positions with the budget amount.

So it's kind of approaching the vacancy question from a slightly different angle.

So it's basically saying, how much do you need to pay for the positions you have filled?

What is the budget and what's the difference?

And in some cases, there may be actually insufficient budget to support the currently filled positions.

But in other cases, it will be the other way.

There will be more budget authority than is required to support those currently filled positions.

So it's a slightly different tact.

So hopefully, the dual efforts will provide the right level of information for council's decisions this fall.

Thank you both, appreciate that.

Yeah, and I'll also underscore that that's been a constant point of conversation as well for me, recognizing that we continue to put additional money into positions that are not filled and then that money rolls over.

So looking forward to working with all of you as we continue to address this.

Please, please note that the caveat along with the scenario that we outlined was just to provide some assurance that we are looking at how that would impact our existing plans to jumpstart progressive revenue spend plan and wanting to first maintain the investments as codified in 2020 in terms of amounts and spending categories.

So that is the thing that I really wanted folks to see that those investments are maintained and that there is going to be the potential if the scenario does continue to get analyzed, for us to use a higher than anticipated returns, only that amount for only two years, to then help with preventing austerity.

Much more analysis is needed, though, to continue to look at the impact of inflation, for example, and some other issues that we may want to factor in.

So please note the asterisks next to this conversation that we had, which is much more work is to be done.

But I wanted to let folks know in a transparent way, in partnership with many of the stakeholders from Jumpstart, Progressive Revenue Coalition that there is a shared interest in both preserving the spend plan and preventing against austerity in the very short term.

So more work to be done on that with the asterisks there that there's a lot of analysis still to be done.

Any additional comments on this?

We are over 1 p.m.

So I wanna thank you for your shared interest in the questions and the presentations today.

Our next committee meeting will be September 7th at 9.30 a.m.

We have a relatively short agenda, the Yesler-Terrace Moratorium, excuse me, Memorandum of Agreement Modification, the Green New Deal Jumpstart Appropriations for us to consider.

This is the recommendation from the Green New Deal Advisory Board on how they would like their specified dollars to be dedicated and look forward to codifying their recommendation.

And then because we weren't able to get to the quarterly Seattle Rescue Plan spending update, we will have that as the last item on our agenda for September 7th.

With that, great to see you all.

Enjoy the rest of your afternoon.

Today's meeting is adjourned.

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