SPEAKER_06

Good morning.

The special select budget committee will come to order.

It is 9.31 a.m.

I'm Dan Strauss, chair of the select committee.

Will the clerk please call the roll?

SPEAKER_08

Council Member Kettle?

SPEAKER_07

Here.

SPEAKER_08

Council Member Morales?

Council President Nelson?

SPEAKER_15

Present.

SPEAKER_08

Councilmember Rivera.

Present.

Councilmember Saka.

SPEAKER_15

Here.

SPEAKER_08

Councilmember Wu.

Councilmember Hollingsworth.

Councilmember Moore.

Present.

And Chair Strauss.

SPEAKER_06

Present.

SPEAKER_08

Five present, six present, excuse me.

SPEAKER_06

Thank you.

We are also going to open the October 22nd special meeting of the Economic and Revenue Forecast Council.

The council will now come to order.

The time is 9.32 a.m.

Council Member Morales is present for a select committee.

I'm Dan Strauss, chair of the Economic and Revenue Forecast Council, also joined here today by members of the Forecast Council, City Council President Sarah Nelson, the Seattle Mayor's Chief of Staff Jeremy Rocca, and City Finance Director Jamie Carnell.

We have all of City Council members joining us today in real time to receive this critical information together.

We also have Council Member Wu present.

So I believe that the select committee is not accepting verbal public comment today at today's meeting.

We will, you can submit public comment by emailing the council at council at seattle.gov as well as there are public comment cards located near the podium.

You can also reach the forecast council at forecastoffice at seattle.gov.

So colleagues, where we are today in the In the previous meetings when I have had the forecast office come to city council select budget committees there was a lot of duplicative presentation.

And so instead of having two separate meetings because of everyone's great interest, we're just doing it all together to come to the information that's presented at the same time so that we have equal access to asking the questions, as well as equal access and timing of receiving this information.

I've just received this information this morning.

It's not good.

We'll get into it.

And colleagues, also, the presentation, because it was only released this morning, has been emailed to you by Jan Duras, the director.

as well as my staff just emailed it to you, so it's at the top of your inbox at 9.29 a.m.

Before we get going in here, I'll pass it over to Jan Duras.

I just want to go through some operational details.

Again, the Economic Revenue Forecast Council is Council President Nelson, myself, Jeremy Rocca as the co-chair, and Jamie Carnell.

So when we are voting on forecast office items, only these four people will be called because these are the only four members of the forecast council.

The forecast office is an independent office from both the mayor and the city council.

This was a change that was made in the last four years.

It had been part of the city budget office and is now an independent body, which is why the forecast council is set up with Jeremy Rocca from the mayor's office as coach, as the vice chair.

Let me double check these notes.

Yep, vice chair.

Thanks, Jeremy, sorry about that.

And me as the chair.

And so that's how the operations of governance over an independent body are occurring.

And so with that, the main purpose of the meeting is for us to all receive the updated economic and revenue forecasts together as the city council is reviewing the mayor's 2025-2026 proposed budget.

We're gonna receive and review this final revenue forecast update of the year.

And this revenue forecast is especially important because it serves as the basis for the adopted budget.

The changes that we will see coming from the forecast office today are changes from the proposed budgets baseline understanding for creating that document.

And so we'll get into more about what that means shortly.

The main goal of this joint meeting is to increase transparency and accountability around the city's revenue forecasting process and budgeting process.

This is good budget reform and to ensure that there's no political influence on the forecasts themselves, which is why it's an independent body.

The staff from the city budget office is also present today to provide briefings regarding revenues still in the purview of the budget office.

And so with that, I'm gonna ask the clerk to read the first item into the record.

SPEAKER_08

Adoption of Economic and Revenue Forecast Council meeting minutes of August 5th, 2024 for possible vote.

SPEAKER_06

Thank you.

And is there any discussion on the meeting minutes?

Seeing none, I'll ask the clerk to please call the roll.

Oh, I can see that if there's no objection, the meeting, the August 5th, 2024 meeting minutes will be approved.

Hearing no objection, the meeting minutes are approved.

Yep.

Okay, great.

So now we're going to move on to the second item of business.

Will the clerk please read the two items, the next two items into the record at the same time?

SPEAKER_08

Agenda Item 2, October 2024, Economic and Revenue Forecasts and Office of Economic and Revenue Forecasts, recommendations on the 2024, 2025, and 2026 Economic and Revenue Forecasts.

For briefing, discussion, and possible vote.

SPEAKER_06

Thank you.

The forecast presentation will be led by the staff from the Office of Economic and Revenue Forecasts to ensure that the Economic and Revenue Forecasts are informed.

Address staff from the City Council central staff and City Budget Office will also participate in this briefing.

The Office of Economic and Revenue Forecasts will present the three economic revenue scenarios baseline, pessimistic, and optimistic.

The office will then provide a recommendation about which of these scenarios should become the formal forecast.

We will then have the opportunity to discuss this recommendation and whether to affirm the recommendation or consider a different forecast scenario.

With that, I will now pass it over to the forecast office to introduce themselves with Director Duras beginning.

And colleagues, when you're looking at this very long presentation, a lot of the first number of sections are the lead up with the information that informs the current forecast and that current forecast is at the end section.

With that, Director Duras, take it away.

SPEAKER_12

Good morning, forecast council members and city council members.

My name is Yandra.

I'm chief economist at the forecast office.

SPEAKER_04

Hello, everybody.

This is Sean Thompson, another economist with the Office of Economic Revenue Forecasts.

SPEAKER_13

And I'm Dave Hennis with the city's budget office.

SPEAKER_19

Keep going.

Joe Russell, city budget office.

Ben Noble, Central Staff Director.

SPEAKER_06

And as our formal welcoming to City Council, a reminder that everyone receives is please pull the microphone as close to your mouth as possible and speak directly into the mic.

Thank you.

SPEAKER_12

All right, so here is the outline for the presentation today.

First, we are going to look at recent economic developments and summarize the changes in the forecast for US and for the regional economy.

As a reminder to the public, our forecasts are essentially prepared in two steps first we are updating the regional economic forecast and then using that regional economic forecast to inform the revenue forecast primarily because there are a lot of large economically driven revenues and any changes to the regional economic forecast then result in changes in the revenue forecast so then the second part will be that update on revenues, first looking at general fund revenues and then selected other government revenues.

So with that, let's look at the changes in the economic outlook for US as a whole.

When we were here in July, it was in the middle of quite of a turmoil, and it was a very turbulent week.

After the report for July came out at the beginning of August, the employment report came out, there were increased fears of a recession because of how weak that employment report was.

It also led to expectations that Fed will have to cut interest rates more aggressively, move faster, and do bigger cuts to avoid the hard lending, to avoid recession.

So that's exactly what happened.

The first cut was a larger than typical cut.

In September, Fed decreased the interest rate by half of a percent, and currently the expectations are that this will be followed by two additional quarter percent cuts in November and then December.

That will be then followed by additional quarter percent cuts throughout 2026. The chart on the right shows the comparison of what the forecast for interest rate was back in July.

That's the fainter red line.

And then the darker red line, that's the current forecast by S&P Global.

And you can see that downward shift, which essentially incorporates that large half a percent cut, the two additional cuts this year, and then six additional quarter percent cuts throughout 2026. Both of those are baseline scenario forecasts.

And we are going to discuss the pessimistic scenario too.

The pessimistic scenario would entail interest rates coming down faster because Fed is kind of trying to avoid a recession or trying to mitigate the recession because pessimistic scenario actually has a recession as part of its forecast.

So pessimistic scenarios at hard landing, recession occurring, Fed trying to stimulate the economy by lowering interest rates further.

So it's not really a good outcome, even though it might seem.

And in some sense, lower interest rates are good, but not really when it's a recession.

So overall, Fed is succeeding in terms of bringing the inflation down.

The demand and supply in the labor market are moving closer to the balance.

The number of job openings per unemployed person is roughly where Fed would want to see, somewhere where it was previously.

right before pandemic as a result price pressures are easing national housing market is cooling down so we are seeing lower inflation for rents and so the revised forecast actually brings down the inflation forecast for 2024 and first half of 25 again you can see the downward shift between the the faint red line and the darker red line throughout the rest of 24 and the first half of 23. Then there is a bit of an interest, a bit of an inflation increase that follows, but eventually inflation is coming down and coming to the Fed's target.

Pessimistic scenario, that's the case where the increased conflicts, increasing tensions and conflicts in Middle East and Ukraine lead to higher oil prices, higher energy prices overall, inflation that is higher.

And again, because it's a recession, Fed is not going to, according to the scenario, fight the inflation, the elevated inflation with higher interest rate, but tries to achieve the other part of its dual mandate, stimulate the economy and lower the interest rates.

The forecast for U.S. that we are focusing on here in this presentation is coming from S&P Global.

It's the main input for the work that we do when we are developing the regional economic forecast.

We are comparing that forecast with alternative or other sources of forecast for the U.S. economy from Moody's Analytics in particular, and then also comparing it to the Wall Street Journal survey of economic forecasters.

This is done to get some sense of how conservative or how optimistic that S&P Global's forecast is.

We are trying to make sure that their baseline scenario and the alternative scenarios are not too far from where the rest of the economists are believing the US is heading.

Occasionally, there are different opinions about how the outlook for the next two years will look like.

The chart here, each dot in this chart represents one economist and what that particular economist believes, the inflation, the federal funds rate, the unemployment rate.

...is going to be in 2025. For federal funds rate, it's the rate at the end of 2025. And so, each dot is one of the economies in this survey, and then highlighted are the blue dot, which is the average or the median in that survey, the red dot, that's the S&P Global's forecast, and the yellow dots are the Moody's Analytics forecast.

What this chart is in general saying is that S&P Global's forecast is slightly more conservative than Moody's analytics for real GDP growth.

You can see that red dot all the way at the bottom section is to the left with slightly less than 2% real GDP growth.

according to S&P Global, but slightly above 2% forecast from Moody's Analytics.

Similar sort of a thing, difference, similar sort of a difference for the outlook when it comes to the labor market.

Moody's Analytics is slightly more optimistic and they believe that the unemployment rate is not going to come significantly higher than where it is right now.

SNP Global, on the other side, foresees further increases in unemployment and unemployment rising to 4.6 by 2026. And that's, again, not the pessimistic scenario.

It's a baseline scenario, which does foresee some increases in the unemployment rate as the labor market continues to balance to what would be a longer, strong equilibrium.

Now, for federal funds rate, it's the opposite.

And again, that's because of how Moody's Analytics and S&P Global differ in terms of their view of where the economy is and where it's heading.

S&P Global, as you can see, that red dot for federal funds rate is to the left, so that means lower interest rate by year-end 25 than where the average economist and where Moody Analytics would see it, because, again, Fed is trying to...

trying to stimulate the economies, trying to prevent further weakening of a labor market, and that's done by lowering the interest rate slightly further than where Moody's analytics economists believe it needs to be, that the interest rate needs to be.

The difference is not particularly large, it's half of a percent difference, But it's there, and it's a difference that prevails in the long run.

And finally, when it comes to CPI inflation, the difference is there.

They're smaller.

both S&P Global and Moody's analytics are slightly above in terms of their expectation for inflation for next year, but nothing that would be particularly concerning.

So again, to summarize, S&P Global may be slightly more conservative in terms of the growth, employment growth, real GDP growth for 2025. Because of that, slightly lower interest rates predicted by S&P Global.

Finally, when it comes to the outlook more broadly on the likelihood of a recession, luckily those fears back in July subsided and further employment reports were stronger.

So the outlook for the likelihood of a recession right now is somewhere around 26%, roughly where it was back in July.

So no big changes in terms of that.

One out of four as the odds for a recession.

So yeah, overall, labor market in the US continues to be moderating.

Luckily, that week report in July was just one month.

It was followed by particularly strong September.

job gains and revision of those initial estimates for July.

So that essentially motivated S&P Global to revise their forecast for employment growth up.

Right now it's 0.8% growth in 25, up for 0.6%.

Pessimistic scenario, again, that's a recession occurring.

Relatively shallow recession, comparable to 2001, not 2020, and not 2008. So relatively shallow recession, but it would imply that there are job losses, the unemployment rises further beyond where it would go in the baseline scenario.

Now, moving on to the regional forecast, there are some additional things that we are incorporating when we are developing the forecast.

We use the national forecast and we use the information on the local and regional economy.

One of them one of the very important sources of information here are the employment estimates coming from Washington State Employment Security Department we have presented back in July the result of Revision that the ESD performed as a part of their quarterly benchmarking, what's called quarterly benchmarking process.

It moved employment estimates for Seattle metropolitan division area down.

So that's the second line that just showed up on the chart that's hovering slightly above zero, somewhere between zero and 0.5.

The revision that came afterwards, the most recent revision, increases the employment estimates up.

So on average, employment is now growing by the ESV's most recent estimate about 0.7% on a year over.

So that by itself would be certainly good news and would motivate an upward revision in the revenue forecasts.

More employment growth means also more momentum going forward.

It means higher incomes, higher spending, and so higher revenue generated by different taxes.

So unfortunately, there has been, when we were looking more closely at that employment data, the underlying changes by industry are more concerning As a part of the revision, the recent revision, ESD decreased their estimates for employment in trade, information, financial activities, professional and business services sectors.

Overall, as this chart shows, the employment in these sectors has been declining since summer 2022. It has declined so far by 30,000 jobs, which is 3.8% of that peak.

Now, the reason why we are focusing here on these particular sectors is their outside importance for business and occupation, sales tax, and payroll expense tax.

These sectors overall account for about 43% of the regional employment again that would be the employment for King and Snohomish counties because that's the kind of information that's available on monthly basis we don't have monthly employment data for for Seattle um what we do have for seattle is a tax collection and again if we are looking at the businesses that operate in these industries those businesses account for about 70 percent of the overall business and occupation sales tax and payroll expense tax Again, the fact that the employment, the regional employment is declining and has been down is not good news for the revenue collection for these particular revenue sources.

As a final point of where exactly the regional labor market currently is, looking at it and comparing it to the development in the rest of the Washington state.

We have seen weaker employment growth since 2020 in the regional labor market.

King and Snohomish counties have not been growing as fast as Washington state, cumulatively, 2020, Washington State has added 4% jobs.

Over the same period, Metropolitan Division, King and Snohomish counties have only gone up by 0.5%.

Now, metropolitan division is a part of Washington state.

As a chart shows here, it's about half.

So if that half has not grown at all, that means that to get to the 4% growth for Washington state as a whole, the area outside of Seattle metro, so part of Washington state that excludes Seattle metropolitan division, has grown about 8% cumulatively over the course of four years.

Again, at the same time as Seattle metro area employment has been roughly same.

So that overall means that the share of the employment that's within Seattle metro area has gone down from 51% of the overall state employment to 49, slightly above 49% of the total state's employment.

And so region, in that sense, is not driving the growth like it was in the 10 years before pandemic, which is shown in the part of the red line between 2010 and 2020, where the share of the regional employment in state was going up.

So to summarize the employment outlook for US, there has been a slight upwards revision for the employment growth represented by that upward shift in the blue lines from July to October.

When we are looking at what those revisions for the employment data in Seattle metro area imply, together with some additional bad news, the strike and the layoffs at Boeing will certainly have an impact on the labor market and economy more broadly.

So building all those in implies slower growth than we were previously predicting for 2025. The part of the line that has gone up, the two red lines, compare the July forecast that we presented here in August and the current forecast, there has been the upward revision for total employment.

and not necessary for all the relevant industries or the most important industries, but there has been an upward region for employment growth.

The fact that those...

important industries have been revised down.

The fact that there have been layoffs announced at Boeing mean that for the rest of 2024 and for 2025, we are predicting about 0.7% growth year over year on average throughout until 2026. And that's the baseline scenario.

Again, S&P Global produces three main scenarios.

The baseline is currently assigned 55% probability.

The pessimistic is 25% probability.

And then the optimistic, which is not shown here, is assigned at 20%.

Probability, just like for the nation, the pessimistic scenario would lead to job losses, which would be notable.

It would be about 4.3% fewer jobs in the Seattle area by summer 2026 compared to where we are right now.

That's a recession that's, again, milder, slightly milder than the 2001 recession and certainly significantly less severe than the Great Recession or the 2020 recession.

The recovery would take until 2029, again, slightly shorter than what we have seen for the 2001 recession.

In general, it would feel very, very similar.

Unless there are any questions, we can move on to the new forecast.

Director Dross, yes.

SPEAKER_06

When was the last time we saw downward revisions like this?

SPEAKER_12

Well, there are certainly some parts of a downward revision that are unprecedented, and we'll get to that when we'll talk about the sales tax.

In terms of the overall magnitude of these downward revisions, there have been some years recently where...

revisions of a similar magnitude have occurred.

And if we can postpone that question when we are presenting the general fund revenue forecast, that might be more helpful.

Those revisions for employment, if we are only looking at employment revisions, they do occur.

Every quarter, sometimes they are smaller, sometimes they are shorter, sometimes they go up, sometimes the employment numbers go down.

The unfortunate news here is that recently they have been just going down, and in the case where they have gone up, it's not the kind of industries that we want to be revised up.

SPEAKER_06

Thank you, and I see Council President has her hand.

I've got just a few more questions, and I'll pass it over to you, Council President.

It's my understanding that one of the first steps that you take is looking at the regional economic situation, and that region includes Pierce, Kings, Snohomish counties.

Are there other geographic areas that are contained within our regional outlook?

SPEAKER_12

So the regional model that we have developed has two counties.

It's King and Snohomish counties, so it's the metropolitan division.

The forecast for those two counties is what's used to inform the revenue forecast.

We are occasionally tracking and monitoring development in the rest of the Washington state, but we don't believe that it has a particular relevance or its relevance for the revenue forecast, it's much smaller.

SPEAKER_06

That's fair.

And I can't help but notice in Snohomish County that the second largest employer is the Tulalip tribes, who continue to be a successful...

large business, the first though being Boeing, and I can't help but notice that some of the issues that have arisen have occurred, and what I mean is there was a strike supporting the union and their right to strike, supporting, you know, and all of that, not saying anything here about that, standing with the workers, but when we're looking at this economic forecast, did that play a role in the current situation?

SPEAKER_12

It does for the employment growth forecast that's shown here in the chart.

The red line has moved down to incorporate the strike that's still ongoing.

which is bringing down the forecast for employment growth in the second half of 2024. And then those announced layoffs, still unclear how much they'll affect the regional employment versus some of that will be taking place elsewhere.

But we have tried to estimate the impact of those layoffs and the impact on the regional employment in the aerospace manufacturing sector.

And so it is a part of what's driving down the employment growth.

SPEAKER_06

And thank you.

And just separating that a little bit, there's been the white-collar furloughs and potential layoffs compared to the blue-collar strike that is occurring.

Jan, should Boeing provide a contract to IAM 751 that they find sufficient and vote in favor of and...

resolve the strike, would that have an impact on the revenue forecast?

When is the next time we get that update?

I know that that's happening this Wednesday.

What's our timeline as far as the forecast goes?

SPEAKER_12

So when it comes to the impact on the revenues, the direct impact of Boeing is not that large as would be the impact of some other employers in the city.

A lot of that economic activity is not really taking place in the city and does not directly affect or does not affect to a large extent The revenues, BNO would not be, again, significantly directly impacted by these layoffs.

Sales tax is destination-based, so again, relatively limited impact on that.

Parole expense tax, that's a different story.

It depends where exactly, if it's these white-collar workers and if they happen to be employed in Seattle, and if Boeing happens to be one of the companies that's passing all those thresholds.

the layoffs of these workers would impact the payroll expense tax revenue.

Again, 10%...

10% layoffs that have been announced in Boeing will not have particularly big direct impacts.

It's the indirect effects that would matter.

Lower overall employment means lower wages and salaries, incomes, less spending, overall consumer sentiment coming down, and just everything dragging the revenue collection.

But again, there are things that would be more worrisome if this was 10,000 jobs in another company.

SPEAKER_06

Well said, noting that the impact that it has on our revenues received, which we received that report from you for the last quarter and last Friday, the revenues received aren't going to be as impacted because we are getting secondary economic impacts from these salaries.

That's correct.

With that, I'm going to pass it to Council President Nelson, and then I'm going to check in with Director Carnell and Vice Chair Rocca to see if they have questions, and if not, I'll pass it over to Council Member Salka.

SPEAKER_15

Thank you.

So just confirming, I'm looking at the first time that the place where the July and the October forecasts diverge, and so that is in, looks like...

Well, July, basically.

So where the light pink line is going up and the red line is going down, I'm assuming that the assumption, the reason for that divergence is what we've already been talking about, is the strike.

Is that safe to say?

Or are there other assumptions that maybe led to that divergence that we haven't already touched on?

Or other factors for that divergence?

SPEAKER_12

So the fact that the first part, these two lines, the darker red line is above the one that's showing the July, that's the impact of the upward revision in the employment estimates by ESD.

Essentially, ESD went back, looked at the employment data.

You can see that it's going back all the way to 2023, and it becomes larger over 2024. So occasionally, there are these larger revisions of things that have already happened, just better estimates for employment data.

So it's not about The outlook that's changing, it's about our understanding of the current employment in the regional market, and that's what's happening here.

SPEAKER_15

Okay, because in July it looks like, so I'm looking at the pink line, it looks like you were, the regional employment forecast was on a positive trend, but the red line shows that it actually went down.

That's what I'm looking at.

SPEAKER_12

Can you repeat that one more time?

SPEAKER_15

Yeah, when you look at where the three lines join, that looks like in the middle of 2004, right?

And then the pink line goes up, but the red line goes down.

And so I'm just wondering if, you know, so clearly there was an unexpected change turn of events or assumptions that must change.

SPEAKER_12

All right.

So we are now talking about starting from middle of 2024 and going forward.

Right.

And the fact that the pink line is above the red line.

Yes.

Got it.

All right.

Sorry about that.

Yeah.

So that's not the historical revision.

That's the Boeing strike, the layoffs, the overall lower employment growth implied by the composition of the employment by industry.

The fact that those important industries, professional and business services, information sector, trade and information sector, the ESD has revised down the data for employment growth there.

So again, looking at that last line, the one that keeps coming down, ESD is essentially saying that, well, these sectors have not stabilized yet.

They are still in a decline.

There is less momentum going forward, less employment growth to be anticipated in near future until these sectors stabilize.

and the employment stops coming down as it is based on the current estimates.

SPEAKER_15

Okay.

Thank you.

SPEAKER_12

So the July forecast was more optimistic than...

The July forecast was more optimistic regarding the employment outlook for 25, yes.

Okay.

SPEAKER_15

Thank you.

And then on page 10, this is just really probably an easy question.

4%...

employment growth in the Washington state versus .5 in Seattle Metropolitan Division, that's because our economy is so dominated by those industries that are more volatile or not doing so well, correct?

When was the last time there was alignment within about 2%?

Or has there?

Go on.

SPEAKER_12

So, yeah, the fact that the growth in Seattle metropolitan division is so weak that half a percent has a lot to do, again, with that other chart which shows the declining employment in the sectors which are 40% of the overall employment.

And that's happening in the Seattle region, not really outside of the Seattle metro area.

Thank you.

Okay, that's all my questions.

SPEAKER_06

DIRECTOR DEWOLF.

THANK YOU.

CHECKING DIRECTOR CARNELL VICE CHAIR ROCHA.

DO YOU HAVE QUESTIONS AT THIS TIME.

SPEAKER_05

NO I HAVE NO QUESTIONS AS FOR IT'S BEEN A VERY CLEAR AND CONCISE PRESENTATION.

THANK YOU.

SPEAKER_09

NO QUESTIONS FOR ME.

JUST YOU KNOW REITERATING THAT THE SEATTLE METROPOLITAN SLOW CONTINUED SLOW GROWTH IS CONCERNING.

SPEAKER_06

Over to you councilmember soccer then councilmember kettle and then councilmember Rivera.

SPEAKER_02

Thank you.

Mr. Chair and Thank you for this initial briefing.

Look forward to learning more later for clarity.

I do have some Questions initial questions at a high level on all this all ties together with what I imagine What I see is previewed later will be discussed in more fulsome detail later but Maybe some of those will get addressed along the way and this is part of this journey.

I do have some kind of foundational questions to ask about and just kind of level setting how all this ties together with respect to the Revenue Forecast Council, Chair Strauss, that you mentioned earlier.

Specifically, would love to better understand The roles and responsibilities of the Revenue Forecast Council, because we kind of glossed over a little bit today.

So, the roles and responsibilities of the Revenue Forecast Council, its decision-making authority, who provides the baseline subject matter expertise.

Do they report up to the executive, or do they report up to us, or a mixture of both?

And also, the composition of the Revenue Forecast Council.

I understand that council president and our budget chair on the council side represent that, and our budget chair—the council budget chair serves as chair of that council.

What is the rest of the composition?

And then those other questions.

Thank you.

SPEAKER_06

Thank you.

I'm going to brief.

I know I provided a brief summary.

I'm going to turn it over to Director Noble because he is the one person that was the CBO director when the forecast office was in CBO.

He then went to be the independent forecast council director and is now central staff.

Director Noble, I will ask for you to keep the summary short, and then he'll work with you, Council Member Saka, offline to answer any further questions, if that's all right.

SPEAKER_11

Several years ago, I was going to say 2020 or 2021, City Council created the forecast council.

Council Office of Revenue and Economic Forecast or Economic and Revenue Forecast on both the King County and state offices similarly titled.

So for both King County and the state, there is a separate function, separate from the budget office, that forecasts revenues.

And like, again, having been modeled on those significantly, The Seattle office that Jan directs reports to a four-member board.

Again, this was all set out in SMC that was adopted by the city council.

A four-member board that includes two representatives from the executive side and two from the council.

On the council side, it is the council president and the finance chair, if you will, the budget director, chair of the budget committee.

On the executive side, it is the mayor...

or his or her designee, which in this case is Jeremy Rocca, and the finance director, who has also joined you as well here, so Jamie Carnell.

So Jan's position, which I held for a couple years myself, reports to that board and to those four individuals The expertise is within that office.

Jan can say more.

They subscribe to a national forecast service that provides a national forecast.

There's a regional model that the city in some ways inherited from an outside consultant many years ago, which we have made our own, which Jan in particular has made his own.

So that's the general setup.

And it was a very purposeful decision.

so that, if you will, I'm just going to go here to foxes and hen houses, come to mind that the folks who are running the budget office who are engaged in the enterprise of trying to balance the budget might arguably have a conflict of interest or might face political pressure from either the executive or the legislative branches in terms of the forecast itself.

And the goal was to, and this is very explicit, so I'm not making this up, the goal was to separate them from those kind of political pressures and to deliver to be able to deliver a, if you will, dead-flat forecast without influence.

SPEAKER_02

And so the baseline information and the subject matter expertise fed up to this council is provided by the mayor's office?

SPEAKER_11

No, the forecast office itself.

So Jan Durris, PhD in economics, I went to when I was there.

Sean from the UW.

So the expertise is in the office.

SPEAKER_02

Who does the office report to?

SPEAKER_11

that for forecast council, those four members.

SPEAKER_06

I've answered this question twice already.

I'm going to ask for us, if you've got questions on the forecast base that we've just gone through, happy to take those questions.

I do want to keep us ticking along because we have not even gotten to the meat of the subject yet.

SPEAKER_02

This is really important in terms of like understanding the broader context here.

So Mr. Chair, I do think it is important to better understand and daylight this.

Director, I don't know if you can respond.

SPEAKER_11

Again, the expertise is in the forecast office.

Who does that office report to?

To the four members of the forecast council, which are two from the executive and two from the council.

Again, the thing is set up with that balance in mind throughout.

SPEAKER_02

Okay.

And then their decision-making authority?

SPEAKER_11

So the way the ordinance that is structured, and you will see this play out today one way or the other, the director of the forecast office will present a recommended forecast, and you will see that today, that unless the forecast council votes to override that forecast, that is the official city forecast.

And to override requires three of the four members, very purposely structured so that it requires some consensus between the executive and the legislative branches.

You need one vote at least from one side or the other to override that forecast.

So that's the setup.

You'll hear a little bit today from executive side staff.

There's some very...

narrowly narrow set of revenues that are derived really from department operations where the executive is well positioned to to be able to develop those forecasts because they're working closely with the offices you know the some themselves on the things like deployment of parking meters as an example but the larger economic driven revenues that account for the 80 plus 90 percent of the revenue of the general fund revenue forecast and also the payroll expense tax forecast, which is not part of the general fund, all come from the forecast office.

SPEAKER_02

Thank you.

Ultimately, what I was trying to drill down into is this whole construct of independence.

I would actually submit that it is not truly an independent council.

We do have good representation, proportional with the executive and the council.

And this is, I think, the best system based off everything I know that we have in place today.

But it is not true independence.

But in any event, thank you.

SPEAKER_07

Council Member Kell.

Thank You chair Strauss it's interesting to listen to the briefing as an adult here in Seattle it's kind of sad news but as a boy who grew up in a Rust Belt area of around the Great Lakes it's so it's obviously sitting here we need to do better in this role, and I find, can I say, I may have misheard you, because I think Chair Strauss asked the question, because Seattle, Metro Seattle, there's different definitions, like just King County, the three counties, and then some include, the Metro areas include Skagit and a couple counties further to the south.

I heard you say Sonomish, but I didn't hear Pierce.

When you said Metropolitan Division, is it just King and Sonomish?

SPEAKER_12

Yes, so there is metropolitan division and then there is metro statistical area.

So yes, it does get confusing.

In our work, we are almost 100% of the time looking at Key and Snohomish counties.

There are some exceptions where the data that's being released, the official data is only coming for the tri-county and would include the Pierce County CPI.

would be one example that's essentially for a price index for the three counties rather than just two.

But most of the time, when I say metro, it would mean King and Snohomish, but not Pierce.

SPEAKER_07

OK, thank you for that clarification.

I really appreciate the point somewhat in the questions from the chair regarding the impact of Boeing.

Knock on wood, that goes well, because that is a major industry in our area, particularly if it's coming home, if it's becoming an engineering firm again.

I married into a Boeing family.

That would be fantastic for the region.

But for us more directly, you know, I think about Amazon.

I think also in the government sector, you know, Amazon's gone three days a week.

In January, they're going to go five days a week.

Legislative is already four days a week.

The executive's gone to three along with the county and Sound Transit to three in November, basically, next month.

And, you know, I see...

those kind of factors and other factors being at play in terms of Seattle specific as it relates to the taxes that are listed like on slide nine.

And it's interesting because, you know, if you look at like the legal profession, they've really downsized downtown, downsized in the city.

Part of it is the pandemic, part of it's leveraging work from home, reducing costs.

And part of it, I believe, is the attractiveness of downtown, you know, across many fronts and, you know, As my colleagues know, I turn every meeting into a public safety meeting, but the attractiveness of downtown has been impacted by the public safety front, and it impacts businesses' desires to be here, their decisions.

And I was just curious, are you looking solely at the numbers, or are you looking at some of these underlying factors that play into it?

And by the way, it's not just public safety issues.

And then tied to that, too, is the optimism and the momentum, like the World Cup.

So when I see these numbers, I'm hearing a lot of things that are going the other way, but the numbers seem to be pointing the opposite way.

And I was just wondering if you can address that kind of

SPEAKER_12

Yeah, so in addition to the employment data, we do incorporate other things.

Return to the office is a really important factor for payroll expense tax, for business and occupation tax.

So those economic forecasts are just one part.

of the input, and then we have some additional data inputs when we are building the revenue forecast, and we do take into account the return to the office.

It's certainly good news for business and occupation tax, for payroll expense tax, when there is a Increased return to the office because the tax base gets larger.

And in the same vein, office vacancy rates are an additional factor that we are taking into account that are RELATED TO THAT.

IN THE LONGER RUN, IF THE RETURN TO THE OFFICE WERE TO STALL, THE FIRMS WOULD SHED OFFICE SPACE, THE OFFICE VACANCY RATE WOULD DEPRESS ASSESSED VALUES OF A COMMERCIAL REAL ESTATE THAT WOULD LEAD TO LOWER REED, FOR EXAMPLE, IN ADDITION TO THE IMPACT ON THE BNO, IN ADDITION TO THE IMPACT ON PAYROLL EXPENSE TAX.

ALL RIGHT.

THANK YOU.

SPEAKER_06

THANK YOU, COUNCIL MEMBER KELT.

COUNCIL MEMBER RIVERA.

SPEAKER_17

thank you chair thank you young you know I was going to ask but my colleague council member kettle asked about how return to work has impacted this but so thank you for answering that question then I'll just make an observation that on this slide 12 the SMP global is assigning a probability of 25% to the pessimistic scenario which looks a lot worse than the optimistic scenario here for 2025 in particular, and I'm wondering, is that assignment of probability, 5% seems like a lot in difference between those two scenarios, but can you confirm for me that that's the case?

SPEAKER_12

Yeah, so there's two things of probability.

that determine how the risks are balanced.

The first of it is how much of a probability there is to the upside and how much is to the downside.

And then the second thing would be, well, how good is the upside relative to the baseline and how bad the downside is relative to the baseline.

Right now, the risks are, in general, skewed towards the downside, both in terms of probabilities and the likely outcome.

The downside is a recession.

That's the 25% thing that was mentioned at the beginning for overall likelihood of a recession within the 12 months from now.

The optimistic scenario, that's 20%.

The scenario is usually assigned the highest probability to the...

No, they always do assign the highest and more than 50% to the baseline.

That's why it's a baseline.

It has to have more than 50%.

Yeah.

SPEAKER_17

All right.

Well, I would have rather be in the optimistic scenario, but nevertheless, that's where we're at.

And it's helpful to know how these things are calculated.

And thank you for answering on the return to work, because I've been saying since I got here, we got to get folks back in the office.

because it's having a huge impact on our economy.

And we see it here today, as you're describing.

So thank you.

Thank you, Chair.

SPEAKER_06

Thank you, Council Member Rivera, who is Vice Chair of the Select Budget Committee, but we're right now in the Forecast Council.

Good to see you.

And with that, I'm seeing no other hands regarding the economic outlook for U.S. and Seattle area.

Let's dive into the bad news.

SPEAKER_12

All right, so one more slide and then we'll get to that bad news.

So just as a quick reminder where we are in terms of the revenue collection for 2024 and what new information we had when we were developing this forecast.

The chart on the right shows how the revenue is coming typically coming in throughout the year, how much of a particular revenue stream is collected, and we are aware of at the time where we are developing the April, the August, and the October forecast.

So, overall, by this time of year, we have about half of the general fund revenue in for the first two quarters.

Since August, we have received returns for business and occupation for the second quarter.

Third quarter is currently coming in, but the full information is not available yet.

the distribution, sales tax distribution from Washington State for August and September.

Given the lag between when the economic activity takes place and when the revenue is collected and remitted, August and September distributions are in general accounting for economic activity that took place in June and July.

So again, we have information on the economic activity that took place in the first two quarters of 2024, with the exception of REIT.

That one, we actually have all three quarters in already.

And that's also the reason why the purple line is higher than everything else.

By the time of the October forecast, three quarters of REIT revenue for current year are in.

In 2023, it was 80% of the revenues collected.

SPEAKER_06

And Jan, just before, Director Dura, my apologies, before we get into this, I'm going to ask colleagues, we are going to take questions just from the forecast council members until the end of this presentation, and then we'll come back and open it up to everyone.

I believe Director Carnell, Jeremy, Council President, unless there's something that we really need to ask, let's also hold our questions until the end.

And I'll ask on the forecast council members first and then turn it over to the general council.

With that, Director Duras.

SPEAKER_12

So here comes the bad news in parts.

The first part is the sales tax revenue and the recent developments in terms of sales tax revenue and how much the growth of this particular revenue stream has gone down.

2022 was quite a strong year for revenue collection.

The black line shows the total year-over-year growth in sales tax for individual months of the year, and then those bars show the contributions of main sectors.

and construction sectors are in particularly the two significantly important sectors, and then leisure and hospitality would be the third one, the rest of the industries, and that's everything else put together.

So throughout 2022, pretty much all those four parts were contributing to the overall growth, and as you can see, it's been really strong in excess of 10% in general throughout 2022. That continued roughly for the first half of 2023, but then the slowdown in the second half of 2023 brought the revenue collection down, and we started to see year-over-year declines in sales tax revenue.

And the black line under that's below zero means that sales tax revenue in that particular month has declined in the year over year comparison and as you can see a lot of that is due to the construction sector and the slowdown in the construction sector pulling down the rest of the sector so if you stack up those bars that are above zero subtract the bars that are stacked below zero you get to where that black line is so the fact that those yellow bars start to be consistently below zero means that construction sector is offsetting the gains made made in all the remaining Sectors and that that sort of story continues throughout 2024 so overall sales tax revenue is on average declining in the year-over-year comparison around 2% There has been slightly better Slightly better months First two months were slightly better, but then it went back to 2% declines and as you can see again mostly construction sector with the Recently with trade sector again weighing down on the overall overall collection We have talked about the slowdown in construction last couple of meetings here.

We were anticipating that to some extent It's always harder to figure out how much exactly that construction sector will slow down We are seeing just overall over demand for new construction as a result of high interest rates as a result of a large amount of vacancies for office space, and those vacancy rates are certainly not motivating to build more office space.

In recent years, there have been a lot of multifamily units delivered to the market, and right now, again, because of high interest rate, it's not the time where the developers would rush and build.

They're trying to wait out and wait for the time when the interest rates will come down, where the overall uncertainty will be lower, and when those projects will start to pencil out.

So construction permits have declined significantly.

That's one of the inputs that we are using to kind of get a sense of where construction sector is heading before construction activity takes place.

Permits have to be issued, and so it's kind of a leading indicator for where the construction sector is heading um construction permits uh have for the uh 12 months ending in september 2024 declined 40 relative to what we were seeing pre-pandemic so right now um again for 12 months ending september 2024 the value of permits issued was 2.6 billion that's 40 less than the 4.3 billion that was That was the average for 2016 to 2019 period before pandemic and before the interest rates started to go up and before the construction sector started to slow down.

Construction sector is weighing down significantly on sales tax.

In addition, with those revisions in the employment data, that means that the large economically driven revenues are not growing as fast.

In some cases, they are actually declining and One last thing, I guess, to say here.

The fact that the sales tax is declining on the year-over-year basis outside of a recession is really quite unprecedented.

In history, there have been periods where sales tax in nominal terms was declining year-over-year.

During the recessions, that's usually what takes place.

But outside of recession, that's...

really not something that we have seen before.

SPEAKER_06

Director Duras, as we're moving into slide 16, can you help orient us to the columns on this chart, because I know that there's gonna be information filled in as we click through.

So can you help us understand the actual for 23, where that information comes from, what the October forecast, where that information comes from, and then what these next charts of the difference from 25 to 26 in the three-year smoothing.

Sure.

Thank you.

SPEAKER_12

Okay, so before we look at individual revenue streams, first just looking at what the overall picture looks like for the general fund.

The first column shows the 2023 actual, so that's the actual revenue received for 2023. There is an additional row that takes out grants and transfers, and those are different from the rest of the revenues, and there is a reason.

to look separately at the general fund that excludes those two categories.

The next three columns to the right of the actual 2023 are the current forecast that we are presenting.

So the three numbers show the total general fund revenues that we are currently projecting for the current year, again, based on roughly 50% of a collection that we have collected so far we are trying to project the rest of the year third and fourth quarter and where it's going to end up once that is in and then we have 25 and 26 forecasts the next streak Starting to show up are the differences between the current forecast and the forecast that we have and the proposed and the forecast that was used for the 2025-26 proposed forecast, which is pretty much same as what we have presented here in August.

There are some small technical changes.

for 2024 and some other things that happen in 2025, 2026. So the difference again is October forecast in comparison to the 2025, 2026 proposed budget.

SPEAKER_06

Just to clarify for the viewing public, the three columns under the difference between 25 to 26, that is since the budget was transmitted to us, the changes that we're seeing and what we have to tackle before us.

Is that correct?

SPEAKER_12

That's correct.

That's precise.

SPEAKER_06

Fantastic.

SPEAKER_12

fantastic that we have the chart to walk us through this bad news yeah it's bad news as you can see those changes add up to about 48.6 million over the course of three years with a large part of that being the downward revision for 2026 in general that slow economy growth that's driving um these revisions that that's uh the reason for these revisions it accumulates over time so these these numbers get larger as we look at 25 as and we'll get 26 because the slow employment grows the slow growth in income and spending that just adds up over time and lowers uh The revenue projections.

So looking at the individual revenue streams, the rows that are highlighted in blue are those that our fork our office is forecasting.

As Ben mentioned, there are a couple of revenue streams where CBO is better positioned.

to forecast and they remained within budget office which coordinates with individual departments that have a better insight into where that revenue stream is heading.

For property tax, it's a little bit of a combined thing.

We are developing forecast for the assessed value and Sean is developing forecast for assessed value and for new construction.

and that is used as the input for property text, and then property text forecast itself is developed by CBO.

Dave has some information for where the revisions are from.

SPEAKER_13

Sure, so I wanted to explain the differences for the property tax, which includes two elements.

One is the general expense levy, which is general fund money, and the other is the MEDIC-1 EMS levy, which also goes into the general fund, but it's designated for the purposes of that service, right?

MEDIC-1.

And so the changes you see here, the negative 1.2 million in 2025 and this negative 6.3 in 2026 are all due to the EMS levy.

And essentially, there's a game that gets played between the AV of the county and the AV of the city and Given the conditions, we get changes in the MS levy along the way throughout the year.

The essential math is that the amount that the dollars levied, then they have to figure out what rate they need to apply to collect that amount of levy dollars.

And if the King County's AV increases, then that levy rate comes down.

You need less rate to collect that dollar amount that they want to collect.

the city receives its assessed value times that rate.

And so if the city's AV does not grow at the same rate as the county's AV, then we get a change in our revenue and we get a negative result.

So that's what's happening here is that King County's AV is increasing faster than the city's AV, which yields us negative 1.2 million in 2025. There's a bit of that going on in 2026 as well, but the primary reason in 26 is that we learned too late to include in the proposed budget that the likely rate that will be charged for the renewal of the Medic One EMS levy in 2026, for collection in 2026, will be less than what we assumed.

So it's about a cent and a half less than we assumed, and that results in this large minus 6.3 change.

SPEAKER_12

All right.

Now, moving on to those revenues that our office is responsible for.

Again, the rows highlighted in blue, the revenues that are Economically driven and that are affected directly by the revisions in the economic forecast as you can see sales tax revenue Business and occupation tax revenue they have been revised down Considerably over the three years these two add up to about 38 million downward revision relative to the proposed proposed budget forecast so 38 out of the 48 million is coming from those two sources because, again, they are the most sensitive to the changes in the economic outlook.

Whenever the economic outlook deteriorates, that directly feeds into the forecast for these revenue streams.

Construction sector slowdown, again, an additional thing beyond the employment employment data revisions and slower employment outlook, employment growth outlook.

So over those three years, sales tax has been revised down, business and occupation tax has been revised down as a result of the underlying economic forecast, not the collection year to date other than the fact that lower construction sector revenue means that this sector continues to weigh down on the rest of the sectors contributing to the sales tax.

And then for utility, private utility tax, those are the revenues that Sean is working on, and he can provide additional insight into those.

SPEAKER_04

Thank you, Jan.

There we go.

Yes, so for private utility taxes, essentially in a nutshell is that a lot of the downward revisions for the next few years were a result to do for cable and telephone tax revenues.

We've seen that year over year, those tax revenues have been declining.

I'm assuming that people are moving away from telephone and cable televisions for their entertainment and communications to more digital-based.

We haven't really done much research, but assuming that.

Outside of the private utility taxes or those private utility taxes, the tax revenue for steam, natural gas, and broker natural gas tend to be coming in consistently.

There's no real revisions for those.

But again, as Jan mentioned earlier, when it comes to the deciding the amount of information we have currently and forecasting that we're about halfway through what we have in terms of information.

But as a result, over the next three years, the total private utility tax revenue will be revised down $2 million.

Thank you.

SPEAKER_12

Thanks.

And then the last row, the last blue row, payroll tax 2021 obligations.

So we do continue to receive some returns going back to 2021 obligations.

It's not something that's easy to forecast.

We are essentially not assuming anything to coming.

So it's a surprise to the positive side.

So the 1.4 million that has been added to this forecast are those returns for 2021 plus the penalty and interest that's associated with those late returns.

And then the rest of the revenues, again, it's revenues that CBO is in charge of, so they can provide information on those.

SPEAKER_13

Sure.

And just to be clear, where there is a blank, like public utility taxes, there's no revision.

So that's what's going on with any of the plain white spaces.

For parking meters and court fines, Joe, do you want to speak to those?

Sure.

SPEAKER_19

Yeah.

Parking meters have been revised down.

The city adjusted the rates that we pay at the parking meters just a week ago, actually, in mid-October, and those came in lower on average than we had expected in the August revenue forecast.

There were more areas where we actually lowered the rate than we had seen in the past.

So that's the reason for that drop in a million dollars to the forecast there.

The court fines row is composed principally of parking citations, parking tickets, and red light camera revenues.

Parking citations are relatively flat from no change from the August revenue.

forecast.

However, the red light cameras continued to trend downward.

So the actuals we saw in June through September surprised us to the downside a bit.

So that's why we lost the $800,000 there in 2025. Dave, you want to speak to the others?

SPEAKER_13

SO THE NEXT CATEGORY, LICENSES, PERMITS, INTEREST INCOME AND OTHER, THAT INCLUDES A LOT OF DIFFERENT THINGS, ALL THE VARIOUS LICENSES THAT THE CITY PUTS OUT, PERMITS, ET CETERA.

BUT THE CHANGES HERE ARE DUE PRIMARILY ALMOST EXCLUSIVELY TO THE INTEREST INCOME, AND IT'S BASICALLY DUE TO A REVISION UPWARD IN THE INTEREST RATES THAT WE ARE GETTING ON OUR CASH POOL INTEREST EARNINGS.

SO THAT'S PRETTY STRAIGHTFORWARD, I THINK.

I THINK THAT'S ALL WE HAVE TO SAY FOR THIS CHART.

SPEAKER_12

Thanks.

So just to summarize, it's not really good news.

When it comes to the size of the downward revision, it's about half a percent of the general fund for 2024. That's 6.5 million.

It's about...

0.5% of general fund in 24, 16.9 million, that's about 1%, and then 25.2 million for 26, 1.5% downward revision.

So on average, we are looking at 1% downward revision for the general fund over those three years, which is substantial in terms of...

the worst kind of news that we have delivered in the last four years.

Looking back at 2020, the situation has been much more dire, but we have seen in 2022 downward revisions that were similarly painful in the years that we were forecasting for, not necessarily the current, but the following years.

SPEAKER_06

And before we move on, Director Duras, I just want to check in with the forecast council members if there are questions on this slide.

SPEAKER_09

I don't have a question on this slide, but can we go back to the sales text?

I want to understand the change in the hospitality, assuming that we had a good summer.

It seems like our leisure and hospitality rate has changed significantly.

John, can you comment on that?

SPEAKER_12

If it's this particular chart that you had in mind to go back to, in this chart, contributions of leisure and hospitality to the overall sales tax growth is shown in the red bars.

They do tend to be on the positive side, so those red chunks of bars are above zero.

with the exception, I guess, of one, two, three, four, that looks like April and then July.

For July, it's a year-over-year effect that we have here.

If you look back at the events taking place in July 2023 and how much...

how much excitement there was about things going on back in July 2023 that increased the leisure and hospitality's revenues in 2023. So the year over year comparison is biased because of that.

And that's why we are not seeing any particular contribution for 2023.

SPEAKER_09

Thank you for the additional clarification.

SPEAKER_06

Thank you.

Other forecast council members?

Jeremy, Council President, I see Council President's hand.

SPEAKER_15

Thank you very much.

It's easy to understand construction because we understand interest rates going up, cranes coming down, et cetera.

It's fairly understandable.

But could you please go back to that other chart?

Yeah.

Trade is concerning.

So is that a function of a weaker world economy that is other trading partners and what they are able to purchase from us?

SPEAKER_12

Yeah, so we were trying to look into the underlying reasons for why trade sales tax revenue is performing so poorly.

There are a couple of things to remember here.

This particular sector has grown, or contributions of that particular sector have been quite significant in the years right after pandemic.

When people could not spend money on traveling, on experiences, they just tended to buy more goods.

They would either buy furniture for their homes, renovate their homes, they would make some big ticket purchases.

Then there was that pivot once the restrictions, pandemic imposed restrictions were lifted, people started to slowly move their spending back towards those patterns where they would travel more.

And so there is a little bit of that effect.

So less spending on goods, and because of that, the sales tax revenue from trade sector, which is, again, mostly spending on goods, performing poorly.

A lot of it is coming from...

The motor vehicles, sales of motor vehicles that have declined quite considerably year over year.

Overall, the trade has been down, but the impact of fewer motor vehicles being purchased, that's just pulling everything down even further.

And, yeah.

SPEAKER_06

Thank you.

And I'm not seeing any questions from Jeremy Rocca at this moment.

I will ask us to continue moving on, just highlighting that this PRESENTATION, THIS CHART THAT WE'VE BEEN LOOKING AT DO NOT INCLUDE REAL ESTATE EXCISE TAX, THE PAYROLL TAX, OR THE AD TAX.

SO, COLLEAGUES, WE HAVE BEEN HAVING, AS YOU SAW FROM THE LAST CHART, THESE DOWNWARD TRAJECTORY WAS HAPPENING LAST YEAR.

We came back in the quarter one, but now we're back on this negative trajectory again with the sales and use, business occupation, and the payroll obligations here from 21, as well as the property tax.

There is some silver lining.

We're gonna get into the silver lining now with Director Duras.

Usually in years past, even when we've received bad news here, we've been offset in the net.

So at the end of the day, we've been whole.

This year is different.

So that's the bad news is that we don't have good news that it's offsetting this bad news.

Over to you, Director Duras.

SPEAKER_13

If I could interject here really quickly on the silver lining front, for the property tax, the MEDIC-1 EMS levy, we weren't able to build this in exactly into the forecast of revenue for the proposed budget, but we were able to set aside $4.7 million in anticipation of this change in the revenue in a reserve.

And I think Dr. Noble is aware of this.

But just for good news, so that 48.6 million is actually 4.7 million less in terms of dealing with a problem.

Thank you.

SPEAKER_06

Thank you.

Back to you, Director Duras.

SPEAKER_12

All right.

So moving on to what's in general better news, the outlook for the non-general fund revenues has not been good.

revised down considerably and in fact for some of them there have been upwards revisions that partially offset that would partially offset the the general fund revenues losses for payroll expense tax the overall Revision adds about 27.4 million over three years.

Slight increase in 24, and then bigger increases in 2025, again, as the effects accumulate over time.

We have one more slide on payroll expense tax that follows, so I'll leave that for a second.

Moving on to rate, we have seen additional, about $2 million of additional revenue from several larger sales companies.

that has led to an increase in the forecast for 24. And then the fact that the interest rates are coming down and are coming down faster than previously expected feeds into a better outlook for 25 and 26. Mortgage rates have locked in a lot of potential sellers, so the overall amount of homes sold have been low recently.

People who have been able to refinance or took a mortgage that's below 3% are now looking at the current mortgage rates are upward of 6%.

to move to sell the current home and buy a new one, they would not do it.

But as the interest rates start to come down, that pain of accepting a higher interest rates will shrink and that lock-in effect will diminish and ease.

So that's, again, something that's driving up the REITs revenue forecast up.

Over three years, it adds about $10 million.

For admissions tax, there is a small downward revision that has to do with some fine-tuning of our forecasting of individual categories, not necessarily an impact of less of tourism or less food traffic seen in Seattle area.

It's just some technical issues with the forecast and how different categories contribute here.

Then the blue line for sales tax for transportation benefit district sales tax, same sort of factors at play here as for sales tax that goes into the general fund, a downward revision due to And those same factors is taking place here.

And then finally, the short-term rental tax.

SPEAKER_13

Sure.

Thank you.

And I was remiss earlier.

I didn't introduce one of our team members, Alexandria Zhang.

She's on Zoom.

I think that's the anonymity of Zoom.

But she's forecast the short-term rental tax.

And I think essentially what this is is capturing what actuals have been in 2024. They've been up a bit.

which is a good sign for visitors and so forth.

And so this just carries through into the three years, 24, 25, 26.

SPEAKER_12

All right, so with that, I want to add a few more things on that payroll tax.

So going back to the reason why We have increased the forecast by 2.4 million for this year, 10.5 next, and then 14.6 for a combined of 27.4 million over three years.

The stock market is performing very well.

Stock prices and tank companies are growing, and the purple dots in this chart show the expected year-over-year growth in the stock prices for a select couple of companies that are here as an illustrative example.

You can see that their stock prices have gone up or are expected to go up quite considerably in the 24 over 23 comparison shown again by those purple dots.

the outlook for 2025 is shown here with the blue dots for the average forecast and then the line goes for spreads between the low and the high estimate all these estimates are coming from wall street journal data and their stock price targets from their the analyst ratings the data that Wall Street Journal compiles and makes available and that we are using to inform the payroll expense tax forecast.

Again, the reason here is that a large part of compensation in a lot of companies is in the form of stock rents, so whenever those are performing well because of stock prices performing well, we have reasons to believe that the payroll expense tax will perform quite well.

And so those effects tend to dominate, as they have in past, they tend to dominate the effect of employment changes.

And with that, we have in mind the fact that there have been layoffs since 2022, as you have seen in the chart, for professional business services information and trade sector.

Tech companies in general are not only in the information sector.

A lot of them would be classified as other sectors.

Amazon Web Services, again, not information.

Instead, it's a professional and business services.

Amazon.com, the retail component, that would be in trade rather than the information sector.

And that would be the reason why those couple of sectors combined are so important for the local economy and for revenue collection.

So, again, going back to stock prices versus the employment outlook, the layoffs do have a negative impact on revenue collection.

We have started to look at the employment data.

We have been able, in the last two years, secure access to...

the data from the Employment Security Department for the employers in the Seattle area.

And so we are now able to start to figure out the effect on the payroll expense tax coming from changes in the employment versus changes in the stock prices, still in relatively early stages.

So far, what we are essentially seeing, what we believe is going on is that if you have, let's say, 100 employers, say 5% of them are laid off, and that would otherwise pull down the overall compensation paid by the company and the payroll expense tax if it was imposed on them.

If you have those 100 employers, who have part of their salary in form of a stock grant, let's say 150K base, 150 in terms of stock grants, and those stock grants go up by 20%.

Overall, you are going to see an increase in the payroll paid by the company, even in the presence of that 5% workforce decrease.

And so the effect of...

Compensation that's going up due to stock prices dominates the effect of changes in employment.

And again, there have been layoffs.

They have not been visible when you are looking at the overall payroll tax because they are small relative to the effects due to stock price changes.

For 2025, the S&P Global expects stock markets to continue to grow.

So now we are moving from individual companies and outlook from individual companies and looking at the outlook for stock prices and stock market as a whole.

For 25, S&P Global expects the stock prices to grow slightly slower, as in compared to 24, just 5.4% growth, and then They actually predict a decline in 26, a 3.6% decline even in the baseline scenario.

The pessimistic scenario and the recession would hit the financial markets just like it would hit the employment and economy overall.

And so stock prices would decline already in 25. Instead of growing, it would be 1.3% decline rather than 5.4% increase.

SPEAKER_06

And then, Director Duras, at the end of slide 20, I'm going to ask the forecast council members if they've got questions over these last three slides.

SPEAKER_12

Sounds good.

So far, we have been looking at the baseline scenario forecast.

This one and the next one summarize those alternative scenarios, the optimistic and the pessimistic scenario, and compare them to the baseline scenario forecast, depending on the revenue stream that we are looking at that spread between the Optimistic and pessimistic scenario varies, and you can see that it's particularly large for payroll expense tax, especially looking at 2026. Given how much stock prices can grow or decline and the uncertainty regarding The outlook for stock prices so far out, it's not surprising that the range will be much larger than the range for business and occupation or sales tax, where the impact of a recession would be much smaller.

Again, one thing you can see here is that the risks are skewed towards the downside, so that optimistic scenario line is above the baseline, but the distance between the optimistic and the baseline is much smaller than the gap between the baseline and the pessimistic scenario forecast.

SPEAKER_06

If you want to stick to the ...

Yeah, no, one more slide.

One more slide, all right.

We'll take this as a group for the forecast council members.

SPEAKER_12

All right.

The table here now compares those alternative scenarios to the baseline and focuses on main economically driven revenues.

For general fund that sales tax business and occupation and utility taxes And then in addition we are adding the table here presents the payroll expense tax and trade to largest non general fund revenues and The total general fund revenues would be between 17 million and 69 million lower in the next three years if things were going along the pessimistic scenario rather than baseline.

So the impact of recession, again, would be particularly severe for sales tax and business and occupation tax.

In case of that optimistic scenario, again, there is some upside risk, just smaller, and the increase for 26 is only 37 million because of that.

Payroll expense tax, 45 million less for current year, 107 million less for 2026, again, Completely different kind of revenue stream compared to sales tax compared to business and occupation tax for it a little bit of a downside a little bit of an upside slightly skewed towards the downside especially for 25 and 26 because interest rates and how much they matter for sales of homes and the overall uncertainty regarding the path of the interest rate and that something that that matters here the most for this particular revenue stream thank you director duras i'm going to ask forecast council members if they have questions over the last three slides i'll start us

SPEAKER_06

On the slide 20, you had indicated the space between the optimistic and baseline is usually larger than it is presented in this forecast.

It is, from my experience, more typical to have an even or similar amount of space between the pessimistic and the baseline as well as the baseline and the optimistic baseline.

Are there additional risks here?

Is this what the S&P was getting to with the probability for each of these different potentialities being different?

Help me understand what our inherent risks are right now.

SPEAKER_12

So, we do have a slide that's summarizing forecast risk and we're looking at those that matter most for, we believe matter most for the revenue forecast.

When it comes to the national forecast from S&P Global, there are, the risk for the downsides are something that has been around for some time and so that gap between the baseline and the pessimistic scenario due to a recession occurring in the 12 months that has been there in last year.

And going further back, you're right, that balance of risk would be more even.

But recently, it's really skewed towards a downside because of that potential recession and very few things at the same time that can go better than expected.

There is still a lot of uncertainty regarding the likelihood of a soft landing, and again, coming up with things that can go potentially better, it's just not that easy.

SPEAKER_11

If I might add, just echo some of what Jan's saying, and he may not completely agree with this, The national economy is doing remarkably well.

There isn't a whole lot of upside left.

I mean, we're getting really strong employment growth.

Interest rates are coming down.

Stock market has never been.

I mean, so there's really, on that side, there's not a whole lot better it could be doing at some level.

Obviously, locally, there's a different story there having to do with the situation we're in.

And then on the downside, world events are such that they're It doesn't take long to spin up a scenario where things like higher energy prices and instability in commodity prices, some of the stuff that we saw in the pandemic and post-pandemic spin up again and drive you into, if you will, a darker place.

To my mind, that's where that asymmetry comes from.

We're actually doing quite well, but then there are obviously situations across the globe that could have significant negative impact on a national, never mind international scale.

SPEAKER_06

We're still on the way to a soft landing, but there's a little bit of turbulence before we're hitting the tarmac.

Is that what I'm hearing?

SPEAKER_12

It's been characterized as a bumpy ride, but hopefully soft landing inside.

SPEAKER_06

Okay, thank you.

I'm going to just check in again.

I see I've got Council Member Kettle with a question, but I want to check in with Council Member Nelson, Jeremy, Director Carnell.

SPEAKER_15

Yeah, I do have a question.

I don't know which slide or batch of slides it applies to, but it is something that I ask myself about.

When we talk about PET revenues, where or to what extent, how closely are you tracking...

a decline that is due to those workers no longer in Seattle?

SPEAKER_12

So the ESD data that we have available allows us to get some insight into the employment changes in city versus outside of a city.

It's a noisy sort of information because of the way how things are reported to the .

Quite technical, but the idea is that the data is coming from the unemployment insurance that's administered by the state, and so employers have to file Returns that specify how many employees they have how much they are compensated But they don't necessarily have to specify where exactly those employees are located It can be, depending on the company, it can be the company's headquarters.

If the company has several locations in the county, we are restricted in our ability to figure out how much of that employment is in city.

versus outside.

But for companies that have only one location and they open a new location elsewhere, that would be something that we could see.

So we are, again, looking at the data.

It's still in the early stages, but we will be able to get some insight into those changes for employment in the city versus somewhere else in the county.

SPEAKER_15

OK, so you've talked about the PET being somewhat, not necessarily volatile, but uncertain because of potential layoffs in this sector.

However, what I'm hearing you say right now is that you're not tracking volatility based on where the actual employee is performing their work, which does feed into how much that company pays.

SPEAKER_12

To the extent that's possible, we are trying to do that.

Again, it depends.

And for some companies, it's easier than for others, depending on how many locations they have, depending how they are filing, because of that, it's an effort that takes time.

But we are starting to incorporate those employment changes.

And when we are looking at employment changes, to the extent it's possible, we are using the distinction of cities of Seattle versus outside.

Other than that, it's...

about looking at correlations in, again, noisy data and trying to make the best of what we have.

SPEAKER_15

Got it.

So for a viewing public, if the company has a base in Seattle and some other, if they're headquartered in Seattle but have an office across the lake, that's what we're talking about is multiple locations.

SPEAKER_12

That would be a case, yeah.

So a company can have several locations and can have offices here in Seattle or somewhere in the east side and then where exactly those employees work and the to the extent that they are still working from home that's an additional layer of uncertainty because of how payroll expense taxes the tax base is calculated it's not just the employment itself that matters but in in terms of the work from home if somebody's living outside of seattle and Performs the work at home does not commute to the office.

That would not be a part of a tax base for payroll expense tax So that that's why we are also tracking the return to the office and using that as an additional input in the payroll expense tax forecasts Thank you Thank You council president director Cornell and Jeremy anything here Maybe I already asked you with that.

SPEAKER_06

I'm gonna I see.

Yep.

My assumption was correct.

I'm going to pass it over to Council Member Kettle.

Colleagues, I will ask us to, for this section, stay on payroll expense tax, real estate excise tax, admission tax, sweetened beverage tax, short-term rental, Seattle transportation benefit taxes, and commercial parking, because we will then be moving to the next slide where it gets more general again.

Over to you, Council Member Kettle.

SPEAKER_07

THANK YOU, CHAIR STRAUSS.

THANK YOU, DIRECTOR NOBLE, FOR YOUR NATIONAL OUTLOOK.

IT DOESN'T SEEM TO MATCH POLITICAL RHETORIC, WHICH HIGHLIGHTS DISINFORMATION AND MISINFORMATION THAT HAPPENS ACROSS THE COUNTRY, AND I WOULD ADD, IN OUR OWN CITY.

DIRECTOR DURAS, THANK YOU.

I SHOULD ALSO SAY THANK YOU TO MR. THOMPSON.

for being here, along with the CBO team of Mr. Hennis and Mr. Russell, plus Ms. Zhang, who's up on Zoom.

So thank you all for being here and for the presentations over this.

I really appreciate the points about trade.

It's a good reminder that we are a major port city, and the port has got to be central in our policy decisions and what we do moving forward.

But to the section here, I was really struck by your point that year-over-year sales tax downturn is unprecedented, given the fact that we've not had a recession.

A, I'd be somewhat interested in your thoughts why I would, you know, and it's really important because the sales tax and the B&O, that's 78.6, nearly 80% of the 48.6 million downturn is related in those two areas.

And as we know, downtown drives the city.

The city drives the region.

The region drives the state economically.

I would give you an answer.

It's because of the policies of city government, this council that created, in part, some of the situation that we saw on the ground regarding urban disorder and the like.

Yes, we had the pandemic, but we came down with policies that help create the challenges that we're dealing with today.

And the impact is huge.

When 80% of it, is related to sales and B&O.

I think that's something that we need to be mindful.

And by the way, even on the small end, Mr. Russell was talking about, we heard about this just recently, how we took parking enforcement operations out of SBD, went to SDOT, that was a disaster, and now it's back in SBD.

When we have the organizations that's part of the collection that is in disorder because of the policy decisions that this council and the city overall made, we shouldn't be surprised.

And so I was just, and by the way, looking forward and looking now, like what we just did with the design review holiday, the commercial to residential push that we're looking to do, but even the DAP, the Downside Activation Plan, was so important to the point that I'm making, along with the DAT and UCT that goes to the other point that I was making.

Part statement, so question, major comment, year-over-year sales tax downturn is unprecedented.

Your thoughts, would you agree with me, disagree?

You have something to add?

Is there additional pieces, or how would you play that out in terms of the unprecedented nature of the sales downturn?

SPEAKER_12

Yeah, so it's, again, something that hasn't been seen, and a lot of it is the construction sector weighing down at the same time as those spending patterns shifting from goods and people spending more on leisure and hospitality.

Now, if somebody travels out of Seattle, that's not going to increase the local sales tax.

So one important thing would be able to bring people into Seattle.

There are certainly policies that would increase the tax base by making the city more attractive to visitors, by making it more attractive to people to work here.

It's certainly things that will matter.

The fact that we are seeing this downward revision, that's just the impact of other things going on.

It's not necessarily an impact of some of the improvements that we have seen in terms of return to the office, in terms of the number of visitors that are coming into Seattle and things like that.

SPEAKER_06

Thank you, Council Member Kettle.

With that, if there are no other questions in this section of the forecast, we're going to move into the overview, and then we'll be taking a vote as the forecast council.

As we're moving into there, actually, I'll save my final comments for before the vote, if you want to take it from here, Director Duras.

SPEAKER_12

All right, thank you.

So this is a summary of what has been presented today.

and a little bit of additional thoughts on forecasts, risks, and finally, a recommendation which scenario should be adopted as the official forecast.

So first, to quickly summarize the outlook for national economy, based on the S&P Global's forecast, The baseline scenario has a 55% probability attached to it.

The pessimistic scenario in the recession, that's 25% chance to occur.

In the comparison of S&P Global to the other forecast, it does look like their S&P Global's forecast is slightly more conservative regarding the the outlook for economic growth in 25 and 26. In addition to the changes in the national forecast, The reason why we have seen a downward revision in the revenues is overall weaker outlook for regional employment due to the data revisions, due to layoffs at Boeing, which don't necessarily have a direct effect or a large direct effect.

revenues but the indirect effects are relevant here a couple of things that we do see as forecast risks first of all it's an election year and the baseline scenario does not incorporate some of those policies that might be implemented by by the candidates running for the president of the US.

Depending on how the elections go, whether it's divided government or whether it's Republicans or Democrats completely in control, things can...

can be worse depending on how things go, and the inflation can potentially come back up due to some of the policy proposals, which would then require FED to step in and balance the risk of higher inflation, which would require higher interest rates, which would then again, which would pose headwind to the economic growth.

So there is a lot of things which are uncertain and will get resolved in the next couple of months, but for now are not directly built into the forecast.

That forecast can change considerably depending on how things go in the next couple of weeks.

The second thing, something that has been around for a while, the outlook for commercial real estate is still uncertain.

There are a lot of debt has been issued and a lot of that could potentially lead to some failures in...

some failures in the banking sectors, not necessarily big banks failing, but some smaller banks can be failing, and depending on which part of the region we are looking at and which part of the U.S. we are looking at, that uncertainty is more or less relevant.

Not necessarily a big risk for a nation as a whole, but potentially a risk for regional economies.

Construction sector slowdown has been things that we have discussed here quite considerably, and again, depending on the paths of the interest rates, depending on whether they continue to go down or the Fed has to slow down because of other shocks to the economy, that construction sector outlook can worsen or can improve.

The third bullet point speaks to the employment data.

We have seen those downward revisions.

If the ESD revises employment data upward, that would be certainly an upside risk, which has not been directly incorporated into any of the forecast.

We acknowledge it, and it's just hard to quantify and hard to directly estimate and figure out how much of a risk that might be.

And then finally, we have talked last time in July regarding, we had some discussion regarding the rising office vacancy rates and the additional risks that the initiative 137 would post job growth and potentially revenue.

That's not new, it's just the same thing as before.

Acknowledging all these risks, we do consider baseline scenario to be the most likely outcome for 24, 26. The uncertainty is large, it has been elevated for a while.

Fed will hopefully be able to stick to the soft landing and if the elections don't end up in some policies that are going to be implemented that would result in interest rates which need that baseline scenario is again most likely or very likely to be what will take place or closest to what actually will take place over the next three years.

So that's the scenario we are recommending.

The baseline scenario is our recommendation for the October 2024 revenue forecast.

SPEAKER_06

Thank you, Director Duras.

I will make a few comments and I'll pass it over to my colleagues on the forecast council and then open it up to my council colleagues here.

The punchline here is that I will be, I think you're taking your recommendation for recommending the baseline scenario is the correct determination.

So that's where I will be today.

I just want to...

Respond to the presentation that we received here, which is that we are still suffering from the down downstream economic impacts of the pandemic I am glad to hear that we are still on track to meet the soft landing after the Fed cut interest rates last last month in This turbulence at the end of the soft landing is giving me some pause.

Again, looking back at your presentation, this was from some of the August, that mini recession that was occurring in August, as your PowerPoint described.

When we were speaking before...

the committee today, we talked about the last time this happened.

We discussed that the last time this type of news in a revenue forecast was in October 2020, colleagues, which was after the initial pandemic recession earlier that year, which forced us back to pass a, we did budget in 2020 during July, June, July, August as well.

Previous to 2020, it was 2008. And so I just want to center where we are in the economic cycles and where we are today in this budget.

Because the hardest part of this news is we now have about a $20 million gap within the proposed budget we received from the mayor.

And so colleagues, that's when we add and subtract all the payroll pluses, the REIT pluses and the general fund negatives.

We had a hard job before and now it's even harder.

This is hard because I heard many of us agree on the benefit of so many programs we as the city distribute to our residents from tenant assistance to tax assistance and legal aid.

We all want to be able to do these things and what we've just learned is that we had a hard job last week and this job is even harder today.

Usually during the forecast, we receive an upward revision.

That's typical.

And so even if it's a couple million dollars, right?

That couple million dollars really can buoy us in this moment and this is the first time in a long time since 2020 that we've had to take another big pause and look at our books.

Today we're faced with these even harder decisions.

Jumpstart is continuing to be the parachute it was intended to be while allowing us to fund the priorities identified at the outset plus mental health as added last year.

Every year we've had Jumpstart on the books.

We've used it for the general fund to fund those general fund programs.

We have just once met the original priority funding levels and have never met the funding levels plus inflation.

We were only able to meet that goal once, and that was due to the federal COVID relief funding, which is ending this year.

From this presentation, we are still experiencing these downstream economic impacts from the pandemic, and funding general fund programs to mitigate the economic downturn from the pandemic was a jumpstart, was one of Jumpstart's original goals.

We have two general decisions that we're going to have to make about Jump Start moving forward, which is how will we use Jump Start this year, and how should Jump Start be used in the out years moving forward?

These are the two questions we're asked every year.

This is not new.

And if we were to not use Jump Start funds to fill in the general fund decreases that we've just been presented.

That would be the departure from past practice.

And it would be the first time that we would not be using Jumpstart in the general fund.

And so colleagues, I just want to center us there as we're moving into this next week of harder decisions than I had.

When we were in council yesterday, I had hopes for a better presentation today.

This is not on Director Duras.

I will say Director Duras and Director Noble outperformed the state during the pandemic for their forecasts.

Your forecasts were more accurate than the state's forecast, and that was impressive.

And so that's why I'm going to be comfortable taking your recommendation to use the baseline scenario for this October 2024 revenue forecast.

I just wanted to share that broader context with you colleagues.

With that, I see Council President has her hand.

I'll check in with Vice Chair Rocca and Director Carnell as well.

SPEAKER_15

So what's striking?

SPEAKER_06

Actually, I'm going to go with vice chair first.

Oh, okay.

I'm sorry.

I didn't, I said it wrong.

Vice chair.

It's over to you.

SPEAKER_05

Yeah, no, thank you.

Chair Charles.

I just, uh, and thank you council president Nelson for being patient with me.

I just wanted to thank you for creating this space.

I think this is a, an excellent way to do this.

So the entire council can hear what we're hearing from the office of economic and revenue forecast.

And I just wanted to express the mayor's office intention and the mayor's intention to continue to be good partners with the city council as you guys now turn to your balancing package.

This is not good news, but I'm very confident in this council's ability to weather that storm.

So just wanted to say thank you.

And I too agree with the recommendation here to go with the baseline, but we can take a vote on that later.

SPEAKER_06

Thank you, Vice Chair.

Council President.

SPEAKER_15

What I was gonna say is that what's, if I recall correctly, the first year I was in office in 2022, there was a jolt with the October forecast, but it was because of sharply declined REIT revenues, I think, right?

That's correct.

And this time I'm really zeroed in, as Councilmember Kettle was, on the sales tax and also B&O tax, because those declines are on gross receipts, the B&O taxes, and I always look at B&O because that is an indicator of economic activity.

of our businesses across the city, large, small, et cetera.

But the good news is that we are, we're more in control of the forces that do impact B&O than we are REIT, one would say.

And so just, Piggybacking on what Councilmember Kettle said, we have an opportunity in this budget to continue to make decisions that will try to help increase those gross receipts going forward.

But I am always keenly interested, unless in the construction, I try to take out that sales tax and then look at all the other things that are impacting the job creators in our city.

Thanks.

SPEAKER_06

Well said, Council President.

Director Carnell.

SPEAKER_09

Yes.

And again, thank you for creating space here for us to have this conversation with all of the Council.

I appreciate the work that the Revenue Forecast Group has done.

I appreciate the volatility that they're working in around things that are constantly moving and changing.

That is the environment in which we live.

I, too, remain concerned about sales tax and B&O tax and the impact that we're seeing here.

But I also understand it from individual households having to make decisions on what they will and won't do.

I think we as a city have a great responsibility to lead the way for them, as Councilmember Kettle said, to come back downtown and enjoy the experiences that our city has to offer.

Again, I'm leaning towards the baseline scenario.

I think it is To be said, though, with the volatility that continues to come and with the election season upon us, I would encourage the Prevenue Forecast Council to, in the future with these, help us understand what pessimistic versus baseline really means.

Because I think, at some point, if things continue to be as volatile as they are, we should have a conversation about where do we go from here.

But at this point, with the data that we have.

And thank you again for the team who pulled this together.

I will be looking at the baseline scenario.

SPEAKER_06

Thank you, Director Carnell.

And I'll just rip off of some things that council president shared because i forgot to share the good news which is that real estate excise tax has traditionally been a telltale indicator of if we are going into a recession or not real estate excise tax will drop a year or so before we go into the recession so that was when council president was referencing that drop in october of 22, I believe, that was a really big jolt and a really big, a moment for those of us who are paying attention to these small indicators to say, what is coming next?

And so with real estate excise tax coming back, I think Director Durris, when we were talking before this meeting, I think got a little jolted by how excited I got because it was Because it's a telltale.

While the dollars aren't coming in the door like we want today, it's a good indicator of a brighter future.

And to the sales tax, the construction aspects of the sales tax, beyond just building buildings, for the last, weathering through the pandemic storm, we had civic projects.

We had the waterfront and the waterfront overlook pass built.

being built.

We had the Convention Center being built.

We had the Climate Pledge Arena being rebuilt.

And these were all construction sales tax.

We don't currently have a public project that is generating sales tax in the same way right now.

And that's something for us to identify.

Good news on the horizon is that Sound Transit will be voting on the West Seattle PREFERRED ALTERNATIVE THIS NEXT WEEK, IT IS THE NEXT TWO SOUND TRANSIT EXTENSIONS ARE ALL WHOLLY WITHIN THE CITY OF SEATTLE, WHICH IS AN IMMENSE AMOUNT OF SALES TAX REVENUE.

GRANTED, IT'S A DECADE OFF, AND COLLEAGUES, BEYOND JUST DOING THIS BUDGET PROCESS, I'VE BEEN DEEP IN THE WEEDS WITH SOUND TRANSIT AS THE COUNCIL'S REPRESENTATIVE ON THE SOUND TRANSIT BOARD.

If anyone wants any briefings on that, I am happy to share with you everything there is to know about 6th Avenue busways, sidewalks, and high-voltage power lines.

With that, I'm going to open it up to my colleagues on the City Council Select Budget Committee if there are questions about anything in this presentation.

Council Member Rivera.

Okay.

SPEAKER_17

Thank you, Chair, and thank you all for being here today and being so thorough in your presentation.

You know, I have more of a comment than a question, really, and that is just that I am, you know, it's disappointing to hear that our local economy is not doing as well as the national economy, but that is the reality, and I understand it's because of the industries that we rely upon in Seattle.

So I'll just say that I agree with Council President Nelson in that we need to, as we reflect and we work on this current budget, we need to keep that in mind.

How are we going to make decisions based on the reality that is at the local and regional level.

I think that's really important and it is a point I wanted to underscore because the public is looking at the national economy and how things are improving and we need to be really realistic about what we have on the ground.

And we need to be making budget decisions based on that.

So I just really, it was more to underscore that point.

And so, thank you.

SPEAKER_06

Thank you, Council Member Rivera.

Colleagues, any other questions at this time?

Council Member Saka.

Thank you, Mr. Chair.

SPEAKER_02

Also appreciate the thoroughness of this presentation, really complex stuff.

And we are all...

Most of us at least are digesting it in real time on the fly We got this via email probably when many of us were on the way to work to City Hall today.

So and we're Digesting understanding in real time with with members of alongside members of the public.

So Which you know typically we get these briefing materials in advance, but because the nature of this what's going on, you know We're doing it concurrently with everyone else.

So Difficult to hear, you know some of this news But, you know, we will emerge stronger from wherever we land with respect to any of these policy decisions that are teed up right now.

So, but also just would love to better understand what, so I understand that the conclusion or the forecast office's recommendation is to use the baseline scenario for the October 2024 revenue forecasts What happens if, assuming we do that and adopt that recommendation, what happens if future forecasts and actual revenues received turn out to be more rosier than this projection, more revenues in the coffers?

Who decides what to do with that extra funding that we're not planning for today?

SPEAKER_11

Director Noble, I'm going to pass this over to you.

Happy to go in.

As we enter the beginning of next year, the accounting on 2024 revenues and expenditures will be complete towards the end of February.

It takes that long to wrap up the year, and if you live in the accounting world, get through the 13th month and some other technicalities there.

So we'll know about the 24th situation, both in terms of expenditures and revenues late February.

There is then a new revenue forecast produced in April, usually first or second week of April.

So that's the first formal revenue forecast update.

And on the basis of that, those two pieces of information, we get a better sense of where we are for 24 and 25. And it'll be a forecast for 26 as well.

So then there is the opportunity for the council and the council and the mayor to work on supplemental ordinance.

So if there were additional resources, again, they would be well documented with that April forecast, and you could then be in a position to contemplate making amendments to the 2025 budget and potentially anticipate changes to the 2026 budget.

Legislation to appropriate any net new money, if you will, can be initiated by either the mayor or the council.

We have set up a calendar, if you will, of supplementals where we wouldn't expect a supplemental proposal.

So a mid-year supplemental would come from the mayor's office via CBO or maybe the other way around in June for potential council consideration.

But if there was a desire to move sooner, that could be possible.

SPEAKER_02

Thank you.

So my understanding is correct.

So if down the road we have any sort of net new money, as you coined it, I like that framing, the proposal for that money can be generated either by the executive or the council.

Because this is the first year in a while, it sounds like that we are in this situation.

Would it be...

be possible I'm sure it would to for the council to set direction and in terms of a resolution on what if that happens what we'd like to see that that kind of funding spent with the understanding it's no decisions are going to be made until any proposal is and then we have we finally vote on it councilmember soccer I'm gonna jump in and not recommend that option I'm happy to explain a little bit more

SPEAKER_06

where we're going.

It has been a function that has been working well.

I am absolutely here for budget reform processes.

You're living through one right this moment, but holding, I would recommend against that at this time.

I'm happy to discuss offline with you in greater depth.

Anything further?

Good to go.

Thank you.

Council Member Morales.

SPEAKER_00

Thank you for being here, everyone, and walking us through all of this.

I'm still trying to formulate my question.

To see that we are now forecast to have a 1% decline over 25, one and a half, potentially over 26, I guess my first question is, as the council preparing the budget for these years, Would it be best practice for us then to plan on a similar reduction in the budget of the city to compensate for that?

That's kind of first question.

I'm assuming the answer is yes.

If we use the payroll expense tax to backfill that 1% reduction, what does it mean?

Given the volatility of that revenue source, what does that mean for our ability to continue to provide services if there is some dramatic change in the revenue of that, in the income of that source.

So I'm just trying to understand, you know, if we start to rely on that source for general fund to fund basic services, what risk does that create for us?

SPEAKER_06

I'm not sure if this is a forecast office question or Director Noble, Director Eder question, but I'll let you all say it.

SPEAKER_11

I'm willing to take a shot in that context.

Two levels of that, at least.

One of which is in the immediate term, if we saw a decline in revenues relative to forecasts, and again, I think you have correctly identified among the key, among the largest revenue sources, the payroll expense tax would seemingly be the most likely source for that kind of uncertainty, that volatility.

The immediate term would be to fall on the revenue stabilization account, otherwise known as the rainy day fund.

Someone here is going to remind me the balance is in the neighborhood of $50 or $60 million at the moment, so that gives you a sense of what's there.

Depending on what had caused the downturn, you might not want to use that up all at once because you might anticipate that you'd want to spend on that reserve over multiple years.

But that would be your, if you will, first line of defense.

And it is built specifically for that.

And just to sort of square some circles perhaps, We had talked, when we gave the overview of the payroll expense tax last week, we mentioned the fact that the executive had built in a reserve, and we were suggesting that might be, you want them to develop policies around that, so to anticipate the exact scenario you're describing.

That could be, then, an additional amount of reserve in addition to what's in the general funds, rainy day funds, so making a number up.

If you added 30 million to that, then you'd be more like 90 million of total reserve between the two.

But then beyond that, you're gonna be left to reduce either to increase revenues in some other way or to reduce expenditures in the longer or in the medium to long run, if you will.

SPEAKER_00

Okay, thank you.

SPEAKER_06

Thank you, Council Member Morales.

Colleagues, other questions at this time?

If there are no further questions, I'm gonna lead us into the adoption of the October forecast.

I'm sorry, I just lost some of my slides.

And so at this time, per the ordinance that created the Office of Economic and Revenue Forecasts and this forecast council, it is the role of the Economic and Revenue Forecast Council to review and approve the forecast.

In terms of approving this forecast, It seems as if we concur with the recommendation of the forecast scenario, and if that is the case, there's no formal vote required.

The goal of the legislation was to remove any risk of political influence over the forecast and receiving recommendations from staff of independent experts in the best way to achieve this aim.

Council Member Saka said this very well.

We are all receiving this information at the exact same time.

The public, council members, members of the forecast council, members of the executive THE MAYOR'S OFFICE.

WE ARE ALL GETTING THIS AT THE SAME TIME.

THAT SAID, THE FORECAST COUNCIL REPRESENTS AN ELECTED LEADERSHIP OF LEGISLATIVE AND EXECUTIVE BRANCHES.

IT HAS ALSO BEEN APPROPRIATE THAT WE HAVE THE AUTHORITY TO OVERRIDE THE RECOMMENDATION OF THE FORECAST OFFICE SHOULD WE JUDGE THAT THIS MAKES SENSE.

PER ESTABLISHING ORDINANCE, SUCH A DECISION WOULD REQUIRE A THREE-MEMBER THREE MEMBERS OF THE ECONOMIC AND REVENUE FORECAST TO VOTE APPROVING THAT ALTERNATIVE SCENARIO.

AS YOU'VE HEARD, INTERIM DIRECTOR DURAS RECOMMENDS THAT THE BASELINE SCENARIO OF THE OCTOBER 2024 FORECAST IS USED AS THE BASIS FOR THE 25-26 ADOPTED BUDGET.

I WILL ASK FORMALLY IF THERE ARE ANY OBJECTIONS TO USING THIS.

FROM COUNCIL PRESIDENT, DIRECTOR CARNELL, JEREMY ROCHA, I'M SEEING EVERYONE SHAKING THEIR HEAD NO. indicating a negative response.

So I will request that the meeting minutes reflect our concurrence regarding that we are using the recommended forecast.

This is the formal step called for under the bylaws as the way we report our approval of the forecast recommendations.

Just ensuring are there any objections from the Economic and Revenue Forecast Council members?

Hearing no objection, I am directing the Forecast Office to record in the meeting minutes the Economic and Revenue Forecast Council's concurrence with the recommendation to use the baseline scenario for the October forecast.

With that, we have reached the formal agenda for the forecast council meeting.

If there are no further questions, the economic and revenue forecast council will be adjourned, but don't go anywhere because we've still got the rest of this select budget committee meeting.

Hearing no objections, the economic and revenue forecast council is adjourned.

colleagues we have been here for quite some time it is 1149 a.m.

as we have a lot of presenters that are going to be room moving off of the dais and moving back on to her into the committee table I am gonna ask for us to be in an 11-minute recess I was gonna start with five but let's just start at noon we will go from noon onward so I'm hoping it's not gonna take till 4 or But we do have two sets of presentations.

We have the department presentation and then central staff analysis.

So with that, if there's no objection, the select budget committee meeting will be in recess until noon.

Thank you.

SPEAKER_99

Oh, oh, oh.

Thank you.

Thank you.

SPEAKER_06

Thank you.

Welcome.

The October 22nd Select Budget Committee will come back to order.

It is 12.01 p.m.

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

Will the clerk please call the roll?

SPEAKER_08

Council Member Kettle.

SPEAKER_07

Here.

SPEAKER_08

Council Member Morales.

Oh, excuse me.

Council Member Saca.

SPEAKER_06

Here.

SPEAKER_08

Council Member Wu.

Present.

Council Member Hollingsworth.

SPEAKER_06

Here.

SPEAKER_08

And Chair Strauss.

SPEAKER_06

Present.

SPEAKER_08

By present.

SPEAKER_06

I'll let everyone know when anyone else joins.

I know that we were just taking a quick recess in between presentations.

We have Vice Chair Rivera with us now.

Colleagues, This is another abnormal presentation.

This is abnormal Tuesday the 22nd where we are now gonna have SDOT come back and present to us a presentation of what would your budget look like should the levy pass.

Colleagues, I need us to stay completely focused on the budget before us and not speak about the levy in broader terms because it is before the voters at the moment.

After SDOT's presentation, we have Director Eder at the table, but like all other departments, he was just here to help facilitate.

So this is going back to week one of budget with SDOT.

They'll have their presentation And we will transition to Calvin Chow who is here from central staff to bring us back to this week in budget where central staff analysis of our policy considerations that are on the table.

So with that, no further ado, I'm gonna turn it over to Director Gregg Spatz.

And Director Spatz, if you could pass it down the table so everyone gets introduced, thank you.

SPEAKER_16

Thank you, Chair Strauss.

I'm Greg Spotts, director of the Seattle Department of Transportation, and I'm joined by our finance manager, Chris Godwin, and senior deputy director, Francisca Steffen.

I must say, I was hoping for a little more upbeat warm-up act, but here we are.

We do have some upbeat material to present.

We're presenting...

what sort of spending authority and positions we would need in the event that the voters pass the transportation levy in two weeks.

And today we're just going to provide a high-level summary.

There's a lot of detail on our slides, so we're going to move relatively quickly through this material.

Next slide, please.

Just to orient everyone, Okay, I thought we were going to go to the one after that.

So anyway, today we're going to present a high level summary of what budget amendment is proposed to resource SDOT properly in the event that the levy passes.

And then we're going to provide a brief update on our levy readiness, preparing for implementation in January.

So where we are along our journey, the next slide is a chronology.

In July, the council approved an ordinance to put the transportation levy on the ballot and passed an accompanying resolution.

And right after that, we stood up a levy readiness team in SDOT.

to be preparing so that we could hit the ground running in January should the voters pass the levy.

One of the findings of the Levy Oversight Committee for the current levy, the levy to move Seattle, was that SDOT got off to a bit of a slow start in 2016 when that levy passed.

And we've been working very hard to make sure we get off to a better start, should we be lucky enough for the voters to pass the levy.

In September, we provided the requested levy readiness document.

Today, we have a package of amendments and a capital program spend plan.

FOR YOUR CONSIDERATION, AND WE'RE ALSO PROVIDING TODAY ANOTHER INFORMATION PACKAGE THAT WAS REQUESTED IN THE RESOLUTION PERTAINING TO HOW WE'RE GEARING UP TO BEGIN ON THREE PROGRAMS THAT WERE OF PARTICULAR INTEREST TO THE COUNCIL.

AND WITH THAT, I'M GOING TO PASS IT TO CHRIS GODWIN.

SPEAKER_18

THANK YOU.

GOOD AFTERNOON, COUNCIL MEMBERS.

AGAIN, FOR THE RECORD, I'M CHRIS GODWIN.

I'M THE FINANCE MANAGER FOR THE SEAL DEPARTMENT OF TRANSPORTATION.

We're now going to discuss the financial planning and budgeting component of our proposal and specifically showing how our proposed budget amendment aligns with attachment A that was part of the levy ordinance that council approved in July.

The proposed budget amendment will add to the current law budget and reflect passage of the levy.

It will add $178 million in budget in 2025 and $193 million in 2026, specifically for the transportation levy.

So all the numbers we're going to be discussing today would be in addition to what the council was provided a couple of weeks ago as part of the department's current law budget submittal.

Okay.

We start with a six-year projection of revenues and expenditures.

This is to show, more than anything, that our proposed budget will be sufficiently tailored to our revenue.

As you may recall from approval of the ordinance, our levy package comprises sort of large specific projects, like structural improvements to specific bridges, and also programmatic budgets like Vision Zero.

This financial sort of projection shows how, if you look at the bottom line, the total projections by year sort of jump up and down, but it is all intended to make sure that we stay within the revenues that are collected.

And you can see that by that ending fund balance line at the top of this.

A couple of other Just items to point out on this, but we'll also see them in just a moment.

The good governance line item on here is front-loaded with some additional revenues in 25 and 26. That represents significantly the Transportation Funding Task Force.

And then the pedestrian safety portion for the first four years is also front-loaded, reflecting our significant commitment to new sidewalks.

Okay, so we're going to go through each of the program areas from Attachment A to discuss the proposed increase in budget as well as the proposed increase in positions, which is also going to be approved by this council.

SDOT is taking a three-pronged approach to resourcing the levy from a position standpoint, including resourcing currently filled positions that will transition to the new levy as we complete work on the existing levy.

filling current vacancies to staff up to ensure that we can hit the ground running and then also requesting additional positions in 25 and we are also signaling or messaging our intent to ask for positions in 26. this is all um taking some lessons learned from the current levy and ensuring that we have adequate staffing chris if you're gonna you're speaking very fast so i'm gonna say okay slow down a little bit i'll take it down and then if you can bring the microphone closer to your mouth yeah absolutely

SPEAKER_06

It's our council welcome where I remind everyone to bring the microphone.

Thank you.

SPEAKER_18

Again, and the last note on that is that these positions are essential to support the planning, development, and delivery of the transportation levy.

As far as the deliverables or the projected impacts, there should be nothing in that second column on this table that is surprising.

This aligns directly verbatim with what we have in attachment A.

So for Vision Zero, we are proposing to add $113 million in the six-year CIP and including $16 million in 2025 and $16.5 million in 2026. This program area includes new programs for neighborhood-initiated safety partnership program and for the neighborhood traffic safety improvements.

The $16 million increase represents 105% growth over the current law budget.

And in addition, we anticipate needing 17.6 positions over the biennium, 13.7 of those positions would be in 2025.

SPEAKER_06

And Chris, just to clarify, you referenced Attachment A just a moment ago.

And can you clarify, is that Attachment A to...

The ordinance that was approved in July.

For the levy.

For the levy, yes.

So not Attachment A to any of these things.

Attachment A, again, and this is me just saying what I already know, but saying it out loud is, this was the document that we all went over and over and over and over and over and over and over again.

So what we're seeing is a summary of things contained within there.

SPEAKER_18

Yeah, and not to be confused with Attachment A to the budget, which will actually show the appropriations.

SPEAKER_06

That's why I asked.

Thanks.

SPEAKER_18

For street maintenance and modernization, we are proposing to add $246 million in the O&M budget and the six-year CIP.

This includes $43 million in 2025 and $37 million in 2026. This program area is where we budget for much of our large paving projects, but also includes our crew work on street surfaces and includes our pothole work.

The $43 million increase represents a 245% increase over our current law budget, and we anticipate needing 9.6 new positions over the biennium with 5.8 new positions in 2025.

SPEAKER_06

Thank you.

Colleagues, any questions on this slide?

Please, Vice Chair Rivera.

Thank you.

Actually.

Sorry, I should offer Councilmember Saka as chair of the committee overseeing this department.

Sorry, I got a little off my normal cue from this morning's forecast council, and then Councilmember Rivera, I'll call on you.

SPEAKER_02

Thank you, Mr. Chair.

No questions or comments from my perspective at this time.

I'll reserve that until the very end, but, you know, yeah.

Thank you, Councilmember Rivera.

SPEAKER_17

Thank you, Chair.

Just a point of clarification because you're talking about $43 million, but I don't see it delineated here.

Is that of the $112.8 million that you're talking about here?

And is there a chart that delineates these pieces?

Because it's hard to track how much if now you're throwing figures out that I'm not seeing on this chart.

SPEAKER_18

43 million is a is the first year of that hundred and twelve The 246 that's for street maintenance There is an attachment it is not in our presentation But it was sent to your sent council central staff and and they can give it to you that has attachment a and includes the FTE requests and the budget requests by year so you can see it broken out and The document before us is a high-level summary that really shows what's actually in the budget amendment itself.

SPEAKER_03

If I may, the central staff memo that's on the agenda, if you look at attachment one, has that broken out by year, and attachment two is the full list of the FTE requests.

SPEAKER_17

Thank you.

SPEAKER_06

This is why we typically split the presentations, but here we are.

Back to you, Chris.

Okay.

SPEAKER_18

Moving on to bridges and structures, we are proposing to add $161 million in the O&M budget and the six-year CIP.

This includes $19 million in 2025 and $28 million in 2026. This program area includes a combination of specific projects called out in attachment A, like our mechanical engineering work on the Ballard-Fremont University bridges, as well as our bridge planning work and our ongoing work on structural preservation.

The $19 million increase in 2025 represents 180% increase over the current law budget, and we anticipate needing 8.7 new positions over the biennium with 7.1 new positions coming in 2025. For transit corridors and connections, we're proposing to add 126 million in the six-year CIP.

This includes 13 million in 2025 and 14 million in 2026. This program area includes our work on transit lines like RapidRideR, transit improvements and access to light rail, and transit passenger safety.

The 13 million increase in 2025 represents a 20% increase over the current law budget, and we anticipate needing 3.5 positions over the next biennium, with 3.1 of those in 2025.

SPEAKER_06

I'm sorry, Chris, one more time.

Can you pull the microphone down towards you?

Because you look down at your paper and then we lose you.

I'm a bit hard of hearing, so I've been looking at you because I've been reading your lips.

SPEAKER_18

Okay, thank you.

SPEAKER_06

Colleagues, any questions here?

We're going to keep ticking on.

SPEAKER_18

All right then, moving on to pedestrian safety.

We propose to add $165 million in the six-year CIP, including $31 million in 2025 and in 2026. This program area includes our work on new sidewalks, and the budget reflects the front-loading of the sidewalks in the first four years, with tapering starting in 2031. The $31 million increase in 2025 represents a 166% increase over the current law budget.

We anticipate needing 37 new positions over the biennium, with 17.6 new positions in 2025. This is part of the budget where there are higher ads for crews to help build and maintain sidewalks.

Signals and operations, we propose to add 49 million to the O&M budget and the six-year CIP with 12 million in 2025 and in 2026. This program area includes maintenance and improvements for signs and signals and adds funding to the transportation operations center that will keep the center operational 24 hours per day.

The $12 million increase represents a 65% growth over the current law budget, and we anticipate needing 7.2 new positions over the biennium with 3.4 new positions in 2025. Okay, I'm just going to keep on going then.

Please do.

Bicycle safety.

We propose to add $110 million in the O&M budget and the six-year CIP, with $17 million in 2025 and $33 million in 2026. This program area includes ongoing maintenance, investments in better bike barriers, and the budget jumps from 2025 to 2026 because of the inclusion of the Lee realignment of the Burke-Gilman Trail.

The $17 million increase represents a 308% growth over the current law budget, This may seem like a significant increase in budget, however, this program area in our base budget was heavily impacted by the loss of the current levy and is starting from a lower base than usual.

We anticipate needing 9.1 new positions over the biennium with 6.6 new positions coming in 2025. Climate resiliency.

No.

People Streets.

Did I skip one again?

Yep.

Sorry, People Streets and Public Spaces.

We propose to add $47 million in the O&M budget and CIP with $10 million in 2025 and $7 million in 2026. It's work that might otherwise occur through different projects and programs.

There's not really a comparable base for me to give you the percentage growth over.

This is a somewhat uncharted territory for us, or it pulls together small pieces from other projects.

This program area includes our work on downtown activation, investments on Third Ave, Fortson Square, the Occidental Promenade, and other key locations in advance of FIFA and other major events, as well as our work on pedestrian lighting.

We anticipate needing 7.2 new positions over the biennium, with 5.1 new positions coming in 2025.

SPEAKER_06

I'm not seeing any questions, so just keep on going.

SPEAKER_18

For climate and resiliency, we propose to add $52 million in the O&M budget and the six-year CIP with $11 million in 2025 and $8 million in 2026. This program area includes our work on urban forestry, low-pollution neighborhoods, and climate and electrification work.

The $11 million increase represents a 213% growth over the current law budget, and we anticipate needing 5.2 new positions over the biennium to support the work, with 4.3 new positions coming in 2025. For freights and good movement, we propose to add $35 million in the six-year CIP with $4 million in 2025 and 2026. This program area includes our freight work investments in the heavy haul network, leave-away industrial zone safety improvements, port connections to I-90, I-5, and freight spot improvements.

The $4 million increase represents a 234% growth over the current law budget, and we anticipate needing 4.8 new positions over the biennium, including 3.1 new positions in 2025. For good government and equitable implementation, we propose to add $5.1 million in the O&M budget with $2 million in 2025 and $3 million in 2026. This is another example when I cannot provide a reasonable comparison in the base budget because the majority of the funding here is for the Transportation Funding Task Force and some of our other investments.

And there isn't a comparable base.

We do anticipate needing 0.2 FTE staff time to support this work starting in 2025. So that's the extent of the summary on the actual investments that are in the package before you.

And I am now going to, barring any questions, pass it to Francisca Stephan to talk about our levy readiness approach.

SPEAKER_06

Actually, I'm just going to tee that up.

SPEAKER_18

Oh, sorry, Greg first.

SPEAKER_06

Thank you, Chris.

Director Spatz, just before we get in, I'm going to double check with my colleagues.

We are currently on slide 12 of 24, so we're halfway through the presentation.

We're going to switch subject areas now.

Chair of the committee overseeing this department, Council Member Saka, do you want to make comments now or just at the very, very end?

SPEAKER_02

Thank you, Mr. Chair.

I'll just wait to the end.

SPEAKER_06

Fantastic.

Any questions, colleagues, from what we've already seen because we're switching gears?

Take it away, Director Spatz.

SPEAKER_16

Thank you, and thank you, Chris.

I also wanted to thank the mayor's office, CBO, and central staff.

We've all been working very closely together to pull all this detail together.

It's actually quite a lot of work to contemplate a whole bunch of new programs and how you do the spending over six years, and it's been a great team effort.

So now we're pivoting to provide a little bit of an update on our levy readiness.

And as I prepare to hand it over to my senior deputy, Francisca Steffen, I just want to note that there's a difference between getting ready and actually starting and lifting up programs.

We won't be actually like hiring project managers and starting the formal work on these programs if the levy passes till January when we were able, when we actually have the resources to charge staff time too.

So we're doing the maximum that's possible in the preparatory phase and a lot more detail will come together when we actually launch.

So with that, I'll pass it over to Francisca.

SPEAKER_14

Great.

Thank you, Greg.

And thank you, Chris, for a really detailed presentation on the numbers.

And, you know, what this section talks about is a little bit more of what's behind it.

How did we get to those numbers?

And you did receive from us a document that was requested through the resolution that adopted the levy, that you adopted in...

in parallel with the ordinance that adopted the levy.

And it is the readiness and high level approach.

And it's got lots of detail in it.

When you have additional questions and things, I highly recommend taking a look at it.

What we wanted to talk about today is our readiness approach and how it's been guided by priorities we've heard from you and the community to date.

And we've done early scoping and resourcing.

We've tapped into knowledge throughout dozens of program owners, project managers, and resource managers throughout SDOT to source what we've gotten so far, with lots more to go, and we're excited to explore those.

But it's been able to help us inform an initial set of deliverables, many of which Chris has talked about, including crew-delivered work that we know is really important to bring to life early in the levy.

As we move forward, we'll be working with you and community and aligning with current challenges and opportunities.

This work falls, you know, it's 30% of SDOT's budget.

This work falls within broader priorities and opportunities that we're all embracing including the FIFA Men's World Cup and the significant work that's coming ahead of us for sound transit construction.

So how do these things fit together as part of what we'll be doing as we move forward?

And importantly, we have an eye towards standing up the key accountability measures that you all defined with the Levy Oversight Committee as well as the Transportation Funding Task Force.

So these are all parts of this overall approach.

One of the things that we have been doing as part of this preparation work is being guided by a lot of data and good valuable information that we have at hand today.

And we've talked about attachment A to the levy ordinance.

We haven't talked a whole lot about the fact that we also have the Seattle transportation plan and continual stream of community input and community requests that we get from the public.

So one of the things that we've been looking at over the last few months is how can we take advantage of the tens of thousands of people who participated in the Seattle Transportation Plan and all of the things that we have learned through that process.

We've also been looking at how the work ahead can be informed by our maintenance strategy, how we can be making the right investment at the right time to support keeping our assets alive as long as possible.

And one of the things that really drives SDOT's work continually is looking at where there are gaps in the network.

What are the things that are keeping people from being able to move from point A to point B?

And how do we move those people through multiple modes and as efficiently as possible through the network?

with an eye towards our commitment to equitable investment.

Where are the parts of town where we can be making investments in our historically under-invested communities?

And last but not least, we really need to be talking about leveraging these funds.

It's important.

Many of these large projects are good contenders for state and federal funding.

And how can we consider the timing of these projects relative to where they could be bringing in additional funds to help leverage the dollars?

So in terms of highlights, one of the things Chris mentioned that I want to underscore is there are many very specific projects that were called out in the Attachment A. As you can tell, Attachment A already has a sort of capital A.

you know, attachment status.

So we go back to it a lot.

But that had a ton of detail in it, right?

As it relates to major maintenance and modernization planning, there are multiple corridors called out specifically there that we were prioritizing as we did this resourcing work to figure out where they fall within the eight-year spending plan.

They are helping to shape the major contours of how our work ahead looks.

And bridges are similar.

These are our large capital projects that take time to design, to scope, to try and leverage for outside funds.

And so one of the things we looked really carefully at, and Chris has been folded into what Chris presented, is how are we going to sequence those projects?

Where are we going to get going quickly?

And what you have on the left side of the slide is our assessment that really in 2025, we need to start getting going on Roosevelt and Pinehurst, Elliott and Western paving projects.

Some work on Rainier and beacon as well as these marginal way.

So we know that should the levy pass These are things we would start working on immediately when we have the resources Bridges similarly we've got an additional factor there, which is we want to have the Assessments done ready for the transportation funding task force as well So while we want to we want to launch the new preventive bridge maintenance program we also want a front load design on the structural repairs to the ship canal bridges and And we want to issue the RFPs and get going on the engineering and alternatives analyses for the replacement candidates so that we can have all of this work as part of the Transportation Funding Task Force conversation.

And not to eclipse, not to have these large projects eclipse many of the really valuable smaller projects that we do, you know, just want to acknowledge that we also have been looking at ways in which we're advancing the safety, significant programmatic work related to safety, maintenance, and operations.

Safe Routes to School and Vision Zero, for example, throughout the city are being scoped with many, many locations and details to be developed with further design, data analysis, and community input.

Our paving sidewalk and landscape maintenance work is also a significant portion of this, as well as our operations and freight investments.

I'll just pause for a second and highlight our work on accelerated sidewalks, because I think it illuminates really the core factors and dynamics that are at play in this readiness work we've been doing.

This is a commitment to accelerate, to build generational investment in sidewalks.

And so we've taken really seriously, how are we going to do that?

And what you see in what Chris presented is some staffing up and some resourcing, both in staff and consultant work.

But what we've also been defining is, how are we going to approach it?

We need to do neighborhood walks with community.

to look at connectivity, to look at site conditions, to look at construction feasibility.

We need to do this deep work right away.

So one of the things that we've been doing is defining when could we get out in community, how would we get out in community, and where would we focus first?

And so that has been a key part of it.

And I think it helps.

It's a good example of how we have been trying to both prepare but not get over our skis as it relates to the funding available and the resourcing available.

So doing that preparatory work.

SPEAKER_06

And Francisca, just as you're moving into these next two slides, there's a slide for North Seattle and a slide for South Seattle.

This is not just for the viewing public's context.

Here we go with the entire city starting in North Seattle.

SPEAKER_14

Yes, and we really couldn't resist just showing you some of these highlights for 2025. These are 2025 highlights, and like we've said, this is not the full list.

This is not fully defined.

We look forward to coming back to you in January to talk with you more about the implementation plan.

But we also know that people want to have a sense of what's coming soon.

So as I've talked about, we know we have the highlights around the new sidewalk walks.

We've identified areas of Bitter Lake, North Gate, North 130th Street, Link Station, as well as the Little Brook area as key parts in North Seattle where we want to start those walks right away.

We'll be continuing and people will be engaging with us on the Aurora Avenue Safety Project's continued planning with a goal towards starting to define a preferred alternative in partnership with WSDOT.

And we know that there will be Safe Routes to School projects all over.

We are really excited about continuing to work in partnership with our schools and to make improvements that are meaningful for the students coming and going.

For bridges, in addition to some of the work we've already talked about for the electrical mechanical and ship canal bridges, there is very specific work in North Seattle with regard to the Roosevelt and Campus Parkway Bridge, as well as Finney and 57th.

So we have already been able to sort of identify with prior work that had been done on bridge asset management that these would be areas of investment for 2025. And again, this is not meant to be comprehensive or exhaustive in any way, but it more highlights so that people and you can get a sense of some of the contours of what you could expect to see in 25. In downtown, a key piece of what we've been front-loading is being ready for the FIFA Men's World Cup.

What does that mean for 3rd Avenue revitalization in downtown?

what does it mean to be doing some investment with tactical improvements around Occidental Promenade and Fortson Square, and what are our South Seattle sidewalk walks.

We've identified areas in the Central District near the Mount Baker Station, the future Graham Street Station, Rainier Beach, different parts of Delridge, as well as Highland Park.

These are areas that we are already starting to try and do a rough calendar of when we would start doing those walks.

Again, with Safe Routes to School, these are gonna be ones that are peppered throughout the area and working with neighborhoods and communities.

With bridges, we have an interesting project that would be carrying forward from the Move Seattle Levee.

The Martin Luther King Junior Pedestrian Bridge over Rainier is one that we had identified through the Move Seattle Levee as needing structural upgrades.

And this one where we were able to afford the design of it in the current levy, but not the construction of it.

So if the levy does pass, we're looking forward to actually being able to start right away to go out to add and do construction on that bridge to get it strengthened.

So again, there is a lot of work ahead of us.

We look forward to working with community.

For example, we have not cost estimated any of these at this point.

The work ahead of us involves more detailed design, more detailed construction feasibility, more detailed cost estimating, as well as continuing to work with community.

But there are some pieces that are starting to take shape that we want to share with you today.

I'll pass it back to Greg.

SPEAKER_06

Thank you.

And Greg, as you're introducing the next slide, if you can give me the music trivia about the intersection as shown in the photo, that'll be helpful.

SPEAKER_16

I'm not sure what the music trivia is.

What is it?

SPEAKER_06

I was also just scolded for not speaking directly into the microphone.

Thank you.

That is the intersection.

The gray building in the background is directly next to the...

Former Reciprocal Records, which is still a recording studio, but the recording company that Sub Pop Records used to record all of Sub Pop's music.

There you go.

SPEAKER_16

That is so awesome.

Thank you so much for sharing that.

So just quickly, I want to mention that...

Part of why we do need to add new positions is the annual revenue of the proposed new levy is quite a bit larger than the existing levy.

The existing levy brings in about $100 million a year.

The new one would bring in $170 in the beginning and growing in out years.

And we do need additional people to move that much money into projects and programs.

So we have...

gone through in great detail what staff we feel we would need to augment our existing staff.

You know, we have 1100 staff positions currently, and we're proposing to add another 72 in 2025 and 44 in 2026. Next slide, please.

And we broke that out for you in terms of where that staff sits in the project delivery sequence.

So along the bottom, you'll see 19 of those staff are oriented towards being program owners, developing the project locations.

About 23 people are designers, engineers, and reviewers.

And one thing we're doing as a lesson learned from the current levy is we need to have enough reviewers so that we don't create like a bottleneck as all these designs mature.

And then 30 folks to actually go out there and build and maintain the infrastructure, augmenting the field crews that we already have.

Next slide.

This is our last slide, actually.

And so this just gives you a preview of the next steps.

We're really looking forward to submitting in writing in late January a 2025 levy work plan and standing up the Levy Oversight Committee and other functions, including the Transportation Funding Task Force.

And we're looking forward to working collaboratively with all of you on all the ramp up in the event the voters pass the levy.

And that concludes our presentation.

SPEAKER_06

Thank you, Director Spatz.

Calvin, Director Eder, Director Noble, anything to share here?

I'll pass it over to Council Member Saka as chair of the committee overseeing this department.

You're recognized.

SPEAKER_02

Thank you, Mr. Chair, and thank you, Director Spatz and SDOT for this work and all your hard work to get us to this point.

You know, I, colleagues, was a little like I think everyone, a little disappointed that we didn't see the first proposed budget we saw was a current law budget that assumes the expiring levy.

But I'm glad we're at this point today where we have a proposal, a set of proposed amendments should the voters approve the levy, that we could consider and potentially adopt, which would serve as the basis to allow us to bring the levy to life.

And so I want to acknowledge the hard work that's been performed by SDOT, up to and including the readiness and assessment report that we mandated as part of an accountability mechanism, as part of the companion was a brainchild of mine.

Really, it's a brainchild of a bunch of you who were telling me, good governance, better accountability, you know, and et cetera, et cetera.

And so, you know, this report that s dot produced and shared with us about a month ago and is included as an attachment in a few of their materials and our own central staff's materials that is a direct result of that.

I recognize the hard work that has been done by s dot and the thought that has been put into that document.

And, you know, there's a lot of funds at stake here should the voter—like, revenue at stake here should the voters approve this.

And it is restricted insofar as, like, we need to be able to show our readiness and ability to implement.

And I'll say, based off of where— What I've heard so far, and thank you for answering my many questions offline and collaborating with me in my office and central staff on any number of things pertaining to the current law proposed budget or the budget that we're talking about now, the levy budget.

Based off of everything that I'm seeing, I feel confident that should the voters pass this levy that SDOT is prepared to execute on day one.

We're doing all the things that we can at this point in the absence of a check.

So we can't hire anyone.

We can't hire even contractors.

We can't start the planning, as Francesca noted a moment ago.

But based off where we're at today, I feel good about our ability, our city's ability to execute should the voters approve this.

But at the end of the day, it's up to the voters, and we'll learn more.

But I just want to, again, recognize the hard work that's been done and the stretch and the extra effort that's been done on members of the SDOT team to get us to this point, to help facilitate and drive transparency and accountability for you know this this huge important amounts of spending and investments in our city and look forward to continue to partner together on regardless of any scenario you know, on a going forward basis.

So thank you.

No further comments.

SPEAKER_06

Thank you, Council Member Stocker.

We'll call on you at the end as well to close us out with the department presentation.

I see Council Member Kettle.

Council Member Kettle, you're recognized.

SPEAKER_07

Thank you, Chair Strauss.

I just wanted to welcome Director Spatz again.

Also, Mr. Goodwin, Ms. Stefan.

Of course, Director Eder.

I can't forget him, along with Director Noble and Mr. Chow.

Really appreciate coming.

TODAY TO TALK ABOUT TRANSPORTATION.

LOTS GOING ON, LOTS OF FACTORS OUT THERE, BUT, YOU KNOW, THIS IS MORE OF A STATEMENT, BUT MAYBE I'LL ASK A QUESTION AT THE END.

BUT ONE OF THE THINGS IN LOOKING AT THIS, REVIEWING THIS BRIEFING, REVIEWING THE EFFORTS THAT YOU'RE TAKING, I'M REMINDED THAT, YOU KNOW, WE'RE A VERY DIVERSE CITY.

BUT WE'RE ALSO A VERY DIVERSE, WE HAVE VERY DIVERSE ASPECTS TRANSPORTATION-WISE.

And it's not simple.

I'm often talking about the port.

I say we can't escape our geography and our topography.

I'm usually talking port.

But that is also regarding our transportation needs.

Think about it.

You know, the hills.

You know, I was at the fire garage, you know, talking to the team that was doing great work in terms of keeping our fire engines and our ladder trucks up and running.

But we're talking about they're talking about the challenges and their pieces were kept failing.

And they go back to the, you know, the the producer in Florida and and they're like, well, why is this happening?

And then they're like, well.

We have grades like this, like James right here.

And actually, you know, 17%.

And this company in Florida was like shocked, absolutely shocked.

They could not believe it.

And then like the engineering and everything that has to go into that, they're like, oh my God.

It's the little things like that that our geography and our topography impacts our transportation, which then impacts things like the fire garage in terms of keeping the fire department up and running, literally.

But then there's also the water spaces.

I talk about the deep port that we have, which is a major and a national treasure and that other American cities don't have.

You know, they don't have those challenges.

But add on to the deep water port, we also have our lakes, our bays, you know, the Duwamish River.

We have the cut, the canals that just add to the difficulty and the diverse, again, nature of our transportation needs.

And then I think about our city of neighborhoods, which is driven somewhat by this.

Each has its unique aspects to it, which reflect, again, the geography, topography, the water spaces, and all this.

And I see this in District 7. Magnolia and Queen Anne, very different.

The hills, the slopes, the steps.

up and down sidewalks, by the way, steps, just to go back to that topic.

It's so unique.

And again, other cities don't have this across America.

And just within District 7, you go from that to, you know, downtown and, you know, Belltown, Uptown, and these different areas, very different.

East, South, and Westlake, very different from the Bayside.

And these are the things that play out.

And then Underlining this, as well as our Seattle values, you know, the focus on safety, whether it's traffic, pedestrian, and bike safety, and bike meaning all types of e-mobility.

The equity pieces.

We saw this in our discussions.

I recognize this as D7 representatives that, you know, D1 and 2 and 5 have very different needs, particularly in areas like sidewalks.

Good governance.

Thank you.

transportation chair Saka for that little highlight, but that plays out in so many ways.

There's obviously the oversight pieces, which are so important.

I imagine the executive wasn't particularly happy about all that, but I think it's important and I think it's important to highlight because that goes to our values and good governance also in my mind, my Navy mind, the maintenance piece, the focus on maintenance and maintaining.

When I look at your briefing and I see this diversity of transportation needs, whether it's the Vision Zero school, neighborhood safety, throw in that, pedestrian safety, bike safety.

And then the governance piece, the street maintenance, modernization, the signals and ops.

And people may focus on bikes and all that, but not enough on roads.

But you look at what's going on with street maintenance, then you add bridges.

Because of the complete approach, the road approach, bridges are roads too.

I see this at Ballard Bridge, you know, now and then that lead up 4 and F.

That is a major road section that's being upgraded, but it doesn't fall under street maintenance.

It falls under bridges.

And, you know, transit corridors, freight.

You know, freight is big, and it plays into it, but it's not really realized that this is street maintenance.

This is street work.

I mean, it's the heavy load network, you know, but it enables...

back to the earlier point, our deep water port.

And it's so massive and so important and so, that we protect in multiple ways, by the way, but in terms of transportation, by having that heavy haul network kind of roads.

And so that really goes, and those roads are not just used by the heavy trucks, they're also used by the vehicles that we use.

So this is kind of like the framing that I look at this in terms of some of these pieces.

But then, you know, on the governance piece, the values piece, you know, the people streets, the public spaces, the climate resiliency.

And again, the last one, the good governance and the equitable implementation piece.

I think this reflects all these different pieces.

And I just say this out loud in terms of how I look at how I frame it, because I hear different opinions.

discussions in different ways and they're talking about different aspects but this is how i digest it and for those that you know that look at one area they need to understand that we have to have this diverse approach all these different elements to it and by the way some of these elements kind of come together like you know in terms of our streets that's where the bridges come in the freight comes in it's not just the one line item the street maintenance bucket And so my bottom line is that our diverse needs need a diverse approach.

And Jared, that's the end of my statement.

I won't throw a question on it.

I just say that's my statement.

SPEAKER_06

I can throw a question on there.

What is the difference between Magnolia and Queen Anne?

Answer is Magnolia has two hills.

Queen Anne has one.

But Queen Anne has a lower section.

Magnolia just has two upper sections.

SPEAKER_07

Well, if you put Wolf Creek Ravine in there, you can kind of almost say that Queen Anne has two.

That's why we have two bridges over Wolf Creek Ravine.

They're very important.

Thank you very much to the people in Queen Anne.

SPEAKER_06

Closest street is Knob Hill?

SPEAKER_07

To Wolf Creek?

Well, third north.

Yeah, there's a whole bunch of streets that are nearby.

SPEAKER_06

Here we go.

Just gabbing over here.

It demonstrates that you did a good job with your presentation.

if we're gabbing.

Colleagues, other questions?

I should have my Zoom up.

I still just see Council Member Kettle's hand.

Colleagues, do we have any other questions?

Otherwise, I'll jump into my comments.

I'll then pass it to Council Member Saka for last word, and we will transition into central staff.

Seeing as none, I will just say I'm thankful that we are ready to hit the ground running should the levy pass.

As you noted at the beginning of your presentation, the critique of the last levy was that we didn't hit the ground running fast enough.

There was an initial lag.

We then did not get into gear appropriately and then we were set to be in gear and the pandemic hit with increased costs, supply chain issues, inflation, et cetera.

And so I appreciate that we are here ready to go.

I can tell you that before Council Member Saka joined the council and we did not have a king of filling potholes, I hesitate to call you the pothole king because we need to know that we are filling them, not creating them.

That there was a presentation, and I remember, Francesca, you were here because it got a little bit awkward where I was asking about what is the difference between the potholes and the pictures that you were showing us at council because We need to fill them faster.

And to Director Spatz, your point that you were making about the difference in revenue that this levy will bring into us is what will generate those improved streets.

Seattleites have to understand that as our city has grown in the last 10 years, which helped create a structural budget deficit, that growth did.

We also have more people on our roads.

We're having colder winters where our asphalt is freezing, which creates more need for Filling potholes and fixing our streets should the levy pass I am happy to see that with this proposal before us We'll be able to get in there and get moving to deliver for everyday Seattleites I also want to bring the attention to the bridges and again emphasize our need to get the planning underway.

I know that the again because the last levy did not get off to as fast of a start as we had desired and We had a lot of big dreams about how we could support our bridge infrastructure here in our city.

I know that we technically met the goals, but I wish that we had hit our stretch goals here.

And I know that the last chair of the Transportation Committee had attempted to bond to push the hand to address our bridges.

While I agreed with him in principle, I couldn't agree with him in the motion because we hadn't done the planning to use those dollars efficiently, which meant that we would have been paying interest on dollars we couldn't use.

Colleagues, another example of using bonds as leverage, Superintendent of the Parks Department, A.P. Diaz, was here earlier today Sometime I've lost all track of time at this point where this The Lake City Community Center a year early could allow another project to be accomplished that's a different you that that's an appropriate use of bonding because The plans are ready for that that project.

I'll just again I appreciate that it seems as if you're ready to go on this planning and development for the bond for the bridges because we have a lot of work to do and that I don't have questions for you.

I will probably have questions for you as I dig more deeply into this.

I will just say that I appreciate your two slides, one of North Seattle and one of South Seattle to really show that this is work that is touching every district.

It's touching every Seattleite.

I was gonna joke with you, Chris, when you were speaking so fast.

We all don't live in transportation.

We just use the transportation network every single day.

So every Seattleite uses the work that you accomplish.

We are just not as deep in the weeds on it as you are.

And I really appreciate the work that you've done.

I'm sure I'll have more tough questions for you once I dig into the subject matter a little bit more deeply.

Thank you.

Council Member Saka is chair of the committee overseeing this department.

The floor is yours to close this out.

SPEAKER_02

Thank you Mr. Chair.

I just want to again applaud the work by SDOT that's been done to get us to this point and recognizing that you know we have as a city been able to incorporate the lessons learned from the infamous 2016-17 levy reset.

And it's very clear by the hard work.

And we incorporated those lessons learned at council direction and mayoral direction.

But the team that actually does the hard work of doing that is right here before us.

And I just want to say, you know, really appreciate it.

All the effort that's been made so far to make sure that we are being transparent, demonstrating our readiness and ability to roll up our sleeves and go should the voters authorize this.

And again, I feel as chair of our city's transportation committee, I feel confident.

I'm confident that in our city's ability to execute and be immediately ready to go start delivering on these various projects if that's what the voters decide.

But I do know as well that our city will be ready in any scenario.

But again, just want to applaud and appreciate the work that's been done.

I know that, and I recognize the 72 FTEs for next year and then 40 something for, 44 for 26. And it was hardening to see the 37 or so for pedestrian safety projects.

I've always said anyone in the city of Seattle who works on building new sidewalks is gonna have a bright future.

So it was good to see some proposed budget authority to add new positions to bring that to life.

So in any event, Thank you again.

I'm sure I will and all of us will undoubtedly have more questions as Mr. Chair, you alluded to earlier as we continue to dive in.

But again, where I'm at today, this is terrific.

So thank you.

SPEAKER_06

Thank you.

Any final comments from the department before we will move on to Calvin Chow's presentation?

SPEAKER_16

Thank you so much for the opportunity to present today.

SPEAKER_06

Sounds good.

And clerk, do I need to read the next item in or is it still the same?

That's what I thought.

Double checking.

And we have Calvin Chow moving up.

The sun is out in Seattle, so we have to close the blinds.

Sorry, colleagues.

SPEAKER_03

Good morning, council members, or afternoon.

and thank you for your time.

I will try to keep this somewhat short.

I have a short presentation to highlight just sort of how this all fits into the budget context that we're all dealing with, and then open it up for questions and comments that go beyond the levy as well that you may have.

So just as a reminder, we've said this a few times, but the proposed budget that is currently in front of you is a current law budget.

It reflects the expiry of the Move Seattle levy.

does not include the appropriations for the transportation levy that's before voters.

So it predominantly shows a number of capital program reductions.

It doesn't reflect SDOT position changes that would be necessary if we don't have continuing funding.

So that's something that we would have to take on in the event that the levy does not pass.

This is just a chart just showing what the proposed budget looks like.

So this just shows that it is significantly lower for operations.

It is a 5.3% decrement from 2024 adopted.

And for the capital funding, it's actually about a 52% decrease.

So it really hits our capital programs.

reminder of some legislation that you have taken to date.

You authorized the submittal of the transportation levy in July, and that established an eight-year spending plan and the program deliverables.

That is the attachment A that was described ad nauseum just a moment ago.

The levy also includes required spending over the eight years that is tracked to that spending plan.

You have some flexibility to change within that after the Levy Oversight Committee has reviewed.

It does require a super majority to make changes to that spending plan, so we are pledging to voters that this is the bill of goods that you will be delivering.

It does include a minimum general fund contribution.

Basically, this is sort of the no supplanting rule.

We're promising that we will maintain our general fund contributions to transportation to be able to collect the levy.

And it includes the continued operation of the Levy Oversight Committee and the reporting requirements that have become standard practice for levy.

You also passed a companion resolution that added, provided council direction on implementation, oversight and reporting.

It directed the levy assessment, readiness assessments that we discussed and also annual work plan reporting.

So at the end of January of every year, the department will have to provide a work plan to the transportation committee on what the anticipated levy deliverables are for that next year.

And it also had a requirement for post-project delivery assessments for projects that are over $25 million.

And then lastly, you also took action on a transportation funding task force resolution just as a companion piece to this directing the formation of that task force.

So I won't go into this.

SPEAKER_06

Cal, if I could interrupt you just real quickly.

This is a very helpful slide.

And I... I'm reacting to it in real time, colleagues, because in the levy conversations that we had in July, it was about eight years worth of funding mechanisms.

What we have in a biennial budget are only two years.

And so I don't want our expectations to be mismatched with what we have before us.

We can't do everything in an eight-year levy in two years.

So here we are.

Thank you, Cal.

SPEAKER_03

Very well said.

So I won't go into too much detail on this chart, but this is just to really summarize what the executive presented earlier.

Shows the eight-year spending plan, the attachment A, if you will, and then the proposed spending for 25 and 26. And largely it is in line with the overall sort of percentages for these different programs.

It's consistent with the spending plan.

There are some programs that are a little bit front-loaded.

New sidewalks is one example.

But it matches what the spending requirements are in the levy and matches Schedule A. I guess the...

that we can expect some year-to-year variance in these programs.

Some of these programs are large and will require some on-ramp time to develop and get the scope ready before they can be spent.

And as our experience with Move Seattle shows, we will actually be completing a couple of Move Seattle projects in 2025 and 2026. So just because we collect the money in that year, the nature of some of these large capital projects means that it could be delivered outside of when we collect the money.

The executive proposal did include staffing requests, so 72 FDEs are proposed for 2025, and they've identified 44 more for 2026. Those would be revisited with the 2026 budget submittal.

And as I mentioned before, there is a requirement for an annual levy spend plan at January 31st of every year.

So just for your sakes or for all our sakes and how we handle this in the budget, the central staff recommendation is to include the executive proposal in your chair's balancing package for presentation on October 30th.

If the levy is not approved by voters, then we would remove that from the balancing package.

Any council member proposals would be developed and discussed during council's deliberations, November 13th to November 15th.

And then chair, again, it's your discretion about whether to make those amendments to your chair's balancing package or to call those items up for individual vote.

And then final vote would be taken at the November 21st special meeting.

SPEAKER_06

Thank you.

I'm going to, at this point, turn it over to Council Member Saka as chair of the committee overseeing this department.

I will say, colleagues, I am receiving and I have received the recommendation from central staff about including it in my chair's package.

We still need to work out some of those details.

I have not settled on that as a decision point.

But I don't want to make unnecessary work.

I don't want to make duplicative work.

And I also want to have everyone be able to see this process in a transparent way.

So those are my goals with this mission.

Council Member Saka, over to you.

SPEAKER_02

Thank you, Mr. Chair.

I guess just thank you, Cal, for your hard work and expertise in helping to unpack and assess the proposed set of budgets for SDOT and tee up some initial thoughts and considerations for us to consider on a going forward basis.

just as always appreciate your sage advice and Yeah, this sounds like some decisions still looming on our chairs part but on this slide, I think is a good kind of Takeaway slide can note the timeline there for for some of those things.

SPEAKER_06

Anyways, thank you Cal Thank You councilmember Saka colleagues, do you do you have questions for Calvin Cho?

Council president

SPEAKER_15

So could you please go to the slide six?

I'm looking at the FTE, the proposed FTE numbers for 2025 and 2026. I'm looking always at budget sustainability.

And so regardless of what happens in November, why are there so many new FTEs that are going to be hired?

because I'm assuming that a lot of the body of work that those people will be doing is roughly the same as what the people that are working on projects for the existing levy are doing.

SPEAKER_03

There is some overlap of positions that would carry forward.

Largely, it's the scale of the amount of money that's expected to be spent.

So it's another 40% more money year to year is anticipated.

And so the executive has stated that to get that money out the door, they need the people to actually do the work.

And so they've identified the 72 positions for 2025. We will have to see how their staffing what their actual staffing recruitment looks like in 2025. And then when we get to 2026, we will be able to reconsider, you know, is that 44 the right number for 2026 or do we have to make further adjustments?

But that is something that will be, I think, top of mind for the department as they get started on this.

SPEAKER_15

Thank you.

SPEAKER_06

Well said, Cal.

I will say that it's my recollection that to get our levy, our most recent levy accomplished within the goals of what we had set out to do, we actually had to bring on staff into SDOT because we had not appropriately staffed previously.

Is that your understanding?

SPEAKER_03

Yes, I think that's a fair consideration.

We also relied a lot on term limited positions with the Seattle levy and had its own complications with being able to sustain the work.

So I think this is more of a standard approach for the next eight years of this levy.

Thank you.

Well said.

SPEAKER_06

Colleagues, other questions?

I WILL SAY FOR SDI, I THINK EVERYONE IS STILL REACTING TO THE BIG BUCKET OF COLD WATER THAT WAS DUMPED ON OUR HEADS THIS MORNING.

SO COLLEAGUES, IF YOU ALL HAVE ADDITIONAL QUESTIONS, I WILL MAKE THE REQUEST THROUGH DIRECTOR EADER THAT IF MY COLLEAGUES HAVE MORE QUESTIONS THAT WE allow rather than requiring to go through SharePoint that maybe we have some individual briefings along the way.

Again, I want to meet your requirements to not send the department in nine separately elected ways and use your staff time well, but I also want to make sure that my colleagues are able to digest this since we're receiving this information out of sync of a typical cycle.

SPEAKER_02

totally understand uh chair strauss and we will work to make uh staff available to address the questions that council members have well said okay uh council member socket do you want to close this out unless anyone else questions comments uh thank you mr chair no just want to i guess restate and emphasize appreciate the hard work cal and the partnership and um yeah

SPEAKER_06

we'll continue to look forward to working closely together in a going forward basis but all good from my perspective thank you mr. chair Thank You councilmember Saka colleagues before we adjourn today's meeting I'm gonna give us again a roadmap to the rest that we're right now at about the center point the halfway point in our budget process the next few weeks are where councils work really get where we get down to work this first half has been information receipt information gathering i will tell you that again the bad news that we received this morning is different makes this year different than all every year since 2008 except for 2020 so here we are in the next week i will be creating the chairs balancing package i know that i have meetings with each of you this week If I call you sometime during this next week, please pick up.

That's my request there.

At which point, amendments to the chair's package will be due on November 1st at noon.

I will be sharing with you in a transparent way which of your priorities are contained within the package and not so that you don't.

And you can start working on your amendments today for that noon November 1st deadline.

What you will need on that noon November 1st deadline are your two co-sponsors, a funding source, and just one broad...

Sentence about what you want to do.

So you don't have to have everything figured out You don't but those are the three things one sentence about what you want to do to co-sponsors and a funding source We will be receiving public verbal public comment on November 30th when the chairs packages is presented at 930 in the morning we will have a public hearing on November 12th, and then we will get into budget amendments from the 13th to the 15th and Colleagues, that is the schedule moving forward.

Any questions or comments at this time?

SPEAKER_17

Chair, did you just say November 30th or October 30th?

SPEAKER_06

I am so sorry.

Yes, it's October.

I am thinking way ahead.

It is October 30th will be the chair's balancing package.

Appreciate that, Vice Chair.

Where would I be without you?

In November.

With that, colleagues, we've reached the end of today's committee meeting.

The next select budget committee will meet again on Wednesday, October 30th at 9.30 a.m.

Select budget committee will accept verbal and written public comment at this meeting.

The public may continue to submit written public comment at council at seattle.gov.

Any further business before we adjourn?

Seeing none, no further business to come before the select budget committee.

We are adjourned.

Thank you, colleagues.