City of Seattle Economic and Revenue Forecast Council meeting of 3/9/23

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Well, good afternoon, everyone.

Thank you so much for joining the Economic and Revenue Forecast Council meeting.

This is the meeting of March 9th, 2023, our first quarterly meeting.

The time is 2 p.m.

and it is my pleasure to be here on behalf of the Forecast Council with my colleagues, Senior Deputy Mayor Monisha Harrell.

Hello, Senior Deputy Mayor.

We have our City Budget Office Director, which is Director Julie Dingley.

Hello there.

And we also have with us Brendel Swift, Chief of Staff in the Council President's Office for Seattle City Council.

Council President Deborah Juarez could not be here with us today, so her designee is Brendel.

Good to see you as well, Brendel.

We have a number of colleagues as well who are from the city team.

Thank you all for joining us.

Whether you're with the Office of Economic and Revenue Forecast or our City Budgets Office, it's wonderful to see you again.

Again, this is our first convening of 2023 and a quarterly meeting.

Today we will have a chance to hear from the Office of the Economic and Revenue Forecast as well as representatives from the City Budget's Office.

We have with us on the line leaders from the Seattle City Council Central Staff including Director Esther Handy and Deputy Director Ali Panucci.

we'll have a chance to have a detailed discussion and hear questions and go through very important issues of substance on our agenda.

The agenda today does include two specific components.

First is the selection of the chair and vice chair for the Revenue Forecast Council for the year of 2023 and the approval of the 2023 work program for the Office of Economic Revenue Forecast.

In addition to these two items, the Revenue Forecast Office will be presenting a report on the final 2022 revenue returns, and we will have a chance to see how this final tally aligns with our most recent forecast.

Colleagues, before moving on to the substantive items, let's begin by formally adopting the agenda that I just outlined and that's been presented and published on the Office of Economic Revenue Forecast website as of this morning.

A copy of the agenda has also been circulated to all of the members here and for members of the public who are watching us via Seattle Channel.

Seattle Channel, thanks again for your broadcasts of these Revenue Forecast meetings live and recorded as well.

All of those materials are going to be included on the Office of Economic Revenue Forecast for today's presentation and will be archived there.

I move to adopt the agenda as presented and circulated by the Office of Economic and Revenue Forecast to this Council.

Is there a second?

Wonderful.

I did hear a second, I believe, initially from Director Dingley and also a second from Senior Deputy Mayor Monisha Harrell.

So we will consider that moved and seconded.

Are there any additional comments?

Hearing none, if there's no objection, today's agenda is adopted.

Okay.

It's really great to see all of you.

Thank you for helping to make the first year of the Office of Economic and Revenue Forecast convening a success.

I think we have one full year plus under our belt, and today is the opportunity for us to initiate the second year of our forecast council.

The first item of business on our agenda is to make sure that we select a chair and a vice chair for the forecast council.

As you know, I had the privilege of serving as chair last year and senior deputy mayor Monisha Harold served as vice chair.

Per the ordinance that created the forecast council and by the bylaws that we adopted last year around this time, we do need to elect or reelect someone to serve in the chair and vice chair roles.

So at this point, I would go ahead and entertain any nominations from the floor for folks who you would like to see serve as chair.

Are there any nominations for chair?

Senior Deputy Mayor Harrell.

I move to nominate Council Member Teresa Mosqueda to serve as chair of the Forest Gas Council.

Thank you very much.

I appreciate that and I would accept such a nomination.

Is there a second?

Second.

Thank you so much.

Any additional nominations?

Okay, well, it would be my honor to continue to co-convene this with the vice chair as well.

So thank you for the opportunity to be nominated and colleagues, I would be very happy to continue to serve in this role with all of you.

If there's no additional comments or no additional nominations, I'll go ahead and call the roll on the nomination of myself to serve as chair.

Senior Deputy Mayor Carroll.

Aye.

Thank you.

Director Julie Dingley.

Aye.

Brindell Swift.

Aye.

Excellent.

And I should double check here.

I had Julie Dingley as filling in.

in FAS's role, but I think that I need to pause and recognize that we have with us Acting City Finance Director Jamie Carnell, who I had the chance to see this morning in the Seattle City Employees Retirement System's Board of Administration meeting, who's also a board member there wearing that hat, serving on behalf of the finance department.

And Acting Director Carnell, you do have a vote here.

Would you like to vote?

I do, and I.

Excellent.

Okay.

And I will call on myself.

But it is unanimous.

Thank you so very much for your faith in this process and for your faith in me as chair.

And with that, we're going to move on to the vice chair.

Colleagues, I'm going to take a moment of personal privilege to just out of the gate nominate Senior Deputy Mayor Monisha Harrell to serve as the vice chair of the Economic Revenue Forecast Council.

Is there a second?

second.

Thank you very much from Brundell.

Any additional comments?

Any additional nominations?

Okay.

Well, I think that's a sign of confidence.

Um, direct, uh, senior deputy Mayor Harold, would you accept such a nomination before we vote?

I would gladly accept.

We had a great year together last year, and I know we'll have another good one this year.

Excellent, wonderful.

Well, let me start with our newest member of the forecast council and that is Acting Director Carnell.

Would you like to vote?

Yes, with pleasure, aye.

Aye, perfect, great.

Brindell Swift?

Aye.

Okay, I'll call myself, Theresa Mosqueda, aye.

and Director Dingley.

I will abstain.

Okay and one abstention that will make it unanimous.

Congratulations to Senior Deputy Mayor Harreld for your continued service as Vice Chair.

Okay, with those formalities out of the way and thanks again to the team at the Office of Economic and Remedy Forecasts who helped to create the bylaws with us last year in quarter one and who got this office off the ground.

We are very excited to be able to continue to work with you and receive this information.

And just by way of reminder, this is information that is shared in real time with the executive and the legislative branch.

That is the intent of the revenue forecast so that we receive the information in real time along with members of the public.

This is a ordinance that was enacted in an effort to follow the timeline and process that is more akin to what is experienced at King County and our state.

revenue office there, forgetting the name of it.

But we want to make sure that both the legislative and the executive branch, along with members of the public, are receiving updates on the revenue forecast collectively and that we hold these meetings quarterly.

So as part of our first meeting for this quarter, we will get into the details of the latest information from the Office of Economic and Revenue Forecasts.

And it will be the start of, I think, a robust conversation throughout the year.

In advance of that discussion, we have approval of the minutes from 2022 from our November 2nd meeting.

A copy of the minutes have been distributed and circulated to members of this forecast council, and they are also posted online.

I would like to move that we approve the minutes from the November 2nd, 2022 meeting.

Is there a second?

Second.

Thank you very much, Director Carnell.

Is there any additional comments or discussion?

Hearing none, all in favor of approving the amendments, please say aye.

Aye.

Aye.

Any opposed?

Any abstentions?

It is unanimous.

Okay, excellent.

Director Noble, thanks again for your leadership at the Office of Economic and Revenue Forecast.

The first item on our agenda is the presentation of the 2022 work plan for your office and Again, per the ordinance that we created from the Seattle City Council signed by the mayor's office, the forecast office each year provides us with a overview of the annual work plan.

Director Noble is going to go through the office's proposed work program for the Revenue Forecast Council here.

After they walk us through the presentation, we'll have the opportunity to discuss the work plan as drafted, and we would be happy to entertain a vote if the body feels comfortable.

Director Noble, I'm going to go ahead and turn it over to you, and thank you again for your work throughout 2022 in our inaugural year.

Thank you.

Much appreciated.

So in a minute here, I'll put up a PowerPoint and walk you through the proposed work program.

Part of that presentation actually includes a review of our accomplishments for 2022. I thought that would be useful context.

And we are accountable to you and don't actually get to see you that often, so I thought it would be important to review what we had done.

And from my perspective, as yours, as you mentioned earlier, a very successful year.

So with that, let me just dive in.

I'm going to share a screen and put up the presentation.

One moment.

You all can see that, yes?

OK.

So I'm going to dive right in, as I said.

Just trying to make sure I get there.

There we go.

So just a quick background, just really more for the broader audience.

Just reminding you that the basic function of the forecast council is to produce the economic and revenue forecasts.

In addition, we have responsibilities, and you'll see that in the second presentation today, to write updates on the actual revenues as they are received.

And then we have a second broader mission to provide policy support when requested either jointly by the executive and legislative branches or potentially individually as well.

And as I walk through the work program, I'll give you some examples of that policy work.

Just reminding you who we all are here at the table, myself, Jan, a senior economist, and Sean Thompson, joined the team in the middle of last year and that was actually one of our accomplishments last year was to get ourselves fully staffed.

So that's kind of who we are and what we do.

Just to remind you as well that we work to a degree in collaboration with the budget office.

We're responsible for the most significant in terms of dollar amounts of revenue streams into the city.

But there are a number of other revenue streams that are really very department specific, where we rely and coordinate with CBO, the budget office.

And you'll see that again today as we go through the presentation, where we summarize the 2022 final revenues.

Digging in to 2022, just for a moment, just again, just to review what we've been working on, just to acknowledge there was a fair amount of work in just getting ourselves set up.

kind of on a bureaucratic technology front transferring software and data and making sure we had appropriate access.

Much of the data that we have access to in terms of tax records includes proprietary information so the city is appropriately careful about anyone having access and that includes us as a group.

Another big thing that we did was to work with central staff and the budget office, mayor's office, council offices, just about getting the relationships and protocols worked out.

we had all, many of us anyway, had worked together over the years, but this was a meaningfully new relationship.

Um, we were, um, we are an independent office.

Um, and as council member Muscata described, we are providing information to the executive and the legislative branches, um, at the same time.

Um, and if you will, in real time, and that there were just some issues and protocols to get sorted out there about how that was going to work.

Um, and I just, uh, note of appreciation for all involved in making that happen.

Um, I think we've got ourselves a pretty smooth operation and, And as importantly, a very clear dialogue.

So whenever there are issues or questions, we know who to talk to and how to sort them out.

So that's been a success.

Another real commitment that we have, and that was the point of creating Office, was about transparency.

And as part of that, we needed to make sure that the work we produced could be distributed and posted.

So I got myself trained on how to populate a website, and I am now the webmaster for The forecast office and the materials that you're seeing today and others are posted there.

It is a repository.

So we only put things up at the moment.

We have not taken them down.

So people can address that history as well.

And then work with Seattle Channel.

So again, another shout out to Seattle Channel for helping make this possible, even in the context of remote and hybrid and the like.

That has been a technical challenge, but one we obviously sorted through.

We then obviously did the forecasting work, so we delivered, and as you'll see, I think, delivered accurate forecasts on the whole for April, August, and November.

We've continued to refine forecasting models in a variety of ways, and we'll talk a little bit more about that as well.

We've also opened up a dialogue with some of our colleagues, including the folks at King County.

I remember Ms. Gator mentioned that our office is in some way modeled on King County.

Actually, we were just there doing a revenue presentation this morning.

We are listening in and they mentioned this touching collaboration as well and I had produced this slide a long time ago so we shared in that as something that had been mutually beneficial for us.

We had learned from them and they from us.

And then as it turns out a graduate student colleague of mine is the co-director of a Center of Economic and Business Research at Western Washington University.

And they actually, using a very comparable model, developed forecasts for Whatcom County and regions kind of in the northwest of the state.

So that's been a useful collaboration as well.

And we had some contact with PSRC around some employment issues as well.

One of the things we are working hard on, and you'll see as it continues to be in the work program for this year, is establishing a data-sharing agreement with Employment Securities.

Employment Securities is the state office.

They have detailed information on payroll and wages at the firm level and actually at the individual level.

And for some of our forecasting, particularly for the jumpstart payroll tax, that would be great information to have access to.

It is, however, highly sensitive, because it is extremely proprietary, if you will.

So it's going to take us some time.

We are now working with Seattle IT and with folks at the state at ESD, and we're going to continue working on finalizing that arrangement.

Then we also worked out a pattern of regular reporting, both the quarterly reports, and as I'll highlight in a moment, some other regular updates that we provide.

And then we've also supported folks on the policy side.

So we actually did an assessment of our own forecast accuracy.

That's something we showed you at the last meeting.

It's helped inform us as we look to focusing our work for this year, where's the best place to spend our time, if you will.

We helped on some revenue estimation work.

We made ourselves available for the revenue stabilization work group.

So a variety of issues there as well.

Moving forward, looking at 2023, You'll see there's going to be two slides here, so there's four broad elements to the work program.

One is the forecasts themselves.

As we've described repeatedly, it's a two-step process.

We do the economic forecast, and then we do the revenue forecast.

What you see here on the table is a summary of the calendar we have set up for those.

We've actually scheduled the April and August meetings where we will present those two revenue forecasts.

We continue to coordinate with central staff and then with Council Member Sgata's office.

She serves, obviously, as Chair of the Finance and Budget Committees for the Council, so the coordination of that last update needs to happen with that and with the Council schedule.

The basic idea here, though, and this is a slight difference from last year, is that we'll deliver that forecast a little bit earlier than we have.

In the past, we've talked about it being the November forecast.

The dates here reflect a goal of October.

And the intent there is to provide council with an update in a more timely way to better inform the budget decisions that the council is going to make and give you all information such that you can really process through and make decisions that are informed by what the revenue picture is going to be.

So we'll nail down those dates here in the next couple months and get them on the calendar.

In terms of regular reports, we will continue to produce the quarterly revenue reports, one of those to be presented today.

Essentially, I call it the year-end report.

It is also, by definition, the fourth quarter report for 2022. There are also some internal reports, emails that we send out.

So we get a monthly update from our national forecast firm, IHS Market, and we provide a little summary of that and mail that around to staff.

That's become a regular thing.

It provides, again, just an update on where things are headed on the face of it.

We'll continue that.

We also get monthly updates from the Department of Revenue on our sales, the city sales tax revenues.

It comes with about a seven week lag, as I mentioned here.

So if they come every month, they're reflecting activity that happened seven weeks prior.

But in some ways it's the most timely information we have about local economic activity.

Something I used to always monitor.

I was in the budget office and continue to do so here.

And again, we distribute that widely so that folks can see, get that same information.

So we will continue those tasks.

Sorry, advanced is too far there.

Then we are going to continue work on enhancing the forecasting model.

This task three is a significant part of what we're doing.

I mentioned already finalizing that data sharing agreement with ESD.

Once that is nailed down, We will, well, we're going to work ahead of that as well, but that'll provide critical information for modeling the jumpstart payroll tax.

We're already working on that now based on some of the, we now have final results for 2022, looking to see what information we can use as a leverage to help forecast that.

And we'll talk a little bit about that actually when we present those results.

The real estate excise tax REIT, you'll see that there's a lot of developments there, in particular, fall off in revenues as interest rates have been rising.

We want to try to get a better handle on that, try to see whether we can forecast what's going to be happening there.

Again, we're expecting pretty significant change from recent historic patterns.

Then also new construction, that's a component into the property tax forecast, an area where I think there's an opportunity for some enhancement.

And actually Sean and I have already been working this first couple months of the year here on some work related to assessed value and our forecast that again underlies the property tax revenue.

This again is actually a potentially interesting area related to some of the impacts of COVID and the potential for there to be reduction in the assessed value for offices and commercial properties, and we may come back to you later in the year with some potential insights about how that might play out.

We're then going to continue our policy and research work.

One of the things that we do is to coordinate with Director Carnell's team around the sale of city debt, so the sale of bonds, and as part of that process we briefed, we participated in the briefing of the rating agencies.

Essentially, we are appropriately the city experts on revenues.

Bond rating agencies want to know everything about city revenues.

So that's an important function that I'm not sure I fully anticipated that our level of involvement in that, but obviously happy to support it.

And actually a bunch of the information that we're going to present you today, I've already started to integrate into some materials for that.

Again, we'll be available to the Residence Stabilization Workgroup as necessary.

We've also been working with other parts of Director Carnell's team, supporting their analysis of state legislative proposals and other tax policy issues.

Again, we have access to a good deal of data, and that's been a helpful partnership in both directions.

Just for your information, I'm going to continue to serve in an advisory role on a project related to Memorial Stadium redevelopment.

This does not take very much of my time.

It's just leveraging some past experience, I think, to the benefit of the city.

And ultimately, there might be some revenue there.

We shall see.

And then we have some capacity as well.

And over the course of last year, and I anticipate over the course of this year, individual issues might come up.

Just to mention one that's already happened this year.

to central staff related to some work they were doing on property tax impacts and in particular estimating the property tax burden for folks who are renting rather than owning.

Traditionally the city had sort of quoted numbers and given examples based on home ownership, but we tried to work up and we did work up something that was sort of what's the implied property tax burden for a typical renter.

And given that more than half the city's residents rent, that's probably a good bit of analysis to have added.

So those four elements, those on the previous slide, maybe get back to, yep, the forecast, regular reports, So enhancing the forecasting methods and then policy analysis and research, this is the proposed work program.

And for your consideration, I'm happy to answer any questions before whatever discussion you might want to have.

Excellent.

Well, Council Member Swift.

Ben, I have a question about moving the date for the October meeting or what was the November meeting, the forecast?

Does that run the risk of, do we lose any information in doing that?

For instance, I know new construction numbers come out in the fall at some point.

Is there a chance we're going to miss some numbers?

We would wait for the day before revenues were finalized to have all the information available, but that wouldn't be very useful for you all.

So we've looked at the calendar and coordinated with central staff, and we think that that's not an unreasonable balance, if you will.

In fact, it makes a lot of sense.

And having the council, again, having some personal history, having worked with council through the budget process in previous years, you know, having that information sooner so that it can help frame really kind of what's the realm of possibility, right?

If one doesn't know what the revenue picture is.

One doesn't know if, you know, is this an opportunity to think about expanding city services or is this a situation where we may have to think about pairing them back.

And either one of those things, ideally you'd have more time for the deliberations.

And when I say more time, we're not talking about a lot.

I mean, so that, you know, if we deliver a forecast in the third week of October, Council's making decisions by the middle of November.

That is still a very short window.

Previously, we were delivering that information, you know, in the first week of November and providing barely a week.

So I totally see the advantage in having more information sooner.

And it is part of the job and it's commitment to transparency.

If there is something dramatic that happens, you know, after we deliver a forecast, we're not going to sit on our hands or sit in our whatever.

We will speak up and make it clear that, you know, the situation has changed again and folks need to know that.

But in general, I think it makes sense to balance.

But clearly an important question.

Yeah thank you.

Deputy Director Panucci did you have something you wanted to add?

I raised my hand pardon me instead of.

unmuting myself and I don't know how to take it down.

But what I would, I was going to just say something similar to what Director Noble just added at the end, which is if there's a material change in actual information or, you know, the actuals coming in or forecast information that the forecast office has, city finance has or the city budget office, the council can still consider that even if it comes to us after the official forecast.

And as Director Noble mentioned, they will not sit on their hands.

They will be proactive in letting the council know of any relevant information that's material to their budget decisions.

Thank you.

Any additional questions?

Okay, from central staff's perspective, I'm wondering if you could share a little bit about how you think that this will hold into the city council deliberations at that point, it's well after when the mayor transmits their budget and we all, you know.

wait with bated breath for that November forecast usually.

So from your perspective, can you opine a little bit about the pros or the cons on that timeline?

Sure, happy to.

And I will just acknowledge that this change is really coming from a recommendation from central staff and in partnership with Chair Mosqueda and others to try to balance the council's process and the very quick turnaround time on which you need to understand the mayor's proposed budget.

And then the information that you need to balance with any amendments to address council member priorities that may not be reflected in the initial proposal.

So I think that we are trying this this year so that Council member proposals to amend the budget can be informed by the contacts that you have to balance to versus proposing amendments.

deliberating on those amendments and then getting additional new information that might upend what can or cannot be achieved in the final budget.

So we're hopeful that this will provide a little bit more time to digest any forecast updates and have budget amendments informed by that context.

Great.

Are there any additional comments on the work plan as presented?

Okay.

Any additional comments from the office?

Director Noble, anything?

No.

Okay.

Well, colleagues, thanks for your questions.

Great question, Brendell.

Thank you for bringing that up and for the context as well as the Director Panucci.

We do have an opportunity now to consider the 2023 Office of Economic and Revenue Forecast Council, excuse me, the Office of Economic and Revenue Forecast Work Program as presented by Director Noble.

Is there a motion to adopt the 2023 work plan?

Motion to adopt.

Thank you so much, Senior Deputy Mayor Harrell.

Is there a second?

I think I heard Director Carnell first so it has been moved and seconded.

Are there any additional comments before we vote?

Hearing no additional comments all in favor of adopting the work plan for 2023 please say aye.

Aye.

Any opposed.

Any abstentions.

Okay it's unanimous the motion carries and the work plan is adopted.

Please thank the entire team in your office Director Noble for the work that went into that and that moves us right along to the 2022 year-end revenue results.

As Director Noble described in the beginning of this meeting the work plan is one opportunity for us to get a kind of look back on how things have gone and to prepare us a little bit for moving forward.

One specific step that we talked about in the implementation throughout the course of last year was to make sure that the office, the revenue office provides a report on actual revenue receipts at the close of each year.

And this being our first meeting of 2023, it's our opportunity to look back at 2022 and get those actuals in hand for us as members of the forecast council and for the members of the community as well.

The fourth quarter report for 2022, which is what will be presented today, provides an opportunity for that final year-end summary of how the city's revenues performed throughout the course of last year.

And it provides us with an opportunity to see how those performance, the real performance track relative to the forecasted performance.

This is essential information because the city balances our budgets against those revenue forecasts, as we just described.

The mayor's office looks at the revenue forecast to inform their proposed budget, which is transmitted to council in September.

And then Seattle City Council finalizes its budget towards the end of November and we all rely on these revenue forecasts to build our calendar year budgets going forward and it's really important as well as we are now moving back into biannual budgeting with an endorsed and a endorsed and what's the other word Allie?

Recommended.

I'm sorry, I missed the question.

That's okay.

Well, we have, we don't have a true biennial budget.

Adopted and endorsed.

Adopted and endorsed.

Adopted and endorsed.

Okay, we have an adopted budget for 2023 and an endorsed budget for 2024. And for us to be able to ensure that the 2024 endorsed budget is actually balanced, these processes are gonna be really important as we see how 2022 played out.

It'll give us a better sense for how 2023 may continue to evolve, and that may give us a better sense for what to expect in 2024 as well.

So all very helpful, and it's not just rear view mirror exercise at this point.

It does help us also have a better sense of what's to come in the future.

I'm going to go ahead and turn it over to Director Noble.

I think you'll hear some of our most significant revenue sources have modestly overperformed relative to forecast, which is great.

And some have fallen short from what I can tell with the initial review of the materials that were posted this morning.

So after the course of this presentation, we'll have a chance to talk about next steps with the executive, the legislative branch, and the Office of Economic and Revenue Forecast.

So it'll be a interactive discussion at the end of this presentation before we conclude.

Director Noble, I hope that teed us up well for some maybe good news, some potential concerning news, and we'll have a chance to talk a little bit more about it as a forecast council after we get your full presentation.

Thank you, that was a very good introduction to a somewhat nuanced report.

Before I dive in, I just wanted to say one thing about the timing of the report.

In general, we produce these quarterly reports right after the end of the quarter, so usually within two weeks of the close of the quarter.

The notable exception of that is the fourth quarter or the year-end report.

The way that city finances work, we balance the budget to tax obligations through the end of December, and then taxpayers then have, depending on the revenue source, as much as a month more in order to make those payments.

So we don't actually get all the money.

until January, and then given other things, really, until the middle of February.

And in fact, the sales tax revenue for December, which the state collects and distributes, we don't receive that until the third week of February.

So it's really not until now that we're able to produce this last report.

Revenues were finalized last Friday, and we are here on Thursday giving you the summary.

So with that, I'm going to dive in, putting up another presentation.

Sorry, here.

Here we go.

It's the wrong presentation.

One moment, let me try this again.

There we go, that's a little better.

Hopefully, I'm still getting the same one.

Oh, there we go, excellent.

Great, thank you very much.

Yeah, sorry, I was probably more nervous than you all were for a couple seconds there, but we're good to go.

Let me just talk for a minute about the structure of the presentation.

We're going to start with the general fund and walk through that.

As you'll see on that side, things look pretty good.

There is some variation from forecast.

To the extent that it appears to be significant, it's really more of a technical discrepancy issue, and we'll describe that.

We'll then move on to talk about certain of the non-general fund revenues, particularly ones that are dedicated funding streams.

Here is where the messages get a little more nuanced, a little more cloudy.

So I don't want to bury the lead.

Again, you'll see the general fund side, things will look good as we move on.

There are some challenges there, both in Jumpstart and in REIT.

Again, we'll give you those details.

And then at the end, I'm going to turn this over to Jan, who will give you an update on how the national and regional economy have evolved since November, when we last spoke to you, both to give you an idea of why we saw the results we did late in the year, and then also a little bit of a preview of where things may be headed in April.

So diving in, this first chart is designed to give you a sense of the general fund, specifically the performance relative to the forecast, but also some history.

So we're showing you 2018 through 2022, and then they're comparing the actuals in 2022, which are the darker blue.

and then the forecast for 2022, which is the lighter.

And just by the way, that color scheme, just for consistency, you'll see throughout.

So that actual revenues for 2022 will generally be in a darker blue, shade of blue, and then the forecast in a lighter shade of blue, or in any way, a lighter color.

So just overall, just five years of history here, but you can see, you know, pre-pandemic 2018 to 2019, some robust growth.

2020, the impacts of the pandemic, might have actually otherwise been larger, but for some federal support received there.

2021, very significant growth, but largest share of that due to the revenues from the then newly established jumpstart payroll tax.

In 2022, you'll see a slight decline in revenues.

That's also a little deceptive though, because in 2021, Jumpstart revenues were included in this total in 2022. Jumpstart revenues were not because they were deposited into a separate fund.

That said, though, and the last bullet makes this point, 2022 revenues did count on significant support from the Jumpstart fund, from the Jumpstart revenues, and that transfer of revenues is shown in 2022. So it's sort of a nuanced picture of this history, but I did want to give the context.

As you can see, relative to forecast, we've fallen short.

But as I move into the next slide, we'll be able to explain that most of that has to do with a couple of technical issues that I described.

One having to do with grant revenues, another having to do with fund transfers.

And if you look at the overall earned revenues, if you will, we actually beat the forecast just slightly.

As I move on, we'll dig in.

This next slide, I just wanted to highlight the biggest revenue streams and the ones that are really the most economically driven.

So these are the ones where we spend a lot of time in terms of the modeling of the regional economy.

And we do because, collectively, that's a billion plus dollars of revenue there, so a very significant share of the general fund.

And you will see the forecasts are very accurate.

Again, these were from November, so we had about two-thirds of the year's worth of data, but not the full year at that point.

So property tax, essentially on forecast, a difference of less than $200,000 out of $370 million.

Retail sales, just slightly above forecast, $1.5 million, which is about a half a percent.

B and O, a little bit about 5 million, so a difference of about 1.5 percent.

But again, the forecasts were quite accurate.

I didn't want to clutter the picture, so I didn't include the 2021 results for these revenue streams, but just, again, looking at the text and just to mention, property tax was up about 2 percent from the previous year.

Per state law, we were allowed to collect 1% more.

The additional 1.2% that we did collect is the effect of new construction, and it highlights how important new construction is in the growth of those revenues.

Retail sales, growth was quite robust on the face of it, more than 10%, more than 10.5%.

But if you consider how that inflation was running at close to 9% or above, the real growth here, the inflation-adjusted growth, was quite modest.

And B&O, again, growth of 5%, again, in the context of inflation, though, that is not as strong as it might at first seem.

So those are the biggest revenue streams, but they're not the whole story.

The next slide digs in, and I will walk through the structure here.

This is the most numbers I'll put up on any one slide, I promise.

But it does give you the detail here.

So organized here, so obviously the revenue sources on the left.

The first column is the actual, those are the actual results for 2022. The next column is the forecast.

Next column, then, is the variance.

So positive means the revenues were above the forecast.

Red, obviously below.

And then on the right, final, is the percent of the forecast.

If it's above 100%, again, that is an over-collection relative to forecast, or over-performance, rather, relative to forecast.

If it's under 100%, it's one where, again, the results were less than the forecast.

And that gives you a sense of just how far above or below We've covered the first three on the previous slide.

I'm just going to walk down here, talking about the variances in particular, and offering you some explanation.

Whoops, didn't mean to do that.

So private utilities, we are down by about a million relative to forecast.

That's small differences in several of those revenue streams.

So some of them are likely to do with timing of payments.

So nothing significant there.

sort of some noise if you will.

Public utility taxes up by almost eight and a half million.

That's good from a revenue side, less good from a forecast accuracy side.

The explanation here though is compelling, if you will, in terms of understanding why we missed this one.

More than 6 million of that difference comes from city light.

And it's particularly due to a spike in cold temperatures, or a drop, I suppose, in the weather in November and December.

So after we had prepared the forecast, we got a rough cold snap there for November and December.

And actually, I suspect that this was, in some ways, amplified by the current hybrid work from home arrangements, because that has a lot more people heating their houses during the day than has historically been the case.

So it's good if you're selling electricity in your city light, and it's good for our tax revenues.

Obviously it can be a burden on folks who are paying those bills.

So good news there from a revenue side, and I don't think there's anything systemic in terms of corrections we need to make to the forecasting process.

We are talking about working to engage the utilities a little more in the fall to be sure that as we round out the year that they're looking forward and have fully accounted for differences than they'd already seen.

So we'll continue to refine that.

Really small differences in the next few revenue streams.

Notable big difference next is in grants.

issue here is is really in some ways the way the city budgets for grants so that as a grant is received department may well know that it's going to take several years to spend down but they never know precisely the rate at which they're going to be spending down a grant so they accept we add officially we have added all of the revenues as a grant is accepted depending on the nature of the grant and then with the expectation that the authority to spend it will be carried forward at the end of the year if it's unused.

So this is really much more of an accounting issue than it is a revenue shortfall issue.

I don't know whether CBO wants to say anything more about that, but again, it's every reason to think that that revenue will be received as those expenditures occur.

So this is not hitting the city's bottom line.

It's really just a timing issue.

Director Stingley is nodding, so if there aren't other questions, I can move on.

Next obvious big one is.

One second on that just so that we don't lose the thread here.

David Hines were you going to say something.

I was just going to say exactly make that last point that we expect all of this to come in as the work gets done as the reimbursements get received etc.

It's now been shifted in time.

I do have a question, though, about how this gets factored into the general fund reserves bottom line.

Because when we see something that's in the red, it signals to me we have to make up for it.

So I guess we can come back to it so that you can finish with this chart, Director Noble.

But I don't want the takeaway to be that we have another $18.9 million.

gap that we're trying to fill if we anticipate that a large part of that $36 million delay is going to be filled at some point.

And I see Deputy Director Handy's hand up.

Sorry, Deputy Director Panucci's hand up.

Please go ahead.

Thank you, Chair Mosqueda.

I wonder either from Director Noble or Director Dingley or Dave, if you have thoughts on if there would be better ways to include grants either on the forecasting, on the revenue side, or on the expenditure side, because this is a area that has been in sort of ongoing point of, I would say, lack of clarity of sort of how to track track that and it does as Chair Mosqueda was describing sort of muddy the takeaway from overall from the from the general fund?

Yeah I'd be happy to jump in.

It's a great question and it's important to remember that when we're looking at this we're only looking at the revenue side and we don't have the expenditure side to accompany it.

So this is not a situation where expenditure is continued but the revenue didn't come in.

So it's not a both the work didn't get done the expenditures were not made because as Dave and as Director Noble said that shifts the body of work in time so we will see both the expenditure and the revenue come back into play in future years this is so there's no expenditure that this was this needs to have balanced against because it didn't it didn't occur in in the actual expenditures and then um Deputy Director Panucci to your point we are absolutely looking to improve how we record with the grants throughout the budgeting process.

So look for more from us on that front in the coming months.

Deputy Director Panucci did you have another thought on that.

No I was I jumped ahead before Julie addressed the second part of my question so excuse me Director Dingley.

Appreciate that.

Thank you.

Okay, I do I we can we can absolutely have a lot of faith in Director Dingley's commitment to helping us on a number of fronts improve how the.

budgeting processes will continue to improve, no doubt.

But I do think that the question is still good, and we can come back to it later.

We don't have to spend too much time on it here.

But I am concerned about the presentation of the information in a chart like this, because the takeaway for me and others would be, oh my goodness, we need to address this shortfall that we see at the bottom of the chart.

And we're hearing clearly that the 36 plus million associated with grants is not actually a deficit.

We're not missing the mark by what would appear to be a long shot.

And so it's probably just a matter of how we present the information to have like an above the line, below the line analysis at some point.

So let's come back to that, but I think it's just a matter of how the information is being presented.

Just on that front, and I totally appreciate the point, and actually I wanted to spend a little time on it in this part of the table.

At the high level, and I probably meant to say this when we started this, from a sort of city financial perspective, this is only half the story.

It is only the revenue.

So you really, you can't draw conclusions about where the general fund stands from just this presentation really ever.

You know, they'll do this year in and year out, and that will always be the case.

In terms of a below the line, above the line, there is a separate, and I'll come back to talk about the other individual lines here, but this green line at the very bottom is very much intentionally that.

So what I've done there is to take a sum of the variances, well, sum of all of the columns And I've left out the grants, and in a minute we'll talk about the transfers as well, the fund balance transfers, which I think are also sort of artificial, if you will.

And then from that perspective, you look at the totals there, with those two elements set aside, the picture is that we're to the good by about $20 million.

And again, in the overall scheme, that is only 1.5% of the total general fund.

So the overall difference is still small, but it is to the good, if you will, if you set aside what I've described as sort of technical issues.

Excuse me.

The fund balance transfer one is comparable.

There was some work that was not completed.

If it had been completed, we would have been eligible for some reimbursement through the federal system.

So that's also an item where there's less revenue, but there is also less expense.

So I think it is, and I took it out as well into that green sum that I don't think is representative of what's going on in terms of the overall picture.

Then in terms of the other remaining three categories here, service charges and reimbursements, again to the good here, a difference of about $3.7 million This had to do with some work that was done in the departments where they earned some revenues late in the year and they hadn't fully informed the budget office or us about that likelihood.

So that's a communication issue that we all need to continue to work on.

The federated nature of the city makes some of those conversations somewhat challenging, but that's part of what was going on there.

Part of the next category, which was similar, some work that SPD had done that earned some revenue.

Again, there'd been a communication issue.

The other piece there that was a good one is there was some additional interest earnings.

If there's any good news around increasing interest rates, it's that the city's own fund balances earned some additional revenue.

Then the last item is that we continued into the third and fourth quarter to get some late payments from the previous year for the payroll tax, and per city ordinance that additional almost $1.6 million was deposited into the general fund.

So again, overall, if you take out the grants and the fund balance transfers, and again, I think there's good reason to think of the overall picture that way, the general fund finished in terms of revenues, about $20 million ahead of our last forecast.

A big chunk of that from City Light, but also from our core revenues also outperforming forecast just slightly.

So that's the story on the general fund.

And I was going to move on to the non-general fund sources.

And actually, the next one is the payroll expense tax.

But before I did, I want to make sure there were not other questions on the general fund.

No additional questions for me, but I think that it's a good reminder both you and Director Dingley have noted.

This is not the full picture, and we try to remind people of that when we do the presentation in the Finance and Housing Committee as well.

We have a meeting that we always make sure to schedule as a follow-up to these Revenue Forecast Council discussions so that the Idaho City Council and members of the public, again, can receive the information.

And we always try to remind folks that, as Director Noble noted and as Director Dingley noted, the revenues are only one half of the puzzle.

We also need to know how much is going on with the spending.

And there's additional revenue sources that Director Dingley, through the city budget's office, has purview over.

So, Director Dingley, is there anything else you'd like to add to that as a caveat before going into the discussion about the jumpstart payroll expense tax?

No, I think you covered it very well, Council Member.

Thank you.

All right.

Well, let's go ahead and move on to the next slide.

So we shall.

So this slide is, excuse me, just so you know, this slide is in the deck.

It's just all the words we were describing.

It's just here so that if someone pulls this down from the web, they'll have some of the same explanation.

So let's talk about jumpstart payroll tax, both looking at revenues in 21 and 22. And I'm going to just talk a little bit here about the chart on the right.

It gives you a sense of what we saw and what we had been forecasting.

So first line, first column is the 2021 revenues.

The final revenues there, totaled $293 million.

The two shades there are to reflect the fact that a good deal of that money, $45 million of it, so the lighter shade, came in after the end of 2021. So we'll talk in a minute about the fact that we don't expect that to happen again, but just highlighting that point.

The middle one, the light blue, is our forecast.

Our forecast was for almost $280 million.

If you recall, that was our August forecast.

And when we came in November, we were uncomfortable with that number.

We had a sense that it was going to be lower.

But we didn't really have a firm basis for predicting a different number.

And we'll talk a little bit more about what were the drivers and why that was the case.

Painfully, we turned out to be right.

So on the right, you have what the actual revenues are for 2022. If you do the math, well, the math relative to 2021 is pretty simple.

It's a $40 million difference.

So relative to 2021, the first year, we've taken in $40 million less.

Relative to our forecast, the difference is about 26 and a half million.

So also significant.

And again, we don't expect there to be significant late payments coming in.

this year.

And then the reason for that is twofold, and there's a couple of sub bullets there.

We look to see for people who filed in Q3, how many of them haven't filed for Q4?

We might suspect if they haven't, they will.

And there are some folks who haven't, but they didn't pay very much money in Q3.

So even if they were to come in, they wouldn't make a big difference.

And it may be that they overpaid through Q3 and don't owe us anything.

The other thing we looked at is, well, is there anyone who paid in 2021 who hasn't paid in 2022?

excuse me again, and there are a few of those, but again, in dollar terms, not significant.

What I would also add, though, is that for many of the revenue streams the city collects, B&O being a great example, there's actually a regular pattern over the course of any given year of people requesting refunds because they've overpaid, and the city's audit team discovering that people have underpaid.

And there's every reason to think that we'll see some of that with the Jumpstart payroll tax as well.

The difference here, though, is that, and we'll get to this on the next slide, there are relatively few payers, so that kind of normal process of refunds and audit fines and the like, that could lead to some volatility that we haven't seen from other revenue streams.

So we'll continue to monitor that is really all that we can do.

But just highlighting that potential volatility.

So two obvious questions to ask here, and this tries to lay them out.

So why did the revenues decline, and why did we miss on the forecast?

They're not entirely separate questions, but there are some different factors that work there.

In terms of why revenues declined, I'll get there in a second, but the chart on the right is, we think, much of the explanation.

So just to provide the context before I walk through the chart, a significant share of the revenues into payroll tax come from the tech sector.

And in the tech sector, a significant share of compensation comes from grants of stock.

So someone will sign on with a company, and there will be an agreement that every year for the first x number of years, you'll receive a certain number of shares.

And then the value of those shares are what they are when you receive them.

And they then count as compensation in our tax.

And what you can see on the chart on the right is that in some of the major players in the tech sector, stock values have been suffering very significantly.

So the parts of the chart that aren't shaded, so that are gold or color, track what's happened what happened over the course of 2022, so from January to December, essentially.

And you can see every single one of these large tech firms was in decline in terms of stock value, and rather significantly in some cases.

And moreover, that decline continued into the fourth quarter, so even after we received some third quarter payments.

This is, we think, a significant explanation for why we're seeing the decline in revenues.

There's been a lot of news about layoffs, but the truth is they didn't start until late in 2022 to the extent that they did.

And they weren't that many people.

So undoubtedly, that's not helping.

And actually, in terms of shortfall of our forecast, our forecast had anticipated some growth in employment.

But that's what we've been seeing in that sector for a long time.

But we think this is a big share, a big piece of it, again, are these drop in stock values.

So we are now, from a forecasting perspective, we're now looking at how we might incorporate up-to-date information on stock values into our forecast and actually potentially some predictions of future stock values as well.

And then another element that we think is going on here is that the hybrid work-from-home situation is becoming apparent that it's going to be a longer-term norm that probably was expected.

And as that's the case, we think firms are coming to terms with understanding what their tax liability is and understanding that For folks when they're not in the office and they don't live in the city, the city's not in a position to tax that share of their compensation, of the compensation earned when they're outside the city.

And firms are starting to realize that it's worth keeping track of time inside the city and outside the city and the like.

So that may be also some of what's going on here.

On the whole, work from home doesn't help us, if you will, because the extent that people are, because we know pre-pandemic, and not that we were collecting this pre-pandemic, but just in general, the city was a place where people came to work during the day, and the city's daytime population was larger than its nighttime population.

So the extent that folks end up at home, some of that tax base will ultimately be lost to us.

So that's why we think revenues have declined, and we're going to be updating the forecast again in April, and we'll try to incorporate some of this insight into that forecast.

In terms of our shortfall relative to forecast, and this again highlights some of the challenges overall, it's really important to understand just how concentrated this revenue stream is, how few payers there are.

So as noted here, top 10 payers account for 70% of the total revenue, right?

And so our revenues, our fortunes here depend on their business success in any given year.

And as any, as they collected, and they're not And many of them are in the same sector, so they move together to a degree.

So that's going to be a challenge in terms of forecasting.

And in fact, if you look at it, they are really the explanation unto themselves.

So they account for almost all of the decline relative to 2021. So that's just a reality about this source.

So that's what's happened here.

Again, why we think the decline, why we're struggling on the forecast side.

why we're investing so much time trying to establish a relationship with ESD so we can get a better handle on this data.

I think it's also one of these things that one of the reasons we're good at forecasting some of the other revenue streams is that we have literally decades of history and decades of data.

We have only two years here and two pretty strange volatile years, if you will.

So that's just going to be a challenge for another 10 years, if you will, while we collect data and get to know this revenue stream better.

I mean, that all said, we're still, it is a very significant revenue stream that has been clearly a great value in terms of increasing the resources that are available to the city.

And its volatility is something that, you know, will need to be managed.

But, you know, the good news is it's a very significant revenue stream that has, you know, our original forecast were $200 million.

So we're still outperforming that initial forecast.

but obviously current conditions are making things challenging.

So that's what we have on Jump Start, so happy to take questions about that.

Thanks, thanks for the summary here.

Any additional questions from folks?

Yes, please go ahead Vice Chair Harrell.

Question on do we know, so you gave some of the reasons for There might be some people who aren't working as much from Seattle and they're calculating.

Do you have a difference from the previous year in terms of the number of people companies are accounting for versus the rate of pay.

Like is there a fluctuation that you can share with us around you know there were a thousand employees paid for but the salary was higher in one year.

or there's fewer employees paid for, but the salary is dipped, what the two toggles are?

So, Jan may weigh in here, because he's closer to some of these data.

You hit on one of the reasons we really want to get a hold of that data from ESD, is they have, at a firm level, information on the number of employees.

Otherwise, there are data at a more aggregate level for the number of employees that are working in these sectors, but it's less precise.

We are also creatively, and I think smartly, using some aggregated cell phone data to track the number in real time, to track the number of people and the level of activity.

around some of the locations where these operations are centered, if you will, South Lake Union, as an example.

So we're trying to keep track in real time about what daytime activity looks like and what the number of employees that are coming and going.

I don't know if Jan, you want to say more?

The firms, when they are filing the payroll expense tax returns, they essentially don't have to provide any information regarding the number of employees or anything that would allow the distinction that you were asking about.

The alternative ways how to account for that is the ESD data that we are working on to get access to, and then the food traffic data.

And we have seen some change between 2021 and 2022 in terms of how many employees are returning to the office.

And there has been an increase in some of the major tech for some of the major taxpayers.

So that has been some kind of a mitigating factor.

that offset some, in some instances, was able to offset even further losses.

So that would be another contributing factor.

Given the data that we have available, we believe that the stock prices are the main driver.

And then to some extent, that's returned to the office.

In some cases, works in our advantage.

In some cases, it does not.

In several cases, there are companies which are which have offices located outside of the city of Seattle, and then with the return to the office, the employees that are residing in Seattle but are now returning to the office would not be subject to the Jumpstart payroll expense tax.

Any additional follow-up question?

Just looking at this chart here, and I understand this is from the sources of Yahoo Finance, Given that we're not at the end of quarter one for 2023 yet, the line that's darker or more bold, that's the projections for the end of this first quarter of 2023.

Those lines end in the fourth quarter of 2022. The final point in this chart is the last quarter of the previous year, so it does not show anything since then.

It's the actual data.

Okay, so it's ending at that second to last marker, and this is actuals.

Right, that's correct.

Okay.

All right.

well.

I want to underscore a point that I was getting at earlier which is this is I think the beginning of a conversation and I want to make sure that we just state for the general public as well the importance of the work that's to come I know we're not at the end of this presentation yet, but given the sort of dramatic nature of the chart that's in front of us, my office, we will be working closely with the mayor's office, the city budget's office and central staff to ensure that we have a plan to fully address the scope of the issue that we're seeing here.

And over the course of the upcoming weeks, we will be working closely with the budget office and also Of course, in consultation with the Office of Economic and Revenue Forecasts is necessary to make sure that we have the full data in front of us.

But the budgetary implications of what we're reviewing right now will continue to be discussed between the executive and the legislative branch as we get the overall revenue picture that I noted before.

the additional revenue sources that the city budget's office manages and projects, we will be able to combine all of this information to have a fuller explanation of how we can adapt our expected expenditures and the potential impact on the upcoming expenditures throughout the course of the upcoming year and next year as well.

So more work to come obviously, but I just wanted to flag at this juncture that we know that there is going to be much more conversation to have with the mayor's office and the Seattle City Council and I look forward to those discussions with you all.

With that, I'm going to move on, keep us on schedule.

I'm going to talk about some other dedicated revenue streams.

Although REIT is the first element, I'm going to come back to that one.

Just real quick, admissions tax, slight performance, overperformance relative to forecast.

Sweetened beverage, slightly below, but again, difference here is small.

Short-term rental tax, again, slightly above, but again, difference is quite small.

So really tight on forecasts there.

With respect to REIT, and I'll have another slide here in just a moment, You recall that we brought the forecast down in November by 11 million, so we actually have been forecasting in excess of 105 million, and yet revenues actually fell about almost 4 million short of that.

The driver here is increasing interest rates and the rapid impact on on both residential and commercial markets.

So real estate excise tax depends on the value of the property sold and the number of transactions.

Next slide is going to highlight a little bit of history here, so I'm going to give you some animations.

So this first line is what we think of as kind of the typical years.

This was 2018, pre-pandemic.

There's this obvious seasonality to the home sales and commercial transactions, particularly residential transactions peaking in the summer.

2021 was an amazing performance.

So finished, again, north of $95 million.

And you see the same seasonal pattern, but this incredible growth over the course of the year.

So recall, this is the second year of the pandemic, very low interest rates, tech sector locally quite strong.

So that was a remarkable performance.

This is what we saw in 2022. So interestingly, the first part of the year, we were actually outperforming 2021. And our forecast was for a total that was going to exceed 2021. And you see right about June, July, things changed.

And they changed dramatically.

And revenue stream continued to drop off.

And again, we're seeing this both on the commercial and the residential side.

So we adjusted the forecast.

We can appreciate that we had information through September when we updated the forecast.

And so the somewhat sobering news is this last piece, which is what we're seeing for the first two months of 2053, which is continued low performance.

So almost historically low.

Only year that we can find that is comparable is 2008, so this was the height of the Great Recession.

And we are barely outperforming that year for the first two months.

I don't want to be alarmist, but this is the pattern of data that are out there.

So I just wanted you to see and understand what happened and what we fear may be happening.

All the other folks at state level, county level, are seeing similar things.

So that's kind of a high-level story on REIT.

And I looked like there was a question, but I'll leave it to Chair Muscata to manage.

Okay, thank you.

Forecast Council Member Swift.

I just have a question about the chart.

At the end of 2022, REIT revenue was around $6 million, am I reading that correctly?

That was the monthly, yeah, these are three-month averages, but yeah, so the monthly total, it's actually a little bit less than that, just to smooth that out a little bit, I think it was 5.2.

And then January of 2023, it's $2 million, one month later?

Yes, it was $2 million.

Yeah, I mean, again, some of this has to do with the timing of transactions and when they close.

There's often a year-end rush, if you will, for a variety of reasons, presumably tax planning.

So it's a big drop.

Is that typical from December to January?

Yeah, I mean, if you look at, yeah, we don't have Yeah, I mean, look at the end of 2021 and the beginning of 2022, you see a comparable drop.

So the last point on the green line, the first one on the blue line.

So again, there's often a year end rush.

Director Noble, is this in dollars for the time period not adjusted?

So is that 20, Are the $08 in $08 and the $23 in $23 or is there any adjustment there?

Yes, there's no adjustment.

It is in fact worse than it appears in real terms.

This would be an interesting chart to see for 2022 when the interest rates change to

or at least noting when the interest rates changed.

Yeah, and this is a moving average, so it's smoothed things out a little bit, and there's some delay with the closings.

But one of the things that I described that we're trying to focus our attention on the modeling here is understanding ever more those interactions between the interest rates.

Again, this is a sort of strange environment, because the Fed is very purposely driving up interest rates with the goal in the short term with the goal of trying to bring them down quickly afterward.

But nonetheless, that's the kind of correlation that we are precisely looking for and looking at.

Great.

So do you think that you would be able to share back around with us?

Yeah, we can put something together and share some additional information.

And obviously, we would want to present that to the public as well.

So we could post that on the website.

We can do that too.

What's that?

And we will do that as well.

Yes.

Great.

Additional questions?

You said you didn't want to be the bearer of bad news, and yet it continues.

I said, I wasn't bearing the lead.

It's payroll and REIT that are the challenge.

On that note, just covering the last few.

So these are transportation-specific dedicated streams.

So the Transportation Benefit District has a share of a sales tax and has a vehicle license fee.

Those are both marginally outperformed forecast commercial parking tax.

Again, marginally outperformed.

The SSTPI, the Safe School, I'm going to mess that up.

It's the red light and speed zone cameras around schools.

Underperformance there.

I don't know, Dave, if you've had a chance to collect any additional information.

We are still exploring that one.

Again, we only had final numbers as of last Friday.

Yeah, I sure have.

So essentially there's three things going on with the schools on camera revenues in the, I believe it's school safety, Transportation improvement, I'm not sure what the P is.

Anyway, the first issue is that clearly citation volume was just less than projected from the existing cameras.

And there's a constant effort of trying to figure out with this revenue stream, how quickly people figure out where the red light cameras are, where the school zone cameras are, and do they change their behavior.

And so we've been watching the data over the years.

trying to figure out how that declines or moves.

Does it flatten out at what point?

And so we got that a bit wrong.

And particularly coming out of the pandemic with traffic changes and things, that's been a little bit of a challenge.

In addition, there were six new cameras implemented in the fall of 2022. And so trying to predict how many citations would be generated at each of those locations, is also a challenge because it's hard to understand what the traffic flows are given, you know, we're not in the transportation department, so we don't really have all the data to sort of make an estimate.

So we were off a bit there.

There's always the possibility of payment compliance being slightly different.

I'm still waiting on data to find out whether I can deduce whether that's the case about number of people paying when they do get a citation with the, The court's now re-implementing collections.

We should see an increase in 2023, but for 2022, that was still not the case.

And then the last thing was just there was an unfortunate staffing situation where the officers, each of these camera-driven citations have to be reviewed by a police officer.

And with staffing issues and other demands on their time, they were not able to review many in the September time frame.

And so we missed the deadlines on those.

And so there's a drop in the revenues from that as well.

And perhaps this is a question you have for Senior Deputy Mayor, I was wondering if you had anything else to add.

I was wondering if, David, if we could get the numbers at some point for how many tickets we are having that are expiring out before they're able to get reviewed by officers that would give us a little bit of indication as to, you know, is that a, you know, is that a hundred ticket problem or is that a thousand ticket problem?

Those are the raw numbers of what they're having to throw out.

Sure.

Yeah, and it's it's it's the problem has been solved, so they.

Realize it, they fixed it, but I think the magnitude is in the thousands so.

We can work on getting those numbers free.

It would also be helpful to know on the on the ticket on the volume when the difference between people getting the violations at the beginning of the camera going in versus, you know, after the cameras go in for, say, a few-month interval.

So, you know, when the cameras are new, are there 1,000 violations?

And then after it's been on for three months, people have gotten a round of tickets, and it's now the volume is half.

That information would be helpful to also balance out whether or not there's value in moving the cameras once we have successfully slowed speeds in certain areas.

Yeah, the timing is not that quick.

It takes, after installation, they usually go in in the fall, and the peak numbers are in that first year.

And then after that, it starts to decline.

But it's not like a dramatic drop off.

It's a gradual decline.

And then what I believe we've seen over time is that it sort of evens out.

It levels out.

So yeah, moving the cameras would be interesting.

There's a cost associated with that, but anyway.

But again, the majority was not these officers not being able to review.

The majority of the problem was trying to predict the number of citations overall.

Thank you.

So that's what we have on revenues.

The last couple slides are on the economy.

Well, I think that probably wearing our other hats, we would want to talk a little bit about policy and direction for the department.

And so I'm seeing the senior deputy mayor maybe nod a little.

So we'll talk about that offline.

I just didn't want members of the viewing public to think, oh, you know, that this practice of not prioritizing this process is going to sort of continue, I guess.

So I'm just assuming that we'll continue to have a conversation about Policy and prioritization within the department, but that's outside of my purview and it's probably wearing different hats But it seems like there's probably some good conversations to have as well About how we prioritize within the the stuff that we have Within our city director Dingley perhaps you have an update on that

related to that, but just wanted to before closing out on the revenue portion, talk about where we kind of go from here when we consider from the budget perspective, if Council Member, if now is a good time for that.

Yeah, that sounds great.

Great.

So as we've said, we heard from myself, from Director Noble, from Council Member Mosqueda, it's really important that we remember that this is one piece of the overall picture.

There's really three bits of information that I would need in the budget office and that the decision makers for the city would need to understand before we could figure out a path forward for what does this mean for payroll expense tax or for REIT.

This is one, so 2022 actuals is one.

The second one is how did 2022 end in spending?

How did we do spending against the budget that we had?

So how much is left unspent, if you will?

And then what is this ultimate updated forecast in April going to tell us when we find out on April 10th?

How far down are these going to go?

Are they going to sort of maintain current trajectory?

We don't have those pieces of information yet.

Once we see all of those data points, that's when we can really have, as Council Member Mosqueda noted, that collaborative discussion about adjusting in the future.

We're monitoring the situation closely, particularly with REIT.

We know we have cash balances in REIT, and we have not sent direction as a result of this, for example, to stop spending.

So we are, however, continuing to monitor, and we're going to have to make considerable updates into 2024 around projects, around timing, and just when they hit.

So whether this is something that a project was going to anticipate to start in 2024, perhaps that needs to go to 2025 or further out, but we're going to have additional time to figure out how to digest and move forward given this information in the coming months.

Great, well said.

I appreciate that partnership with you and senior deputy mayor and the team and the executive office in close partnership with central staff.

So thanks so much.

Okay Director Noble I'll hand it back to you.

Yeah so the last portion of this presentation is in some ways it is catching up on where the economy has been since we last were in November.

But it also does look a little forward.

So in the context of looking forward, I think it's actually a useful way to wrap up.

So I'm going to turn this over to Jan.

We have one slide to very quickly talk about the U.S. economy and then one for the local economy as well.

And as you'll see, overall, results have been tracking pretty well to our forecast.

But with that, Jan.

All right, so first, quickly on the national economy.

This slide summarizes what the forecast was at the time when we were working on our last forecast, the last economic forecast and the revenue forecast back in October and early November 2022. The chart on the right compares the national forecast that serves as a main input for our forecasts and the actual performance of the U.S. economy.

The main takeaway here is that the economy performed slightly better than expected, but there were no particularly dramatic differences in terms of personal income and personal outlay.

They grew slightly faster than what IHS Markit was expecting in October.

When they were working on that forecast, they had information in general up to the August data.

So the last four months were roughly in line with what they were expecting, slightly better.

The labor market outperformed slightly their expectations.

Consumer spending were continuing to outperform expectations and showing resilience, even though the inflation was high.

But as you can see, their inflation forecast was very close to the actual 2022 inflation.

So going into 2023, the economy is showing much more strength than expected.

And back in October 2022, IGES market was expecting the economy to enter a recession in the first quarter of this year, a mild recession that would only last first two quarters.

They are now revising their forecast up.

We have just received their March forecast yesterday and The main takeaway is that there is an overall better outlook for things that would be driving the sales tax forecast and the BNO forecast.

That's not necessarily the case with the housing market forecast, which the outlook for 2023 is slightly better, but the outlook for 2024 would be much worse than what they were anticipating back in October.

Next, moving on to to the regional economy.

Similar sort of a story as for the national forecast versus actuals for last year.

Back in October when we were working on the regional forecast, we in general had data up to the third quarter for economic indicators.

the first two quarters of revenue for taxable sales.

That means that we had data through August.

Given that a lot of sales tax activity actually occurs during the holiday season, those taxable sales that were used as base of our forecast accounted only for 45% of the overall tax revenue for 2022. We still were able to get the forecast quite close to the actual outcomes as you saw presented before.

Sales tax outperformed the forecast slightly.

B&O outperformed the forecast slightly.

For the economic indicators, the local economy, those layoffs are not yet showing up in the overall employment data.

And the inflation has come down slightly since the peak in last summer, but it's still quite high.

And our forecast from October was pretty much with what we saw by the end of 2022. So inflation is coming down.

Regional inflation is outpacing the national rate.

There is still some concern that last two months have the inflation, that this inflation has been not as fast as expected.

So there is some concern that those inflation years will have to be revised.

But overall, The starting position in 2023 is pretty good, and there is some mild optimism for sales tax and for BNO.

The situation is much more complicated, and we'll work actively on improving the accuracy of the forecast.

There are reasons to be concerned about that.

We'll come with an update, a more detailed update.

Next month, at this point, this concludes our presentation.

We are happy to take any questions.

Okay, thank you so much.

Are there any additional questions?

Can I ask you just to summarize what the last point was on the inflation?

Did you say that inflation looks like it's trending downward?

that it's started to shift downward, which is obviously a good sign.

The emerging concern is that it's not shifting downward as fast as some had predicted and hoped.

And so as we update the forecast for April, Employment, expenditures look good.

If there's any sort of concern, it is on the inflationary side, in part because that will also lead the Fed to keep interest rates high, which will have, again, ripple effects, particularly as we've seen in the real estate space, but maybe not only that.

So that's more to come, and we are digging in as we speak.

Great.

chair and senior deputy mayor Harrell, any additional comments or questions from you?

No, this was very informative.

Thank you.

I've been taking notes on the larger gaps and I'm sure we'll discuss that a little bit more next month as we get to the projections.

But thank you for the really, really valuable information today to see.

how the November projections actually closed out for us in 2022.

Excellent.

Thank you very much.

And, um, uh, forecast council members, Carnell and Swift, anything else from you?

I just appreciate the partnership that we have with the revenue forecast council.

We have a lot of continuing discussions, you know, as a great, uh, license and tax administration team that we have works closely with them.

So, you know, we're all, we're all waiting through a lot of information and I appreciate that collaboration greatly.

Great.

Thank you so much.

It's exciting to have you here too, as well.

Anything from Youth Workforce Council members?

No.

Thank you, Chairman Skiddock.

Okay, great.

Well, thanks to all of you.

And much more work to come as both the Forecast Council Office, excuse me, the Office of Economic and Revenue Forecast has indicated and also as indicated by Director Dingley from the City's Budget Office.

We, my office and central staff look forward to participating in many more conversations to come as we digest this information with the executive branch.

I want to thank you for all of your participation today.

We have reached the end of our agenda and before we adjourn, Director Noble, is there anything else that you'd like to add?

Nope, just thank you for the opportunity and we'll look forward to seeing you next month.

Okay, sounds great.

And I want to remind everyone that our next forecast council meeting is going to be on April 10th at 9.30 a.m.

We do have our meetings quarterly, so we have April, August, and October, and then we will have subsequent presentations in Seattle City Council's Finance and Housing Committee meetings so that the broader community can continue to get the information that we've received here from the forecast council, at the forecast council.

And thanks again to Seattle Channel for broadcasting these.

If there's no additional questions or comments, we will be adjourned.

Hearing no additional questions or comments, we are adjourned.

See you on April 10th.

Thanks, everyone.